Tapiola Pension Interim Report 1 January – 30 September 2011
• Net return on investments at current value was -4.8 per cent between 1 January and 30 September 2011
• The solvency ratio was 22.0 per cent at the end of September and the solvency position was 3.0
“Tapiola Pension’s return on investments reflects the uncertainty in the investment environment. The steep decline in equity markets at the end of the summer resulted in a negative return. However, the company’s solvency is strong enough to survive even a negative stock market trend," says Satu Huber, Managing Director, Tapiola Pension.
As much as four fifths of Tapiola Pension’s investment assets yielded a positive return. This was enabled by fixed income, real estate and private equity investments as well as hedge funds, which diversified the risk. These investments compensated for the negative return caused by the decline in equity markets.
“A major change in allocation between equities and fixed income investments was carried out in the summer. Equity and business risks were reduced, and we responded quickly to the weakening of expectations in investment markets by significantly reducing the total risk of the investment portfolio. By early August, we had already implemented many of these measures,” says Hanna Hiidenpalo, Investment Director, Tapiola Pension.
A good return of almost 4 per cent was achieved in fixed income investments – particularly in government bonds – by weighting bonds issued by the most stable countries. Tapiola Pension divested itself of the bonds of European peripheral states a long time ago. Other investment assets have also been carefully analysed with regard to the risks facing this region. The low weighting of investments in companies in the financial sector has been further reduced.
Cash investments serve as a good buffer
“Uncertainty in the markets will continue. Tapiola pension has reduced its risk exposure and now has an excellent liquidity position. The large proportion of cash investments enables Tapiola to continue operating effectively in the markets and adds flexibility to our investment activities,” says Hiidenpalo.
At the end of September, Tapiola Pension’s solvency ratio was 22.0 per cent (28.7%) and its solvency position – i.e., the solvency margin in relation to the solvency limit – was 3.0 (2.9). Without the temporary changes in legislation, the solvency ratio would be 17.1 per cent (23.5%) and the solvency position 2.4 (2.4).
Stable, responsible investing
In an annual survey of signatories to the UN Principles for Responsible Investment in September, Tapiola Pension’s investment operations achieved excellent results. The company’s investments ranked among the best in nearly all areas. Almost 200 investors participated in the survey. Tapiola Pension has incorporated the Principles for Responsible Investment into its investment processes, and it is in the top 10 in the Nordic countries and among the best 12 pension investors globally.
Over the past decade, the implementation of the Principles for Responsible Management has generated better returns for Tapiola than for any other Finnish pension insurance company. Between 2006 and 2010, the average return on investments was 5.1 per cent and between 2001 and 2010 5.9 per cent.
Appendix: Allocation and rate of return, 1 Jan 2011 – 30 Sep 2011 and solvency
Additional information:
Managing Director
Satu Huber
Tel. +358 9 453 2619