Swedish pension provider Alecta has revealed it has written off SEK 12.7bn of its investment in Heimstaden Bostad, 25 per cent of the value of the holding.

Publishing its full-year results, Alecta revealed its flagship DC product, the Alecta Optimal Pension, made a return of 8.7 per cent in 2023. For its DB pension, the return was 7.1 per cent. Although the return for its DC product is above the pension industry average of 7.1 per cent, Alecta said the 2023 return was “negatively affected by the losses in the US banks and a decline in the value of Alecta's shareholding in Heimstaden Bostad”.

Assets under management (AUM) in the total portfolio for Alecta Optimal Pension totalled SEK 265bn at the end of 2023 and in its DB insurance AUM amounted to SEK 980bn. Alecta's solvency ratio was 199 per cent on 31 December 2023 and total capital managed by Alecta was SEK 1,245bn.

The pension company was upfront about 2023 being characterised by its investments in three US banks and in Heimstaden Bostad, which also prompted the Swedish Financial Supervisory Authority to initiate two separate investigations and the Swedish Prosecution Authority to initiate a preliminary investigation into suspected corruption.

Alecta's holdings, with a total value of approximately SEK 20bn, in the US banks Silicon Valley Bank, Signature Bank and First Republic Bank, became worthless during the spring when the banks collapsed in a so-called bank run in the US as a result of the rapid rise in interest rates.

Heimstaden Bostad, Alecta's largest single holding in which approximately SEK 50bn has been invested, was negatively affected by the rise in interest rates. This led to a significant decline in the value of Alecta's shareholding in the company.

“During the fourth quarter, the decline in value was SEK 8.7bn in Heimstaden Bostad, corresponding to 18.8 per cent of the value of the holding. Of this, SEK 2.1bn was attributable to a 4.5 per cent decrease in the net asset value of Heimstaden Bostad and SEK 6.6bn to a 15 per cent discount on Alecta's shares based on an independent market valuation at year-end,” the company stated.

“Overall, the impairment of Heimstaden Bostad is SEK 12.7bn, 25 per cent of the value of the holding, in 2023.”

Alecta CEO, Pedar Hasslev, acknowledged that 2023 was a “very turbulent year that created a significant crisis of confidence in Alecta”. He continued: “We have implemented several measures but are fully aware that it will take time and require hard work to regain customer confidence.

Following the company’s crises Alecta undertook a series of management changes, along with changes to its investment portfolio.

“During the spring, management changes were initiated, along with a review to develop measures to reduce risks in the equity portfolio. Since taking over as CEO on 1 September, I have continued and intensified this work. We are strengthening procedures, reporting and risk monitoring in asset management, and reinforcing leadership at all levels. We have also reviewed and reduced the risk in the equity portfolio," Hasslev noted.

---