Nordic roundup: Danica Pension, PenSam, Halkin, BRF Kredit Bank
DENMARK - Danica Pension slipped into a pre-tax loss during the third quarter, as markets were hit by the debt crisis and jitters over political moves to solve it.
But contributions at the Danske Bank subsidiary were up 13% at group level to DKK20bn (€2.7bn) on the back of corporate client wins.
Danica Pension posted a pre-tax loss of DKK300m at the end of the third quarter compared with a profit of DKK1.6bn in the same period 2010.
At the half-year stage this year, the pensions firm had reported a pre-tax profit of DKK400m.
Managing director Per Klitgård said: "Of course it is not a satisfactory result, but if we drill down into the numbers, it covers a business that is functioning well, with a large customer intake and control over its costs.
"The fall in Danica's result is solely due to a lower return as a result of the debt crisis and the political uncertainty about how the crisis would be solved."
Costs as a percentage of contributions fell to 4.7% in the third quarter from 5.1% in the same period last year.
Total assets were static year-on-year at the end of September at DKK296bn.
Klitgård said the company had won several new corporate clients in the first three quarters of the year and that this was behind the contribution increase of 14% within Denmark.
"The fact contributions grew in a period of redundancies, bankruptcies and a certain wage restraint shows Danica Pension is doing well in the increased competition," he said.
Unit-link products were having the most impact on contributions, he said, with Danica Balance and Danica Link witnessing a 29% increase in contributions in Denmark to DKK8.9bn.
However, on investment performance, Danica also said these two unit-link pension products had suffered price falls of as much as 20% since the beginning of January.
In other news, Denmark's PenSam has announced its entry into the residential mortgage lending market, having earmarked an initial DKK1bn to take on good-quality second-lien loans from troubled Danish banks now forced to offload them.
The DKK84bn labour-market pension fund group says the frozen money and residential property markets had opened up a good investment opportunity.
Benny Buchardt Andersen, head of investment at PenSam, said: "The lending market is so locked right now that there are many good payers out there. These are quite ordinary people with good, secure incomes, who cannot get loans because of the banks' problems. We would like to help them."
PenSam said it had provisionally set aside DKK1bn to lend as long-term fixed-rate residential mortgages in the form of mortgage bonds.
The business will be conducted via investment manager Halkin, which has set up a fund to acquire and hold second-lien mortgages in Denmark.
So far, PenSam is the sole investor in the fund.
Buchardt Andersen said he expected PenSam to get a return of 7-8% after costs including projected defaults, which he said was far better than current bond market yields.
"We have a 'first move' advantage in this market because we are not buying distressed loans, but good-quality loans from distressed banks," he told IPE.
The external investment manager Halkin will function as wholesaler, with contact to customers taking place via existing banks or property agency chains with an interest in referring customers unable to raise financing to PenSam.
Meanwhile, administration and payment flow will be outsourced to BRF Kredit Bank.
Halkin will also be responsible for credit checks and dealing with any breaches of loan contracts.
Buchardt Andersen said: "Their credit skill and ability to follow up are decisive in making this a good business for us."
He stressed that PenSam had made stringent demands for the separation of functions and ensuring that control over the mortgages was maintained.
At the same time, the pension fund sees it as a priority that the mortgage bonds it issues be on fair and transparent terms for customers, he said.