DENMARK - Strong investment returns in the second half of 2009 caused Danica Pension Group’s pension savings to increase by 10% to DKK256bn (€34.4bn) last year.

Figures from the group’s annual report showed all three of its pension products - Danica Traditionel, Danica Link and Danica Balance - all produced positive investment returns over the year.

In particular, customers in Danica Balance and Link - market-based products where customers can select their own investment profiles - recovered a “significant part of their losses in 2008” following a return of DKK5.9bn, or 24% before tax, compared with a 24% loss in 2008.

Henrik Ramlau-Hansen, chief executive of Danica Pension, said: “Our customers have made it through the financial crisis in good shape and with strong returns for 2009. The customers’ return on investment for 2009 was a very satisfactory DKR18.3bn. This is one of the highest returns in the market.”

He added: ‘The average return on Danica Balance was 22% and Danica Link 25%. Danica Link customers generally have a slightly higher equity share than Danica Balance customers. With these strong returns, many customers have recovered their losses from 2008.”

Danica Traditionel, which provides policyholders with a set rate of interest on their savings, also performed well to return 7.1% before tax compared to -1.2% in 2008. Figures showed the value of the scheme increased to DKK181.3bn, from an asset allocation of approximately 80% in bonds, and 10% each in equities and real estate, with equities posting a 22.2% return. Bond holdings also delivered 9.4% while property investments achieved 4.1%.

Because of the positive performance Danica Pension confirmed the rate of interest on savings has been further raised as of the beginning of 2010 to 3.25% before tax, compared to 2.25% in October 2009. (See earlier IPE article: Recovery allows Danica to improve pension terms)

The report noted total pension premiums reached DKK20.4bn, although premiums in Denmark fell by 11.8% over the year to DKK16.4bn, and single premiums fell by 43%, because of lower economic activity and rising unemployment. However, this was offset by a continued strong demand for Danica Balance and Link, which accounted for 80% of new business and saw regular premiums rise by 12.6%.

Danica Pension Group post a pre-tax profit of DKK2.95bn compared to the loss of DKK1.19bn the previous year.

Looking ahead, however, Danske Bank - which owns Danica Pension - admitted in its annual report that the performance of market-related activities including Danica Pension this year “will depend greatly on trends in the financial markets, including the level of securities prices at the end of the year. The extraordinarily high level of income of 2009 is unlikely to continue into 2010”.

Danica Pension, itself, noted: “The profit for 2010 is expected to be adversely affected by the allocation of special allotments to certain policyholders from the former Statsanstalten for Livsforsikring, which now forms part of Danica Pension. The expenditure in relation to special allotments is expected to be approximately DKR500m before tax.”

The pension group added that the special allotments to these policyholders in 2009 had reduced the profit for the year by DKK40m, before tax, with the “legitimate bonus expectations” agreed as part of the privatisation deal in 1990 expected to be allocated to customers in 2011, at the earliest.

There are approximately 135,000 policies from Statsanstalten for Livsforsikring still in force, although the obligation for special payments only applies in years when this is warranted by the size of the excess capital.

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