PRESS RELEASE 20 AUG. 2009
- Tapiola Pension’s overall result for the period 1 January to 30 June 2009 amounted to EUR 176.2 million (EUR -421.1 million). The six-month return on investments at current value was 4.9 per cent (-3.7% 6/2008) and market value at the end of the review period was EUR 7,875.7 million (EUR 7,299.3 million 12/2008).
- Solvency ratio rose to 18.5 per cent of technical provisions (16.2% 12/2008) and the solvency position was 2.9 (2.9 12/2008). Without the temporary changes in legislation, the solvency ratio would have been 13.8 per cent (11.5% 12/2008).
- Premium income for the period 1 January to 30 June 2009 remained almost at the same level as in the same period last year. Premium income by the end of June amounted to EUR 715.3 million (EUR 719.9 million 6/2008).
The good return on Tapiola Pension’s investments raised the six-month result to clear profitability. Despite the positive result, the future looks extremely challenging according to Managing Director Satu Huber.
During the first half of 2009, total production continued to decline strongly everywhere in the industrial countries. The financial crisis became evident in the real economy in the standstill of investments, in the massive liquidation of stocks, as well as in the catastrophical decline in global trade. There is still a way to go before we are back on the growth track, and recovery is likely to be slow, because the unravelling of the credit bubble and the increased unemployment weaken the consumption possibilities of households.
“The most significant causes for concern are the development of the domestic economy and employment,” estimates Managing Director Satu Huber. “The weakened economic position of companies has begun to show in the premium income from Tapiola Pension’s pension insurance policies and in the total payroll figures notified by customers. The total payrolls used as the basis for advance premiums have been decreased somewhat during the early part of the year, and it is predicted that the growth of premium income will halt during the course of this year,” says Huber. The unemployment rate at the end of the review period was 9.1 per cent. According to an estimate of the Finnish Centre for Pensions, the unemployment rate will rise to 9.8 per cent and in 2010, the payroll will decrease by 4.0 per cent compared to 2008.
Return on equities was 14.4 per cent
In the financial markets, the expectations as regards future economic development have become clearly more positive during the late spring. The steep decline of the equity markets that continued for some 18 months ended for the time being in early March. During the first half of the year, Tapiola Pension increased the weight of equity in its portfolio from approximately 14 per cent to over 22 per cent. Of the asset classes, equities yielded the best return. Equity investments yielded a return of 14.4 per cent (-12.7% 6/2008). “There are, however, still reservations about the permanence of the rise in share prices. For this reason, some of the equity risk has been hedged towards the end of the review period," says Tapiola Pension's Investment Director Hanna Hiidenpalo.
In the interest market, risk premiums have narrowed significantly from the start of the year. High-risk corporate bonds and emerging market fixed-income instruments have been the best performing fixed-income investments. “During the early part of the year, the share of corporate risk was selectively increased in Tapiola Pension's fixed-income portfolio. The proportions of money market investments and government bonds have been decreased,” says Hanna Hiidenpalo. The rate of return from bonds was 3.7 per cent (-0.7% 6/2008)
In the European real estate markets, the negative development caused by the financial crisis continued throughout the spring. The proportion of real estate investments in Tapiola Pension’s portfolio remained at the year-end level, and their result came to zero (+1.9% 6/2008) due to the losses from the real estate funds.
Demand for customer loans, including premium lending, remained at a reasonably active level during the first half of the year. The share of loans rose to 4.7 per cent (4.2% 12/2008) of total investments.
Further Information
Tapiola Pension
Satu Huber
Managing Director
Tel. +358 (0)9 453 2619
Tapiola Pension
Hanna Hiidenpalo
Investment Director
Tel. +358 (0)9 453 3310