According to preliminary information, the investments of Veritas Pension Insurance yielded a positive return of 6.4 per cent in 2014 (7.4 per cent in 2013).
“Our investments yielded especially good returns in 2014,” states Niina Bergring,Chief Investment Officer of Veritas Pension Insurance. “The yield was, however, primarily brought about by decreasing economic growth and inflation expectations. In the long term, this is not a positive thing, especially if the economic growth does not get a second wind in Europe or continue to remain at least moderate in the US and developing markets. We have, essentially, gotten our future returns in advance. The markets are vulnerable to fluctuations, particularly if the interest rate expectations this year rise suddenly or if the growth is weaker than expected.”
A very strong return on fixed income investments in relation to the interest rate level
The drop in the interest rate level in Europe to nearly zero enabled the good return on fixed income investments, perhaps even too good in Bergring's opinion. “Due to the existing interest rate levels, the return expectations will remain very low. The interest rate expectations in the US also dropped to an extremely low level at the end of the year.”
Veritas’ returns on fixed income investments were strong in 2014, at 5.5 per cent. The best return within the interest bearing asset classwas achieved by low-risk investment grade loans, at nearly 10 per cent.
Equity yield amounted to 9 per cent
Positive development within the equity market was strongly supported by the growth in risk-taking brought about by the central banks. “Central bank communications continued to support liquidity, while growth expectations - and inflation expectations, in particular - dropped globally during the year. Without the support of the central banks, the decrease in growth expectations would have brought the yield from equity into the red.”
Veritas’ return on equity amounted to nearly 9 per cent in 2014 (16.7% in 2013).
Positive signs from Europe
The stimulus plan announced recently by the ECB builds confidence that the situation will even out and it may turn development toward a sunnier path, in Finland as well.
“The lending of the banks appears to be continuing its growth pattern and the latest ECB analysis indicated that companies’ loan requests for investment purposes have finally revived. This is especially good news, and we hope that this trend will continue. The ECB stimulus plan specifically supports this type of emerging growth in lending and is necessary in Europe’s current weak economic situation.”
Veritas’ solvency strengthened over the previous year with the solvency capital being 29.1 (27.6) per cent of the technical provisions, which is 2.2 (2.1) times the solvency limit.
VERITAS PENSION INSURANCE
Jan-Erik Stenman, President, tel. +358 (0)10 550 1600, +358 (0)50 343 2299
Niina Bergring, Chief Investment Officer, tel. +358 (0)10 5501 882, +358 (0)40 8221 514
Tommy Sandås, Financing Director, tel. +358 (0)10 5501 186, +358 (0)50 593 0138