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Skandia's Danish pension operations, PKA boosted by equities

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DENMARK - High equity allocations boosted the investment return at Skandia's Danish pensions operations last year, taking asset values back to their pre-financial crisis levels.

The investment return was 10.6% for 2010. No comparable figure was available for 2009.

Similarly, Danish pension fund PKA announced returns of 13.7% for 2010, aided by a strong performance from its equity portfolio.

Skandia said 2010 was a good year for the pension company's traditional pension savings product, Skandia Bonuspension, and that the business was now back to the level it was at before the financial crisis.

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Managing director Charsten Christensen said Skandia's high proportion of equities had significantly dented 2008 profits.

"We tried to turn the situation around in two years, and today, Skandia is in a very advantageous position," he said.

"As part of a big corporation, we have the necessary capital to be able to hold onto our high equities allocation. That benefits our customers in the long run in the form of a competitive account dividend."

Skandia is part of the Old Mutual Group.

The 2011 account dividend - the voluntary interest rate Danish pension providers apply to traditional with-profits pension products - has been set at 3% before tax.

For 2010, Skandia paid an account dividend of 3.5% before tax on new contributions to its Bonuspension, while the yield remained at 1.5% for existing savings in the product.

This year, the account dividend has been put at the same level for all savings in the product.

Investments in regional equities markets helped Skandia outperform the global equities benchmark by 6.8%, it said.

Morten Halborg, head of asset management and investment operations at Skandia, said:

"In 2010, it was particularly our investments in new markets that produced the good return, but Danish and European shares also contributed positively."

PKA's chief executive Peter Damgaard Jensen said his scheme was also reaping the rewards of its asset allocation strategy, which saw it maintain its exposure to the stock market.

Claus Jørgensen, PKA's head of equities, echoed the sentiment, saying: "The main point is that the strategy hasn't changed all that much, which is why we got this result.

"We have around 12% of our listed equities in Danish equities, which compared with the size of the market is quite a big allocation."

The scheme's Danish equity portfolio returned 38.4%, outperforming the average growth by the Copenhagen Stock Exchange by 1.6 percentage points and resulting in an overall equity portfolio return of 23.5%.

PKA, which now has total assets of DKK137bn (€18.4bn), also announced that it would offer indexation of 4% to its customers, above the Danish inflation rate.

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