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Finland's Etera denies claims it plans to merge with Ilmarinen

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  • Helsinki, Finland

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Finnish mutual pension insurance company Etera has refuted claims it may merge with another Finnish mutual pension insurance company next year.

In a statement, the company’s managing director Hannu Tarkkonen said Etera would continue as an independent pension insurance company, despite speculation in the Finnish media to the contrary.

Helsingin Sanomat, the largest daily in Finland, reported last week that Etera’s returns and solvency had weakened so markedly over the year to date that it considered solving the situation by merging with Ilmarinen, the second largest mutual pension insurance company in Finland.

Allegedly, Fennia Pension and LocalTapiola Pension, which will merge at the end of 2013, had also been interested in merging with Etera.

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In addition, according to the newspaper, the management fees Etera charges from its customers are insufficient to cover all its operational costs.

The newspaper said the firm would, therefore, have to fill in the gap from its investment returns.

According to Helsingin Sanomat, Finland’s Financial Supervisory Authority (Fiva) is observing the situation, which many pension professionals consider extremely problematic.

Etera currently manages assets worth nearly €5.6bn, and generated a -0.4% return for its investments over the first three quarters of 2013.

Ilmarinen manages assets worth nearly €31.5bn, while its investments returned 6.5% over the same period.

Etera’s solvency level, 16.2%, is currently the weakest among Finnish mutual pension insurance companies.

Ilmarinen’s solvency level stood at 25.8% after the third quarter of this year.

The core of Etera’s investment strategy is to diversify risks as much as possible, which has not worked in this year’s market environment, Tarkkonen said.

“We were actually prepared for weaker development of the markets,” he said.

“Equity markets developed better than we expected because of the actions central banks took.”

According to him, although Etera’s solvency level has fallen this year, it is still within the “normal” operational range.

Tarkkonen, who will retire next summer added: “The situation [still] enables having normal, full-scale investment operations.”

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