DENMARK – Profits at Danish commercial provider Danica Pension surged more than 200% last year before tax on the back of high investment returns and efforts to run the business more efficiently.

But pension contributions in Denmark fell by 4% after the firm opted to withdraw from contract tenders where it thought prices were too low, the Danske-bank subsidiary said.

Group pre-tax profit rose to DKK2.4bn (€354m) in 2012 from DKK733 in 2011.

Per Klitgård, chief executive, said: “Our continued efforts to enhance operational efficiency, focus on profitability and an extremely good investment return all contributed to this strong performance.”

Traditional with-profits pension plans ended the year with an average return of 9.2%, up from 6.8% the year before, while customers with unit-link plans Danica Balance and Danica Link saw average returns of 11.5%, up from the 2.5% loss suffered in 2011.

Total contributions fell by 10% to DKK24.7bn as a result of a decline in single contributions, Danica Pension said.

Regular contributions, on the other hand, rose 2% to DKK14bn.

Total contributions in the Danish business dropped 4% to DKK18.1bn.

“The decline was explained by the fact that, while 2011 saw the addition of two major corporate schemes, 2012 was affected by Danica’s withdrawal from tender rounds in which the prices were in Danica’s opinion unrealistically low,” the company said in its 2012 report.

During the year, Danica Pension made moves to shift some of its guaranteed pension liabilities to unguaranteed unit-link products.

In the autumn, it said it offered customers with high guarantees the opportunity to change from the conventional product to Danica Balance, receiving compensation for forfeiting their guarantee.

In 2012, DKK1.8bn in savings shifted from Danica Traditionel to Danica Balance, it said.

“In October and November, the offer was given to 20,000 customers, and, in 2013, it is expected to be extended to 60,000 to 80,000 customers,” the company said.

The step was taken to support last June’s agreement between the government and the pensions industry, which urged pension providers to help customers move out of guaranteed products, which increase risk for providers.

Meanwhile, labour-market fund FunktionærPension reported investment returns of more than 12% for both unit-link and traditional with-profits pension plans for 2012.

On average, the unit-link product FPm produced an investment return of 12.8% before tax for 2012, up from 3.5% in 2011, the office workers fund said.

The with-profits product, FPg, ended the year with a 15.5% return, down from 16.1% the year before.

FunktionærPension, which is run by PFA Pension, said: “In spite of the moderate growth picture, 2012 was a really strong year for higher-risk assets.”

Both equities and credit bonds produced strong profits, with traditional bonds also providing good returns, it said.