FINLAND - The €5.8bn Eläke-Fennia Mutual Insurance Company saw the value of its investments reduce by €285.2m in the first half of 2008 as it reported a net negative investment return of -4.6%.

Interim results from the pension company showed the number of pension insurance policies for both employed (TyEL) and self-employed (YEL) workers rose to 200,000 by the end of June, to increase the firm's market share.

Eläke-Fennia revealed it now pays out pension benefits to over 78,000 people, with a total expenditure of €357m at the end of June, although this is expected to increase to €724m by the end of 2008.

Lasse Heiniö, managing director of Eläke-Fennia, said the firm has attempted to lower the level of risk in its investments, caused by the current market conditions, by reducing its allocation to equities.

The figures showed the allocation to shares fell from 46.6% at the end of December 2007 to 32.6% at the end of June 2008, while the allocation to bonds increased to 33%, from 30.9%, although "other debt and deposits" received the largest boost with the allocation - more than doubling from 7.2% to 16.8%.

Direct real estate investment produced the best performance with a return of 3.4% for the six months, while listed shares had the worst result with a negative return of -15.8%, accompanied by hedge funds which delivered a negative return of -0.7% and bond yields of -3.2%.

The combined overall negative investment return was -4.6% compared to 5.6% at the end of June 2007, while the first half produced a negative investment result of -€285.2m, though Eläke-Fennia claimed over a five-year period the average return is about 6%.

Despite the negative result, the company emphasised its solvency ration is still sufficient at €749m, or 14.1% of technical provisions, which is 1.8 times the legal minimum requirement for a capital buffer.

Eläke-Fennia's results follow a similar pattern to other Finnish mutual pension companies, as Varma, Ilmarinen, and Tapiola have all reported first half falls of between 3.7% and 4.9% in the past week. (See earlier IPE articles: Ilmarinen loses €1.7bn in H1 and Finnish funds report negative returns in H1)

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