President and CEO’s Review
In the highly challenging and difficult-to-predict market situation of 2013, Varma’s priority was to foster the company’s strong solvency. Proactive investment activities and careful diversification of investments produced good results, and Varma has reinforced its position as the most solvent earnings-related pension insurance company in Finland. Varma’s record-strong solvency considerably improves the company’s capacity to operate in a challenging market situation. Our customers can focus on their own business challenges and rely on Varma’s ability to take care of the current and future pension liabilities entrusted to its care.
The total return of 9 per cent on Varma’s investments was achieved at a very moderate risk level. As proof of this, our solvency capital increased and stood at EUR 9.1 billion, or 31.6 per cent of the technical provisions at the end of the year. We improved our operating expense efficiency over the course of the year, and as a result we have reserved EUR 105 million for client bonuses.
The Finnish economy faces severe challenges. The aging of the population is seen and felt at Varma too: the amount of pensions paid out by the company increased by EUR 300 million to a total of EUR 4.8 billion. The Finnish earnings-related pension system’s pension liabilities are growing, whereas the nation’s economy is not. However, our country’s private earnings-related pension system stands on a solid base, and the main labour market organisations are negotiating on the need for its reform.
In recent years, differences in the level of risk buffers between pension companies have substantially increased. Some companies are doing better than others, and consolidation in the sector has been progressing. Has the time finally come to test the effect of a moderate increase in competition on the efficiency of the implementation of the earnings-related pension system?
I would like to extend my thanks to Varma’s customers, policyholders and insured, and to our personnel for their co-operation over the years and for good work during 2013.