DENMARK - PensionDanmark has reported a negative return on investments of -6.8% for the first nine months of 2008, as "unrest" in financial markets impacted negatively on the pension fund.
Quarterly figures from the scheme showed the investment return before tax between January and September 2008 was -8%, albeit after tax this improved to -6.8% compared with a return of 1.7% after tax over the same period in 2007.
Despite the poor returns, PensionDanmark revealed the total value of its assets increased from DKK70.82bn (€9.5bn) at the end of June to DKK71.4bn three months later, as it highlighted an 11% increase in premiums produced an income of around DKK7.5bn.
That said, the quarterly report admitted the beginning of the fourth quarter has continued to be poor for its investment returns as by the end of October equity markets had fallen almost 40% in 2008, while the expansion of credit spreads has led to depreciation in commercial and mortgage bonds.
PensionDanmark confirmed in early November the overall investment return of the fund, after tax, was -10% for the 10 months of 2008, although it claimed its solvency capital is still more than four times the statutory solvency requirements.
Torben Pedersen Möger, chief executive of PensionDanmark, said: "The collapse of financial markets in October show that imbalances in the financial system have been much greater than previously thought. Unfortunately, the financial crisis has now evolved into a real economic crisis, which appears to be longer and deeper than the previous cyclical downturn."
Möger added while the central banks and governments, in both Denmark and the rest of the world, have reacted with "stabilising action" to try and put a floor under the markets, "we can expect a long period of continued turmoil in the financial markets".
PensionDanmark issued an update in October on the impact of the financial crisis on the fund in which it confirmed that it is likely to end 2008 with a negative investment result, although it highlighted it still has a 'green light' under the Danish financial supervisory authority's traffic light system. (See earlier IPE article: PensionDanmark solvency four times the limit)
Meanwhile, the DKK49.3bn (€6.6bn) Industriens Pension claimed the financial crisis "will have no impact on members", as it revealed the scheme's return on investments between January and the end of October 2008 was -3.5% - much less than rival pension providers.
Jan Ostergaard, director of investment at Industriens Pension, said: "Our limited losses are due to the fact that we sold most of our shares and bonds have a relatively high yield. We have very large reserves so we are not forced to sell the shares we have left."
In addition, Ostergaard pointed out the large reserves also mean the pension fund can follow developments and "use the option to buy more shares the day it again become attractive", and in the meantime it said it still has a 'green light" from the financial supervisory authority and is "well-prepared for a critical development in the financial markets".
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