27/01/2023

December 2022 Monthly Report

Overview of supervised entities’ activities in the financial services sector for December 2022

PENSION FUNDS

SECOND PILLAR PENSION FUNDS

At the end of December 2022, mandatory pension funds (MPFs) had 2,179,051 members, that is, 6,709 (0.3%) members more than in the previous month. Category B funds had 85.6% of all MPF members, while category A and category C funds had 10.7% and 3.7% of all MPF members respectively. In 2022, 83,788 new members joined MPFs i.e. 23,8% more than in the previous year. In accordance with legal provisions, when recruited, new members are assigned to a category A fund if they fail to choose the MPF themselves. After 10 years, unless they decide otherwise, they are assigned to a category B fund. They have to belong to a category B fund at least between the ages from 55 to 60. Between the age from 60 to 65, they have to belong to a category C fund. Out of the 7,678 new members recorded in December, 7,399 (97.6%) were assigned by Regos automatically, while this share reached 97.4% in the previous year. Termination of membership due to retirement or death in 2022 was recorded with respect to 15,929 insured persons, 14.7% more than in 2021. Total net contributions paid to MPFs in December amounted to HRK 729.9m (0.6% of net assets at end-November), while payments from all MPFs due to personal account closures amounted to HRK 150.2m (0.1% of net assets at end-November). On an annual basis, HRK 8.2bn were paid to MMFs in 2022, i.e. 9.7% more than in the previous year, while the total amount of payments from these funds amounted to HRK 2.1bn, which is 7.6% more than in 2021.

At the end of December 2022, net assets of MPFs amounted to HRK 132.2bn, declining by HRK 783.6m (0.6%) relative to the previous month. Compared to the end of 2021, this is a decrease of HRK 809.8m or 0.6%. Nominal monthly Mirex index returns reached -0.7% for category A, -1.1% for category B and -0.6% for category C. Depending on the pension fund of a particular pension company, the range of annual returns of category A funds ranged from -7.13% to -2.11% in 2022, category B from -7.61% to -2.95% and category C from -7.16% to -3.49%.

The invasion of Ukraine, the rise in energy prices and the global increase in inflation led to a strong global change in financial asset prices in 2022, with a simultaneous decline in the stock and bond markets, which has not been observed in the last 20 years. Such circumstances have affected almost all classes of financial assets worldwide. According to currently available data, the 8 largest European pension funds recorded average returns of -13.6% in the first half of 2022, while the S&P 500 yield was also negative (-19.44%) at the end of 2022.

However, unlike other investments, pension savings are of a long-term nature which makes it more possible to balance positive and negative trends in markets. In this way, funds generally generate positive returns over a longer period of time. In addition, pension fund returns (monthly, annual, multiannual) reflect the result of investments on all insured persons’ contributions to a particular fund over a certain period of time, while for each individual member the impact on their total assets, i.e. their individual returns, is different, depending on the period of saving in category A, B and C funds and the amounts of payments.

Statistically and observed over a longer period, the annualised[1] returns of all categories of pension funds remained positive. In Croatia, the minimum period of contributions of each member to category B and C funds is five years, so from 2017 to 2022, the five-year returns of category B funds range from 2.13% to 2.99%, while the same returns for category C funds range from 0.74% to 1.11%. Annual rates of return of category A funds range from 3.84% to 5.16%. Annualised Mirex returns since the beginning of MPFs’ operation reached 6.3% for Mirex A, 5.0% for Mirex B and 3.3% for Mirex C.

At the end of December 2022, bond investments of MPFs totalled HRK 83.8bn (63.4% of total assets), making their share increase by 0.2 p.p. on a monthly level, i.e. 0.7 p.p. on an annual level. The share of equity investments in MPFs’ assets decreased by 0.3 p.p. on a monthly basis, amounting to 20.2% of MPFs’ assets (HRK 26.7bn) at the end of December 2022, while the decrease on an annual basis stood at 1.0 p.p. Investments in domestic shares accounted for 12.2%, while investments in foreign shares accounted for 8.0% of MPFs’ assets. As regards other investment types, investments in investment funds amounted to HRK 14.0bn (10.6% of the assets), making the proportion of these investments in total assets decrease by 0.3 p.p. relative to the previous month, i.e. by 1.1 p.p. on the annual level. Investments in cash and deposits amounted to HRK 6.5bn, i.e. 4.9% of MPFs’ assets at the end of December 2022, which was a decrease by 0.3 p.p. on a monthly basis and increase by 1.7 p.p. on an annual basis.

THIRD PILLAR PENSION FUNDS

In December 2022, the number of members of 8 open-ended voluntary pension funds (OVPFs) rose by 1.0% on a monthly basis, while the number of members of 21 closed-ended voluntary pension funds (CVPFs) increased by 1.8%, making the number of members of these funds reach 374,702 and 47,718 respectively. Total monthly payments made to voluntary pension funds (VPFs) in December 2022 amounted to HRK 290.1m (3.8% of net assets at the end of the previous month), increasing by 271.5% compared to the previous month. On the annual level, total payments made to these funds in the entire 2022 amounted to HRK 983.0m, increasing by HRK 49.0m (5.3%) relative to the previous year. Total payments made from these funds in December 2022 reached HRK 26.5m, rising by HRK 3.3m (14.21%) compared to total payments made from VPFs in November. Total payments made from these funds in the entire 2022 reached HRK 339.1m, rising by HRK 32.3m (10.5%) relative to 2021. Total payments from VPFs made due to retirement and other reasons accounted for 82.3%, payments made due to the change of fund reached 13.4%, while those made due to death accounted for 4.3% of total payments in December. As regards total payments made due to retirement, the amount of HRK 6.4m was paid in the form of lump-sum payments, HRK 8.4m was paid through a pension company (fund), while HRK 6.8m was transferred for payment to pension insurance companies.

In December 2022, net assets of VPFs increased by HRK 192.4m (2.5% on a monthly basis, i.e. 2.1% on an annual basis) and stood at HRK 8.0bn. Monthly nominal returns of VPFs in December 2022 ranged from -1.6% to -0.2%, while returns on an annual basis ranged from -10.5% to -4.1%. As regards the investment structure of VPFs, at the end of December 2022, the largest part of the portfolio was made up of bonds and amounted to a 52.4% share in total assets, followed by stocks with a 25.1% share and investment funds with a 12.6% share. The share of bonds in VPFs’ investments decreased on the monthly basis by 0.8 p.p., the share of investments in investment funds decreased by 0.9 p.p., while equity share decreased by 0.4 p.p. On an annual basis, the share of bonds increased by 2.0 p.p., while the shares of stocks and investment funds decreased by 0.8 p.p. and 2.4 p.p., respectively.

INSURANCE COMPANIES

In December 2022, there were 15 insurance companies operating on the market. Their total gross written premium in 2022 amounted to HRK 12.7bn, of which HRK 2.85bn (22.5%) related to life insurance premium and HRK 9.83bn (77.5%) to non-life insurance premium. On an annual basis, total gross written premium rose by 8.2% in 2022, with the increase in non-life insurance premium totalling 11.5%, and the decline in life-insurance premium reaching 1.8%. The structure of non-life insurance gross written premium was dominated by motor vehicle liability insurance (32.9%), followed by insurance of land motor vehicles (16.1%) and other property insurance lines (10.8%). The amount of claims settled reached HRK 7.7bn, increasing by 5.7% on an annual basis. HRK 3.2bn of this amount related to life insurance (a 7.2% increase on an annual basis), while HRK 4.5bn related to non-life insurance (a 4.7% increase on an annual basis). In the total amount of claims settled in non-life insurance, the largest amounts relate to motor vehicle liability insurance (37.9%), insurance of land motor vehicles (19.9%), insurance against fire and natural disasters (7.6%) and other property insurance lines (13.2%).

CAPITAL MARKET

In December 2022, the total turnover on the Zagreb Stock Exchange reached HRK 214.3m, decreasing by 4.4% on a monthly basis. Total turnover for the whole year 2022 reached HRK 3.0bn, which is 16.5% more than the annual turnover in the previous year. Market capitalisation rose slightly (by 0.8%) relative to the previous month and stood at HRK 258.9bn, of which stocks amounted to HRK 135.8bn, bonds to HRK 123.0bn and ETFs to HRK 56m. On an annual basis, market capitalisation decreased by 5.5% compared to the end of the previous year. As for stock indices, which were all positive, the largest monthly rise was recorded by CROBEXkonstrukt (13.7%), while CROBEXnutris recorded the smallest monthly rise (3.0%). The main ZSE stock indices (CROBEX and CROBEX10) recorded a monthly increase of 4.3% and 3.1% respectively. Both bond indices grew moderately on a monthly basis: CROBIS by 0.2% and CROBIStr by 0.4%. On the annual level, the highest annual rate of return of 52.5% was recorded by CROBEXtransport, while the main stock indices recorded annual decrease, namely: CROBEX -4.8% and CROBEX10 -8.4%, same as both bond indices: CROBIS -12.6% and CROBIStr -10.5%. PLAVA LAGUNA d.d. was the stock most traded in December, with its turnover amounting to HRK 12.1m (11.8% of the overall trade in stocks in December) and a 6.6% monthly price increase. The stock that recorded the largest annual turnover was PODRAVKA d.d., which generated annual turnover of HRK 178.0m with annual price increase of 0.3%.

INVESTMENT FUNDS

In December 2022, there were 100 UCITS operating on the market, same as in November. Total net assets of UCITS amounted to HRK 16.3bn at the end of the month, decreasing by HRK 512.6m or 3.1% compared to the previous month, while net assets of all UCITS decreased by HRK 5.2bn (24.2%) relative to the end of the previous year.

Total net payments of all UCITS in December were negative (HRK -278.0m). The only positive category were funds marked as “Other” (HRK 43.9m). Negative monthly net payments were recorded by bond funds (HRK -297.6m), feeder funds (HRK -12.4m), balanced funds (HRK -3.8m) and equity funds (HRK -8.0m). Looking at net annual payments, all types of UCITS, except those in the “Other” category, were negative in 2022, namely: bond funds HRK -3.8bn, balanced funds HRK -203.9m, equity funds -134.5m, feeder funds HRK -47.6m and other funds HRK 775.6m, which amounts to HRK -3.4bn for all UCITS. Bond funds’ net assets accounted for 67.9% of the total net assets of all UCITS at the end of December, while equity and balanced funds accounted for 12.1% and 6.5% of the total net assets of UCITS respectively. In December 2022, all types of UCITS recorded negative asset-weighted average monthly returns, namely equity funds -1.1%, feeder funds -3.9%, balanced funds -2.9%, other funds -2.0% and bond funds -0.5%. Average annual returns weighted by the share in assets were also negative for all types of UCITS: -13.7% for equity funds, -15.1% for feeder funds, -14.0% for balanced funds, -11.8% for other funds and -6.8% for bond funds.

Net assets of the Fund for Croatian Homeland War Veterans and Members of their Families amounted to HRK 953.6m (a 2.1% monthly increase), with the monthly return of the fund reaching 2.3%. On an annual basis, net assets of that fund decreased by 3.7%, while its annual return reached -2.5%.

The full report is available at Publications/Monthly reports.

 

[1]The annualised return is the geometric average of annual returns realised in the period observed.

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