Varma - Annual Report 2012

Varma's financial trends

Varma's total result at fair value stood at EUR 1,201 (-1,378) million. The total quarterly result varied during the financial year, such that the first quarter result was the strongest and the second quarter result the weakest. Varma's financial performance in the second half of the year was stable.

Varma's solvency strengthened during 2012 by EUR 1,196 million, and at the end of the year solvency capital amounted to EUR 7,716 (6,520) million. Varma's solvency ratio, i.e. solvency capital in relation to technical provisions, is the highest in the earnings-related pension insurance sector, at 28.0 (24.8) per cent. The solvency capital was at a strong level: 2.4 (2.5) times higher than the solvency limit. The solvency limit is changed in accordance with the risk level of the investments. Varma's strategic goal is to boost the company's solvency through stable returns and operational efficiency.



In accordance with the temporary legislation that was in effect until the end of 2012, the share of the provision for pooled claims included in the solvency capital was EUR 1,147 (1,096) million. Excluding the temporary provision for pooled claims equated with the solvency capital, the solvency capital would have been EUR 6,569 (5,424) million, and its ratio to the technical provisions 22.9 (19.8) per cent and to the solvency limit 1.9 (2.0). The minimum level of the solvency capital was EUR 551 million at year-end, whereas without the temporary legislation it would have been EUR 2,250 million. The change in the equalisation provision covering the risks of net claims was EUR -12 (-38) million, and the equalisation provision was EUR 1,108 (1,120) million.


On 31 December 2012, Varma's solvency capital, calculated according to the Act that took effect on 1 January 2013, was roughly EUR 7,677 million, which corresponds to 27.8 per cent of the technical provisions according to the new Act. The ratio of the solvency capital to the solvency limit, calculated according to the new Act, is around 2.2.

The return on investments was EUR 2,492 (-711) million at fair value, which was 7.7 (-2.1) per cent of the invested capital. The interest credited on the technical provisions was EUR 1,303 (667) million. Thus, the investment result for 2012 totalled EUR 1,189 (-1,378) million. The average annual nominal return on Varma's investments over five years was 2.5 per cent, and over ten years 5.5 per cent. Operating expenses were 16 (27) per cent lower than the administrative costs included in insurance premiums, and the loading profit stood at EUR 21 (35) million. The underwriting result was EUR -9 (-35) million.

At the end of 2012, EUR 78 (73) million was transferred to the provision for current bonuses for client bonuses. The transfer represents roughly 0.4 (0.4) per cent of the estimated payroll of the insured.

The TyEL payroll of those insured by Varma totalled about EUR 17.7 (17.3) billion in 2012. The payroll is estimated to have increased about 1.5 per cent, compared with the actual 2011 figure. Varma's premiums written totalled EUR 4,230 (3,977), of which TyEL insurance accounted for EUR 4,041 (3,802) million and YEL insurance for EUR 190 (175) million.

At the end of the year, 539,740 (540,340) individuals were insured by Varma, which was 600 less than a year earlier. The number of valid insurance policies totalled 68,900 (70,040), covering 41,280 (41,940) self-employed persons and 498,460 (498,400) employees.

During the year, a total of 3,881 (4,026) new TyEL insurance policies and 5,782 (9,105) YEL insurance policies came into force at Varma. The volume of YEL insurance policies was boosted in 2011 by a legislative amendment that expanded the number of shareholders and individuals working in a managerial position covered by YEL.

Earnings and employment notifications received during the year totalled 1,476,812 (1,267,563), of which 90 (88) per cent were received electronically.

Varma observes good insurance principles. All business transactions with policyholders are on market terms. Particular attention is paid to transactions covering the financing of a policyholder's operations, real estate and other transactions, and leases. At Varma, business transactions related to pension insurance or investments are carried out independently. When acquiring new assets in connection with client transfers, Varma is mindful not to infringe on the previous insurance portfolio.

Varma provides policyholders with services through its own service channels and through the service networks of If P&C Insurance Ltd and the Nordea Group.

In 2012, a total of EUR 4,500 (4,194) million in pensions were paid out. The number of pension recipients increased, and at year-end, Varma was paying TyEL and YEL pensions to 331,383 (330,038) people.

A total of 24,179 (26,644) new pension decisions were made during the year. The number of new pension decisions increased 9.3 per cent and the total number of all pension decisions was 7.5 per cent lower than in 2011. Old-age pension decisions numbered 11,515 (11,739), and 5,888 (6,466) disability pension decisions were made. The decline in numbers primarily concerned part-time pension, unemployment pension, and disability pension.


Due to the raised retirement age limit, part-time pension decisions were down and stood at 901 (1,561). As a result of a legislative amendment, no individuals were eligible to begin collecting unemployment pension in 2012. Continuation decisions on temporary pensions totalled 5,736 (5,500), and other decisions numbered 14,186 (16,331). These were decisions required as a consequence of the changes in pension rights.

Of all customer contacts concerning pension services, 69 per cent took place online.

Vocational rehabilitation is an alternative to disability pension, and the number of rehabilitation cases at Varma increased again. Rehabilitation has proven to be successful, as nearly three quarters of those who received Varma's rehabilitation continued in working life following their rehabilitation. Varma has for years been a forerunner in vocational rehabilitation. Throughout 2012, Varma assisted its client companies in managing personnel risks through client-oriented co-ordination of well-being-at-work services, rehabilitation services and pension decision services in order to support the management of pension costs and longer careers. Varma also contributed to the costs of customers' well-being-at-work projects in accordance with jointly agreed and often multi-year plans and contracts.

31 Dec. 201231 Dec. 2011Change
Number of insured
TyEL 1 498,460498,40060
1of which covered by TEL registered supplementary pension insurance5,5456,310-765
Number of insurance policies
Number of pensioners
Part-time pension3,9864,848-862
Survivors’ pension51,48751,773-286
Disability pension36,19538,787-2,592
Unemployment pension4083,501-3,093
Old-age pension223,999215,8638,136
Early old-age pension15,30815,26642
Total 2331,383330,0381,345
2Those receiving YEL pension28,96929,065-96
Those receiving TEL/YEL supplementary pension41,43241,124308

Varma's customer service has seen a considerable increase in the use of the company's online services. Pension recipients are able to update their address and account number information themselves by logging in using their personal banking codes. Through Varma's eServices, the insured can obtain the most recent estimate of their old-age and part-time pensions at various retirement ages.


Varma sent out 574,149 (722,000) earnings-related pension records to its insured in 2012. The record shows information on earnings that apply to pension as well as the pension that has accrued until the end of the preceding year. The pension record is also available via Varma's eServices. As of 2013, the print version of the pension record will be sent to the insured every three years, but they can check their pension record annually online.