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Insurance companies have large assets

At the end of 2018, Swedish insurance companies owned financial assets of
almost SEK 4,600 billion, which was nearly equivalent to Sweden’s GDP
(see Figure 19). 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 paid-in 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 consist mostly of traditional life insurance,
but unit-linked insurance has increased during the last years. In unit-linked
insurance, the policyholders choose the funds in which to invest capital and the
financial risk is borne by the policyholder. 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 equities 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 bonds, but also
in properties (see Figure 20). The bonds purchased by insurance companies
are mainly bonds issued by foreigners, 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. This is because non-life insurance companies
need to manage future claims payments. Life insurance companies often have
a longer investment horizon, since the savings take place over a longer period.

Lower return on life insurance companies’ assets in 2018

The return on the life insurance companies’ assets is important, since it affects
the level of future occupational pension payments. For 2018, the total return
on assets managed by Swedish life insurance companies amounted to around
a half per cent (see Figure 21). This is below the average annual total return
on assets over the past ten years and is to a large extent due to the negative
developments on the Swedish and international stock markets during the fall
of 2018. Despite the lower return 2018, the average yearly return on the life
insurance companies’ assets has been around seven percent since 2009. The
fact that Swedish life insurance companies’ assets to a relatively great extent
consist of equities have contributed to the return during these years.