Finnish pensions insurance company Varma this morning reported a 2022 investment loss of -4.9% – narrowly outperforming Ilmarinen, but the firm saw a bigger dip in overall assets than its peer after taking in a smaller volume of pension premiums during the year.
In Varma’s full-year results statement released today, chief investment officer Markus Aho said a cooling of inflation growth in the last quarter of 2022, falling long-term interest rates and an improvement of Europe’s energy situation had calmed markets, and European equities had performed strongly at the end of the year.
“The worst fears of a recession have not been realised, although we cannot be certain yet how the investment environment will develop,” he said.
Within Varma’s overall portfolio, equities lost 8.7% in 2022, fixed income made a 5.2% loss, but private equity produced a positive 7.9% return, real estate generated 5.7% and hedge funds returned 2.3%, according to the 2022 results published.
The value of Varma’s total investments fell to €56.2bn from €59.0bn, putting it practically on level pegging with its main rival Ilmarinen once more in terms of size, whereas Varma had been leading after the third quarter.
Varma said its solvency ratio declined to 130.5% from 139.4% – a similar degree of weakening to that reported by Ilmarinen yesterday, but from a stronger starting point than its rival.
Even though Varma’s -4.7% investment loss was narrower than the -6.6% reported by Ilmarinen yesterday, Ilmarinen had taken in €6.56bn of pension premiums during the year – more than the €6.1bn gathered by Varma.
On the other hand, the two institutions reported similar volumes of pensions paid, at €6.61bn for Ilmarinen and €6.5bn for Varma.
Yesterday, Ilmarinen said its cost effectiveness had improved over the year, with the ratio of operating expenses to expense loading components falling to 63.1% from 75.1%.
This morning, Varma reported a 70% figure for this, and said it would refund €173m in client bonuses to its customers – a similar level to the €175m of refunds Ilmarinen has said it is making.
“The bonuses will lower our customers’ TyEL insurance contributions in 2023,” Varma said.
Elo ends 2022 with narrower loss than two larger rivals after unlisted equities surge
Elo, the third largest of the four pension insurance companies in Finland’s private sector earnings-related pension system, reported a narrower investment loss for 2022 than Ilmarinen and Varma, at -3.7%.
Hanna Hiidenpalo, deputy chief executive officer of the Espoo-headquartered pension provider, said: “The total return on Elo’s investments in 2022 remained negative, as the returns of most listed asset classes were weak.”
But she said the return in the last quarter had been positive.
“The return on investments was improved by diversification into real estate and infrastructure investments, which generated a positive return,” she said.
While equities ended with a 6.9% loss and fixed income assets lost 2.8% in the year, Elo said unlisted equity investments had produced a positive 20.2% return, and that interest rate hedges had continued to help to mitigate losses from strongly-rising market rates.
Real estate produced a 5.3% positive return for Elo, according to the results statement, though the firm said the changed economic situation had slowed down trading in the real estate market towards the end of the year, and yield requirements for property had risen.
“Investors’ interests have shifted to safer sectors, such as housing and public sector real estate,” Elo said.
Elo’s total assets dipped to €28.2bn at the end of 2022 from €29.4bn a year before, and solvency weakened to 121.4% from 128.1% by the end of the year.
Veritas’ positive Q4 still leaves self-employment pension provider with 4.5% 2022 loss
Veritas – the smallest of the four pension insurers – has reported an overall loss on investments of -4.5% during the year, in spite of a positive 1.8% return for the fourth quarter alone.
Among asset classes, fixed income investments made a 7.4% loss, equities ended the year with a loss of 8.4%, while property made a positive return of 3.3% and the category of “other investments” – more than half of which is hedge funds – garnered a 10.3% return for Veritas, according to the report.
Kari Vatanen, CIO at the Turku-headquartered pension provider for entrepreneurs, said: “Alternative investments served as the bright spot of the year, with their positive development mitigating the negative return impact of the equity and fixed-income markets.”
The mild winter had been a stroke of luck for Europe, he said, adding: “It allowed us to avoid the worst of the energy crisis.”
Veritas’ total assets fell to €4.2bn over the year from €4.4bn, even though the pension insurer reported a 13.4% increase in premiums written during 2022.