PRESS RELEASE, 16 AUGUST 2011
• Tapiola Pension’s return on investments at current value was 0.2 per cent for 1 January to 30 June 2011.
• The solvency ratio was 27.5 per cent at the end of June, and the solvency position was 2.6.
• Operating expenses fell by EUR 1.7 million, and the loading ratio was 83.1%.
• The insurance portfolio developed positively during the period under review.
Tapiola Pension’s six-month return on investments at current value was 0.2 per cent (3.9% in June 2010). At the end of June, the fair value of investments stood at EUR 9,506.2 million (EUR 8,957.8 million).
“At the beginning of the year, investment markets were characterised by a slowdown in economic growth and accelerated inflation. Furthermore, the uncertainty concerning the problems in the public-sector economies of the euro area weakened the markets in the first half of the year. In this situation, the positive return on investment activities can be considered favourable,” says Tapiola Pension’s Managing Director Satu Huber.
With a return of 17.7 per cent (5.7%) over the period under review, direct private equity investments were the asset class yielding the best return. The return on private equity investments, too, continued its good trend. Private equity funds returned 7.2 per cent (9.9%). “The profits of the target companies in the funds improved during the period under review, which is reflected in the positive return on private equity investments,” says Hanna Hiidenpalo, Investment Director.
The return on listed equity investments remained negative. This was mainly because a significant share of the investments was in Nordic equities. Equity investments returned –1.3 per cent (3.1%). In the same period, the OMX Helsinki index yielded a return of –6.1 per cent.
Corporate loans returned 1.6 per cent (3.2%), which was the best among all fixed income investments of Tapiola Pension. The return on government bonds remained at –0.5 per cent (15.0%). A significant proportion of Tapiola Pension’s government bonds are held in states with the highest credit rating. The return on bonds was 1.1 per cent (5.1%).
The return on real-estate investments was 3.0 per cent (1.9%). Direct real-estate investments and real estate funds returned 2.9 and 3.5 per cent, respectively. International real-estate investments are made in those key European markets with the best return and highest liquidity.
The share of Tapiola Pension’s hedge fund investments was increased during the period under review. Hedge fund investments yielded a better return than fixed income and equity investments. Their return for the beginning of the year through the end of June was 2.1 per cent.
Continuing strong solvency
The company’s solvency ratio rose to 27.5 per cent (26.7%) from the previous summer’s level, and the solvency position – i.e., the solvency margin in relation to the solvency limit – was 2.6 (3.0). As a result of the changes in calculation of the solvency limit that came into force at the end of March, the solvency limit rose by approx. one percentage point. This was the main reason behind the worsening of the company’s solvency position. Without the temporary changes in legislation, the solvency ratio would have been 22.4 per cent (21.6%) and the solvency position 2.1 (2.4).
Tapiola Pension’s operating expenses fell by EUR 1.7 million. The loading profit rose to EUR 5.3 million, and the loading ratio was 83.1 per cent.
Tapiola Pension’s insurance portfolio developed positively during the period under review. At the end of June, there were 25,843 (25,594) TyEL policies and 210,617 (216,913) people insured under them. The number of YEL policies started to increase, standing at 49,428 (47,885).
By the end of June, premium income from TyEL policies increased to EUR 655.9 million (EUR 622.9 million), and premium income from YEL policies to EUR 102.6 million (EUR 94.6 million). Sales of policies to new companies about to commence operations fared well at the beginning of the year.
An exceptionally challenging financial outlook
“The economic outlook has quickly weakened in the course of the summer, around the world. Investment markets have reacted strongly to this trend. The structures of the world economy and the system of the financial markets are being pushed to their limits. The debt problems of the economies in Europe and the US will cut growth in the coming years. Because of this, the weaker outlook will limit risk-taking and hence expose markets to strong value changes,” Hiidenpalo says.
Additional Information:
Tapiola Pension Interim report 1 January 2011 - 30 June 2011 (in Finnish)
Managing Director Satu Huber
+358 9 453 2619
Investment Director Hanna Hiidenpalo
+358 9 453 3310