ATP shifts €2.7bn to hedging portfolio after longevity data change

ATP, Denmark’s giant statutory pension fund, has announced it is shifting DKK20bn (€2.7bn) from its investment portfolio into its hedging portfolio to account for the latest change in its longevity projections.

More detailed data — and excising US figures from the information used — has meant an adjustment in its longevity model, the DKK768bn pension fund said, with the new projections adding 3.7 years to the expected lifespan of an average newborn boy in Denmark and just under two years to that of a baby girl.

Christian Hyldahl, ATP’s chief executive, said: “We have expanded the methodology and for the first time included detailed data, including causes of death, which is enabling us to provide an even more accurate estimate of the development of lifespans.”

According to the new projections, 40% of girls born in Denmark now are expected to live to see their 100th birthdays, he said.

The main reason for the changed projections comes from the removal of the US from the data, because causes of death there differ significantly from those observed in Denmark, ATP said.

The US has historically represented about 40% of the data in the lifetime model, and therefore has had a major impact on life expectancy, it said.

Scotland and Luxembourg, meanwhile, which are more like Denmark, are included in the new data set, which – capturing 330 million people – is still very large, the pension fund said.

Narcotics-related causes of death are 5.5 times more common in the US than they are in Denmark, and traffic accidents are 3.5 times more likely, according to ATP.

As of today, ATP is moving DKK20bn from the bonus potential — which makes up the investment portfolio — to the fund’s large hedging portfolio, which backs the pension guarantees.

In accounting terms, the transfer will affect the half-year earnings negatively, but members’ total assets remain unchanged, ATP said.

ATP’s hedging portfolio will have DKK677.3bn of assets after the adjustment, and the bonus potential will amount to DKK99.1bn.

Back in 2016, ATP added an extra DKK9.9bn to its coverage of guaranteed pensions to account for longer average lifespans observed in the country’s population.