Finnish mutual pension insurance company Etera saw its investment return fall last year to 3.7% from 6.3%, as equities and bonds produced slimmer profits but said it improved cost efficiency and increased the amount it was transferring to client bonuses.
In its financial statement for 2015, the pension provider reported a fall in solvency levels.
Solvency capital ended the year at €751m, down from €861m at the end of 2014, giving a solvency ratio of 14.2%, down from 16.9%, and a solvency position of 1.4 versus 1.6.
Stefan Björkman, Etera’s chief executive, said: “Our diversified portfolio reacted less to the stock markets’ extremes than the earnings-related pension sector on average.”
He said returns flowed in steadily from a number of sources, and that returns on equity investments, bonds and real estate in particular had been good.
Fixed income generated a return of 2% last year, down from 4.8% in 2014, while equities produced 6.6%, down from 10.8% the year before.
Real estate investment made 4.2% for Etera in 2015 compared with 5.4% in 2014.
Relative allocations between asset classes were little changed between 2015 and 2014, and fixed income investments made up 44.3% of Etera’s total investment at fair value at the end of December.
Equities accounted for 29.3%, real estate made up 17% and ‘other’ investments, including hedge funds and commodities, added up to a 9.4% slice.
Operating expenses shrank by 4% from the previous year to stand at €42m at the end of December, Etera said, adding that it would transfer €10.2m to client bonuses for 2016, up from €8m the year before.
“We have systematically enhanced our operations, which has resulted in a better loading profit and higher client bonuses,” Björkman said.
Etera’s domestic investments made up 38% of the overall portfolio at the end of December, down from 42% a year before.
Björkman said the pensions insurer focused particularly on real investments and investment loans in its Finnish investment.
“This manifested itself as investments in real estate, real estate loans and infrastructure and loan funds,” he said.
Even though domestic investment shrank last year, Etera said investing actively in Finland would be one of its areas of focus this year.
“We will seek investment targets in Finland regardless of the short-term economic cycle,” Björkman said.
Etera’s total investments grew to €5.91bn at the end of 2015 from €5.8bn a year before.