Two of Denmark’s largest commercial pension funds, PFA and Danica Pension, have reported steep investment losses for this year’s first quarter of 10.5% and 15.4% respectively, blaming the COVID-19 outbreak in their interim results statements.
For mutual provider PFA, the 10.5% figure is the total return related to its PFA Plus market-rate product, while the number given by Danske Bank’s pensions subsidiary Danica Pension is the return on customer funds in its Danica Balance Mix product, for those with a medium risk profile and 20 years to retirement.
At PFA, group CIO Kasper Ahrndt Lorenzen said: “From mid-February, things began to turn, as the consequences of the COVID-19 pandemic began to make their mark on the financial markets.
“When the virus appeared outside China in earnest, and Denmark, along with many other countries, shut down our society, the big falls quickly followed,” he added.
PFA said its riskier assets such as listed equities had been hit the hardest, with that asset class ending the quarter with a 17.7% loss, while unlisted investments had remained more stable including the property portfolio, which was down 1.6%. Overall, alternatives suffered a 10.8% loss.
“At these times, the goal is to minimise losses, and that is where our many investments in the unlisted area, e.g. in properties and offshore wind farms, show their strength, as they are more robust, and largely guarantee a fixed, regular income, even though financial markets are declining,” said Ahrndt Lorenzen.
PFA said the negative returns seen in this year’s first quarter translated to losses of between 4.1% and 15.1% for its customers holding market-rate pension products, depending on their selected risk profiles.
In absolute figures reported by the pensions firms in their interim reports, PFA said its total return on investment between January and March was minus DKK33bn (€4.42bn), compared with the DKK57.6bn it garnered for the whole of 2019.
Danica Pension’s before-tax first quarter profit was reported as having fallen to DKK22m from DKK381m in Q1 2019, and it said it had managed to retain a solvency ratio of 189%, which was on a par with the level at the end of December 2019.
Ole Krogh Petersen, Danica Pension chief executive, said: “We have a solid and robust investment strategy, which we are sticking to and which we believe will see our customers’ savings safely through to the other side of the corona crisis.”
On the business side, the pensions subsidiary said premiums had increased at both its Danish and Norwegian operations in this year’s first quarter from the same period last year by 9% and 15% respectively.
This came after it had gained around 200,000 new customers from its takeover of SEB Pension initiated two years ago, Danica Pension said.