First-half profits fall by 36% at Danish pension fund ATP

DENMARK - Profits at Danish pension fund ATP slipped 36% in the first half of the year from the same point a year earlier, with losses on equities and hedging activities weighing on results.

Between January and June, the ATP Group made a profit of DKK8.1bn (€1.1bn), down from DKK12.7bn reported for the first half 2010.

ATP said profit was driven primarily by the return on index-linked bonds.

Chief executive Lars Rohde said: "Results are satisfactory - not least in view of the fact that the economic upswing lost momentum in H1, especially in the US, which was exacerbated by the negative financial market impact of the European debt crisis."

Investments produced a profit of DKK8.4bn, but hedging - designed to safeguard pensions against interest rate fluctuations - made a loss of DKK1.3bn.

Changes in guaranteed pension benefits added a profit of DKK1bn.

Out of ATP's five investment classes, or risk classes, four generated positive returns, while equities resulted in a loss.

The interest rate risk class produced a return of DKK2.6bn, or 1.8%, credit ended the period with a DKK2.1bn return, or 4.1%, and equities made a loss of DKK0.7bn, or -1.2%.

The inflation risk class produced DKK5.6bn, or 4.8%, while commodities generated DKK1.7bn, or 8.9%.

Among equity investments, the biggest contributor was private equity, which returned DKK2.3bn or 9.1%, while Danish quoted shares constituted the biggest burden to results, making a loss of DKK2.1bn or 7.2%. Holdings in Danske Bank and jewellery maker Pandora were the biggest losers.

The pensions organisation also reported a significant rise in expected longevity.

The annual update of ATP's observed remaining life expectancies for 65-year-olds showed a strong increase in male life expectancy of 3.5 months, and a rise of two months for women.

ATP said the increase would entail additional provisions of approximately DKK3.6bn.

"However," it added, "the increase entailed only a slight adjustment, since ATP had already made additional provisions of just under DKK18bn in 2010 as part of the transition to a new life-expectancy model to factor in expected future increases in life expectancy."

Total assets for the ATP Group dropped to DKK712bn at the end of the reporting period from DKK745bn at the end of June 2010.