Tapiola Pension Interim Report 1 January – 30 March 2011
PRESS RELEASE
3 MAY 2011
- Tapiola Pension’s investment return between 1 January and 31 March was –0.1 per cent (4.4% 3/2010).
- The solvency margin, which indicates financial solidity, was 27.9 (27.2%) per cent of technical provisions and 2.3 (3.3) times the solvency limit.
- The annual return on capital employed from 1 January 2001 to 31 March 2011 was 5.8%.
For the first three months in 2011, the return on Tapiola Pension’s investment portfolio at current value was ‑0.1% (4.4%). At the end of March, the market value of investments stood at EUR 9,477.6 million (EUR 8,983.8 million).
Venture capital funds brought the best return, amounting to 4.6%. Unlisted shares brought a positive 2.1% return, but the negative return on listed equity brought the return on the overall equity investment portfolio down to –0.4%. Real-estate investments also yielded a good return of 1.4%. Return on fixed income investments was zero.
“The near-zero return on investments reflects the eventful nature of the market during the early part of the year, which saw strong fluctuations in returns. This was due both to rising interest rates and crises in investment markets. Risk management and effective diversification of risk were important in such a turbulent environment,” says Satu Huber, Tapiola Pension's Managing Director.
Tapiola Pension's solvency ratio remained good despite the unstable investment environment. The solvency margin, which describes financial solidity, accounted for 27.9 per cent of technical provisions. The solvency margin was 2.3 times the solvency limit. Without the temporary changes in legislation, the solvency ratio would have been 22.8 per cent (22.1%) and the solvency position 1.9 (2.7).
Tapiola Pension’s long-term returns have remained good. The annual return on capital employed from 1 January 2001 to 31 March 2011 was 5.8%.
Fluctuating investment returns at the beginning of the year
In January 2011, the atmosphere on investment markets was positive. “The debt problems of the peripheral eurozone countries were no longer in the headlines. Positive expectations were supported by good economic news from the US and Germany. However, the outlook was quickly weakened by the unrest in Libya and other Middle Eastern and North African countries, and the subsequent rise in oil prices. The debt difficulties within the euro area also returned to the headlines. At the beginning of March, the ECB hinted at future rate hikes. Additionally, the natural disaster in Japan in March weakened investors’ confidence radically,” says Jonna Ryhänen, director of securities at Tapiola Pension.
These factors were expected to slow down economic growth considerably. Equity markets around the world reacted violently. Depending on the index used, equity markets declined in value by approximately 5–20% compared to the beginning of the year.
“Investment markets recovered quickly from these crises. At their lowest, equity market returns were clearly negative compared to the beginning of the year. By the end of March, markets had improved and returns had risen back to near zero,” continues Jonna Ryhänen.
Instability continues on investment markets
The short-term outlook for investment markets remains uncertain. Economic figures published in Western countries have been encouraging, and growth can be expected to continue at a moderate pace. As inflation accelerates, central banks around the world will be forced to increase their key interest rates, which will slow down global economic growth. At the same time several risk factors, such as the crisis in the peripheral eurozone states and the rising oil price, are casting a shadow over the markets.
Appendices:
Investment return in accordance with risk, solvency
Additional information:
Managing Director
Satu Huber
+358 9 453 2619
Director, Securities Division
Jonna Ryhänen
+358 9 453 3430