FINLAND - Ilmarinen Mutual Insurance Company saw its investment assets rose by €2bn in the first half of 2009, and revealed its "best ever quarter" in terms of investment performance.

Figures from the pension company's interim report showed it generated a first half return of 6.6% following an increase in share prices and the "dramatic increase in the values of fixed income instruments carrying credit risk".

Harri Sailas, chief executive of Ilmarinen, noted the value of investments jumped from €20.9bn at the end of 2008 to €22.9bn six months later and added "our forbearance was rewarded when the return on investments during the second quarter was the best ever in Ilmarinen's history".

The asset allocation of the scheme at the end of June was 23% in equities, down from 29% at the end of December, while fixed income including loan receivables was 62%, real estate was 11%, with the remainder divided between hedge funds and other investments.

Despite a lower allocation, the equity portfolio produced the best return of 8.8%, driven primarily by the 12.7% return on listed equities, although a -23.4% return on private equity offset the gains.

Fixed income assets also performed well with a return of 7.7%, although real estate investments produced -0.9%, as a 2.7% yield on direct property assets was not sufficient to offset the -18.2% return on real estate funds and joint investments, while hedge funds returned 4.3%.

Sailas said: "A large part of the impairments taking place during the financial crisis have been restored. We are rapidly returning to the growth track of 4% that has normally been the basis for forecasting the trend in future pension contributions."

Following its positive performance, the firm's solvency position also improved to a solvency ratio of 18.2% of technical provisions and a solvency capital of 2.9 times the required limit against 14% and two times the limit at the end of 2008.

Meanwhile, Etera Mutual Pension Insurance Company also posted a positive first half performance with an overall return of 2.6%, although it noted the value of its premium income fell by 9% to €239m compared to the same period in 2008, while its solvency position reached 13.9% of technical provisions, or 2.4 times the required solvency level.

The value of the fund reached €4.85bn at the end of June, as the firm still managed to increase its share of sales of new employee and self-employed policies to 17% and 9% respectively, even when premium income declined on the back of weakness in the employment situation in the construction industry - its biggest market.

Moving against the tide of current activity, its fixed income portfolio produced the best performance with a return of 3.6%, while equities returned 2.5%, as a yield of -14.8% on private equity assets limited the impact of a 6.1% return on quoted equities and 3.1% on unquoted equities.

Real estate investments also contributed a positive note the first half figures with a return of 1.5%, although other investments, comprising hedge funds, commodities and other assets produced a return of -6.4%.

At the end of the first half, Etera's asset allocation comprised 63% in fixed income, 19% in equities, while 16% was allocated to real estate and the remainder in absolute return and commodities investments.

Mika Pesonen, chief investment officer at Etera, said: "Our investment returns saw a clearer improvement on the red figures recorded at the end of 2008, but the first half of 2009 nevertheless proved challenging."

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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