Varma’s 2021 half-year result: The return on investments was 10.4 per cent, i.e. EUR 5.2 billion

The first half of 2021 marked Varma’s best half-year investment result in its history. The return on investments was 10.4 per cent, or EUR 5.2 billion, and the value of the investments grew to EUR 55.0 billion. Equity investments and hedge funds performed especially well.

“Varma’s half-year result was very strong, and pension assets reached a new record,” says Varma’s President and CEO Risto Murto.

“Finland’s economy has coped well with the coronavirus crisis, and the financial situation of Varma’s customers has improved since the start of the year. The spread of the delta variant of the virus is likely to slow down the opening up of the service sector somewhat, but fortunately it will not change the underlying economic picture. The outlook right now is exceptionally strong,” Murto adds.

Varma’s investments yielded a return of 10.4 (-5.7) per cent, or EUR 5.2 (-2.8) billion, in January–June. The value of investments grew to EUR 55.0 (50.2 on 1 Jan) billion at the end of June. Equity investments yielded the highest return, at 18.3 (-8.4) per cent, of which private equities accounted for 25.2 (-5.1) per cent and listed equities for 16.2 (-9.7) per cent. Other investments returned 7.4 (-8.9) per cent, of which hedge funds accounted for 7.5 (-7.9) per cent.

Varma increased the share of equity investments by 4.7 percentage points since the end of last year. At the end of June, equity investments made up 51 per cent of the entire investment portfolio, more than ever before.

“The equity markets have performed very well, and Varma’s hedge fund investments have also yielded good returns. US equities broke records the entire first half of 2021 and continued to do so in July, despite the spread of the delta variant of Covid-19. Companies’ earnings season has not brought disappointment following the market growth,” says Varma’s CIO Reima Rytsölä.

Thanks to good investment returns, Varma’s solvency capital grew to EUR 14.7 (11.5 on 1 Jan) billion and was 1.8 times (1.7 on 1 Jan) the solvency limit.

“In the second half of the year, investors will keep an eye on whether the rise in inflation will come to a halt as expected. If the central banks tighten their monetary policy too quickly, economic growth would be at risk,” says Rytsölä.

Most client companies able to cope with pandemic-period defaults

The financial situation of Varma’s customers appears to be better now than it was last year and even somewhat better than it was at the start of the year. For example, there were fewer payment reminders, overdue payment plans and bankruptcies in January–June than in the same period last year, and the feared wave of bankruptcies never materialised.

“If the restriction situation continues as it is now, most companies will probably be able to settle the payments they accrued during the pandemic,” Murto estimates.

The number of disability pension applications arriving at Varma decreased in January–June. In the first half of the year, Varma processed 12 disability pension applications in which the long-term effects of the coronavirus were indicated as the main reason for disability. Of these, one applicant was granted permanent disability pension and six were granted the fixed-term cash rehabilitation benefit. Disability pension applications on mental health grounds decreased by nearly 13 per cent compared to the same period last year.

The pension liabilities of the bankrupt pension fund Viabek were transferred to earnings-related pension companies on 30 June 2021. As part of the arrangement, approximately EUR 61 million in liabilities transferred to Varma. The management of Viabek’s current earnings-related pensions and pension benefits earned by employees and entrepreneurs, as well as most of Viabek’s assets, was transferred to four earnings-related pension companies. Varma contributed EUR 23 million to help cover the shortfall in Viabek’s pension assets.

Varma invested EUR 430 million in funds to combat climate change

Varma continued to build a carbon-neutral investment portfolio as well as its work to mitigate climate change by investing a total of EUR 430 million in two global sustainable ETFs. Varma also signed the Global Investor Statement to Governments on the Climate Crisis, which aims to promote investments, for example, in clean technologies and environmentally friendly infrastructure.

At the end of June, 575,000 (543,000 on 1 Jan) employees and entrepreneurs, as well as 348,000 (347,000 on 1 Jan) pensioners were insured by Varma.

Varma Mutual Pension Insurance Company is a responsible and solvent investor. The company is responsible for the statutory earnings-related pension cover of more than 900,000 people in the private sector. Premiums written totalled EUR 4.9 billion in 2020 and pension payments stood at EUR 6.0 billion. Varma’s investment portfolio amounted to EUR 55.0 billion at the end of June 2021.

Media contacts:

Katri Viippola, Senior Vice President, HR, Communications and Corporate Social Responsibility, tel. +358 400 129 500 or katri.viippola(at)varma.fi

Suvi Vesterinen, Communications Manager, tel. +358 40 555 8029 or suvi.p.vesterinen(at)varma.fi  

Attachments:

Half-year report presentation

Half-Year Report 1 January–30 June 2021