Market turmoil during the first quarter sent investment returns for AMF Pension, the Swedish pensions provider, into the red, with a loss of 0.7% compared with a 6.5% return for the same period in 2015.
The results take AMF’s average annual returns for three and five years to 31 March 2016 to 7.3% and 6.2%, respectively.
Peder Hasslev, vice-president and CIO at AMF, said: “The first quarter was characterised by falling stock values and even lower interest rates. In this continuing low-yield environment, we need to diversify away from equities and fixed interest, into new asset classes.
“Because of AMF’s status as a long-term investor and also its financial strength, we see good opportunities for such investments. So we will continue our efforts to find balanced risk and return.”
Meanwhile, total assets under management grew to SEK528bn (€57bn) by the end of March, from SEK527bn at end-December 2015.
Premium income for the occupational pensions provider, jointly owned by the Swedish Trade Union Confederation and the Confederation of Swedish Enterprise, rose to SEK11.7bn over the quarter, from SEK11.2bn for the same period in 2015.
However, the group turned in an overall loss of SEK6.7bn compared with a SEK22.2bn profit the year before.
AMF said this was largely because of lower yields and lower growth in the value of assets.
The solvency level fell to 199%, from 206% on 31 March 2015.
Johan Sidenmark, president at AMF, said: “The low-interest-rate era we are in will limit the ability to generate returns, while stock markets are characterised by turbulence.
“Low costs and charges are thus of particular importance, and guarantees are increasing in value. Traditional insurance possesses favourable characteristics for the coming years, in terms of low charges, guarantees, long-term perspective and flexibility between asset classes.”
Sidenmark also said AMF would focus on strategic efforts to simplify pensions for customers and thereby reduce its already low charges.
“Thanks to good returns over the past 20 years, many of our retired customers have received a large pension in addition to their guarantees,” he said.
“But they have contributed to this surplus and deserve to get a larger percentage of their pensions guaranteed.”
He said AMF would convert part of this surplus to the guaranteed pension amount, while continuing to boast the highest solvency ratio in the industry.