At the end of 2019, Swedish insurance companies owned financial assets of about SEK 5,350 billion, which was more than Sweden’s GDP. Most of the capital, almost 90 per cent, is managed by life insurance companies, while the rest is managed by non-life insurance companies. The reason why life insurance companies have large assets and that these have grown in the past ten years is because premiums accumulate and generate returns. Alecta is the life insurance company with the largest assets, followed by Skandia, AMF Pension, Folksam and SEB Pension.
The life insurance companies’ assets are mostly related to traditional life insurance, but unit-linked insurance has increased in recent years. In unit-linked insurance, the policyholders choose the funds in which to invest capital and the financial risk is borne by the policyholders. Unit-linked insurance thus differs from traditional insurance, where the insurance companies choose how to manage the capital and the financial risk is borne by the insurance companies.
Insurance companies invest mainly in shares and bonds
By managing their assets, the insurance companies generate returns and bonuses, which benefit the policyholders. Swedish insurance companies mainly invest in Swedish and foreign equities, investment funds and debt securities, but also in properties. The debt securities purchased by insurance companies are mainly bonds issued by foreign borrowers, Swedish government bonds and bonds issued by Swedish banks and mortgage institutions.
Non-life insurance companies typically invest in assets of shorter duration than the life insurance companies do. The reason why non-life insurance companies have a shorter investment horizon is that they manage ongoing claims payments. Life insurance companies often have a longer investment horizon since the savings take place over a longer period.
High return on life insurance companies’ assets in 2019
The return on the life insurance companies’ assets is important, since it affects the level of future pension payments. For 2019 the total return on assets managed by Swedish life insurance companies amounted to 12.5 per cent. This is higher than the average annual total return on assets in the past ten years and is to a large extent explained by the positive development on stock markets in Sweden and globally in 2019. The fact that the Swedish life insurance companies’ assets to a relatively great extent consist of equities has contributed to the average annual return being seven percent since 2010.
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