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Private equity lifted Etera in 'fluctuating markets'

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  • Private equity lifted Etera in 'fluctuating markets'

FINLAND - A 45.8% return on private equity and unquoted equity investments helped Etera Mutual Pension Insurance Company achieve an overall result of €47m in 2007, albeit this is a fall of €91m from the previous year.

The pension company's full financial statements for 2007 revealed the value of its investments increased from €5.8bn to €6.1bn following an overall return of 4.5%, although this was below the 7.7% achieved in 2006.

Mika Pesonen, chief investment officer at Etera, said the result was "satisfactory" for such a challenging year, and despite the fact "fluctuations in market values lowered Etera's returns"  he claimed the benchmark index was "clearly outperformed thanks to successful allocation choices".

Figures revealed private equity and unquoted equities provided the largest returns of 45.8%, while fixed income achieved 1.4% - double the yield from 2006 - and investment loans produced a consistent return of 5.1%.

However, returns from quoted equities fell from 18.4% in 2006 to just 3.4% in 2007, while real estate returns also slipped from 14.2% to 12.5%, though Etera revealed its first 5% allocation into absolute return investments  - which include capital protected products, hedging and hedge funds - yielded a return of 4.9%.

Etera also confirmed income from employee premiums had fallen 13% in 2007 to €628m, however it claimed this was "better than predicted" and attributed the drop to legislation reform, which meant the insurance policies of public sector employees were transferred from Etera to the public sector pension act scheme.

At the beginning of 2007, Finland combined the three previous pension acts - the Temporary Employees Pension Act (LEL), The Employees Pension Act (TEL) and the Pensions Act for performing artists and certain groups of employees (TaEL) - into a single employment pensions act (TyEL).

This ended Etera's position as the only insurer to offer LEL and TaEL pension, and forced it to compete for clients in 2007 with other employment pension companies, which resulted in it losing 5,610 policies valued at around €115m, but gaining 2,465 new TyEL clients, which is equal to 11.6% of all new TyEl business.

Kalevi Hemilä, managing director of Etera, said: "The first year of competition with the other employment pension companies was tough, but we were able to achieve a good result and establish our position in the earnings-related pension market.

"The round of insurance transfers in March 2007 dampened our hopes. The number of policy transfers from one company to another was high, but in the June and September rounds the numbers levelled off. In September, many clients returned to Etera. Those who left Etera included many former TaEL clients, who had taken out insurance for short-term employees, and small companies," Hemilä added.

As a result, figures showed Etera now has responsibility for 325,000 employees and 1,603 self-employed persons 1,603, and during 2007 it paid a total of €863m in pensions and rehabilitation expenses.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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