Swedish insurers dump equities for fixed income
SWEDEN- Swedish life insurers are rebalancing their portfolios, and replacing equity investments with interest bearing asset classes and lower risk alternative investments, according to reports in the Swedish press.
Mutual insurance companies have lost SEK90bn (e9.78bn) over the last six months, and have been forced to retreat from equities, replacing them with alternatives such as fixed income and private equities. At the end of the first half of this year, Swedish life insurers were holding 52% of their assets in fixed income securities and 44% in equities.
Many life insurers are now looking to encompass a broader range of asset classes in their portfolio in order to spread risk and increase returns. Skandia Liv has employed the services of AP1 vice president Bo Ljunglof to evaluate the diversification of its portfolio.
Malin Bjorkmo, director of Skandia Asset Management is reported as saying: “we are particularly interested in private equity and corporate bonds, and are also looking at hedge funds and commodities. We will not exclude any asset class.”
Says a spokeswoman at Swedish fund manager, Folksam: “funds are having to be more conservative now. We ourselves have downsized our equity allocation from 40% to 20% over the course of this year. Our portfolio is now 70% bond-weighted.”
Swedish life insurer, SEB Trygg Liv, owned by Skandinaviska Enskilda Banken, has also dramatically reduced its allocation to equities. “At the lowest point we held just 5% in equities”, Anders Mossberg, CEO at SEB Trygg Liv is quoted as saying.
Risk reducing has become essential for life insurers, which have come under scrutiny from regulatory authorities for being 10% underfunded. Life insurers have been given three years to build up funding levels of 105%.