Veritas solvency strong despite 4% fall
FINLAND - Veritas Mutual Pension insurance company retained a strong solvency ratio in the first half of the year at twice the minimum required limit, despite reporting negative investment returns of -4%.
Interim results said the premiums the firm will receive are predicted to rise by 10% by the end of 2008, as Veritas insured 7,940 employed people under TyEL policies in the first six months and 13,670 under the self-employed YEL insurance policies.
However, while the company received €166.6m in pension premiums in the first half, compared to €145.9m in the same period in 2007, the overall return on investments was -4%, which resulted in an overall loss of €115.6m.
The poor performance in the first half - compared with an 8.5% return in 2007 and an average return of 7.5% a year over the last decade - was similar to many other asset managers and pension funds and attributed to a "drastic decline" in traded shares, which resulted in a negative return of -13.7% over the period.
Veritas reported equity investments lost €77.4m and bond portfolios also performed poorly with a loss of €10.6m, however it claimed the stock market impact was partially offset by a large allocation to short-term fixed income instruments.
In contrast, the firm's real estate investments produced €9.4m, while other debt and deposit instruments recorded an income of €3.2m, to give an overall negative return on assets of -€75.6m.
Jan-Erik Stenman, chief executive of Veritas, said the first half showed "strong growth in premiums" following the firm's completion of a number of TyEL transfers, as its new distribution network "has begun to bear fruit".
Stenman added: "The investment return was negative, but because of the last few years of good investment results, the solvency remains strong."
The capital adequacy ratio at the end of June 2008 measured 23.7%, slightly lower than the 32.6% at the end of December, however Veritas noted this is still twice the legal minimum solvency requirement.
Stenman said: "The investment climate will be challenging for the rest of the year. A strong solvency will allow us to continue to monitor the long-term investment market fluctuations and a strong financial standing will also benefit customers."
Despite the fall in returns, Stenman said the company "has developed in line with the targets set" and revealed the priorities going forward will include continued development and improved customer service, as it is "investing heavily in cooperating with our partners in continuing to develop their own sales network".
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