The four Finnish pension insurance companies behind the private-sector side of the country’s earnings-related pension system reported investment returns of between 8.3% and 13.5% for January to September, and at the three largest firms solvency ratios increased.
Elo reported a return of 9.4% for the nine months, Veritas generated 8.3% while the largest two providers, Varma and Ilmarinen, posted January-to-June returns of 13.5% and 10.5%, respectively.
Elo’s solvency capital increased to €6.09bn at the end of September 2021, from €5.96bn three months before, and its solvency ratio rose marginally to 126.9% from 126.6%.
However, Veritas, the smallest of the four pension insurance companies, saw its solvency capital dip slightly at the end of September compared to the end of June, to €1.01bn from €1.02bn, with its solvency ratio softening to 131.1% from 131.5%. The ratio was still higher than the end-December figure of 128.8%, however.
At Varma, solvency capital increased to €15.7bn at the end of September from €14.7bn on 30 June, and its solvency ratio rose to 137.7% from 135.6%, while Ilmarinen saw its solvency capital rise to €15.36 from €15.05bn and its solvency ratio climb to 135.0% from 134.6%.
At the end of September, total assets for Elo, Veritas, Varma and Ilmarinen stood at €28.3bn, €4.2bn, €56.6bn and €58.4bn respectively, according to the interim reports released at the end of last week.
Elo on track, Varma on hedge funds
Elo, which has been under close scrutiny by the Finnish FSA following very low solvency levels during the market turmoil of March 2020, commented on steps it was taking to improve things.
It said the FSA would review the need to carry on its direct supervision of the company via its authorised representative, lawyer Pekka Jaatinen, in April 2022 at the latest.
“During the past year, the company has taken several measures to develop its corporate governance, management system and risk management,” Elo said, adding that the development efforts were progressing “as planned and on schedule”.
Veritas reported that it had increased its market share of YEL insurance policies – pensions for the self-employed – in the first nine months of this year.
The number of YEL policies on Veritas’ books stood at 13,589 at the end of September, up from 13,285 at the close of 2020, according to the interim report.
Tommy Sandås, interim chief executive officer at Veritas, said: “The beginning of the year has been very strong for us in terms of customer acquisition and retention,” adding that the firm’s “personal and active service approach” obviously worked.
In its Q3 report, Varma commented that it had been promoting sustainability in hedge funds.
“Thanks to Varma’s engagement efforts, approximately 95% of Varma’s hedge fund investments have responsible investment policies in place, and a climate risk assessment is being conducted on them,” the Helsinki-based pension provider said.
According to the latest asset allocation figures, hedge funds make up 16% of Varma’s overall portfolio with a market value of €9.09bn at the end of September.
Meanwhile Ilmarinen’s CEO Jouko Pölönen made remarks in his firm’s report on the financial stability of the Finnish pension system, which he said would face challenges in the medium and long-term, despite being one of the best pension systems in the world.
“Financial challenges should be prepared for well in advance and not left for future generations to deal with,” he said.
Pölönen took issue with one particular plan, saying: “The public proposal to raise earnings-related pensions of less than €1,400 would weaken fairness between generations and would go against the basic principles of the earnings-related pension system.”