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Länsförsäkringar Liv skims a negative return

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  • Länsförsäkringar Liv skims a negative return

SWEDEN - Länsförsäkringar Liv, the fourth largest life-assurance company in Sweden, reported a total traditional management return of -0.6% in 2008.

Annual figures for the firm reported a net loss of SEK30.1bn (€2.8bn), as although premium income increased 4% to SEK11.3bn in 2208, the value of the total assets under management dropped to SEK150.2bn.

Länsförsäkringar Liv offers pension savers different management options, including traditional, new world and insured pensions, although most of the firm's assets are invested in the traditional life assurance, while the insured pension is a private pension product which uses a combination of a long-term bond and an investment fund allowing savers to "take advantage of upturns in the stock market without risking invested funds".

The traditional management option, which has SEK120.7bn assets, reported a net loss of SEK29.5bn as premium income fell to SEK5.5bn and investment income was -SEK4.8bn, however the overall return was -0.6%.

Investments in this option are mainly in listed shares and interest-bearing securities, although there are also allocations to property and alternative investments, albeit Länsförsäkringar Liv admitted the market turbulence in 2008 meant the share of equities in the portfolio was gradually reduced in value from 52% to be worth just 10.6% over the year.

The rest of the assets - 76.2% - were allocated to interest-bearing securities at 31 December 2008, while 8.8% was invested in properties and 4.3% was in alternatives.

Figures from 2008 showed the traditional equity portfolio returned -38.7% and alternatives also performed poorly with a return of -32.6%, however these were partially offset by a positive 8.9% yield from fixed income and 2.7% from property while a "positive impact" was also gained from the fund's "slight currency exposure" as the Swedish krona weakened during the year. 

Länsförsäkringar Liv admitted the solvency ratio had deteriorated over the year from 152% in 2007 to 114% at the end of December 2008, while the collective consolidation - the company's capacity to provide a bonus and the market value of assets in relation to guaranteed commitments - also slipped from 114% to 105%, although it pointed out customers received an average bonus of 3.5% in 2008, before tax and fees.

The new world management option, meanwhile, invests 70% of its assets in equities - comprising 20% in North American shares, 15% in Sweden and Europe, while 10% is allocated to both Japanese shares and Asian equities - while the remaining 30% is in interest bearing securities.

The total return for this portfolio was -28.1%, compared to 4.2% in 2007, as Länsförsäkringar Liv noted the assets in the new world management are hedged so "the returns are not affected by trends in the exchange rate between the SEK and other currencies".

Håkan Danielsson, managing director of Länsförsäkringar AB, the parent company of Länsförsäkringar Liv, said: "Earnings for 2008 show that Länsförsäkringar has remained secure and stable during the financial crisis. All core operations are profitable and we have reported earnings growth in most areas. Respect for other people's money and active risk measures are central for us, which resulted in excellent credit quality, a strong cost/income ratio and high collective consolidation in the life-assurance operations and solvency in the non-life operations. We are correctly positioned in an uncertain financial environment."

The annual report also confirmed the board of Länsförsäkringar Liv had submitted an application to the Swedish Financal Supervisory Authority, the Finansinspektionen (FI), in December to demutualise the company to become a "profit-distributing, limited liability life assurance company".

It claimed this would be positive for customers as it would provide greater security for savings and the possibility of higher returns, and the proposals received approval in a vote by members in autumn 2008.

However Länsförsäkringar Liv confirmed the earliest date for demutualisation would not be until 1 January 2010.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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