Pension Fennia’s financial statements for 2012: Excellent investment income of 10.3 per cent
“Our overall investment income was among the highest in the pension insurance field. We should be especially proud of our excellent operational efficiency; the administration cost surplus of €14.3 million was, in terms of euro amounts, the best in Pension Fennia’s history. Our solvency also improved during the year,” states Lasse Heiniö, Managing Director of Pension Fennia.
Pension Fennia's investment income at fair values stood at 10.3 per cent in 2012 (-1.6% in 2011). The best yield was gained from quoted shares at 16.7 per cent (-18.4%) and direct real estate investments at 14.8 per cent (8.4%).
Calculated from the start-up of operations in 1999, the average nominal yield for Pension Fennia’s investments was 5.0 per cent and the real yield was 3.0 per cent. The average nominal yield for investments over a period of five years (2008-2012) was 3.0 per cent and the real yield was 0.7 per cent. The average nominal yield for investments over a period of ten years (2003-2012) was 5.3 per cent and the real yield was 3.4 per cent.
Our solvency strengthened during 2012. The amount of the solvency margin increased from €975.9 million to €1,394.6 million. The solvency ratio stood at 22.3 per cent (16.5%) of the technical provisions and 2.8 times (2.6) the solvency limit at the end of the year. Without the temporary solvency regulations, the solvency ratio would have been 17.4 per cent of the technical provisions and the solvency position 2.2 times the solvency limit.
The best efficiency in Pension Fennia history
Pension Fennia’s operational efficiency was excellent; the administration cost surplus stood at €14.3 million, or 25.3 per cent of the loading profit. This result, in terms of euro amounts, is the best in Pension Fennia’s history. Pension Fennia will transfer €18.8 million (€13.2 million) to client bonuses, which is 0.4 per cent (0.3%) of the insured total payroll.
Pension Fennia’s total operating expenses for 2012 totalled €59.6 million (€56.6 million). The company employed an average of 252 (252) persons in 2012.
Good result for all asset classes
The market value of Pension Fennia’s investments stood at €7,495.2 million at the end of 2012 (€ 6,772.8 million). At the year-end, equities investments accounted for 21.7 per cent (19.2%) of the investment portfolio, fixed-income investments including bond investments, and loan receivables, other money market instruments and deposits for 51.9 per cent (56.3%), hedge fund investments for 11.0 per cent (10.9%), and real estate investments for 15.3 percent (13.3%).
The result in all asset classes was at a good level. The best yield was gained from quoted shares at 16.7 per cent (-18.4%) and direct real estate investments at 14.8 per cent (8.4%). The yield of fixed-income investments was a total of 9.0 per cent (3.3%) and for hedge fund investments, 8.6 per cent (-3.3%).
A strong position as an insurer of self-employed persons and SMEs
The premium income as a whole stood at €1,355.0 million. Pension Fennia retained its strong position as an employment pension insurer of self-employed persons and SMEs. On the basis of advance information, our market share increased by 0.5 percentage points, despite the fact that the overall transfer business result met with a slight loss. The area of new business remained at a good level.
At the end of 2012, the number of insured in Pension Fennia was 228,520. The number of TyEL insurances decreased by around 690 policies to 22,930 with a total of 188,920 insured. The number of insured employment relationships at the end of 2012 was around 3,540 higher compared with the previous year. The number of the YEL insured grew by some 280 self-employed persons during the year and, at the end of the year, the number of valid YEL policies was 39,600.
In 2012, Pension Fennia handled a total of 17,600 pension matters, of which 8,300 were new pension applications. The total number of new applications remained at the level of the previous year. The increase in the number of old-age pension applications has evened off and the current growth stood at about 4 per cent. As a result of a legislative amendment, unemployment pension applications have been nearly entirely eliminated. At the end of 2012, the company had 86,370 pension recipients. In 2012, the amount of pensions paid out exceeded one billion euro for the first time, for a total of €1,003 million.
Future outlook
“The growth forecast for the global economy in 2013 is cautious, but slightly brighter than the previous year. Growth is expected to develop positively as driven by the US and Chinese economies. The situation in the euro zone remains difficult, which may be reflected as insecurity in the investment market. The interest rate is expected to remain exceptionally low. Investment income for 2013 is expected to be at a lower level than that of the previous year,” says Eeva Grannenfelt, Director and Chief Investment Officer at Pension Fennia.
In December 2012, the Boards of Directors of the Mutual Insurance Company Pension Fennia and Tapiola Mutual Pension Insurance Company signed a letter of intent concerning the initiation of a plan to merge the companies’ operations. The aim is to form a new employment pension company that provides its customers with high-quality services for the management of employment pension security and competitive client benefits. During the spring, the parties will draft a plan aimed at a merger, and this plan will be discussed and finalised by the administrative bodies of both companies by the end of June 2013. In accordance with the letter of intent, the activities of the merged company will begin on 1 January 2014, provided that the actual corporate law process and official paperwork have been completed.
“The merger of Pension Fennia and Tapiola Pension is a welcome undertaking in terms of the pension system and Finnish society in general, because it will bring efficiency and operational reliability to the entire system. Our customers have also seen the benefit of the new company and reacted positively to the news of the merger,” states Lasse Heiniö.
Financial Statements 2012 (pdf) >
For further information, please contact:
Lasse Heiniö, Managing Director, tel. +358 (0)10 503 7204
Eeva Grannenfelt, Director, Chief Investment Officer, tel. +358 (0)50 544 6355
Irmeli Heino, Finance and HR, tel. +358 (0)10 503 7208