SWEDEN - Occupational pensions company Alecta returned 3.1% in the first quarter of 2006, outperforming the industry average by 0.4 percentage points and bringing the total market value of its portfolio to SEK 409bn (e44bn).
The performance also resulted in a marked increase in its funding ratio, up to 142% from 128.5% in December last year.
But Alecta president Tomas Nicolin (pictured) stressed the impressive funding ratio “does not mean the same” as it did in the past, following the introduction of the Occupational Pensions Directive.
“Previously, there was a substantial hidden reserve in how we valued our obligations, and therefore the funding ratio we reported,” explained Nicolin. “Now this hidden reserve has been made visible by valuing liabilities at market interest rates, and this should be taken into account when looking at Alecta’s high funding ratio.”
Seen as an average over the last five years, Alecta’s total return was 5.6% at the end of March, outperforming the industry average by 0.9 percentage points over the same period.
“Our investments continued to provide a good return during the first quarter. We are among the elite of Swedish life insurance companies with regards to returns over the past five years,” said Nicolin, who pointed to low costs as one of the key drivers in Alecta’s strong performance over past years.
Many people paid charges on their pension capital that were far too high, he said: “High charges eat into the future pension. Having low costs means that we do not use more resources than we need to be able to provide a good pension.”
By Damian Clarkson
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