EUROPE - The Swedish pension foundation of Skanska, the construction conglomerate, with assets of SEK3.6bn (€400m) returninhg 7% for 2010.
The foundation's portfolio is fairly unusual compared to peers, as it has a very high allocation to alternative investments, with infrastructure and real estate accounting for some of its exposure.
At the end of 2010 the foundation had a 43% allocation in alternatives, marking a 15 percentage point increase compared to the year before. Alternatives were increased at the expense of equities, which now only make up 22% of the portfolio. Fixed income assets have also been decreased to 35% from 42%.
Meanwhile, the latest Quantitative Impact Study (QIS5) shows that Swedish and Finnish pension and life insurance companies are above the minimum capital adequacy levels required.
The Swedish insurance industry uses two calculation methods. One, which is used by all other countries, is the required solvency margin (RSM) as well as their own traffic-light model.
Using the RSM system Sweden has a 677% margin, which is the highest, followed by Iceland at 380%. If the traffic light model is used the margin in Sweden is 134%. The variation results from differing accounting methods of calculating surplus funds, which in Sweden are part of the company assets.
The low margin when the traffic-light system is used results because the Swedish system is already adapted to Solvency II. A total of 29 Swedish life insurers took part in the QIS5 study, with a market share of 90%.
The Finnish insurance industry is also well equipped for the capital adequacy requirements.
According to the Federation of Finnish Financial Services, life companies had a surplus of 24% and other insurers 118%.
Insurance companies from 30 countries took part in QIS5 and nearly all are above the solvency capital requirement (SCR). On average the study shows that life companies, which in many European countries are also pension providers, had capital buffers four-times higher than the minimum requirement prescribes. However, one in 10 would not be able to continue operating if Solvency II was in operation now.
The study also shows that combined the insurers have a buffer capital of €395bn, compared to SCR and €676bn, above the minimum capital requirement. Nearly 70% of insurers across Europe affected by Solvency II took part in QIS5, amounting to over 2,500 companies, of which 610 were life companies.
Solvency II comes into force on January 13, 2013.