Germany’s 142 Pensionkasse (PK) turned in a good year in 1998, with combined investments rising 6.5% to DM120.4bn (e61.6bn), according to the annual report of the BAV, the Berlin-based insurance supervisory authority. The increase follows a growth of 6.8% in 1997. Total contributions to the 142 funds reached DM3.74bn, up from DM3.71 in 1997.
The report tables all the data at book value, as legally PKs do not have to disclose hidden reserves. According to Patrik Bremerich at Risk Management Consultants in Cologne, the PKs give their reserves in their annual reports so digging can reveal the extent of reserves. Book value figures have their use though, according to Bremerich. “The book value does not really tell you anything about the quality of a company. It tells you something about asset allocation,” he says.
The PKs are reluctant to reveal market value as they aren’t legally bound to do so and it complicates the matter. Bromerich is confident this is going to change and cites recent evidence that up to a third of life insurance companies may have dfficulties maintaining today’s figures at today’s levels due to a lack of reserves. “There are insurance companies that basically have no reserves, there are other ones with enormous ones and it makes a difference for the policy holder whether you have a policy at one of the better companies.” He is confident this will change but that it may take some time before the average client gets behind it.
Membership of Germany’s PKs was marginally down from 2.47m in 1997 to 2.42m in 1998. Over the same period though the number of pensioners rose from 922,000 to 954,000. Again reported in book value terms, the figures show PKs placed just over DM63bn or 56% of total investments in fixed income, mortgages and unquoted loans. At the other end of the spectrum, equities still account for a tiny share of investments, DM1.8bn, or 1.6% in 1998, down from 1.7% in 1997. Investment funds, which include institutional Spezialfonds, accounted for DM30bn, or 26.5% in fixed income during 1998. This figure is up from DM25bn, or 23.5% in 1997. Real estate investments accounted for DM6.8bn or 6% of total investments, much the same as in 1998.
The report also gives the yields, both net and current, in book value terms. According to Bremerich, current yield excludes realised gains and losses. “It’s interest income, dividend income and rental income. There is no extraordinary sector in the number,” he says. Net yields include the two. Using this methodology, the average current yield for all but three of the funds was 7%, net yield averaged out at 7.3%. In 1997, net yield was marginally lower at 7.2%, current yield marginally higher at 7.3%. IPE