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Etera drops €1bn in 2008

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  • Etera drops €1bn in 2008

FINLAND - Etera Mutual Pension Insurance Company saw its market share fall to 5.6% in 2008 and has reported an overall loss of €1.03bn following a negative investment performance.

Full figures from Etera's annual report for 2008 showed the return on investments was -17% in 2008, and the value of the assets dropped from €6.1bn to €4.9bn as it reported losses on all investment areas except real estate.

The pension company revealed premium income for the year was down 9.5% to €569m, as although Etera accounted for 14% of all new TyEL insurance policies - for employed workers - and 7% of all new YEL policies for the self-employed, it admitted transfers between pension insurance companies "was considerably less active than in 2007".

It added the premium income from customers joining Etera was €3m less than those transferring out, so while the share of new insurance policies increased from 2007, the firm's market share actually fell from 6.9% to 5.6%.

However, Kalevi Hemilä, managing director of Etera, said: "Customers concentrated their insurance policies on Etera and we acquired customers in new branches of industry. The first round of insurance transfers in 2009 was profitable for Etera, so the present trend looks good."

The pension firm also reported an investment return of -17% in 2008, with the biggest losses coming from equity holdings, despite reducing the proportion of both equities and hedge funds in the portfolio and increasing fixed income assets.

The equity allocation, reduced from 37% to 21% over the year, returned -40.9%, with quoted equities posting the worst result of -44.4%, as the pension firm holds 45% of its equity portfolio in Finland and other Nordic countries.

That said fixed income investments, which increased by 14 percentage points to 58% of total assets, also produced a negative return of 2.1% although it pointed out its loan portfolio increased by around 82% over the year to €306.8m in response to strain on the financial market.

The 4% allocation to absolute return investments, comprising capital-protected products, hedging strategies and hedge funds, yielded a loss of 19.1%, even though Mika Pesonen, chief investment officer at Etera, revealed the firm had "continued to decrease our investments in hedge funds. At the end of the year they stood at 2%".

Real estate investments - of which over half is in office premises - produced the only positive return of 1.2% overall, while indirect property investments and funds achieved a yield of 1.5%.

Despite this, Etera reported a "solid" solvency ration of 14% and a solvency position of 2.2 times the legal requirement as the solvency margin, which acts as a risk buffer for investments, was valued at €621m.

Hemilä said: "The international financial crisis made 2008 a challenging year. However, Etera's solvency remained solid, and the sale of new insurance policies was brisk."

Looking ahead, the pension firm noted there is uncertainty in the construction industry in 2009, one of Etera's key operation sectors, so this "will be likely to weaken premium income" thought it stated it would "strengthen its competitiveness by improving the efficiency of its operations and by networking", and would place an even stronger focus on becoming the "forerunner in e-business".

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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