The ATP Group Annual Report 2012

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Management's Review Business Model Risk Pension Hedging and Investment Hedging Investment Administration Social Responsibility The ATP Group Financial StatementsReportFinancial highlights – ATP and the GroupATP GroupDKK million 2012 2012Return on hedging portfolio 45,417 45,417Return on investment portfolio 12,067 12,544Return on investment and hedging portfolios 57,484 57,961Increase in pension liabilities due to interest-rate falls, etc. (37,018) (37,018)Tax on pension-savings returns on investment and hedging portfolios (8,683) (8,704)Investment expenses (247) (598)Investment and hedging-activity results 11,536 11,641Pension-activity results, etc. (1,432) (1,547)Profit for the year 10,104 10,094Net profit for the year, broken down by activity:Investment activities 10,086 10,191Hedging activities 1,450 1,450Pension activities, etc. (1,432) (1,547)Ratios:Investment-activity results relative to the bonus potential (per cent) 13.6 -Pension-activity expenses per member (DKK) 68 -Investment-activity expenses per member (DKK) 248 -Bonus rate (per cent) 15.6 -Danish FSA ratios:Return before tax on pension-savings returns (per cent) 9.9 -PROFIT FOR THE YEAR – HIGHLIGHTSThe ATP Group recorded a profit of DKK 10.1bn in 2012.ATP’s reserves – its bonus potential – increased to DKK84.2bn. Total assets at the end of 2012 were DKK 624.1bn.2012 was another year overshadowed by the financial crisis,with low interest rates and uncertain financial markets.The year was characterised by weak growth and high debt,with trends in the eurozone in particular contributing to theuncertainty. Throughout the year ATP’s management chosean investment approach with low utilisation of the risk budgetin the light of the significant uncertainty in the financialmarkets.The DKK 10.1bn profit was driven by a return of DKK 58.0bnbefore tax on pension savings. This is equivalent to a rate ofreturn of 9.9 per cent applying the Danish Financial SupervisoryAuthority’s accounting method. From the return, ATPmade a provision of DKK 37.0bn to safeguard future pensions,primarily as a result of interest-rate falls. The tax onpension-savings returns totalled DKK 8.7bn.The profit for the year is a consolidation of the results for thefour activities: Pension, Hedging, Investment and Administrationactivities. Hedging and investment activities are theprimary contributors to the positive result.ATP’s investment activities are divided into a hedging portfolioand an investment portfolio. The aim of the hedgingThe ATP Group – Annual Report 20128
Management's Review Business Model Risk Pension Hedging and Investment Hedging Investment Administration Social Responsibility The ATP Group Financial StatementsATP member assets 2008-2012ATP’s returns relative to the returns of life-insurance companiesand non-occupational pension funds in the period 2002-2011DKK billionPer cent80070060050040030020010002008 2009 2010 2011 2012Bonus potential– reservesPension liabilities302520151050-52002 2003 2004 2005 2006 2007 2008 2009 2010 2011Average2002-2011ATPLife-insurance companiesand non-occupationalpension fundsATP average 2002-2011Life-insurance companiesand non-occupationalpension funds average2002-2011portfolio is to ensure that changes in interest rates do not affectATP’s ability to meet its pension commitments to members,while the aim of the investment portfolio is to generatea return that is sufficient to preserve the long-term purchasingpower of pensions. Overall investment and hedging-activityresults were a profit of DKK 11.5bn.The hedging-activity results were a profit of DKK 1.5bn,meaning the hedging activities completely lived up to theirobjective.ATP’s investment-activity results were a profit of DKK 10.1bn.The bonus potential is ATP’s basis for taking on investmentrisk, and the investment-activity results corresponded to areturn on the bonus potential of 13.6 per cent. Credit bondsand investments in listed domestic equities and private equitiesin particular made significant contributions to theprofit for the year. The investment portfolio has contributedpositive returns in each quarter over the last four years.The Board of Directors has set the long-term target that,over time, hedging and investment-activity results must besufficient to ensure that pensions are revalued in line withthe Retail Price Index (RPI). The target is fixed independentlyof trends in the financial markets. The performancetarget for 2012 was set in isolation at DKK 17.2bn, whichis extremely ambitious in a year with historically low interestrates and uncertain financial markets. In the light of thechallenging market conditions and ATP’s decision to bothmaintain the low risk level throughout the year and to payfor protection against large losses, the profit of DKK 11.5bnwas considered satisfactory.According to a recent statement by the Danish Financial SupervisoryAuthority, covering the 10-year period from 2002to 2011, ATP achieved an average market return, after taxand expenses, of 8.8 per cent, which is 3.9 per cent higherthan the average for the Danish life-insurance and pensioncompanies. The size of future pensions depends on creatinga high, stable return year on year.ATP’s pension-activity expenses totalled DKK 325m in 2012,equivalent to 0.05 per cent of the average assets, or DKK 68per member. This level is in line with expectations for 2012.In 2012, overall direct and indirect investment expensesamounted to DKK 1,185m, equivalent to 0.20 per cent of theaverage assets managed by ATP in 2012, or DKK 248 permember. This level is in line with expectations for 2012.The Group’s expenses are low – by Danish and internationalstandards. The international comparison of expensesand performance in the pensions area (CEM benchmarking)shows that ATP’s administration expenses are 88 per centlower than for the other companies in the comparison. A recentCEM survey also shows that ATP’s total investment expensesare significantly lower than those of its peers in theglobal pension community.The ATP Group – Annual Report 20129
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The ATP Group Annual Report 2012

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