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Danish roundup: Nordea, PMF Pension, PenSam Liv

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DENMARK - Profits at the life and pensions arm of Nordea surged by nearly a third in the second quarter of this year, with unit-linked and pure risk products becoming bigger profit generators.

Operating profit for the division was €73m in the April to June 2012 period, up €16m or 28% from the previous quarter and €18m or 33% from the same period in 2011, the Nordic banking group said in its interim report.

It said: "Unit-linked and pure risk products continued to increase in importance as main profit generators, contributing 72% of total operating profit in the second quarter."

Unit-linked products produced a profit of €28m in the second quarter, up 47% year-on-year, and risk products ended the period with a €15m profit, a rise of 15%.

Traditional with-profits products made a €17m profit, down 11% year on year, but up 31% from the first quarter 2012, while premium guarantee traditional products only broke even after a profit of €1m in the first quarter.

Assets under management rose 9% year on year to stand at €48.7bn at the end of June - 2% higher than at the end of March.

Premiums fell 20% year on year and 13% from the first quarter to €1.3bn. This fall was mainly due to seasonal effects, Nordea said.

"Life & Pensions' strategic focus to shift the product portfolio towards capital-efficient products continued in the second quarter," it said.

"The effect of this meant that 75% of total premiums were channelled into unit-linked, premium guarantee traditional or pure risk products."

Economic capital, or internal capital requirements, stabilised during the second quarter at €2.3bn, having increased sharply from the fourth quarter of last year.

The rise was driven by lower interest rates, which hit the market valuations used to calculate economic capital, it said.

"However, the lower interest levels have not had any impact on either the solvency ratio, which has improved from 147% to 150%, or the profit generation in traditional products," the company said.

In other news, PMF Pension, the Danish pension fund for teaching assistants, is to merge with its parent company PenSam Liv to ease pressure on the PMF Pension's capital strength.

The boards of both companies decided on the merger for operational and economic reasons.

Helen Kobæk, director at PenSam, said: "The merger of the two companies will reduce the pressure there has been on the PMF Pension's capital strength.

"In addition, merging the two companies will lead to operational benefits."

For accounting purposes, the merger will take effect retroactively from 1 January.

This depends on approval of the change from the Danish financial regulator Finanstilsynet, which is expected on 1 November 1.

There will be no changes to customers' pensions or conditions as a result of the merger, PenSam Liv y said.

At the end of 2011, it managed assets of DKK60bn (€8bn), while PMF Pension managed DKK7.4bn.

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