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Market turmoil deflates pensions

Results still strong in face of global subprime losses

By Paul Voosen
Staff Writer, The Prague Post
May 21st, 2008 issue

In one of the more tangible impacts of the global financial slump, supplementary pension funds saw their profits drop 60 percent in the first three months of this year compared to the same time last year.
Profits reached 560 million Kč ($34.9 million) in the first quarter, compared with 1.4 billion Kč in 2007, according to the Association of Pension Funds in the Czech Republic (APFČR), a lobbying group that represents the country’s funds.
Two pension funds reported negative earnings for the quarter, Aegon PF and ČSOB’s PF Progres, the former losing 13 million Kč and the latter 20 million Kč. Aegon is the newest pension fund on the market, founded last year by the Dutch life insurance giant Aegon.
“The losses last year and in the first quarter were caused by the high initial costs that are quite natural for several years while starting a ‘green field’ company,” said Vladimír Bezděk, CEO of Aegon PF.
“The loss won’t have any impact on the yields of our client’s contributions. It will be covered from shareholders’ resources and the yields will reach very competitive level with other pension funds,” he added.
While domestic banks and other financial service companies have been largely unaffected by the credit crunch, the plummet in worldwide stock exchanges stemming from the crisis has reached the Czech Republic through a domino effect, causing a drop in the Prague bourse and a decline in returns for investment vehicles like pension funds.
Compared with the losses rung up in the West, however, the country’s funds have done quite well, according to the APFČR.
“Although it is a decline, it is still a positive result considering the uncongenial developments on the capital market, which many companies have struggled with,” the APFČR said in a May 16 press release.
Aleš Michl, an analyst at Raffeisenbank, seconded this assessment.
“There is no subprime crisis on the Czech market,” he said. “After the global sell-offs [that occurred] in the first quarter, it is a positive result to post a profit or be above the benchmark.”
The pension funds continued to add clients even as stocks fell this year, gaining 94,000 clients in the first quarter for a total of 4.056 million accounts. More than 60 percent of working Czechs now hold private pension insurance, according to the APFČR.
Ten pension funds now operate on the Czech market after ČSOB’s Progres fund completed its merger with Zemský PF at the end of 2007. ČSOB, the country’s largest bank by volume, acquired Zemský in June 2006. It also controls a second fund, PF Stabilita.
— Hela Balínová contributedto this report.

Paul Voosen can be reached at pvoosen@praguepost.com


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