De Eendragt makes radical portfolio shift in bid to raise solvency level
De Eendragt, the €1.5bn Dutch pensions insurer, has shifted its entire investment portfolio into fixed income to lift its solvency to the required level.
To improve its risk profile, the insurer offloaded all stakes in equities, non-listed property and alternative investments, according to its 2013 annual report.
The company – which provides defined benefit, defined contribution (DC) and collective DC plans for companies of the former paper mill Van Gelder – saw its financial position deteriorate following the adjustment of the European Central Bank’s AAA curve as a result of the downgrading of France.
As a consequence, De Eendragt had to write off €38m worth of assets, it said.
In addition, a new and improved internal model for liabilities had a negative impact on De Eendragt’s assets, which also suffered from stricter Solvency II requirements.
As a result of these developments, the pensions insurer was unable – for the second time in a row – to grant indexation to deferred participants or pensioners.
The insurer also revealed in its annual report that it failed to attract any new clients last year.
De Eendragt argued, however, that its proposition was still attractive, pointing out that most expiring contracts had been renewed over the period.
The board said it decided to carry on as an independent company after an extensive strategic study into the possibility of cooperating with other players in the pensions industry failed to reach a satisfactory conclusion.
It also said its new executive board had been tasked with prioritising the development of a strategy for the long term, after Philip Menco, its director since 2004, departed last May.
De Eengragt lost 5% overall last year, citing the effect of rising interest rates on its fixed income holdings in particular.
Its ‘maximum diversification strategy’ for emerging market equities returned 31%, while its ‘minimum variance’ approach for the same segment returned 4%.
De Eendragt’s 30% non-listed property holdings – the “cornerstone” of the investment portfolio since 2007 due to the attractive risk/return ratio over the mid term – generated 1.6%.
The insurer attributed the result in part to a further decrease in the value of its assets after appointing a new surveyor.
In its annual report, De Eendragt confirmed it divested its stake in a long/short commodities fund – after a 7% loss – due to disappointing long-term performance.
It also terminated its Global Tactical Asset Allocation strategy earlier this year after it produced a net return of 1.2%.
According to the insurer, its long-term trends-based investment in a CTA hedge fund returned 9%, while its stake in a short-term strategy delivered a slightly positive result.
De Eendragt did not respond to IPE’s repeated requests for additional information.