Varma

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Strong solvency benefits our customers

Varma’s strong solvency secures pensions. Thanks to its high solvency, Varma has been paying very competitive client bonuses for several years now.

In 2015, Varma’s solvency remained at a high level. At the end of 2015, solvency capital was EUR 9,956 million (10,252), or 31.4% (34.0%) of the technical provisions.

Solvency has an effect on the size of client bonuses: our strong solvency allows us to transfer higher amounts to client bonuses. In 2015, we transferred EUR 115 (117) million to client bonuses. We have been paying very competitive client bonuses for several years now.

Solvency 2006–2015

 

Pension liability and risk buffers

Pensions are protected also during economic turbulence

The economic year 2015 was weak for Finland. During trying times, strong solvency offers protection against unstable capital markets.

Owing to its strong solvency, Varma is able to target better returns on pension assets. High solvency capital allows us to make higher-risk investments with a higher return potential, thus enabling higher returns on pension assets.

The higher the risk of the investments, the greater the amount of solvency capital required. Good investment returns in the long term help secure the financing of pensions.

The statutory solvency capital requirements are set so that pensions will be secured also during lean economic periods, and the solvency limit is the most important of these requirements. The limit is based on the risk level of investments. The insurance risk is also taken into account in the calculation of the solvency limit.

Varma’s solvency limit at the end of 2015 was 16.8% (15.8%) of the technical provisions, and the solvency capital’s ratio to the solvency limit was 1.9 (2.2).

Solvency regulations will be amended

Regulations concerning the calculation of the solvency limit and investment diversification of pension institutions will be renewed at the start of 2017. In future all the relevant investment risks and insurance risks will be taken better into account in the calculation of solvency. At the same time, the separate regulations on technical provisions will be abolished.

The solvency and investment activities of earnings-related pension companies will also be affected by the pension reform, due to take effect at the beginning of 2017, which will change how the return requirement on pension liabilities is determined. The equity-linked provision for current and future bonuses will be raised in two steps: in 2017 it will rise from 10% to 15, and in 2018 to 20%.

This change will increase earnings-related pension insurance institutions’ possibilities to invest in equities. The share of equities of the entire investment portfolio will, however, be limited to 60%. Investing in equities allows better returns on the pension system in the long term, and thus mitigates the pressure to raise earnings-related pension contributions.

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The year in brief

In 2015, Varma’s return on investments stood at 4.2 per cent. The value of investments increased to EUR 41.3 billion. Premiums written increased clearly, and operating expense efficiency also showed positive development. Solvency capital was strong at EUR 10.0 billion.
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President & CEO review

2015 was a good year for Varma, and we succeeded well according to all key indicators: we maintained our strong solvency position, our premium income increased, we processed pension applications faster than before and our operational efficiency is at a competitive level.
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Lower earnings-related pension contributions for customers

Varma is a solvent company. That means the best client bonuses in the sector and lower pension contributions for our customers. Our modern digital services provide our customers with a comprehensive set of tools that enable them to take care of their pension matters easily.
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Varma for entrepreneurs

Varma is a solvent company and thus a safe choice. Varma’s extensive services, provided through various channels, make attending to insurance matters easy.
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Pension cover

The number of pensioners and the euro amount of pensions paid is constantly rising at Varma. Our task is to pay pensions correctly and on time to an increasing number of pensioners.
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Workability and good working life

Workability management promotes companies’ competitiveness and productivity and the societal goal of longer careers. Our workability services improve employee well-being and working life at our client companies.
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Varma’s targets and strategy

Varma's core task is to secure pensions. Our main goals of strong solvency, good development in premiums written, high quality pension services and efficient operations, also stem from this.
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Operating environment

The economic year 2015 ended in a climate of turbulence. Uncertainty in the global economy is again on the rise.
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Solvency

Varma’s strong solvency secures pensions. Thanks to its high solvency, Varma has been paying very competitive client bonuses for several years now.
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Fixed income investments

The return on fixed-income investments remained slightly negative, at -0.4 per cent. They accounted for 30 (32) per cent of investments and had a market value of EUR 12.3 (12.8) billion.
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Equity investments

Equity investments performed the best of all asset classes. They accounted for 45 (41) per cent of Varma’s investments and yielded a return of 8.8 (9.1) per cent.
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Real estate investments

Varma’s real estate investment portfolio amounted to EUR 3.9 (3.8) billion at the end of 2015, and the total return stood at 3.3 (3.8) per cent.
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Other investments

Other investments accounted for 17 (20) per cent of Varma’s portfolio.
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Varma’s investment principles

With EUR 41.3 billion in investment assets, Varma is Finland’s largest private investor. We invest the assets to secure present and future pensions.
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Targets and measures

On the basis of the materiality assessment, we defined Varma’s CSR targets, indicators and measures.
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Personnel

Varma’s success is based on competent personnel efficiently handling our customers’ pension cover. Customer focus is at the core of Varma’s expert work and operational development. Service that is appreciated by our customers is the result of broad competence and co-operation.
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Responsible investment

Responsibility is an integral part of our investment operations and ownership practices. In 2015, we looked into the responsibility of our hedge funds and decided to determine the carbon footprint of our investments.