Danica Pension profits hit by euro debt crisis, political uncertainty
DENMARK - Profits at Danica Pension fell by more than two-thirds in 2011, after returns were hit by the euro debt crisis and political uncertainty.
More than DKK1bn (€134m) was withheld from profit for the parent company - Danske Bank - because investment returns did not meet the returns guaranteed to customers.
Chief executive Per Klitgård said: "Danica Pension's reduced profit is due entirely to lower capital market returns as a result of the debt crisis and political uncertainty as to a solution to the crisis."
Pretax profit at Danica Pension fell by 68% to DKK733m in 2011 from DKK2.27bn the year before, while total assets rose to DKK303bn from DKK288bn.
"The return on investments of our own shareholders' equity was down almost DKK300m," Klitgård said. "In addition to this, DKK 1.1bn was transferred to the so-called shadow account."
The shadow account contains funds for the parent, Danske Bank, which cannot be added to income until the pensions subsidiary achieves an investment return of more than that guaranteed to customers.
Klitgård said the slump in profit was "obviously not satisfactory", but that there had been a marked improvement during the last quarter of the year.
"The profit also reflects a well-functioning business with a strong inflow of new business and expenses under control," he said.
Premiums rose to DKK27.3bn from DKK24.1bn across the countries Danica Pension operates in - Denmark, Sweden, Norway and Ireland.
Within the core Danish market, premiums were up 13% at DKK18.8bn.
Most ground had been gained in the business customer market, Klitgård said.
"There is no question that the pension sector is highly competitive," he said. "In several instances, competition reached such heights that expenses exceeded income, and Danica chose to withdraw from several tenders in 2011."
Unit-link products contributed most to premium growth, he said, with premium inflow to Danica Balance and Danica Link expanding 20% to DKK11.7bn in Denmark.
The unit-link products made an investment loss of 2.5% for the year, down from a profit of 12.9% the year before, due to equity price falls, the company said.
Meanwhile, the with-profits product Danica Traditionel saw an average return of 6.8% in 2011, up from 5.8% in 2010.