Swedish Pension funds in trouble after the stock market collapseMonday, 26 September 2011
Falling stock prices and low interest rates means that the Swedish pension companies’ debt grows. Since June, the company's debt increased by almost Skr100 billion.
Söderberg & Partners believes in an analysis that more companies could be about to break under the burden of debt, according to reports in various Swedish media.
Salus Ansvar with a solvency ratio of under 110 percent, near the border of bankruptcy, according to the analysis gives a very strong concern to the whole sector. It is also reported that there are additional 3 to 4 Companies which have been deemed to be under similar solvency ratio of below 130 percent.
According to the analysis from Söderberg & Partners, apart from Salus Anvar there is also the Länsförsäkringar Liv, SPP Liv, Swedish state owned Kåpan and Insurance branch of Pension Funds all in trouble.
They all need to take a number of measures in the form of, for example, increased premiums or as Länsförsäkringar Liv has already done to stop new businesses in the traditional insurance sector.
This poses a problem for savers in the long run, says Gustaf Rentzhog, president of analyst firm Söderberg & Partners. Pension savers may move their retirement money to stronger companies - at least if you're young.
Even older pension savers should move them if there are no guaranteed rate of 4 percent, believe Gustav Axehult, an analyst at Söderberg & Partners.
One option according Axehult is AMF pension which looks like a financially strong company. Another is Skandia liv, which has survived the turbulence well and Folksam with the current situation of the highest bonus rate.
The result could be a withdrawal customer as a bankruptcy occurs when the solvency ratio is 104 percent or less. Bankruptcy means that capital is still there, but all the guarantees issued on future returns can not be met.
One of the main reasons is that the long term ten-year rate is at record low, around two percent. This means that there has been relatively low yield on dividend.
The result for policyholders can be that the company will force them to make so-called withdrawal, which means that the customer receives a reduced value of their savings.
So far, the financially weaker companies have sold shares in a downturn, while the stronger companies net purchased shares has gone up. But as the market continue to fall, by another 5 percent, even the larger companies will be forced to sell, according to Gustaf Rentzhog, CEO of Söderberg & Partners.
Söderberg & Partners has worked on the analysis and advice including financial institutions and has graded life insurance companies based on financial strength. The top ports AMF and SEB Trygg Liv Gamla, while SPP Liv, Kåpan and Salus Ansvar are classed on the bottom.
Söderberg & Partners now recommends pension savers to review their retirement on savings and see what the alternatives are, for example, to move savings to another company.
Salus Ansvar insurance company is in liquidation state and has since 2006 moved customers to other pension funds. They have rejected the criticism levelled upon them.
“Our solvency ratio is 114 percent of the company, so there is no acute problem in the current situation,” says Mikael Eklöf, CEO of the company
Today there are over 9500 customers and they need not be worried about their retirement capital, according to the company.
By scancomark.se Team
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