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Pension transfers and equities boost Finnish providers

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FINLAND - A €37m increase in insurance transfers under the Employees Pensions Act (TyEL) and a large position in Finnish equities helped improve the position of Veritas in 2009. And positive investment returns at rival provider Tapiola Pension were driven by an increased equity allocation last year.

Preliminary figures from Veritas Pension Insurance Company showed its investment strategy also paid off over the year as the net return on investment was 10.9%, compared to -15.5% at the end of 2008. This increased the total value of assets to around €1.9bn by the end of 2009, up from €1.7bn in June.

Jan-Erik Stenman, president of Veritas, said: "This result shows that our investment strategy has been correct. We did not make any large structural changes in our investment portfolio last year. The profits from quoted equities were especially good, at around 45%."

Staffan Sevón, chief investment officer, also said the pension company had "invested heavily in Finland, and by the end of the year more than half of our equities were placed in Finland".

"The Finnish economy is relatively strong, we have a very competent labour force and export to growing markets creates diversity in how the companies' results develop. We dare and want to invest in domestic labour and competency," Sevón added.

As a result of the improved figures, Veritas revealed its solvency position had increased from 16.7% of technical provisions in 2008 to 21.3%, which is approximately three times the solvency limit. Meanwhile, preliminary figures published ahead of the full data next month estimated Veritas will pay around €3.7m in client bonuses in 2009.

Rival provider Tapiola Pension reported a preliminary return on its investment portfolio of 13.5% in 2009, compared to -8.3% the previous year.

Early data published ahead of the full figures next month revealed the company's total equity portfolio returned 39.4% while fixed income investments produced 8%. Satu Huber, managing director of Tapiola Pension, described the overall return of 13.5% as the "best ever" result.

Tapiola Pension said it had "augmented its investments in companies considerably" in 2009, as the proportion of equities increased from 15% to almost 30% by the end of the year. It also increased investments in corporate bonds, although it claimed the best performance came from direct equity investments as they generated a return of more than 50%.

Following its 2009 positive performance, Tapiola claimed the negative result in 2008 has been "fully covered and exceeded" to produce an average annual return between 2008-2009 of 2.1%. The solvency ratio of the pension scheme therefore improved over the year from 16.2% of technical provisions to 23.7%, which is equivalent to three times the solvency margin requirement in Finland.

Meanwhile, Hanna Hiidenpalo, investment director at Tapiola Pension, added: "During the past 10 years, from 2000 to 2009, the average annual return on investment activities was 5.3%. The average annual return over five years was 4.8%. The past decade showed that return on equities can be very low or even negative for a long time. Both the broad-based European stock index Stoxx 600 and the S&P 500 posted losses from 2000 to 2009. On average, return on Finnish shares on the Helsinki Stock Exchange was less than 2% a year."

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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