DENMARK - ATP Group has reported a first-half profit of DKK3.3bn (€443m) as its investment portfolio achieved a market return of 3%, or DKK11bn gross, thanks to positive returns in four of its five investment risk classes.
The overall investment result of the organisation was actually DKK 7.5bn in the first six months of 2009 but the firm had to make "extraordinary provisions" of DKK4.5bn to compensate for the increase in Danish life expectancy.
Interim figures revealed the beta portfolio generated an overall return of DKK10.9bn, equivalent to a 3% rate of return, as the bond portfolio achieved a return of 3%, while credit instruments produced 7%, the oil or commodity-related risk portfolio achieved close to 15% and the equity portfolio returned 9% overall.
That said, ATP noted within the equity portfolio was a wide range of results, with listed domestic equities returning 39% and private equity investments dropping 10%.
The only risk class to post a negative performance was inflation-related securities - which included property and infrastructure - which returned -1%.
At the end of June 2009 the asset allocation of the five risk classes in the beta portfolio was 53.2% in nominal interest-rate risk, 9.8% in credit risk, 11% in equity-related risk, 24.6% in inflation-related risk and just 1.3% in commodity related risk.
The hedging portfolio - which uses long-dated bonds, interest rate swaps and repo transactions to protect ATP from market-based fluctuations in the value of its pension liabilities - meanwhile returned DKK700m in the first half, following a widening of the interest rate spread between Danish and European swap rates.
Lars Rohde, chief executive of ATP, said: "It is satisfactory to note that the profit is derived from a much more well-diversified portfolio than just a few years ago. This shows that earnings are more robust today than they were previously."
The half-year report also included an annual update of Danish life expectancy, which showed that while both sexes are living longer women in particular have seen an increase in longevity, causing ATP to make additional provisions of DKK 4.5bn to cover future pension liabilities.
While ATP revealed its financial reserves increased by DKK3.4bn to DKK 50.8bn, equivalent to 14.9% of ATP's guaranteed benefits of DKK 342.1bn, Rohde also warned of a challenging time ahead.
"The results achieved for H1 are highly satisfactory. However, a challenging autumn lies ahead with a risk of new price falls. Although we have seen signs of nascent optimism over the summer, prospects are still for slow economic growth and increasing unemployment," said Rohde.
ATP also highlighted the impact of the government's decision earlier in the year to allow account holders to withdraw savings from the Special Pension Savings Scheme (SP), which required the organisation to pay out more than DKK 30bn to members within a period of a few weeks. (See earlier IPE article: Danes to withdraw €3.3bn from pensions 'for luxuries')
The first-half investment return of the SP fund was just 2%, as ATP revealed by the end of June 2009 two-thirds of its clients had received their SP savings, leaving the value of the scheme at just over DKK20bn.
Rohde said: "SP earnings were impacted by the Danish Government's Spring Package 2.0, entitling SP account holders to withdraw their SP savings this year. We have had to adjust our investment strategy to allow us to release large sums within a short space of time - without affecting the markets during the disbursement period."
ATP also noted in the report that as 90% of all Danish SP account holders are expected to withdraw their savings by 31 December 2009, more than 95%, or DKK40bn, of SP's total assets will be paid out in 2009 making it "necessary to consider the future of the SP scheme in H2 2009".
However,the group also stressed that the large number of SP disbursements has not affected the ATP pensions, as it paid out benefits totaling DKK4.5bn to 730,000 pensioners at the end of June.
"ATP's funds have always been kept completely separate from the SP funds. Accordingly, all ATP members can rest fully assured that they will receive the life-long pensions we have promised them," added Rohde.
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