Denmark’s pension and insurance industry has grown to nearly 4.8 trillion kroner ($712 billion) as of the end of the third quarter, which is more than twice its GDP, according to Danmarks Nationalbank, the country’s central bank. The pension industry accounted for the lion’s share – approximately 4.6 trillion kroner – of the total amount.
“The first nine months of 2019 saw considerable growth in the companies’ balance sheets,” said the bank, which reported that the industry saw gains of approximately 702 billion kroner for the first three quarters of the year due to “substantial returns on pension wealth.” That included investment returns of 479 billion kroner.
The bulk of the 479 billion kroner came from equities, bonds, and interest rate derivatives, which returned 165 billion kroner, 150 billion kroner, and 116 billion kroner respectively. Only 46% of pension and insurance firms’ investments are in Denmark, with the majority outside of the country “so that investments are diversified, and the risk is spread on countries with different economic and political risks.”
The bank also reported that the asset value of its pensions and insurance sectors account for 213% of its GDP. According to the Organization for Economic Cooperation and Development (OECD), the number of its member countries with pension assets exceeding GDP increased to eight in 2018 from five in 2008. The average ratio of assets to GDP was 126% in 2018, compared to 49.7% in 2008.
Denmark topped the OECD’s ranking in 2018 with assets worth 198.6% of GDP at the time, followed by the Netherlands (173.3%) and Iceland (161%).
Denmark’s pension funds have accumulated returns of 256 billion kroner since the beginning of 2018, while its life insurance companies returned 222 billion kroner. The bank said the large returns reflect gains on interest rate derivatives and bonds due to falling interest rates during the first nine months of 2019.
Outside of Denmark, the US attracts the most investment from the country’s pension and insurance sector, drawing 742 billion kroner. Germany and the UK accounted for 334 billion kroner and 189 billion kroner worth of investments, respectively, followed by Luxembourg and Ireland, which drew 129 billion kroner and 122 billion kroner respectively.
The bank also said that half of the pension and insurance sectors’ shares and equity investments are unlisted, and that most of their alternative investments are in this category. The unlisted investments include property investments, investments in private equity, infrastructure, and hedge funds.