Etera’s first half of 2017: Productive operations and determined development

9.8.2017

Etera Mutual Pension Insurance Company had a positive first half of the year. Investments generated consistent returns and solvency strengthened. The work to develop Etera’s work-ability services also produced results. A merger agreement between Etera and Ilmarinen was signed in June.

“Investments in Finland actively continued. We also aim to strongly promote the work ability of Finns. We have strongly focused on developing our operations, and in the first six months of the year, processes were made smoother and new services were launched to help our customers manage their work-ability risks,” says Etera’s Managing Director, Stefan Björkman.

Etera’s customer acquisition progressed well during the six-month period. Premium income totalled EUR 366 million (EUR 331 million), an increase of 11 per cent on the first half of last year.

The return on Etera’s investments during January–June was 3.0 per cent (1.3% in H1/2016). The market value of the investments at the end of the period was EUR 6,205 million (EUR 5,904 million on 30.6.2016). “Market returns were stable during the first half of 2017, which influenced our good result,” says Björkman.

Etera’s solvency strengthened compared to the turn of the year. Solvency capital stood at EUR 897 million at the end of June (31.12.2016: EUR 846 million). The solvency ratio was 116.2 per cent (115.5%) and the solvency position was 1.4 (1.4). 

New legislation governing the calculation of the solvency limit of pension institutions took effect at the start of 2017. However, the new solvency limit is not directly comparable with the previous limit. The new calculation model takes the risks inherent in investment operations into account more comprehensively. It is not expected to have a material impact on Etera’s solvency requirements.

Consistent returns on investments

The return on fixed income investments was 1.6 per cent (2.0%). The return on equity investments was 7.7 per cent (0.2%) and on real estate investments 2.4 per cent (2.8%). The return on other investments was –2.4 per cent (–0.2%), 

Listed equities had the strongest performance of all asset classes during the period. Market returns were quite stable overall in the first half of 2017 and positive in most asset classes. The investment environment is challenging, however, due to the low interest rate level. The euro strengthened during the period, which weakened the return on investments denominated in other currencies. As Etera hedges against most of the currency risk of investments, the impact on the overall return is limited.

Etera continued to actively invest in the domestic market. Finland accounted for 39 per cent of Etera’s investments. Etera invests in the domestic market especially through real estate and other real asset investments, as well as through private equity and debt.

“In the first half of the year, we invested in, among others, rental and senior residences, and in Bolt.Works, a company specialised in construction staffing,” says Björkman.

Etera strives to reduce the environmental impacts of its real estate investments, for instance, by improving energy efficiency. In practice, this is reflected in the form of both construction solutions and technical changes. The use of renewable energy also reduces the carbon footprint. Environmental classification is used in new real estate projects. The renovated Etera Building in Pasila, Helsinki, also received LEED certification in spring. Etera additionally began a climate partnership with the City of Helsinki.

Active development of work-ability services

Etera supports its customer companies in preventing, identifying and managing disability risks. Work-ability services support well-being and business operations. In the first half of the year, Etera focused strongly on developing its work-ability services and on fine-tuning processes. The successful work that began in spring will continue into the autumn.

“In late spring, we launched the ‘Univalmennus’ sleep-coaching mobile app. Studies on work ability carried out by Etera show that sleep disorders are clearly one of the factors reducing work ability. Sleep coaching is one way to support the well-being of employees and self-employed persons insured with Etera,” says Björkman.

The “Ilmianna paras pomo” (“I have the best boss”) campaign of the first half of 2017 shined a light on the importance of supervisory work. In addition to the best boss in Finland, the best regional bosses were also awarded.

In June, a follow-up study was published on how young people studying towards a profession feel about working life. Young people’s confidence in the future was brought to forefront in various parts of Finland: young people believe in their working-life opportunities. If they cannot find work in their field, they are prepared to seize new opportunities. 

In the first half of the year, 209 (223) insured persons began vocational rehabilitation offered by Etera. Three out of four of Etera’s rehabilitees return to work.

Cost-effectiveness at a good level

In recent years, Etera has considerably improved its cost-effectiveness. Costs have been kept at the previously achieved good level, with the exception of the depreciation and other costs related to the earnings-related pension sector’s new common pension processing system. The new pension processing system was taken into use at the turn of the year.

Etera’s comparable loading profit is expected to grow this year compared to last year, as a result of good customer work and economic growth in Finland. This year, a reduction of around 7 per cent in the premium base that applies to all earnings-related pension companies decreases the loading profit.

Pensions for 134,000 pension recipients

Etera granted a total of 2,816 (3,261) new pensions during the reporting period and paid out EUR 576 million (EUR 570 million) in pensions and rehabilitation expenses.

Etera was responsible for the pension cover of 140,000 (120,000) employees and 10,045 (9,420) self-employed persons between January and June. The number of pension recipients at the end of June was 133,676 (136,576).

A major pension reform took effect at the start of 2017. Retirement age limits are gradually rising, pension accrues equally regardless of age and new types of pension are available. Changes were made to the pensions of employees and self-employed persons alike.

Etera and Ilmarinen merge

Earnings-related pension insurance companies Etera and Ilmarinen intend to merge on 1 January 2018. A merger agreement was signed in June. The merger will require the approval of both companies’ shareholder meetings and the relevant authorities. Etera’s shareholder meeting will be held on 12th September 2017.

A merger of the two companies will result in a solvent and cost-effective earnings-related pension company with the most competitive customer benefits in the sector. In combining the strengths of both companies, the goal is to build an innovative and agile service company that offers increasingly diverse and higher-quality services.

Attachment
Material related to Etera’s interim result, PDF

Additional information
Stefan Björkman, Managing Director, tel. +358 050 63219, stefan.bjorkman@etera.fi

The figures are unaudited.

Etera publishes its investment returns monthly at etera.fi/en/investments

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