Finland’s big two pension insurance companies, Ilmarinen and Varma, reported negative investment returns for the first three months of this year of 2.2% and 1.9%, respectively, with their leaders warning of uncertainty ahead and the impact on Finland of Russia’s invasion of Ukraine.

Risto Murto, president and chief executive officer of Varma, said in the interim report released this morning: “The outlook for the economic operating environment is exceptionally uncertain.”

The biggest risks to the global economy and the investment markets are related to accelerating inflation and the central banks’ measures to keep it in check, he said, adding that the “extremely tightened security policy environment” also undermined predictability and was putting the brakes on companies’ investment decisions.

“In Finland, the sharp rise in costs is undermining households’ purchasing power and companies’ profitability, while investments in defense and recovery are simultaneously increasing the public deficit,” Murto said.

Meanwhile, Ilmarinen’s president and CEO Jouko Pölönen condemned Russia’s invasion of Ukraine, saying in the firm’s interim report that it had hit Finnish listed companies more than the average of European firms.

“Russia’s attack on Ukraine is entirely indefensible and has caused great suffering for the people trapped in the midst of the war,” he said.

The war impacted the security and economy of Finland and the rest of Europe, creating uncertainty and concern about the future, Pölönen said in the report.

Ilmarinen said the US equity markets fell by just over 5% in the quarter, and the broad European stock index had fallen by nearly 6%.

“Finland’s equity markets, on the other hand, plummeted by more than 12%. Russia’s war on Ukraine has impacted Finnish listed companies more than the European average,” it said.

Reima Rytsölä, Varma’s chief investment officer, said the firm’s large weighting of US investments had helped offset the general fall in share prices in the first quarter.

“The US equity markets in particular have made a rapid recovery and already clearly surpassed the pre-war share price level,” he said, adding that otherwise, sentiment on the capital markets had been relatively calm since the war started.

Varma’s total assets dropped to €57.6bn at the end of March from €59.0bn at the end of last year, while Ilmarinen reported the value of its assets had fallen to €59.1bn from €60.8bn – keeping Ilmarinen as the largest of the four pension insurance companies in Finland’s earnings-related pension system.

The other two pension insurance companies, Elo and Veritas, reported their investment returns for the first quarter earlier this week, posting losses of 1.9% and 3.5%, respectively.

Separately, Varma announced today that it has appointed its head of private investments, Markus Aho, as its new CIO, to replace Rytsölä, who is set to become CEO of state-owned holding company Solidium in August. Aho is to take up the CIO role from 1 June, Varma said.

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