DENMARK - PensionDanmark reported a first half negative investment return of -6.1%, following volatility on investment markets, while the DKK21.9bn (€2.9bn) FSP pension fund also reported a loss of DKK873m in the first half of 2008.

Interim figures from PensionDanmark showed the total value of its assets gained slightly over the period from DKK70.76bn to DKK70.82bn, as premiums increased by 16% to around DKK5bn.

Torben Möger Pedersen, chief executive of PensionDanmark, said: "The growth is due to more employees [joining the scheme], general wage increases and higher pension contributions. It is positive that we can continue to see a growth in premiums, because it enhances our ability to give members a good supplement to pensions and ATP for their retirement."

However, the interim report admitted the investment result was affected by the "credit crisis and falling stock prices", as the half year resulted in a negative return of -6.1%, which was 0.6 percentage points below the benchmark.

Investments in quoted shares was the worst performer with a negative return of -17.1%, while the impact of the current economic conditions resulted in credit and infrastructure funds producing a negative return of -4.2%.

Property was the best performer with a return of 7%, while private equity produced a return of 0.6%.

However, nominal bonds delivered a negative return of -2.4%, and derivative interest rate instruments yielded -0.5%, in contrast to high interest bonds and indexed bonds which returned 0.2% and 6.1% respectively.

Despite the poor returns, PensionDanmark revealed the bonus and excess coverage level at the end of the first half of 2008 was 11% - this is the part of the total reserves above the legal capital requirements for insurers - which means the pension fund retains a 'green light' rating under the financial risk assessment mechanism.
Meanwhile, FSP pension fund's interim results showed a negative return on investments of -3.8% before tax, although the value of the premiums increased by 10% in the period.

Steen Jørgensen, chief executive of FSP, said: "FSP experiencing increased competition in pensions, and so it is gratifying that the FSP Pension can provide good and competitive products that attract new customers."
Total assets of the fund were DKK21.92bn at the end of June 2008, compared with DKK22.98bn at the end of 2007, as the pension fund blamed the poor return on investments on turbulence in the financial markets.

The negative return on investments was -3.8% before tax and -3.2% net, as quoted equities, bonds and property all produced negative returns, although this was offset by "neutral" returns on unlisted shares and FSP's own properties in Denmark, and a positive return from its commodity allocation.

FSP reported a first half loss for the pension fund of -DKK873m, but despite this the insurer revealed its capital base remains "solid" at DKK2.4bn making it well within the 'green traffic light" financial risk assessment, which it claimed gives its "reasonable leeway to invest actively".

Schjødt-Soren Hansen, president of finance at FSP, said: "Our reserves allow us to continue the active investment, and in the current situation we are following closely the developments in the markets, so we can seize the investment opportunities which arise."

However, the interim report sed the "great uncertainty in financial markets makes it difficult to make a realistic estimate for the year's return on investment (ROI). As a result, the FSP Pension has chosen to maintain expectations for the year as expressed in the annual report 2007."

Hansen added: "It is too early to assess how long the financial turmoil persists. Our current risk level is comfortable, and we are awaiting more clarification in the markets before we decide to increase the pension fund's share of risky assets. The most important thing is not to panic, but focus on the long-term strategy."

FSP agreed a deal with Forca earlier this year to outsource the administration of 17,000 members from 2010, which it claimed would cut costs by DKK7-8000 a year. From 2009 Forca will perform the entire wage and pension payments for FSP.

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