Varma

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We make profitable and secure investments

Varma’s guiding investment principle is to invest pension assets profitably and securely. Diversification plays a key role when we strive for the best possible return on investments in order to secure the payment of pensions.

Varma’s investment plan, which is annually confirmed by the Board of Directors, steers the company’s investment activities. The investment plan outlines the general principles for investments, the basic allocation for investments, targets for return, diversification and liquidity, decision-making powers, control systems and reporting, among other things. A benchmark index is defined for each asset class, against which the result is compared. The Board regularly monitors the implementation of the investment plan. The investment plan also covers the share ownership policy, social responsibility and ownership principles.

We diversify investments in different asset classes

Our goal is to maintain the return of the investment portfolio as high as possible while keeping the overall risk at the desired level by identifying versatile sources of return. Diversification into different asset classes is essential, as they perform differently under different market conditions. Broad diversification also ensures that the risk of a single asset class or investment does not rise to a significant level. Diversification into different asset classes also allows the allocations to be flexibly changed according to the market environment.

Diversification within asset classes

Diversification is a guiding principle also within the different asset classes. Single investments are chosen based on the portfolio manager’s analysis.

Fixed-income investments is the most secure asset class, where creditworthiness and liquidity are the most important factors. Fixed-income investments are broadly diversified between different bond issuers and maturities.

Equity investments are diversified by geographic location, industry and company size. In Varma’s portfolio, listed equity investments seek the highest returns and are also the most volatile asset class. Varma has strived to identify investments with similar returns as equities but with less volatility. These include private equity investments and hedge funds.

Diversification of outsourced investments, which include private equity investments and hedge funds, is implemented through fund types and different managers. The funds selected must meet the most stringent institutional requirements. We know our partners well and have long-term partnerships with them.

Varma uses derivatives to make diversified index-type investments in commodities.

Varma’s direct real-estate investments are located in Finland. The assets are diversified according to types of premises and geographical location. Approximately 60% of Varma’s real estate investments are in the Helsinki area. In addition to rental flats, the portfolio includes all types of business premises, with the greatest weight on office and retail premises. International real estate investments are used to improve diversification within the real estate portfolio. Around 11% of all real estate investments are international.

Risk-return ratio

Investments aim for the best possible risk-return ratio. Desirable investments for a pension investor are those with a steady long-term return and little annual volatility.

We actively seek different types of return sources. The initial investment is based on extensive groundwork and is often fairly small, but the investment’s share in the portfolio may be increased.

Liquidity

The investment portfolio is kept as liquid as possible. This has been beneficial for instance when the demand for pension loans to Varma’s customers has increased. The importance of liquidity is highlighted in a difficult market environment, for example, when the company must be able to adjust the share weighting quickly in accordance with the market situation.

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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.