“The markets recovered from the low point, and the returns on equity and fixed-income investments almost entirely offset the dip of the last quarter of 2018,” says Varma’s CEO, Risto Murto.
The value of investments was EUR 45.8 billion at the end of March (44.0 bn on 1 Jan), and solvency strengthened to EUR 10.6 billion (9.6 bn on 1 Jan).
Varma’s investments have not generated better returns during one quarter since January–March 2015.
“This was the second best quarter for Varma in the past ten years. All asset classes generated positive returns. The positive return development was driven most of all by the strong equity market performance on a broad front, but fixed income investments also generated good returns in spite of the zero interest rate environment,” says Varma’s CIO Reima Rytsölä.
Equities yielded a return of 10.0% (–1.4%), with listed equities performing especially well, at 13.1% (–2.2%). The return on fixed-income investments was 1.9% (–0.3%) and on hedge funds 2.0% (1.9%). The return on real estate investments was 0.7% (1.2%).
“The Fed abandoned its tightening monetary policy, and the equity markets reacted positively to this change. Messages concerning the phase of the global business cycle, however, remain mixed. It is still unclear whether Finland’s next government will face a tailwind or headwind in the export market when it starts its work,” says Murto.
Climate risks’ weight increases in sustainability work
Varma is updating its sustainability programme. Climate change mitigation, promoting workability and good working life, and ethical business will be the focal areas of the updated programme.
For the first time, Varma’s Annual and CSR Report included an account of climate-related risks and opportunities in its investments according to the recommendations of the international Task Force on Climate-related Financial Disclosures (TCFD). Reporting according to TCFD improves the comparability of companies’ approach to climate change. Varma also encourages the companies in which it has a holding to provide an account of their climate-related risks and opportunities.
Varma is launching research activities focussing on workability risk management
The number of disability pension applications received by Varma in January–March increased by 16% compared to the same period in 2018. The number of applications took an upward turn after a long period of decline.
Varma is launching research activities focussed on workability management and workability risk management. The aim is to better identify disability risk factors and to determine the effectiveness of the methods used for managing those risks.
Already in the pilot phase of the research activities, Varma used artificial intelligence to analyse the reasons for disability in the rehabilitation and disability pension applications. The analysis shows that mental health-based disability or the risk thereof among those aged under 45 is often related to challenging sales or care work.
Efficiency still among the best in the sector
Varma was successful in its customer acquisition in the first quarter; the net amount of annual premiums written transferring to Varma amount to EUR 24 million. Efficiency also remained at a good level. Varma used 68% of the insurance contributions meant for operating expenses. The excess will be returned to customers as client bonuses.
At the end of March, Varma provided insurance for 566,000 (560,000 on 1 Jan) employees and self-employed persons and had 344,000 (343,000 on 1 Jan) pension recipients.
Varma Mutual Pension Insurance Company is a responsible and solvent investor. The company is responsible for the statutory earnings-related pension cover of some 900,000 people in the private sector. Premiums written totalled EUR 5.1 billion in 2018 and pension payments stood at EUR 5.7 billion. The company’s investment portfolio amounted to EUR 45.8 billion at the end of March 2019.
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