WORKERS CAPITAL
Sweden’s KPA Pension returns 7.6% on investments in 2023
Sweden’s KPA Tjänstepensionsförsäkring AB returned 7.6 per cent in 2023, a 15.4 percentage point increase on the previous year, its annual financial results have revealed.
The positive return was primarily attributed to improvements in equity markets, alongside interest rates contributing positively to the return.
However, this was partially offset by the negative performance of real estate investments.
Its average return over the past five and 10 years was 5.5 per cent and 5.6 per cent respectively.
Despite the improved return, the pension company’s solvency ratio fell by 2 percentage points to 232 per cent.
However, its managed capital increased from SEK 253.4bn to SEK 296.2bn during the year.
KPA Pension’s rate of return, determined by premium, was 8.8 per cent in 2023, while its defined benefit pension rate of return was 5.5 per cent.
Over the year, KPA Pension’s premium income increased by 49 per cent to SEK 28.9bn.
Earlier in the year, KPA Tjänstepension and KPA Tjänstepensionsförsäkring merged into one company: KPA Tjänstepensionsförsäkring AB.
“Happily, this year we have also improved our results and increased premium income, partly as a result of the new AKAP-KR pension agreement, which in turn leads to a higher pension for our customers,” commented KPA Pension CEO, Camilla Larsson.
“We have continued to work with green bonds and continue to be, according to a customer survey, the pension company that is the best in terms of sustainability.”
Folksam director of investment, Marcus Blomberg, added: “Despite unrest in the world that affects the financial market negatively, we continue to have a good return.
“During the year, we made new investments, among other things, in infrastructure and the real estate sector, which is in line with our long-term strategy.”
Sweden’s AP2 returns 5.9% on investments in 2023
Sweden’s second AP fund (AP2) returned 5.9 per cent after costs last year, its annual report has revealed.
This was equivalent to SEK 23.8bn over the year and a 12.6 percentage point improvement on 2022.
AP2 stated that the improved return was influenced by positive developments in the financial markets, especially in equities.
However, its equity return was partially offset by negative developments in all AP2’s real estate investments.
The pension fund’s annualised return over the past five and 10 years was 6.6 per cent and 6.8 per cent respectively.
After the net outflow to the pension system of SEK -4.8bn, the fund capital amounted to SEK 426bn.
AP2 managing director, Eva Halvarsson, described 2023 as an “eventful year”, as inflation and interest rates peaked in the summer before falling in the latter part of the year, which contributed to a “strong finish”.
“Internally, the year was marked by extensive work on reshaping governance and organisation in order to better handle a changing environment,” Halvarsson continued.
“We have certainly always devoted time and energy to continuously developing the business, but in 2023 we, employees and board, have really turned over all the stones.
“We have reviewed our management strategy with the goal of creating a better return in an even more dynamic and efficient way.
“In 2023, we have continued to develop responsible ownership and responsible investments. This has happened in all five priority focus areas.
“Among other things, climate plans have been defined for additional asset classes and the fund's reporting has been expanded with emissions data for more asset classes and scope 3.”
Finland’s Varma returns 6% on investments in 2023
Finnish pension company Varma returned 6 per cent on its investments in 2023, its annual financial statement has revealed.
This represents a year-on-year improvement of 10.9 percentage points compared to the return of -4.9 per cent in 2022.
The value of Varma’s investments rose by €2.9bn over the year to €59.1bn.
Listed equities performed the best of Varma’s investments, with a return of 10.3 per cent, while its return on all equity investments was 8.6 per cent.
Varma’s return on fixed income investments was 5.6 per cent and its return on hedge funds was 6.1 per cent.
Real estate investments were the only asset class that posted a negative return, with -4.3 per cent.
The pension company’s solvency ratio fell by 0.1 percentage points to 130.4 per cent, while its solvency capital declined from 1.8 times to 1.6 times in relation to the solvency limit.
In 2023, Varma's contribution income was €6.5bn, and the company paid out €7.1bn in pensions.
“In terms of Varma's investments, the year was good, but the returns came especially from outside Finland,” commented Varma CEO, Risto Murto.
“In Finland, the economic situation and stock market development were sluggish. The increased interest rate clearly slowed down the economy.
“The situation in Finland is weaker than the international economy. The investments of the green transition brought positive expectations to the domestic economy, but the increased interest rate and the competition for government subsidies between different countries have clearly hindered the progress of the projects.
“Now we have to hope that the real drop in interest rates will also revive the projects.”
Varma director responsible for investments, Markus Aho, added: “When the rise in interest rates subsided in the late autumn, returns on stocks turned to strong growth.
“At the end of the year, we increased the share weight in the investment portfolio. In an unstable environment, there were a few bumps along the way, but as a whole, the year was upbeat in terms of investment returns.
“From the point of view of the investment market, the mood is more positive than in the real economy.
“Predictions about the global economy drifting into recession have been constantly pushed forward, and there is still no significant threat of recession in the international economy in the light of the figures.
“After inflation and the rise in interest rates levelled off, economic growth has slowed down, but for the time being it is at a stable level. However, the geographical differences are significant and the geopolitical risks are high.”
Dutch pension fund PGB returns 11.7% in 2023
Dutch pension fund PGB returned 11.7 per cent on its investments in 2023, its Q4 2023 report has revealed.
The pension fund’s matching portfolio, which consists of investments to hedge interest rate risk, achieved a return of 12.8 per cent, while its return portfolio, which mainly consists of equities, returned 10.5 per cent over the year.
PGB’s total investment assets increased by €3.2bn over 2023, up to €32bn at the end of the year.
The value of PGB’s liabilities rose from €25.6bn to €28.5bn over the same period.
Despite the positive returns, PGB’s coverage ratio fell by 0.7 percentage points to 112.5 per cent during the year, which was driven by the “sharp drop” in interest rates in Q4 and the 5.2 per cent increase in pensions as of 1 January 2024.
The pension fund’s policy funding ratio also fell, by 2.2 percentage points year-on-year to 116.5 per cent.
Pension customers with a defined contribution pension received returns of between 10.8 per cent and 11.5 per cent in 2023, depending on how long they had to retirement.
“The fourth quarter was a good quarter for our investments,” commented PGB board chair, Jochem Dijckmeester.
“Significant price increases on the stock market ensured that many pension funds achieved a high return on their investments. That applied to us too.
“In addition to the ongoing war in Ukraine, 2023 also saw a flaring conflict in the Middle East. This creates uncertainty worldwide. There was also change closer to home, politics, for instance: The government fell in the summer, resulting in elections. It is not yet clear what the new government will look like.
“Many people, including our participants, can notice on a daily basis that life has become more expensive. We are therefore very pleased that we were also able to increase pensions as of 1 January 2024, as we did in 2022 and 2023. The increase applies to everyone who is accruing, receiving or still owns a pension with us.
“While the government formation is still under way, we are working hard behind the scenes to introduce the new pension rules. The law that was passed in the Senate in 2023 is leading.
“The aim is to have everything ready in our systems in time, so we can inform you in time and properly about how this transition will affect your pension."
Danish pension company PFA returns between 2.7% and 15.9% in 2023
Danish pension company PFA returned between 2.7 per cent and 15.9 per cent in 2023, depending on the customer’s pension product and years to retirement, its annual report has shown.
For customers in PFA Plus, returns ranged from 2.7 per cent and 15.9 per cent, while for customers in PFA Klima Plus, returns ranged from 3.9 per cent and 10.9 per cent.
A typical customer with 15 years until retirement in the PFA’s recommended profile C in market interest received returns of 12.1 per cent.
PFA’s investments in equities performed particularly well over the year, according to the report.
It noted that the lower return in Klima Plus was due, among other things, to many of the industrial companies in Klima Plus had been hit hard by increased costs due to rising inflation, increased interest rates and bottlenecks.
"Over the past three years, we have created a return of 15.2 per cent to an average customer, and this despite a major downturn in the financial markets in 2022,” said PFA CEO, Ole Krogh Petersen.
“This provides financial security to our customers, and we are happy that we have created returns at the top of the commercial pension market.
“It shows that we have a good and robust investment strategy that adjusts our risk so that we mitigate the worst losses when the markets fall like in 2022 and at the same time come in handy when the markets are again more positive like they were in 2023.
“It also gives us faith and expectations that in the coming years we can continue to deliver attractive returns at the top of the market to our customers.”
PFA made record payments of DKK 52bn in 2023, up from DKK 46.2bn in 2022.
It had a result before tax and profit sharing with customers of DKK 1.62bn, compared to DKK 200m in 2022.
This improvement was attributed to better investment returns on the base capital due to the favourable financial markets, an improved underlying operation, and a large influx of new customers over recent years.
"In the first half of the year, we have been adept at adapting our investment risk in line with the fact that inflation has fallen, and the growth prospects and employment have continuously surprised positively and provided tailwinds on the financial markets," Krogh Petersen added.
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