FINLAND - Finnish pension insurers continue to benefit from increased allocations to equities, particularly domestic stocks, as both Veritas Pension Insurance Company and Tapiola Pension post three-month returns of more than 4%.
Veritas returned 4.1% during the first quarter of 2010, up significantly from its negative performance of -1.3% for the same period last year.
Rising equity prices boosted the Q1 result; Veritas' equity portfolio was its best performing asset class, returning 9.1%.
Veritas chief investment officer Staffan Sevón said the pension company's equity allocation was increased during 2009, adding to Finnish equities in particular. He said the allocation was a beneficial way of participating in the economic recovery both in Finland and abroad as Finnish companies are very internationally oriented in their operations.
The economic outlook remains divided, Sevón said, with recovery looking sustainable but the valuation of both equity and fixed income markets appearing strained. In particular, Sevón expressed concern about the worrying development of rising government debt in southern Europe.
The company's solvency ratio was 24.4% of technical provisions or 3 times the stipulated solvency limit.
Veritas' rival Tapiola Pension reported a first quarter return of 4.4% as equity investments produced 9% and its fixed income portfolio returned 2.9%. It represented a significant improvement on the negative -0.1% return posted in the first three months of 2009.
Satu Huber, managing director of Tapiola Pension, said: "Investment markets have developed positively in the beginning of 2010. The global economy has recovered more quickly than expected. A cautious attitude should, however, be adopted towards the sustainability of the growth."
The real estate portfolio also produced a positive result of 0.9%, although within this the 1.7% return on direct real estate investments was more than offset by the -2.8% result from real estate funds and joint investments.
Listed equities produced the best performance in the three months with a return of 9.5%.
Hanna Hiidenpalo, investment director at Tapiola Pension, admitted the good return was supported by the strengthening of the equity market in March. Hiidenpalo added: "During the first part of the year, the Nordic countries have performed better than other markets."
Hiidenpalo said risk appetite among investors remained high, supporting the equity market in the short term. She added: "But in the longer term there is a distinct possibility of new price bubbles forming. At the moment equity markets are supported by low interest rates, good liquidity and lack of alternative investment opportunities."
The value of total assets managed by Tapiola reached €8.98bn, with a solvency ratio of 27.2%, or 3.3 times the solvency limit.