If changes in book values of assets are a fair measure of progress, then Germany's 140 Pensionskassen (PKs) had a good year in 1997, with their combined investments rising by 6.8% to DM113bn (e58bn).
PKs are regulated as insurance companies, but overall market value figures are not provided for 1997 as for other insurers. Joachim Schwend of the Hoechst PK, who is on the PK committee of ABA, the national association of occupational pensions, argues that since the funds are non-commercial and not on offer to the public, there was no need for them to show market value in the same way.
Individual PKs do disclose market values in their annual reports.
The annual report of the BAV, the Berlin-based insurance supervisory authority, shows that the hidden reserves of the insurance industry, excluding the PKs, amounted to15% of total assets in 1997. Investment consultant Hans Karl Kandlbinder says he would expect PKs to have the same or even a greater" proportion of hidden reserves. But Patrik Bem-erich of Risk Management Consultants in Cologne thinks the reserve figure would be less: "I think the proportion would be in the 10-15% range." The figures below, taken from the BAV report, are all on the basis of the lower of market or book value. Contributions to PKs increased by 2.8% in 1997, while the number of active members declined from 2.62m to 2.47m; pensioner numbers rose from 0.77m to 0.81m in the period.
The figures for yields are also calculated on the basis of book values and so have to be interpreted cautiously. "The difference between the two yield figures is that the current figure comprises interest income plus dividends and rental income, including any yields from the Spezialfonds investments," says Bemerich.
"The net figure has added to this realised profits less any realised losses." As Olaf John of consultants Towers Perrin in Frankfurt notes: "In low interest times they will reduce the hidden reserves to subsidise returns and smooth volatility in the market."
The BAV measured the yields obtained by a sample of over 90% of PKs according to the formula used by life insurers, and found the 1997 average current yield was 6.8%, compared with 6.3% in 1996.
Again on a book value basis, the figures show that fixed interest assets, unquoted loans and mortgages made up two thirds of PK assets. Although 'shares' amounted to a paltry 1.7%, it is known that most shares are held within investment vehicles, such as Spezialfonds.
The investment funds' proportion of PK assets increased in 1997 to 23.5%, from 20.1%."

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