Varma - Annual Report 2012

Outlook

The unbalanced state of affairs, uncertainty and risks that are overshadowing the global economy are still extremely severe, which makes forecasting difficult in terms of both the capital markets and the Finnish economy. The situation in the financial markets appears more hopeful this year, but new market disturbances certainly cannot be ruled out. The financial system continues to be sensitive to single events, and the strength of global economic recovery remains uncertain. As a consequence of the financial crises in the euro area, the requirements set for public finances and for the growing debt levels are highlighted. The impacts of the measures implemented in the euro area to rectify and stabilise the situation have not yet been entirely realised. The development of the Finnish capital markets is also important for earnings-related pension investors.

The ageing of the population will reduce the supply of workforce and economic growth potential in the long term. The Finnish pension system rests on a reliable and sound foundation. Issues related to extending people's time employed and trends in the contribution level, however, remain unresolved. Prolonging careers is important in terms of economic growth conditions and to finance the increase in public spending caused by ageing.

Varma's solvency strengthened in 2012, in both absolute terms and in relation to the solvency limit. Since pension costs exceed premium income, new investments also require the realisation of current investments. Varma highlights pension companies' responsibility for professionally handling investment risk management and supports the sector's efficiency and transparency and the prerequisites for competition. Earnings-related pension insurance companies must handle the task set out for them as efficiently as possible for current and future pension recipients.