FINLAND - Varma Mutual Pension Insurance Company has announced preliminary figures for 2008 showing the firm's investments made a loss of 15.2% last year.
The largest private sector pension insurance company in Finland, which paid benefits to 309,000 people at the end of 2008, attributed the poor performance - compared to a 6% return in 2007 - to an "extremely challenging" year.
Figures published ahead of the full results next month showed the market value of the fund's investment dropped almost €4bn from €28.4bn in 2007 to €24.6bn, although it noted the premiums invested over the year actually increased by 8% to total €3.4bn.
Varma stressed the solvency of the company remains strong because although the solvency capital is expected to be 17% of technical provisions, against 31.5% in 2007, its capital is 2.8 times the legal solvency limit - an increase from 1.9 times at the end of the previous year.
Matti Vuoria, president and chief executive of Varma, admitted "for an investor like Varma, the year was extremely challenging, which shows in the poorer results," but added as the investment environment changed so too did the company, as it made "substantial changes in the structure of our investment portfolio".
At the end of September 2008, Varma had 31.1% in equities, 40.8% in fixed income, 13.3% in property and the remainder in other investments including hedge funds
Yet in the preliminary figures Vuoria revealed "our equity weighting is now exceptionally low and we have also taken strong measures to hedge against the equity risk."
That said, Vuoria admitted: "Because of the exceptional market situation, we have made an estimated write-down on our results, which is directed at some of the investments we have made in private equity funds and international real estate funds."
However despite the poor performance, the preliminary figures also showed Varma is able to set aside around €37m, or 0.2% of the estimated payroll for client bonuses, although this is still a drop from the €92m set aside the previous year.
The full audited results for 2008 will be presented in Helsinki on 12 February 2009.
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