The rise in long-term interest rates over the year has been generally positive for the Swedish life and pensions industry, according to a study by Söderberg & Partners, the investment consultants.
While the value of bonds has decreased, so have liabilities, resulting in higher solvency levels, the study found.
Söderberg & Partners pointed out that financially weaker companies such as SPP, Nordea and Handelsebanken had matched their interest-rate risk and therefore did not see much of the solvency-level increase.
At the same time, AMF – financially, the strongest pensions provider in Sweden – has a very short duration on its assets, which will have an effect on future performance, according to the report.
Söderberg & Partners also points out that total return depends on overall asset allocation and cost levels, which generally means those in a stronger financial position will have a higher allocation to equities and therefore continue to deliver good performance.
In the study, the consultancy ranks companies on a scale from 0 to 10, where 10 is best.
SEB Trygg Liv Gamla was ranked first with a score of 8, narrowly ahead of AMF, Folksam and Skandia Liv, all at 7.
The consultancy predicts that, provided markets remain stable, companies with a score above 6 will perform better over a 10-20 year period than funds with an asset split of 40% equities and 60% bonds.
Meanwhile, funds registered in Sweden have the lowest average fees in Europe, according to a study by Morningstar.
Funds registered in Sweden have an annual fee of 1.09% compared with the European average of 1.42%.
Balanced funds have a fee of 1.14% in Sweden and bond funds 0.52%, compared with 1.55% for balanced funds and 0.89% in Europe.
The only exception in Sweden is money market funds, where the fee in Sweden is 0.37% compared with 0.23% in Europe.
In other news, Skandia Liv returned 4% for the three quarters to the end of September, down from 5.6% during the same period last year.
The return for third quarter was 1.8%, driven by holdings in Swedish equities, infrastructure and the credit portfolio.
Skandia Liv has continued increasing its equity allocation over the period, and equities now make up 63% of all assets, an all-time high.
Assets under management came to SEK316bn (€36bn), up from SEK309bn at year-end.
The solvency ratio was also up to 167% from 147% for the same period last year.
Simultaneously, Storebrand boosted operational results to NOK685m (€85m) compared with NOK282m for the same period last year, as all business segments saw a boost during the third quarter.
In addition, the company has cut costs by some 20%.
Premium payments into its guaranteed pension product came to NOK2.3bn over the period.
The result was bolstered by the sale of SPP Pensionstjänst, the Swedish local authority services company, to KPA Pension.
The sale generated a one-time sum of NOK55m, less than the predicted NOK100m, previously stated by Storebrand.
Separately, SPP, the Swedish life and pensions provider still owned by Storebrand, saw income from premium payments increase to more than SEK7.4bn in the first nine months of the year, compared with SEK5.8bn for the same period last year.
Fund products made up 73% of the numbers, an area on which SPP is increasingly focusing its efforts.
Performance for the defined contribution portfolio was 2.1%, with assets under management up by SEK5bn to SEK13bn.
Competitor Folksam Liv increased its income from premium payments by 3% to just over SEK5.9bn.
Returns in the first three quarters came to 3.5%, with alternatives and equities performing particularly well, whereas fixed income investment had a negative effect on performance.
Folksam’s solvency ratio increased to 162% over the period from 141% last year.
Meanwhile, KPA Pension, owned by Folksam, increased its income from premium payments by 14.7% during the first three quarters to almost SEK8.4bn.
Performance was 4.2%, while the solvency ratio increased to 180%, up from 144% for the same period last year.