Heavy share prices losses for pension funds and insurance companies

07/04/2009 15:00

As a consequence of the credit crisis, falling share prices have resulted in continued losses for Dutch pension funds and insurance companies since the third quarter of 2007.

Heaviest blow in fourth quarter 2008

The return on pension funds’ share investments was –8 percent in the first quarter of 2008. In the second and third quarters their losses were 1.9 and 6.2 percent respectively. The heaviest blow was in the fourth quarter, when they lost 17.0 percent on the value of their shares. 

Insurance companies suffered share prices losses of 5.1 and 5.9 percent in the first and second quarters. In the last two quarters of 2008 share price losses increased to 11.3 and 13.8 percent respectively. As the composition of their share portfolios differed, investments of insurance companies showed better returns than those of pension funds in the first and fourth quarters. In the second and third quarters, it was the pension funds that did better.

The MSCI global index, which reflects these developments, fell by 12.4, 1.8 and 11.8 percent respectively in the first three quarters. In the fourth quarter it fell by 21.7 percent.

Return on shares of insurance companies and pension funds

Return on shares of insurance companies and pension funds

Pension funds have more shares than insurance companies

Pension funds have more shares in their investment portfolios than insurance companies. This is one of the reasons that pension funds have been affected more by the developments on the financial markets in recent months than insurance companies. At the end of the fourth quarter of 2008, pension funds had invested 47 percent of their total portfolio in shares, insurance companies only 29 percent.

More invested in foreign shares

Pension funds also own more foreign shares. Just over 84 percent of the share portfolio of pension funds consists of foreign shares. For insurance companies this is nearly 47 percent. As a result, developments for pension funds are more similar to global share price developments. 

Portfolio composition of pension funds, 2008-IV

Portfolio composition of pension funds, 2008-IV

Portfolio composition of insurance companies, 2008-IV

Portfolio composition of insurance companies, 2008-IV

Ali Davarci