DENMARK - PenSam reported a year-on-year decline in the investment return at its core operation PenSam Liv to 0.5% for the first half of this year, and said it was focusing on boosting interest-rate hedging to stabilise profits.

In its 2010 first-half report, PenSam Liv had reported a pre-tax investment return of 6.8%.

Broken down into investment returns for the two PenSam Liv pension products Fleksion and Tradition, the results were 1.8% and -0.2%, respectively.

Both products are based on the with-profits principle, but Tradition has a higher minimum account dividend.

PenSam manages occupational pension schemes for staff in Danish municipalities and regions, as well as in the private sector, and also offers banking and insurance products.
At the end of 2010, it had DKK84bn (€11.3bn) in group assets.

Reporting interim results, PenSam said part of its investment strategy had been to focus on building up interest-rate hedging to protect as much as possible against turbulent markets and to stabilise profits.

"At the same time," it added, "we have chosen to increase our investments in bonds rather than concentrating on equities, which are judged to be a less attractive investment due to the continued uncertain development of the economy."

However, there had been no need to increase longevity provisions because the assumptions PenSam has focused on over the last few years have worked well, it said.

Helen Kobæk, director at PenSam, said: "An analysis of our longevity assumptions shows they meet the Danish FSA's new benchmark. In other words, we will not raise our provisions to be able to meet obligations to customers, who are fortunately living longer and longer."

In other news, profit at Denmark's FunktionærPension slimmed to DKK2.1m in the first half of this year, from the DKK12.3m reported for the same period a year earlier, and pension products ended with narrow investment losses.

The fund said: "The result for the half year is satisfactory in light of the tremendous turbulence on the financial markets."

The fund's traditional with-profits pension, FPg, made a loss before tax of 0.3%, while the unit-link product, FPm, ended in June with a 0.1% loss.

In its interim report, it said: "The result (for FPg) was negatively affected by the organisation's interest rate hedging. Seen without the interest-rate hedging, investment assets produced a good profit of 0.7%."

The fund said it expected the full-year result to be higher than that seen at the half-year point.

"The main factors affecting the result for the first half of 2011 can be put down to the developments in interest rates, where a rise in long yields has caused a significant fall in FunktionærPension's interest rate hedging," it said.

"In the second half, a similar development to interest rate hedging is not expected."
But general developments on financial markets were still volatile, and this had major significance for the full-year result, the fund said.

FunktionærPension, the labour-market pension fund for office and shop workers, had total assets of DKK11.7bn at the end of June compared with DKK10.8bn at the same stage in 2010.

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