FINLAND – Finland’s Etera generated investment returns of 9.9% in 2012, according to preliminary figures, after increasing its allocation to emerging market bonds in the final quarter of the year.

Hannu Tarkkonen, managing director of the mutual pension insurance company, said: “As a result of our new investment strategy, our returns were positive in every quarter of 2012.”

The company had had to manage risk pro-actively to achieve this, he said.

“Our solvency also strengthened, and our premiums written grew compared with the previous year,” he said.

The investment portfolio grew to €5.7bn at the end of 2012, up from €5.3bn 12 months before, and the return on investments rose to 9.9% from the 2.3% loss reported for 2011.

Etera’s solvency ratio rose to 21.3% from 15.7%.

All asset classes generated positive returns during the year, with corporate and emerging market government bonds producing the highest return, at 15%.

Listed equities returned 14.9%.

Jari Puhakka, Etera’s CIO, said the company made changes to its strategic allocation in the fourth quarter of 2012 in line with its longer-term view.

“We increased, for example, our investments in emerging market government bonds, as euro-zone government bonds became less appealing and the interest rate fell to such a low level that the real return was negative,” he said.

Etera also focused on preserving its solvency capital in the last quarter, in keeping with its counter-cyclical investment approach, Puhakka said.

As well as high valuation levels for all investment classes, there were several risks to deal with, he said.

These included the euro crisis, US budget difficulties, fast-growing government debt, the risks arising from central bank action that had been taken and the fact many countries had slipped into recession, he said.

Puhakka said Etera was confident about its investment returns this year, but did not believe they would be as high as those seen in 2012.

“This is mainly because it will be extremely difficult to reach the return on fixed income investments of last year with the underlying yield levels,” he said.

“The investments with the most stable return outlook will be in real estate and private equity and debt.”