PFA, Denmark’s largest commercial pension provider, posted a total investment return of DKK31bn (€4.2bn) in 2020, but said underweighting tech stocks had eroded the market lead it managed to attain in the spring.
In its annual results statement, the pensions firm reported a return of 3.3% for average-rate scheme members after value adjustments, up from 2.6% in 2019.
Allan Polack, PFA’s chief executive officer, said: “2020 is a year we will never forget. COVID-19 left a massive mark on the entire year and, at PFA, we had to adapt to a new reality quite quickly.”
Total customer funds rose to DKK601bn from DKK560bn the year before, according to the report.
Within investments, PFA singled out Danish shares as a particularly strong-performing asset class, generating 24.5% in the year – success it attributed to the large proportion of pharmaceutical and utility investments contained in the portfolio.
Equity investments produced a 4.7% return – slightly lower than the MSCI ACWI stock index, it said, adding that the portfolio had taken a hit in the spring but gradually recouped those losses in the rest of the year.
In its annual report, PFA said its defensive stock allocation had mitigated the fall in equity prices last spring.
“However, the lead in the market was lost over the summer, as we had underweights in some of the tech stocks that were rushing ahead, and in the autumn when cyclical stocks were lifted by the vaccine news,” PFA said.
The company’s operating profit multiplied to DKK1.3bn in 2020 from just DKK340m in 2019 – improvement it said was due to a significantly reduced loss on its health and accident business last year.
The health and accident business had benefited form a rise in policy reactivations, PFA said, but continued to be negatively impacted by more claims than anticipated and major competition in the pensions market.
Ilmarinen boosts solvency after 7.1% investment return
Ilmarinen, the largest of Finland’s mutual pension insurance companies, reported a return on investments for last year of 7.1%, down from 11.8% in 2019, and said it had managed to increase its solvency ratio during the year.
The firm, which is part of the earnings-related pension system, said investment assets grew to €53.3bn by the end of December from €50.5bn at the close of 2019.
The solvency ratio rose to 130.2% at the end of 2020, from 126.6% a year before, due to the good investment result, Ilmarinen said.
Mikko Mursula, Ilmarinen’s CIO, said: “Our investment strategy proved to work very well also in the spring’s crisis market.”
Solvency had not become a limiting factor for investment decision-making, he said, which was why the firm had not cut investment risk levels during spring.
“This placed us in a good position during the positive end-of-year market movement, which can be seen as a good return on investments during the last three quarters of the year,” Mursula said.
Equities returned 20.8% in the year, Ilmarinen reported, up from 12.4% in 2019, but fixed income assets left the firm with a negative return of 0.4%, having produced a positive 4.7% for the asset class the year before.
Real estate made a return of just 0.4% following 2019’s 8.4% gain, according to the full-year report.
“In the real estate markets, the COVID-19 pandemic has led to a higher vacancy rate of premises, impacting the expected long-term rental income and weakening valuations,” Ilmarinen said.
The category of ‘other investments’, however, generated 20.2%, compared with a 2.1% 2019 loss for the segment, which includes commodity investments, investments in absolute return funds and currency investments.
Alecta’s total assets rise to SEK1.04trn
Sweden’s biggest pension fund Alecta has reported a 6.6% investment return for its defined contribution product, Alecta Optimal Pension, and 4.7% for its defined benefit scheme in 2020.
The previous year, the two pension products produced returns of 20.3% and 14.1%, respectively.
The Stockholm-based firm’s solvency ratio dipped slightly to stand at 167% at the end of last year from 169% a year before, according to the full-year results announcement yesterday.
Magnus Billing, Alecta’s CEO, said: “Alecta has a continued strong balance sheet and good solvency, as well as a positive cash flow, which meant that we were able to give back to customers, through increased defined benefit pensions to approximately 1.6 million private customers and a refund of SEK4bn to our corporate customers.”
Alecta’s total assets under management grew to SEK1.04trn by the end of 2020 from SEK963bn a year before.