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Insurance companies and pension funds

Insurance companies and pension funds include life assurance companies, general insurance companies, professional pension funds and company pension schemes.⁷⁾ Total premium contributions to life assurance

and pension insurance companies as a percentage of GDP is rising. The total assets of insurance companies and pension funds have risen by 65 per cent since the end of 1991, while GDP has grown by 31 per cent.

The portfolio of equity securities issued by non-residents has increased almost fivefold since the end of 1991, cf. Table 4. The increase is due particularly to the strong increases in stock-exchange prices in 1996 and 1997. As a percentage of total assets equity securities issued by non-residents have also risen, while the portfolio of Danish equity securities has remained unchanged.

Holdings of debt securities as a percentage of total assets have remained virtually unchanged over the years. Danish debt securities are the largest asset category and debt securities issued by non-residents the smallest. The holdings of securities issued by non-residents of insurance companies and pension funds are regulated by the "balance principle" which determines that consistency must be ensured between assets and liabilities denominated in the same currency. This helps to explain why insurance companies and pension funds still hold by far the largest proportion of their portfolios in krone-denominated Danish securities.

Collective investment institutions

In recent years collective investment institutions have become an important part of the Danish market for savings and investments. Since the end of 1991 the assets of the collective investment institutions have quadrupled. This is due to capital gains on securities as well as the fact that

a low level of interest rates has caused investors to look for alternatives to e.g. deposits with banks.

In contrast to the situation for insurance companies and pension funds investment institutions' holdings of Danish debt securities have increased in particular. On the other hand, as a proportion of total assets holdings of equity securities issued by non-residents have fallen, although from a very high level, cf. Table 5.

There are several factors behind the increase in the portfolio of Danish debt securities. Today, private investors with a relatively short investment horizon account for a large share of the inflow to collective investment institutions. These investors have held only debt securities or had no investment experience at all. Furthermore, during the last few years unit trusts in index-linked bonds have become more common. Index-linked bonds are acquired primarily for pension accounts, since like equity securities, these bonds are exempt from real-interest tax.

Distribution by country

The Nationalbank has conducted a survey of residents' holdings of long-term debt securities and equity securities issued by non-residents distributed by issuer country at end-1997, cf. Box 2. Long-term debt securities are debt securities with an original maturity of more than one year, so that the results of the survey cannot be compared with residents' holdings of debt securities issued by non-residents in the annual foreign-debt statistics. Charts 2 and 3 show elements of the results of the survey.

Box 2 Portfolio survey

As an element of a survey planned and coordinated by the IMF the Nationalbank has carried out a survey of residents' holdings of long-term debt securities and equity securities issued by non-residents distributed by issuer country at end-1997. The Nationalbank, 104 banks and 113 investors participated in the survey. The participants were selected on the basis of the questionnaire survey concerning residents' foreign assets and liabilities at end-1996, net purchases of securities issued by non-residents registered in the payments statistics, and data from the Danish Financial Supervisory Authority. The 104 banks comprise all banks in groups 1, 2 and 3, as well as group 4 banks which trade foreign currency. Since the banks compile both their own portfolios and the portfolios of securities issued by non-residents held by customers who are residents the survey covers close to 100 per cent of residents' portfolios deposited with banks in Denmark. Since the survey comprises only 113 investors it covers a smaller proportion of the share of residents' holdings which are deposited with banks abroad or held privately. The 113 investors own respectively 54 and 91 per cent of all investors' debt and equity securities deposited with banks in Denmark. Assuming proportionality, i.e. that the 113 investors own the same proportion of all investors' debt and equity securities deposited abroad or held privately, the survey has a total coverage of 84 per cent of debt securities and 99 per cent of equity securities. The overall survey results are published in Special Statistics (in Danish) No. 2, September 1998.

The geographical distribution of the portfolios of debt securities of business enterprises and households is relatively limited. 69 per cent of the portfolio is issued by residents of the EU member states. Sweden is the largest issuer country, accounting for 25 per cent of the total portfolio. The portfolio of debt securities is furthermore mainly issued by a small number of countries since the 20 largest issuer countries account for 98 per cent of all debt securities issued by non-residents. Residents hold virtually no debt securities issued in eastern Europe and Africa. 1 per cent of the portfolio of debt securities was issued in Asia, with Japan as the largest issuer country. Japan is also among the 20 largest issuer countries, cf. Chart 2.

For equity securities the geographical spread is slightly greater than for debt securities. The USA is the largest issuer country, accounting for 21

per cent of the total portfolio of equity securities, while 53 per cent is issued by residents in the EU member states. The 20 largest issuer countries account for 93 per cent of the portfolio. These countries include Japan, Hong Kong, Singapore, Brazil and Mexico, cf. Chart 3. 1 per cent of the portfolio of equity securities is issued in eastern European countries and 10 per cent in Asia. Japan is the largest Asian issuer country, accounting for 8 per cent of the total portfolio of equity securities, while equity securities issued in Hong Kong and Singapore constitute respectively 1 and 0.5 per cent of the portfolio.

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