Swedish blue-collar pension fund AMF this morning reported a 9.6% first-half total investment loss, but also revealed discount rate changes had taken the edge off its negative earnings figure for the period.
Johan Sidenmark, AMF chief executive officer, said: “It has been a dramatic and turbulent six months, where the already tense economic and geopolitical situation worsened significantly with Russia’s full-scale invasion of Ukraine in February.”
In its financial report for January to June, AMF said its total return amounted to a negative 9.6%, compared with the positive 8.5% return for the same period last year.
Falling share prices had driven the group’s negative return, Sidenmark said, but added that the decline had been somewhat mitigated by the breadth of AMF’s portfolio and its active management.
“The strengths of traditional insurance, with a good spread of risk, low premiums and a guarantee at the bottom, become particularly clear when there is a storm,” he said.
However, the CEO of Sweden’s second-biggest occupational pension fund said there was a risk that the economy would weaken even more before it turned around, which he said could affect pensions too.
Regarding its earnings as a business, AMF reported a total loss at group level of SEK10.53bn (€1.01bn), compared with a profit of SEK62.57bn for the same period last year.
But the pension fund said changes in the discount rate used to revalue its commitments had impacted its earnings by adding a total of SEK41.2bn.
Earlier this month, Sweden’s largest pension fund Alecta similarly commented that rising interest rates had reduced the present value of its future commitments.
In its interim report, AMF said its solvency ratio – which shows the market value of the company’s assets in relation to the guaranteed commitments to savers – was 228% at the end of June, which compares with 232% at the end of 2021, and 217% at the halfway point last year.
The CEO said the pension fund’s continued strong financial position had allowed it – as announced in March – to strengthen guarantees during the spring for half a million customers with traditional insurance pensions in payment, allocating SEK17m for that exercise.
Back in March, the pension provider said that SEK17bn conversion of accrued surplus in its traditional pensions product into higher guarantees on its pensions would cause its solvency ratio to fall by 15.5 percentage points.
AMF’s total group assets declined to SEK737bn by the end of June from SEK850bn at the end of 2021.
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