Board of Directors’
Report and Financial
Etera
Board of Directors’ Report and
Financial Statements 2012
Contents
Board of Directors’ report 2012... 1
Accounting policies...12
Profit and loss account...15
Balance sheet... 16
Cash flow statement...17
Notes to the profit and loss account... 18
Premiums written and claims paid... 18
Specification of net investment income... 19
Total operating expenses by activity... 20
Notes concerning personnel and members of corporate bodies... 20
Notes to the balance sheet...21
Fair value of investments and difference between fair and book values……... 21
Changes in real estate investments... 23
Real estate shares in Group companies and participating interests... 24
Shares and participations... 26
Other loan receivables itemised by type of security and other receivables...31
Changes in tangible and intangible assets...31
Etera’s capital and reserves... 32
Technical provisions, liabilities, and accruals and deferred income... 33
Solvency margin and solvency... 34
Commitments and contingent liabilities... 35
Key figures and analyses... 37
Summary of key figures... 37
Performance analysis... 38
Loading profit and activities designed to maintain work capacity... 38
Solvency... 39
Investment allocation at fair values... 40
Net return on capital employed... 41
Content of key figures... 42
Risk management... 45
Signatures to the financial statements and the Board of Directors’ report...51
Board of Directors’ Report 2012
Economic development
The first half of 2012 was overshadowed by negative news, such as a slowdown in economic growth, mounting sovereign debts and interest rates in troubled euro-zone economies rising to an unsustainable level. Although the macroeconomic challenges continued into the second half of the year, the European Central Bank’s potentially unlimited bond purchase programme to support troubled economies lifted market sentiment. The slightly brighter US housing market and the only moderate tapering off of growth in China also strengthened confidence in the markets. The liquidity offered by the central banks and the interest rates remaining at a record low level resulted in excellent returns in all asset classes. At year-end, the valuation levels for all investments were clearly higher than at any time since the financial crisis.
Growth in overall production in Finland slowed to a great extent during the year and is estimated to remain at 0.3 per cent in 2012. Finland’s GDP took a downturn after June, and exports declined. Unemployment began to increase in the latter half of the year, and the unemployment rate was 6.9 per cent at year-end.
Developments in the earnings-related pension scheme
Extending careers
The debate on extending careers carried on actively, and ways to extend careers and develop working life were contemplated by many actors. The pension negotiation group chaired by Jukka Rantala, the Managing Director of the Finnish Centre for Pensions, handed over its progress report in February–March of 2012. The labour market organisations’ agreement concerning the extension of work careers was finalised in March 2012.
The pension negotiation group proposed eliminating early old-age pension and raising the minimum age limit for part-time pension. The group also made proposals to improve the efficiency of the earnings-related pension system and to develop unemployment cover to better serve as an incentive. The age limit for the right to continued unemployment allowance will be increased. Parliament approved the amendments at the end of 2012, and they entered into force on 1 January 2013. The amendments are expected to raise the retirement age expectancy by 0.1 years.
A high-level expert group chaired by Jukka Pekkarinen, Director General of the Ministry of Finance, is carrying out a survey on a more extensive reform of the earnings-related pension system. The group is expected to publish its report by the end of 2013. Among the topics the group will examine is the impact of the 2005 pension reform and the need for additional measures. The report will serve as the basis for policies regarding, among other things, age limits, early retirement pension and survivors’ pension, and the details of defining pensions. The pension reform is due to enter into force at the start of 2017 at the latest.
An international evaluation of the Finnish pension system, commissioned by the Finnish Centre for Pensions, was completed in January 2013. The evaluation focussed on the structure,
sufficiency and sustainability of the pension system, as well as its management. According to the evaluation, the Finnish pension system is comprehensive and robust. Finland’s population structure and increasingly global economy, however, call for further development of the system. The age of retirement should be raised and better returns on investments should be secured. The proposed changes can be allowed to develop over time, however.
Solvency regulations
The temporary legislation that was enacted in 2008 as a consequence of the financial crisis expired at the end of 2012. The Act concerned the funding of old-age pensions and the solvency capital of pension institutions. On 1 January 2013, new regulations concerning the solvency capital made up of the solvency margin and the equalisation provision came into effect.
The Ministry of Social Affairs and Health is currently working on a sweeping reform of the provisions concerning solvency and assets covering technical provisions. It is the final phase of reforms that are based on a report drawn up in 2010 by the working groups evaluating the solvency regulations of Finland’s earnings-related pension system. The aim is to draw up a solvency mechanism that is optimal for the investment activities and risk profile of the employment pension system and the objectives of the system.
Solvency II and good governance
The solvency regulation changes are also connected to the Solvency II project based on EU regulations. The purpose of the Solvency II Directive is to harmonise the requirements and insurance supervision principles concerning solvency, to improve the protection of the policyholder and beneficiaries and to increase the international competitiveness of the
European insurance sector. The Directive contains provisions on the qualification requirements of administration and management, on internal control, on solvency and on the internal
assessment of risks and solvency. It also includes provisions on the actuarial function,
outsourcing and publication of information. The Directive must be brought into effect nationally to cover life and non-life insurance companies, but in practice it will also have extensive
influence on the regulations concerning employment pension companies. The possibility of making use of the Solvency II regulations is being studied in the ongoing reform of the solvency mechanism.
Good governance in earnings-related pension insurance companies was a topic of public debate in 2012. As a consequence of the debate, the Ministry of Social Affairs and Health is preparing amendments to the corporate governance regulations for earnings-related pension insurance companies which are not directly related to the Solvency II Directive.
Promoting competition in the employment pension industry
Since the report on promoting competition in the employment pension industry, published in January 2007, there have been discussions at various levels on increasing competition by means of legislation. In particular, potentially changing certain parts of the calculation bases so that they are company-specific has been discussed. In December 2011 the Ministry of Social Affairs and Health requested a report on the assessment memorandum concerning the
effectiveness of the earnings-related pension system. The memorandum examines the company-specific expense loading component contained in the insurance premium and well-being at work activities. The report is still under preparation.
Etera’s result
Etera’s overall result was EUR 306 million (2011: EUR -283 million). The result consists of investment result, the underwriting result and the loading result. The investment result was EUR 295 million (EUR -252 million) and the underwriting result was EUR 11 million (EUR -31 million). The loading result was EUR 0.03 million (EUR 1 million).
Technical provisions, i.e. the money reserved for paying out future pensions, totalled EUR 5,372 million (EUR 5,110 million) at year-end, which was 5 per cent more than in the previous year.
The solvency margin, which serves as a buffer for investment operations, increased to EUR 1,026 million (EUR 738 million). Etera’s solvency strengthened during the year and was at a good level. At the end of 2012, the solvency ratio increased to 21.3 per cent (15.7%) and the solvency position was 3.4 (2.4).
Etera will transfer EUR 8.3 million to current client bonuses for 2013, which corresponds on average to 0.31 per cent of the payroll of those insured with Etera. In 2012, the client bonuses paid by Etera amounted to EUR 5.8 million, i.e. an average of 0.22 per cent of the insured payroll.
Cost effectiveness continued to be a focal point for Etera. Despite extensive IT system procurements, total operating expenses remained at the level of the previous year and amounted to EUR 47 million (EUR 47 million). The majority of the expenses consisted of personnel and IT system expenses. Personnel expenses amounted to EUR 20 million (EUR 20 million). Etera’s expense ratio, i.e. operating expenses in relation to the expense loading components, was 99.9 per cent (97.8%).
Insurance and customers
Despite the uncertain economic outlook, Etera’s premium income grew 5 per cent (8%) on the previous year, and totalled EUR 643 million (EUR 614 million). The premium income from entrepreneurs subject to the Self-Employed Persons Pensions Act (YEL) accounted for EUR 21 million (EUR 16 million). The payroll from private sector employees subject to the Employees Pensions Act (TyEL) grew slightly on the previous year and stood at EUR 2,652 million (EUR 2,647 million). The YEL payroll of self-employed customers increased 22 per cent to EUR 109 million (EUR 89 million). A total of EUR 5.6 million (EUR 8.5 million) in credit losses related to TyEL and YEL premium receivables was recorded. Etera’s market share calculated on the basis of premium income is estimated to be roughly 5.2 per cent (5.4%).
Etera had 17,500 (18,500) clients with TyEL contracts. Additionally, a total of 25,500 (29,000) customers paid TyEL insurance premiums temporarily during the year. Etera’s market share as an insurer of temporary customers was 71 per cent (72%) at the end of the year. The number of YEL insurance contracts increased 9 per cent and at year-end totalled 6,400 (5,854).
Insured employees during the year numbered 206,000 (214,000).
The average TyEL insurance premium for Etera’s customers was 23.05 per cent. The TyEL premium for an employer with an insurance contract (excl. client bonuses and compounding) was 23.3 per cent, if the payroll for 2010 was less than EUR 1.85 million. If the payroll was higher, the rate of contribution was affected by client-specific factors. A temporary employer’s TyEL insurance premium was 23.3 per cent of the payroll. The rate of YEL premium was 22.5 per cent for those under the age of 53 and 23.85 per cent for those aged 53 and over. In
2012, the reduction for entrepreneurs just starting out was 25 per cent for the first 48 months.
Transfer result and sales of new insurance policies
Etera performed well in the insurance transfer rounds. The transfer rounds for the entire year will increase Etera’s premium income by EUR 2.7 million (EUR -16.9 million).
New insurance sales remained strong. Etera accounted for 14 per cent (15%) of all new TyEL insurance policies, and 7 per cent (6%) of all new YEL insurance policies.
Insurance and online services
Services and their related systems were developed in extensive projects throughout the year, and the first roll-outs were successful. The development is ongoing. The goal is to boost
efficiency and to offer customers a way of taking care of their insurance matters conveniently and in real time. The majority of Etera’s customers report their insurance information
electronically, using the real-time monthly notification method.
Client relations and sales collaboration
Etera maintained close contact with its clients throughout the year. The results of the customer satisfaction survey were excellent. According to the survey, Etera’s customers were clearly more satisfied with the service they received in 2012 than in the year before. Customers considered earnings-related pension insurance with Etera to be easy and convenient.
The customer panels were continued, and co-operation with accounting firms remained strong. Etera’s financial administration and payroll management seminars (PHP-päivät) were taken to 13 different municipalities in November and December. There were 18 events in total, with 2,300 people participating.
Etera’s collaboration with Danske Bank continued, and Danske Bank’s Contact Center sells Etera’s earnings-related pension insurance policies. In April 2012, Etera and Danske Bank launched online collaboration, in which customers are able to access Etera’s online earnings-related pension insurance services directly from Danske Bank’s online banking system. This makes the flow of services even smoother for corporate customers.
In November, Etera and Pohjantähti Mutual Insurance Company signed an agreement concerning sales collaboration. Pohjantähti will offer its customers Etera’s earnings-related insurance in its 37 locations and with a staff of 60 contact managers. Insurance sales will be kicked off in spring of 2013.
Well-being at work and vocational rehabilitation
Etera offers its client companies effective tools for productively developing well-being at work. Etera’s goal is to develop well-being at work, reduce the amount of sick leave, prevent
disability and thus extend people’s careers.
Demand for Etera’s well-being at work services continued to grow. A high number of surveys on well-being at work were carried out in Etera’s client companies, and to a greater extent than in the previous year. Etera’s coaching events were expanded and developed. The events tackled such topics as challenging situations faced by managers and change management. In addition, Etera arranged Well-Being-at-Work Card Training in partnership with the Centre for Occupational Safety (TTK). Etera’s online Kompassi (Compass) service supports client
companies in independently developing well-being at work and supervisory work.
Development of a new tool for managing work capacity and health was launched in June. The tool helps to determine the biggest work capacity and health risks of a company’s employees. An essential part of the tool is the electronic work capacity and well-being questionnaire sent to the employees. The results are reported on the company level, and they can be used when management considers ways to target measures to promote work capacity together with occupational health services and other actors. The pilot project was started up in autumn 2012, and the tool will be launched in a targeted manner for customers’ use in 2013.
Customer satisfaction with Etera’s well-being at work services remained at a very good level. According to a survey carried out at the end of 2012, more than 90 per cent of the
Vocational rehabilitation
The number of applications and decisions concerning vocational rehabilitation increased from the previous year. A total of 1,229 decisions (1,135) on vocational rehabilitation were made at Etera, which is 8 per cent more than in 2011. There were 641 new applications (610), up 5 per cent on the previous year. Acceptance into vocational rehabilitation requires, among other things, that the applicant is at risk of a disability affecting his or her capacity to work within the next few years. The aim is to help an employee or entrepreneur return to work and keep them in employment. More than 70 per cent of people who participate in vocational
rehabilitation return to work.
Pensions
Pension and rehabilitation expenses increased 5 per cent on the previous year. Etera paid EUR 1,072 million (EUR 1,025 million) in pensions and rehabilitation expenses, and received EUR 370 million as clearing for jointly payable PAYG pensions (EUR 333 million). The number of pension recipients at the end of the year was 147,166 (150,076).
Pension applications
New pension applications were down 11 per cent on the previous year and amounted to 8,335 (9,369). The number of old-age pension applications was 3,304 (3,530), i.e. 6 per cent less than in the previous year. There were 2,993 (3,584) disability pension applications, which is 16 per cent less than in 2011. Survivors’ pension applications amounted to 1,952 (1,984), part-time pension applications to 69 (78) and unemployment pension applications to 17 (193). Survivors’ pension applications declined 2 per cent and part-time pension applications were down 12 per cent. No individuals were eligible to begin collecting unemployment pension in 2012.
Including applications for appeal and continuation, a total of 20,576 pension applications (21,680) were processed at Etera. The average processing time for pension applications at Etera was 37 days (38). The average processing time for other earnings-related pension companies was 43 days (41).
Pensions granted and the age of retirement
A total of 6,421 new pensions (7,140) were granted in 2012, which is ten per cent less than in the year before. Among new pensions, 40 per cent were old-age pensions (38%) and 31 per cent were disability pensions (33%). Survivors’ pensions accounted for 28 per cent (26%). The most common reasons for receiving disability pension continued to be musculoskeletal diseases and mental health problems. Of disability pensions, 34 per cent (31%) were granted due to musculoskeletal diseases and 26 per cent (28%) due to mental health problems. The average age of retirement among Etera’s insured was 58.1 years and the average age of retirement on old-age pension was 63.9 years.
Pension customers continued to be very satisfied with the service they receive from Etera. The satisfaction index for pension customers remained at the excellent level of the previous year. Of pension customers, 87 per cent felt that Etera values its customers.
New pensions granted in 2011–2012 by pension type
2012 (no.) 2011 (no.) Change, %
Old-age pension 2,568 2,739 -6
Disability pension 2,006 2,353 -15
Survivors’ pension 1,791 1,833 -2 Part-time pension 53 69 -23 Unemployment pension 3 146 -98 Total 6,421 7,140 -10 Pension records
Etera sent altogether 155,637 pension records (374,180) to its insured. The extracts contain information about pension accrual on earnings and benefits for unsalaried periods. Persons over the age of 50 also received an estimate of their future pension. The 2012 pension record was more comprehensive than in prior years, as it also included data on public sector earnings. The number of pension records Etera sent out decreased, as Keva sent out records to public sector employees. Etera previously sent a number of earnings-related pension records to public sector employees whose previous private sector employment contracts had been insured with Etera. Private sector pension institutions will from now on send the extracts by post only every three years. Pension records can, however, be viewed online at any point in time.
Investments
At the end of 2012, the fair value of Etera’s investments stood at EUR 5,711 million (EUR 5,334 million). The return on investments was 9.9 per cent (-2.3%). Net investment income at fair value amounted to EUR 521 million (EUR -125 million). The nominal return on investments over the last ten years was 4.5 per cent.
At the end of 2012, Etera’s investment allocation (on risk adjusted basis) was as follows:
2012 € million 2011 € million Fixed-income investments 3,605 3,010 Loan receivables 406 414
Public sector bonds 164 502
Other bonds 1,664 1,779
Other money-market instruments and
deposits 1,371 315
Equity investments 910 1,373
Listed equities 420 967
Private equity funds 394 324
Direct unlisted equities 96 82
Real estate investments 928 813
Direct real estate investments 703 611
Real estate funds and UCITS 225 202
Other investments 268 138
Hedge funds 148 138
Commodities 47 0
Other investments 74 0
Etera’s investment strategy
The cornerstones of Etera’s investment style are pro-active risk management, a counter-cyclical approach and solvency capital preservation. Etera is a counter-counter-cyclical investor, as it believes this can preserve solvency in the short term and in the long term can lead to better risk-adjusted returns than a passive or procyclical investment style would.
Risk management plays a central role. The risk level of investments is determined through risk budgeting taking into account the solvency situation prevailing at any given time. The
investment portfolio is always evaluated in its entirety, and its contents are optimised dynamically. Portfolio analyses are carried out on both a tactical and strategic level. In 2012, Etera recorded positive returns in every quarter. The return for the year also exceeded the average return for the pension system, for which reason Etera’s solvency also showed stronger growth than the average in the system. In November, Etera won the title of Best Pension Fund in Finland at Investment & Pensions Europe’s (IPE) annual awards event.
Fixed-income investments
Fixed-income investments yielded a return of 8.7 per cent (-0.5%). The return on public sector bonds was -0.2 per cent (-3.6%) and the return on other bonds was 15.0 per cent (-1.2%). The return on other money-market instruments and deposits was 1.1 per cent (1.7%).
The allocation of fixed-income investments, the choice of securities and the adjustment of risks were decisive factors in Etera’s positive development. Investments in emerging market
government bonds were increased, especially in the first half of the year, as euro-zone
government bonds became less appealing and the interest rate fell to such a low level that the real return was negative. During the year, the bonds issued by euro-zone states in the
portfolio were mostly Finnish government bonds. Corporate bonds with a high credit risk also proved to be a considerable source of profit, but their proportion was tactically reduced towards the end of the year, as the relative valuation level began to appear challenging compared to, for example, equities.
Equity investments
Etera’s equity investments generated a 13.4 per cent (-10.3%) return. The return on listed equities was 14.9 per cent (-16.2%) and on unlisted equities 7.8 per cent (9.2%).
It was an excellent year for equity investments, and the variation in returns remained
exceptionally small, thanks to successful tactical investment decisions. Key factors in this were keeping the equity weight low particularly in the second quarter and increasing the risk
towards the end of the quarter. The dynamic investment approach was possible thanks to a number of reforms, such as integrating internally and externally managed portfolios under the same decision-making process, pro-active risk management and progressive analysis methods. Geographically speaking, the equity portfolio yielded consistent returns overall during the year, although there was a lot of fluctuation.
Real estate investments
The return on real estate investments was 6.1 per cent (7.9%). The return on direct real estate investments was 5.5 per cent (5.0%). The development in the value of direct real estate investments was slightly positive and in particular the occupancy rate of business premises improved, and their vacancy rate at year-end was 5.2 per cent (8.3%). The return on real estate funds was 7.9 per cent (17.6%). Etera’s real estate fund portfolio is focussed on Finnish funds.
The Finnish business premises market in 2012 was relatively subdued, and the total volume of trade in the market was roughly EUR 2.1 billion. Nearly a quarter of the transactions took place in the Helsinki area, and measured in euros, nearly half. Etera sold two office properties. In addition, the company sold approximately EUR 10.7 million worth of individual flats in housing corporations. A residential block of wooden buildings commissioned by Etera reached
completion in the Viikki area of Helsinki. One of the corporations was sold to ICECAPITAL Housing Fund II Ky.
Construction on a series of office buildings in the Töölönlahti area of Helsinki continued during the year. The first of these buildings, which will mainly be used by Alma Media Oyj, and Ahlstrom Oyj, was completed in December. KPMG’s office building and a building that will primarily be used by Ernst & Young will be completed in the first half of 2014.
Corporate finance
Etera’s corporate finance involves investments in private equity funds and debt and equity financing primarily for Finnish companies. The return of corporate finance corresponded to the long-term target, and the total return was 7.4 per cent (8.0%). A stable return is, in fact, one of the most important targets in corporate finance during periods of extended uncertainty in the investment environment. Etera’s private equity investments yielded a return of 11.1 per cent (15.0%) and loan receivables 4.1 per cent (3.0%).
Corporate finance is an important channel for Etera’s domestic investments. Etera is reinforcing its role as a Finnish investor and as an active owner. Corporate finance is also considered to have an important role in future, as the belief is that the need for alternative forms of funding will grow as a consequence of, among other things, stricter lending by banks. Corporate finance entails thorough consideration of investment alternatives, detailed corporate analyses and evaluation of the terms of financing.
In 2012, Etera made three new investment commitments in private equity funds and two direct private equity investments, as well as several follow-up investments and different types of loan investments, mostly in Finnish companies.
Other investments
The total return on Etera’s other investments was 25.6 per cent (13.8%). Other investments performed extremely well, thanks to the hedge fund portfolio and commodity investments. The hedge fund portfolio focussed on investments with low sensitivity to return fluctuations in the equity markets.
Responsible investment
Etera responsibly invests earnings-related pension assets, taking into account not only financial aspects, but also matters related to the environment, social responsibility and corporate governance. Etera has committed to the UN Principles for Responsible Investments (UNPRI) and in 2012 for the first time reported on its investments to the UN. Etera signed an agreement with GES Investments Services. GES audits Etera’s equity and fixed income portfolio twice a year and assesses the corporate responsibility of the companies in Etera’s portfolio.
Etera is a member of Finland’s Sustainable Investment Forum FINSIF and participates in the organisation’s meetings and seminars. Etera also actively took part in the general meetings in which it has holdings. Etera promotes sustainable development and eco-efficiency in its real estate investments and is a member of the Green Building Council Finland. Etera uses LEED certification or other environmental certification in its construction projects. Etera’s office building in Helsinki is a Green Office certified by the WWF. The company reports the results of its environmental programme annually to the WWF.
Etera reports on its corporate social responsibility annually in its joint Annual Report/Sustainability Report and complies with GRI3 guidelines in its reporting.
Group
The Group had 58 (45) subsidiaries, 38 of which were real estate companies, 19 housing corporations and one limited liability company. In addition, Etera is a shareholder in 19 (17) associated undertakings. During the financial year, Etera established 3 real estate companies and one housing corporation. Etera purchased three subsidiaries and sold three.
Personnel
Etera employed an average of 290 (284) people in 2012. 95 per cent (95%) of the personnel were permanent. Women accounted for 73 per cent (73%) of the personnel and the average age of the personnel was 45 years (45). 18 (23) employees left Etera during the year, seven of whom retired (5). A total of 19 (41) new employees were recruited, 12 (34) of whom
permanently. The figures do not include annual holiday substitute workers or other short-term substitute workers.
Altogether EUR 16 million (EUR 16 million) in wages, salaries and commissions were paid to personnel. Wages, salaries and commissions are reported in Etera’s Annual
Report/Sustainability Report.
Etera’s Board of Directors approved in November 2012 a restructuring of the organisation which involved separating insurance services into a separate function and centralising all insurance-related tasks under one function. The goal is to further improve the level of service offered to insurance customers and to harmonise operations.
Personnel development and well-being
Coaching leadership was highlighted in general management training and in a training programme targeted at a limited number of managers. All managers received feedback on their leadership in 360-degree evaluations. Customer relationship competency was
strengthened in customer service training. The e-learning environment was taken into extensive use in training related to tools and IT systems and in employee induction.
Operating practices based on a coaching leadership style and employeeship were strengthened with a promise made by directors, managers and personnel to build a good workplace. In the engaging Good Workplace Day, all supervisors and a large group of other Etera employees gathered to contemplate matters related to well-being at work. Well-Being at Work Card Training was also arranged for Etera employees. In the Good Workplace group made up of employees from various parts of the organisation, the participants came up with concrete actions to boost employeeship. Discussion sessions and lectures were set up around the topic, and at the same time, the activities were introduced.
On the basis of positive feedback, telecommuting was adopted more widely. Rewards were developed by encouraging more diverse use of the existing means of rewarding. Etera’s ethical principles were compiled and approved in January 2012. Personnel were trained in the
principles during the spring. The workplace atmosphere was examined in the autumn by means of a personnel survey, the results of which showed a clear improvement from the previous year.
Administration
Etera is owned by the policyholders, the insured employees jointly covered by each insurance policy and the guarantee capital owners. Etera’s guarantee capital is EUR 112,000, divided into 112 guarantee shares with a nominal value of EUR 1,000 each. The guarantee capital is
credited with an annual interest corresponding to a moderate return which is the technical interest rate used in TyEL insurance plus one percentage point. The General Meeting annually decides on the payment of interest on the guarantee capital.
The Annual General Meeting was held on 10 May 2012. The Supervisory Board met twice and the Board of Directors 11 times during the year. The Chairmen of the Board met prior to the board meetings. Six of these meetings concerned nomination and fee issues. The Election Committee met twice during the year and the Audit Committee met three times.
The Chairman of Etera’s Board of Directors is Lasse Johansson, the Chairman of the Board of Hartela Group, and the Vice-Chairmen are Mikko Nyyssölä, Specialist, Confederation of Finnish Industries (EK), and Kyösti Suokas, 2nd Chairman of the Finnish Construction Trade Union. The Supervisory Board elected on 26 April 2012 Tero Kiviniemi, Head of YIT’s Construction
Services, as Chairman, as the previous Chairman, Antero Saarilahti, gave up the post due to retirement. The Supervisory Board re-elected Markus Ainasoja, Officer, the Finnish
Construction Trade Union, as Vice-Chairman.
The Annual General Meeting elected six new members to Etera’s Supervisory Board and eight members with terms due to expire for the term of office ending with the Annual General Meeting in 2014. The General Meeting re-elected auditors from Ernst & Young Oy.
Etera’s Annual Report/Sustainability Report includes a Corporate Governance Statement.
Risk management
Risk management is part of internal control. The purpose of risk management is to manage the risks that could jeopardise the performance of the company’s statutory responsibilities, the achievement of its strategic goals and the development and performance of the business according to the goals set.
The overall responsibility for risk management lies with the Board of Directors and the Managing Director. The Board of Directors annually approves a risk management plan that covers all operations. The responsibilities for the coordination of the planning, assessment and reporting of Etera’s entire risk management to the extent approved of by the Managing
Director have been assigned separately. The risk control related to investments has been organised separately from the Investment function. The task of the Finance and Human
Resources function’s controller team is to assess and control investment risks and report them to the Board of Directors and management.
Insurance risks are managed using the equalisation provision. The underwriting profit is transferred to the equalisation provision and correspondingly the underwriting loss is covered by it. Investment risks are managed by altering the amount and allocation of risk in the investment portfolio so that the risks are always correctly proportioned in terms of the company’s solvency and optimal in terms of the situation in the financial markets. Etera’s Board of Directors has, in its investment plan, defined risk limits, i.e. how much risk can be taken in the different risk areas and for the entire portfolio. Central risk areas are equity, interest rate, credit, currency, real estate and hedge fund risks.
Risk management and Etera’s key risks are described in more detail in the notes to the financial statements.
Outlook
Competition within a pension system that manages statutory social security is not an absolute value. A diversified system improves investment returns and services for the insured and insurance providers, and enhances operations and balances out risks. A variety of operators of different sizes are required in order for customers to have options and so that services can be developed to better correspond to customers’ needs.
Etera has, in recent years, decisively developed its investment operations, sales and services. Development in these areas remains strong. Distribution channels are being reinforced, as are well-developed online sales. The changes that are taking place in the market arena are
increasing competition, which is something Etera has actively prepared for.
The efficiency of operations and IT systems, as well as online services are Etera’s key areas for development. The gradual introduction of the new insurance system will improve both
efficiency and the quality of customer service. Boosting the overall efficiency of the earnings-related pension system requires more extensive co-operation on IT systems between pension institutions, and it appears that there are good opportunities and a common desire to do so. Economic development in Finland will be sluggish in 2013. There are considerable differences between business sectors and partly also regionally. It is difficult to forecast payroll
development, but 2013 is expected to be reasonable in terms of premium income.
Despite the risks, 2013 may turn out to be reasonable for the investment markets, provided inflation remains in check and interest rates remain low. Correspondingly, if economic growth picks up towards the end of the year as predicted, this will support the prices of riskier
investments. The central banks’ measures may also calm the markets, as they did in 2012.
NOTES TO THE FINANCIAL STATEMENTS 31 DEC 2012
ACCOUNTING POLICIES
The accounts have been prepared in compliance with the Pension Insurance Companies Act, the Insurance Companies Act, the Accounting Act and the Companies Act, the Accounting Ordinance, the Decree of the Ministry of Social Affairs and Health on the financial statements and consolidated financial statements of insurance companies, and the regulations and guidelines issued by the Financial Supervisory Authority.
Etera’s capital and reserves includes the initial fund and guarantee capital as well as profits from the current and previous financial years.
Consolidated financial statements
The Group's 58 subsidiaries are Finnish real estate companies and housing companies. The Group also includes 19 associates, which have not been consolidated for due to their being real estate companies and housing companies.
The consolidated financial statements have been prepared as combinations of the parent's and the subsidiaries' profit and loss accounts, balance sheets and notes to the financial statements, eliminating inter-company receivables and debts, income and expenses, and shareholding. Subsidiaries acquired during the year have been consolidated for from the date of acquisition. Cross holdings have been eliminated using the purchase method, excluding mutual joint-stock property companies and housing companies that are not fully owned and have been
consolidated for by proportionate consolidation.
With respect to real estate, the resulting consolidation difference is allocated to the subsidiaries' land and buildings in proportion to their cost. The depreciation plan for the consolidation difference allocated to buildings corresponds to the depreciation plan implemented for buildings in the subsidiaries.
Profit/loss and technical provisions
Technical provisions is the amount of assets reserved for future pension and other costs. This amount does not include the difference between the current values and book values of the assets. The adequacy of these assets in view of the risks associated with Etera’s insurance and investment operations is monitored by means of solvency examination, which is a separate process from actual accounting. Profit for the financial year is determined in accordance with the bases confirmed by the Ministry of Social Affairs and Health.
Book value of investments
Real estate and real estate shares are recognised at cost or current value on the balance sheet, whichever is lower.
Loans to Group companies, loans guaranteed by mortgages, other loans and deposits are recognised at nominal value or likely current value, whichever is lower.
Shares and participations recorded under investment assets are recognised at cost or current value, whichever is lower. The cost is calculated using the average price. Previous value
adjustments are readjusted in the profit and loss account up to the historical cost if the current value rises.
Shares and participations recorded under fixed assets on the balance sheet are recognised at cost or likely current value, whichever is lower.
Private equity fund units are recognised at cost or current value on the balance sheet, whichever is lower.
Debt securities are recognised at cost on the balance sheet, adjusted for the difference between cost and nominal value as well as for value adjustments, if these are attributable to reasons other than general interest rate fluctuations. Previous value adjustments are
readjusted in the profit and loss account up to the amortised cost if the current value rises. The difference between the nominal value and acquisition value is credited to or charged
NOTES TO THE FINANCIAL STATEMENTS 31 DEC 2012
against interest income during the instruments' term to maturity. The cost is calculated using the average price.
Information on securities that are on loan on the balance sheet date on the basis of loan agreements is provided in the notes to the financial statements. Loaned securities are included on the balance sheet. The counterparty in loan agreements effective on the balance sheet date is the clearing and/or settlement house to which the borrower has given collateral security.
Book value of assets other than investments
The book value of intangible assets and furniture and fixtures is cost less planned depreciation. Outstanding premiums are recognised at their likely value.
Fair value of investments
The fair value of real estate investments is determined individually for each piece of real estate using the income approach, regional market price statistics and property appraisals. Such appraisals are conducted by both Etera’s own and third-party experts.
With respect to loans to Group companies, loans guaranteed by mortgages, other loans and deposits, the fair value is the nominal value or likely value, whichever is lower.
As for quoted shares, the fair value is the latest bid price for the year or, if unavailable, the trading price. With other shares, the fair value is the remaining cost or likely sales price or net asset value. For mutual fund units, the fair value is the latest available value of a unit for the year, announced by the management company.
The fair value of shares and participations recorded under fixed assets is the book value. With respect to private equity fund units, the fair value is the fair value announced by the fund management company or, if unavailable, the acquisition cost.
The fair value of debt securities is the trading price on the last trading day of the financial year or, if unavailable, the likely sales price.
As for loans guaranteed by mortgages, other loans and deposits, the fair value is the nominal value or likely value, whichever is lower.
The fair values of foreign currency investments have been determined using the exchange rates quoted by the European Central Bank on the balance sheet date.
Derivative contracts
Derivative contracts have been used operationally to reduce investment risk, and as
investments made for other purposes, but hedge accounting is not applied to them. Unrealised losses from open derivatives are recognised as expenses, but unrealised gains are not
recognised as income. Gains and losses arising from the closing of derivative contracts during the financial year are recognised as income and expenses.
With respect to derivative contracts, the fair value is normally the market price or the likely sales or settlement price of the contract. The derivatives used during the financial year include interest rate, foreign currency, equity and commodity derivatives.
The methods used for determining fair values are the price quoted on the exchange for listed derivatives and the prices quoted by independent third-party service provides for OTC
derivatives, which have been calculated using general valuation models and market
information available on the balance sheet date, such as interest rate curves and exchange rates.
NOTES TO THE FINANCIAL STATEMENTS 31 DEC 2012
Notes on investment indicators
The notes on the investment allocation at fair values and net investment income have been prepared in compliance with the revised regulations and guidelines dated 1 January 2013.
Depreciation according to plan
With respect to fixed and investment assets, depreciation according to plan is calculated in accordance with a depreciation schedule using straight-line depreciation as follows:
Residential and office buildings 40–50 years
Wooden buildings 20 years
Constituent parts of buildings
and their technical equipment 10 years
Furniture and fixtures,
machinery and equipment 5 years
Software and vehicles 4 years
Other expenses with long-term effects 5–10 years
Pension plan
Personnel's statutory pension cover has been arranged through TyEL (Employees' Pensions Act) insurance. Supplementary pension cover has been arranged through either supplementary TEL (Employees' Pensions Act) insurance or voluntary supplementary pension insurance.
Personnel
The average number of employees during the financial year is calculated as the average of monthly numbers of employees who have employment contracts. The calculations are adjusted for part-time employees.
Foreign currency items
Receivables and liabilities denominated in foreign currencies are measured at the exchange rate of the balance sheet date. Exchange differences are recorded in the profit and loss account.
Taxes
The profit and loss account includes accrual-based taxes for the financial year and previous financial years.
Depreciation differences are divided into capital and reserves and deferred tax liabilities.
Total operating expenses by activity
Operating expenses as well as planned depreciation for furniture and fixtures and intangible assets are included in various profit and loss account items, itemised by activity.
Claims paid includes operating expenses and planned depreciation arising from claims handling and activities designed to maintain work capacity.
Operating expenses includes operating expenses and planned depreciation related to insurance policy acquisition, insurance management and administration, as well as statutory charges. Investment charges includes operating expenses and planned depreciation related to the management of real estate investments and other investments.
PROFIT AND LOSS ACCOUNT 1 January - 31 December 2013
€ thousand 2012 2011 2012 2011 Technical account Premiums written 1) 642,990.7 613,812.3 642,990.7 613,812.3 Investment income 3) 903,626.5 1,361,891.7 903,984.6 1,368,085.5 Claims incurred Claims paid 2, 5) -713,209.8 -704,216.3 -713,209.8 -704,216.3Change in provision for claims outstanding
Total change -16,887.8 -60,089.5 -16,887.8 -60,089.5
Claims incurred, net -730,097.6 -764,305.8 -730,097.6 -764,305.8
Change in provision for unearned premiums
Total change -245,668.7 113,660.4 -245,668.7 113,660.4
Operating expenses 5) -26,788.5 -27,338.2 -26,788.5 -27,338.8
Investment charges 4, 5) -541,245.1 -1,294,003.2 -540,579.1 -1,305,408.3
Balance on technical account 2,817.2 3,717.2 3,841.2 -1,494.7
Non-technical account
Appropriations
Change in depreciation difference -128.7 -312.4
Income taxes
Taxes for the financial year -1,160.2 -1,621.8 -1,160.5 -1,621.8
Taxes for previous financial years 113.7 222.0 113.7 222.1
Deferred taxes - - 794.0 2,828.8
-1,046.5 -1,399.8 -252.7 1,429.2
Profit/loss for the financial year 1,642.0 2,005.0 3,588.5 -65.5
ETERA GROUP
BALANCE SHEET AS AT 31 DEC 2012
€ thousand 2012 2011 2012 2011
Assets
Intangible assets 12)
Intangible rights 1,516.2 833.1 1,516.2 833.1
Other expenses with long-term effects 12,491.9 5,250.6 12,491.9 5,250.6
14,008.0 6,083.7 14,008.0 6,083.7
Investments
Real estate investments
Real estate and real estate shares 6, 7, 8) 399,711.1 415,397.9 557,310.8 482,125.7 Loans to Group companies 6, 7) 165,199.1 66,481.7
Loans to participating interests 6,7) 60,347.2 69,204.5 60,347.2 69,204.5
625,257.4 551,084.1 617,658.0 551,330.2
Other investments
Shares and participations 6,9) 2,713,977.3 2,025,195.5 2,713,977.3 2,025,195.5
Debt securities 6) 1,081,098.8 1,585,030.2 1,081,098.8 1,585,030.2
Loans guaranteed by mortgages 6) 156,793.0 168,716.2 156,793.0 168,716.2
Other loans 6, 10) 256,189.8 241,568.8 256,189.8 241,568.8
Deposits 6) 212,419.4 7,181.5 212,419.4 7,181.5
4,420,478.3 4,027,692.2 4,420,478.3 4,027,692.2
Total investments 5,045,735.7 4,578,776.3 5,038,136.3 4,579,022.4
Receivables
Direct insurance operations
Policyholders 68,657.1 66,344.3 68,657.1 66,344.3
Other receivables
Group companies 733.1 142.7
Participating interests 9.6 9.6
Others 11) 105,045.7 201,603.7 116,050.7 201,800.0
Deferred tax assets - 8,969.0 6,916.6
174,435.9 268,100.3 193,676.9 275,070.5
Other assets Tangible assets
Machinery and equipment 12) 1,710.5 1,777.8 1,710.5 1,777.8
Cash at bank and in hand 265,430.9 436,944.0 266,490.9 438,002.5
267,141.4 438,721.8 268,201.4 439,780.3
Prepayments and accrued income
Accrued interest and rent 20,478.7 24,819.0 20,469.2 24,817.5
Receivables from the PAYG pool 649.9 1,615.8 649.9 1,615.8
Other prepayments and accrued income 1,820.4 61.0 3,791.6 3,103.7
22,949.0 26,495.8 24,910.7 29,537.0
5,524,270.1 5,318,177.9 5,538,933.3 5,329,493.9
Liabilities
Capital and reserves 13)
Initial fund 5,000.0 5,000.0 5,000.0 5,000.0
Guarantee capital 112.0 112.0 112.0 112.0
5,112.0 5,112.0 5,112.0 5,112.0
Profit/loss brought forward 40,160.2 38,201.5 41,067.9 41,179.7
Profit/loss for the financial year 1,642.0 2,005.0 3,588.5 -65.5
41,802.2 40,206.5 44,656.4 41,114.2
46,914.2 45,318.5 49,768.4 46,226.2
Accumulated appropriations
Depreciation difference 489.2 361.4
Technical provisions 14)
Provision for unearned premiums 2,783,988.8 2,538,320.1 2,783,988.8 2,538,320.1
Provision for claims outstanding 2,588,189.1 2,571,301.3 2,588,189.1 2,571,301.3
5,372,178.0 5,109,621.4 5,372,178.0 5,109,621.4 Liabilities
Direct insurance operations 725.2 343.7 725.2 343.7
Other liabilities
Group companies 420.5 1,591.3
Participating interests 159.1 220.6 159.1 220.6
Others 15) 69,576.3 115,485.1 72,624.9 119,221.7
Deferred tax liabilities - 9,562.0 8,101.6
70,881.1 117,640.6 83,071.3 127,887.6
Accruals and deferred income
Liabilities to the PAYG pool 248.2 7,320.9 248.2 7,320.9
Other accruals and deferred income 16) 33,559.4 37,915.2 33,667.5 38,437.8
33,807.6 45,236.1 33,915.7 45,758.7
5,524,270.1 5,318,177.9 5,538,933.3 5,329,493.9
CASH FLOW STATEMENT AS AT 31 DEC 2012
€ thousand 2012 2011 2012 2011
Cash flow from operations
Profit/loss from ordinary activities 2,817.2 3,717.2 3,841.2 -1,494.7 Adjustments:
Change in technical provisions 262,556.6 -53,570.9 262,556.6 -53,570.9 Value adjustments and
revaluations of investments 13,223.0 141,179.3 6,992.0 144,894.7 Depreciation according to plan 1,981.8 1,644.5 9,736.4 9,577.0 Other adjustments -157,679.8 -46,620.7 -162,254.2 -53,385.7 Cash flow before change in working capital 122,898.8 46,349.4 120,872.0 46,020.4 Change in working capital
Increase (-)/decrease (+) in non-interest-bearing
short-term receivables 97,211.3 -103,295.9 86,019.9 -107,904.3 Increase (+)/decrease (-) in non-interest-bearing
short-term liabilities -58,187.9 22,276.3 -56,659.3 21,622.9 Cash flow from operations before financial items and
taxes 161,922.1 -34,670.2 150,232.5 -40,261.0
Direct taxes paid -1,046.5 -1,399.8 -252.7 1,429.2
Cash flow from operations 160,875.6 -36,069.9 149,979.8 -38,831.9
Cash flow from investments
Investments in assets -3,574,435.1 -3,268,998.1 -3,551,221.6 -3,272,780.4 Capital gains from inestments 3,251,566.7 3,576,392.7 3,239,606.9 3,583,051.9 Investments and capital gains on
tangible and intangible assets (net) -9,473.9 -4,586.8 -9,830.3 -4,587.4 Cash flow from investments -332,342.3 302,807.8 -321,445.0 305,684.1 Cash flow from financing
Interest paid on guarantee capital and other profit
distribution -46.3 -45.6 -46.3 -45.6
Change in cash and cash equivalents -171,513.1 266,692.3 -171,511.5 266,806.6 Cash and cash equivalents at the start of the year 436,944.0 170,251.7 438,002.5 171,195.9 Cash and cash equivalents at the end of the year 265,430.9 436,944.0 266,490.9 438,002.5 -171,513.1 266,692.3 -171,511.5 266,806.6
ETERA GROUP
NOTES TO THE PROFIT AND LOSS ACCOUNT 31 DEC 2012
ETERA AND GROUP
PREMIUMS WRITTEN 1)
€ thousand 2012 2011
Basic insurance under TyEL
Employer contribution 475,896.1 465,394.9
Employee contribution 145,526.3 621,422.4 132,137.8 597,532.7
Additional pension insurance under TEL 179.2 178.6
Minimum insurance cover under YEL 21,389.1 16,101.0
Premiums written 1) 642,990.7 613,812.3
Credit losses on outstanding premiums (-)
LEL2) 305.3 110.6
TyEL 4,677.7 7,341.3
YEL 607.6 1,145.7
5,590.6 8,597.7
1) Excluding credit losses
2) Concerns the LEL/TaEL contributions prior to 1 January 2007.
CLAIMS PAID 2)
€ thousand 2012 2011
Paid to pensioners
Basic insurance under TyEL 1,069,104.2 1,023,478.2
Additional pension insurance under TEL 6.4 4.8
Minimum insurance cover under YEL 2,445.3 1,071,555.9 1,552.8 1,025,035.8
Clearing of PAYG pensions
TyEL pensions -344,533.6 -301,870.3
YEL pensions -1,349.3 -4,089.8
Share of insurance contributions to the Unemployment Insurance Fund and of
the costs of pensions accrued during unpaid periods -23,837.8 -26,889.9
State compensation pursuant to the VEKL Act -47.7 -26.7
Total -369,768.4 -332,876.6
Claims handling expenses 10,486.5 11,037.1
Expenses for maintenance of work capacity 935.8 11,422.2 1,020.0 12,057.1
Total claims paid 713,209.8 704,216.3
TyEL = the Employees Pensions Act
TaEL = the Pension Act for Performing Artists and Certain Other Employee Groups TEL = Employees' Pension Act
LEL = Temporary Employees' Pension Act YEL = the Self-Employed Persons' Pensions Act VEKL= for pension accrual during certain unpaid leaves
NOTES TO THE PROFIT AND LOSS ACCOUNT 31 December 2012
SPECIFICATION OF NET INVESTMENT INCOME
€ thousand
Investment income 3)
Income from real estate investments Interest income
From Group companies 3,836.1 834.2
From participating interests 1,584.4 1,645.0 1,584.4 1,645.0
From others 620.3 6,040.8 133.8 2,613.0 620.3 2,204.7 133.8 1,778.8
Other income
From others 38,484.9 39,784.5 38,547.0 40,029.1
Total 44,525.7 42,397.5 40,751.8 41,808.0
Income from other investments
Dividend income 51,963.5 58,211.8 51,963.5 58,211.8 Interest income 132,560.6 300,733.9 132,560.6 300,733.9 Other income 452,951.2 637,475.3 711,610.9 1,070,556.6 453,014.0 637,538.1 711,629.3 1,070,574.9 Total 682,001.1 1,112,954.1 678,289.9 1,112,382.8 Value readjustments 36,836.6 21,345.8 36,331.4 21,345.8 Capital gains 184,788.9 227,591.8 189,363.3 234,356.9 Total 903,626.5 1,361,891.7 903,984.6 1,368,085.5 Investment charges 4)
Real estate investments 18,842.3 17,022.3 17,273.2 16,779.8
Other investments 425,993.0 703,006.2 425,993.0 703,006.2
Interest expenses 18,875.3 230,210.5 19,117.4 230,210.8
Total 463,710.6 950,239.0 462,383.5 949,996.8
Value adjustments and depreciation
Value adjustments 50,059.6 162,525.1 43,323.4 166,240.5
Planned depreciation on buildings 358.5 50,418.1 269.9 162,795.0 7,755.8 51,079.2 8,201.8 174,442.3
Capital losses 27,116.4 180,969.2 27,116.4 180,969.2
Total 541,245.1 1,294,003.2 540,579.1 1,305,408.3
362,381.4 67,888.5 363,405.5 62,677.2
GROUP
2012 2011
Net investment income in the profit and loss account
2012 2011
ETERA
NOTES TO THE PROFIT AND LOSS ACCOUNT 31 DEC 2012 ETERA AND GROUP
TOTAL OPERATING EXPENSES BY ACTIVITY 5)
€ thousand 2012 2011
Claims paid
Claims handling expenses 10,486.5 11,037.1
Expenses for maintenance of work capacity 935.8 11,422.2 1,020.0 12,057.1 Operating expenses 26,788.5 27,338.2 Investment operating expenses
Expenses for real estate investments 1,712.7 1,634.0
Expenses for other investments 6,756.7 8,469.4 6,385.2 8,019.2
Total operating expenses 46,680.2 47,414.5
PROFIT AND LOSS ACCOUNT ITEM "Operating expenses" 5)
€ thousand 2012 2011
Insurance policy acquisition costs
Commissions for direct insurance 274.4 440.5
Other insurance policy acquisition costs 10,287.5 10,561.9 9,679.0 10,119.5 Insurance policy management expenses 9,999.3 10,930.5 Administrative expenses
Statutory charges
Costs component of the Finnish Centre for
Pensions 1,361.6 1,756.3
Judicial administration charge 160.2 126.8 Supervision charge to the Financial Supervisory
Authority 117.7 1,639.4 133.1 2,016.3
Other administrative expenses 4,587.9 4,271.9
Total operating expenses 26,788.5 27,338.2
NOTES CONCERNING PERSONNEL AND MEMBERS OF CORPORATE BODIES 5.1)
€ thousand 2012 2011
Personnel expenses
Salaries and other bonuses 16,348.6 15,696.2
Pension expenses 3,170.9 2,976.9
Other social security expenses 935.9 898.7
Total 20,455.4 19,571.8
Management's salaries and bonuses
Managing director and deputy managing director 520.7 514.5
Board members and deputy board members 235.0 250.7
Supervisory board and advisory boards 81.8 85.9
837.5 851.0
Management's pension commitments, monetary loans, guarantees and contingent liabilities
The managing director, deputy managing director, board and supervisory board members or their deputies have not been granted pension commitments or monetary loans, and no guarantees or other contingent liabilities
have been given on their behalf.
2012 2011
Average number of employees 290 284
Auditor's fees itemised by type of assignment 2012 2011
Auditing 69.5 83.8
Assignments referred to in section 1(1)(2)
of the Auditing Act 0.0 0.0
Tax advice 2.0 1.5
Other services 8.5 17.4
80.0 102.7
NOTES TO THE BALANCE SHEET 31 DEC 2012
INVESTMENTS 6)
Fair value of investments and difference between fair and book values
€ thousand 2011
Remaining Book value Fair value Remaining Book value Fair value acquisition cost acquisition cost
Real estate investments
Real estate 28,352.4 28,352.4 32,684.7 30,776.7 30,776.7 35,652.1 Real estate shares
in Group companies 311,493.5 311,493.5 328,480.9 334,579.1 334,579.1 355,888.9 Real estate shares
in participating interests 53,324.8 53,324.8 107,722.7 45,040.5 45,040.5 85,388.1 Other real estate shares 6,540.4 6,540.4 9,781.0 5,001.6 5,001.6 7,456.3 Loans to
Group companies 165,199.1 165,199.1 165,199.1 66,481.7 66,481.7 66,481.7 Loans to
participating interests 60,347.2 60,347.2 60,347.2 69,204.5 69,204.5 69,204.5 Other investments
Shares and participations 2,713,977.3 2,713,977.3 3,023,522.4 2,025,195.5 2,025,195.5 2,212,954.3 Debt securities 1,081,098.8 1,081,098.8 1,111,975.7 1,585,030.2 1,585,030.2 1,576,797.1 Loans guaranteed by mortgages 156,793.0 156,793.0 156,793.0 168,716.2 168,716.2 168,716.2 Other loans 256,189.8 256,189.8 256,189.8 241,568.8 241,568.8 241,568.8 Deposits 212,419.4 212,419.4 212,419.4 7,181.5 7,181.5 7,181.5 5,045,735.7 5,045,735.7 5,465,115.9 4,578,776.3 4,578,776.3 4,827,289.5
€ thousand 2012 2011
The remaining acquisition cost of debt securities includes
the difference between the nominal value and acquisition 6,639.9 9,114.1 cost credited to (+) or charged against (-) interest income
Difference between fair and book values 419,380.1 248,513.2
Fair value of non-hedging derivatives and difference between fair and book values € thousand
Book value Fair value Book value Fair value Other receivables
Option premiums paid 18,620.1 18,902.3 68,331.8 78,601.8
Other liabilities
Option premiums received -39,078.6 -47,718.1 -30,595.5 -36,933.2 Other prepayments and accrued income, and other accruals and deferred income
Forward and futures contracts,
interest rate swaps and option contracts -15,193.6 -1,948.6 -77,138.3 -48,741.5
-35,652.2 -30,764.4 -39,402.0 -7,072.8
Difference between fair and book values 4,887.7 32,329.2
Total difference between fair and book values 424,267.9 280,842.3
2012 2011
ETERA 2012
NOTES TO THE BALANCE SHEET 31 DEC 2012
INVESTMENTS 6)
Fair value of investments and difference between fair and book values
€ thousand
Remaining Book value Fair value Remaining Book value Fair value
acquisition cost acquisition cost
Real estate investments
Real estate 492,584.2 492,584.2 403,103.3 424,480.4 424,480.4 388,259.6
Real estate shares
in Group companies 0.0 0.0 0.0 0.0 0.0 0.0
Real estate shares
in participating interests 53,324.8 53,324.8 107,722.7 45,040.5 45,040.5 85,388.1
Other real estate shares 11,401.8 11,401.8 14,639.1 12,604.8 12,604.8 15,059.4
Loans to participating interests 60,347.2 60,347.2 60,347.2 69,204.5 69,204.5 69,204.5 Other investments Shares and participations 2,713,977.3 2,713,977.3 3,023,522.4 2,025,195.5 2,025,195.5 2,212,954.3 Debt securities 1,081,098.8 1,081,098.8 1,111,975.7 1,585,030.2 1,585,030.2 1,576,797.1 Loans guaranteed by mortgages 156,793.0 156,793.0 156,793.0 168,716.2 168,716.2 168,716.2 Other loans 256,189.8 256,189.8 256,189.8 241,568.8 241,568.8 241,568.8 Deposits 212,419.4 212,419.4 212,419.4 7,181.5 7,181.5 7,181.5 5,038,136.3 5,038,136.3 5,346,712.5 4,579,022.4 4,579,022.4 4,765,129.7 2012 2011
The remaining acquisition cost of debt securities includes
the difference between the nominal value and acquisition 6,639.9 9,114.1
cost credited to (+) or charged against (-) interest income
Difference between fair and book values 308,576.3 186,107.2
2012 2011
NOTES TO THE BALANCE SHEET 31 DEC 2012
REAL ESTATE INVESTMENTS 7) Changes in real estate investments
€ thousand Real estate and real estate shares Loans to Group companies Loans to participating interests Real estate and real estate shares Loans to participating interests Acquisition cost 1 Jan. 505,988.8 66,481.7 69,204.5 625,965.3 69,204.5
Increase 108,949.5 115,251.7 - 158,656.9
Decrease -111,404.2 -16,534.2 -8,857.3 -76,386.6 -8,857.3 Acquisition cost 31 Dec. 503,534.1 165,199.1 60,347.2 708,235.6 60,347.2
Accumulated depreciation 1 Jan. -7,874.6 - - -109,785.5
Accumulated depreciation related to decreases - - - 1,206.8 Depreciation for the financial year -358.5 - - -7,755.8
-Accumulated depreciation 31 Dec. -8,233.1 - - -116,334.5
-Value adjustments 1 Jan. -82,716.2 - - -34,054.1
Value adjustments related to decreases -5,006.1 - - -
Value adjustments for the financial year -8,377.3 - - -1,046.1
Value readjustments 509.8 - - 509.8
-Value adjustments 31 Dec. -95,589.9 - - -34,590.4
-Book value 31 Dec. 399,711.1 165,199.1 60,347.2 557,310.8 60,347.2
ETERA AND GROUP
Real estate and shares in real estate occupied
for own activities 2012 2012
Remaining acquisition cost 20,436.0 20,436.0
Book value 20,436.0 20,436.0 Fair value 23,459.2 23,459.2 ETERA GROUP 2012 2012 23
NOTES TO THE BALANCE SHEET 31 DEC 2012
REAL ESTATE SHARES 31 DEC. 8
Share of ownership,
% Group companies
Asunto Oy Helsingin Kipparin Klaava 85.3 Asunto Oy Helsingin Mänty 100 Asunto Oy Kemin Valtakatu 10 67.07 Asunto Oy Nokian Kissankello 77.09 Asunto Oy Palvelutalo Untuva 100 Asunto Oy Tornion Länsipiha 100 Asunto Oy Turun Kuninkaanlaakson A-talo 91.12 Kiinteistö Oy Alvar Aallonkatu 3 100 Kiinteistö Oy Annalankankaantie 20 100 Kiinteistö Oy Esterinportti 2 100 Kiinteistö Oy Helsingin Ruislintu 100 Kiinteistö Oy Hoivakoti Villa Olavi 100 Kiinteistö Oy Hulikanpala 100 Kiinteistö Oy Hyvinkään Haavantie 4 100 Kiinteistö Oy Itämerenkatu 5 100 Kiinteistö Oy Jämsän Hotellitie 1 100 Kiinteistö Oy Jämsän Jämsänkoskentie 25 100 Kiinteistö Oy Järvenpään Yhteiskouluntie 13 100 Kiinteistö Oy Keravan Peltomäenkatu 2-4 100 Kiinteistö Oy Kontinkankaan kuntoutussairaala 100 Kiinteistö Oy Kuninkaanlaakson Hoivakoti 100 Kiinteistö Oy Kutomotie 16 100 Kiinteistö Oy Kutomotie 18 100 Kiinteistö Oy Kärjen Palvelutalo 100 Kiinteistö Oy Lappeenrannan Ierikankuja 1 100 Kiinteistö Oy Meritonttu 100 Kiinteistö Oy Munkkiluodontie 44 100 Kiinteistö Oy Oulun Soramäentie 1 100 Kiinteistö Oy Pakkalankujan Hoivakoti 100 Kiinteistö Oy Pasilanraitio 9 100 Kiinteistö Oy Rokuan kylpylähotelli 100 Kiinteistö Oy Spektrin Kvintti 100 Kiinteistö Oy Tahkoniemi 1 100 Kiinteistö Oy Tilkan Sairaala 100 Kiinteistö Oy Tilkan Viuhka 100 Kiinteistö Oy Vega 100 Kiinteistö Oy Westend-Helmi 100 Kiinteistö Oy Vänrikinrinne 100 Pommisuoja Oy 100
New real estate shares within the Group
Asunto Oy Espoon Matinpuronpuisto 1 79.58 Asunto Oy Espoon Matinpuronpuisto 2 79.58 Asunto Oy Espoon Matinpuronpuisto 3 79.58 Asunto Oy Espoon Matinpuronpuisto 4 79.58 Asunto Oy Espoon Matinpuronpuisto 5 79.58 Asunto Oy Espoon Matinpuronpuisto 6 79.58 Asunto Oy Espoon Matinpuronpuisto 7 79.58 Asunto Oy Espoon Matinpuronranta 1 79.58 Asunto Oy Espoon Matinpuronranta 2 79.58 Asunto Oy Espoon Matinpuronranta 3 79.58 Asunto Oy Espoon Matinpuronranta 4 79.58 Asunto Oy Helsingin Alvar 100.00 Kiinteistö Oy Helsingin Töölönlahdenkatu 3 100.00 Kiinteistö Oy Joensuun Rantakylän Palvelukoti 100.00 Kiinteistö Oy Kuhankeittäjä 100.00 Kiinteistö Oy Lohjan Yrittäjätalo 100.00 Kiinteistö Oy Matinpuron Pysäköinti 79.58 Kiinteistöyhtiö Sukkasijoitus Oy 100.00
Real estate shares sold by the Group
Asunto Oy Helsingin Rauduskoivu 100 Kiinteistö Oy Seinäjoen Pehtoori 100 Kiinteistö Oy Stella Nova 100
Divided real estate shares within the Group
Kiinteistö Oy Espoon Tuliunikko 79.58
Participating interests Associates
Asunto Oy Espoon Ratsutyttö 26.98 Asunto Oy Espoon Sellonhuippu 25.50 Asunto Oy Jyväskylän Assistentti 25.61 Asunto Oy Jyväskylän Dosentti 44.48 Asunto Oy Jyväskylän Skuutti 40.35 Asunto Oy Rovaniemen Pohjanseniorit 44.50 CFI Fund Management I Oy 49.00 ET-Hoivakiinteistöt Oy 40.00 Goldcup 8742 25.00 Hypo Fund Management I Oy 43.00 Hypo Fund Management II Oy 49.00 Kiinteistö Oy Kauppakeskus Sello 25.50 Kiinteistö Oy Kipparipari 48.80 Kiinteistö Oy Selloparkki 25.50 Kiinteistö Oy Viherlaakson Ostokeskus 29.96 Laulu-Miesten Kiinteistö Oy 25.42 Leppävaaran Hotellikiinteistö Oy 25.50
New real estate shares in associates
Asunto Oy Helsingin Strömbergintie 8 47.50 Asunto Oy Turun Waltter 40.97
NOTES TO THE BALANCE SHEET 31 DEC 2012
ETERA AND GROUP
SHARES AND PARTICIPATIONS 9)
€ thousand Domicile
Share of stock, %
Number
of shares Book value Fair value Shares
3Step IT Group Oy 7.06% 65,615 5,004 5,571
Amadeus IT Holding SA Spain 0.08% 350,000 5,021 6,634
Anvia Oyj 4.27% 4,014 9,134 9,134
Arek Oy 4.00% 560,000 560 560
ASML Holding NV The Netherlands 0.04% 169,400 8,119 8,119
AstraZeneca PLC United Kingdom 0.02% 275,000 9,801 9,801
BASF SE Germany 0.02% 185,000 9,627 13,187
BG Group PLC United Kingdom 0.02% 700,000 8,676 8,676
Bilfinger SE Germany 0.23% 106,158 6,651 7,734
Biohit Oyj 1.21% 128,766 334 515
Cencorp Oyj 4.79% 16,394,735 820 820
Chevron Corp United States 0.01% 110,000 9,022 9,022
Conor SPV I Ky ("SPV") 7.15% 670 442 442
Conor SPV II Ky ("SPV") 7.35% 3,355,563 2,010 3,457
Conor SPV IIIKy ("SPV") 6.16% 3,635,612 2,011 2,618
Deutsche Post AG Germany 0.05% 650,000 10,054 10,767
Deutsche Telekom AG Germany 0.02% 1,000,000 8,607 8,607
Drillcon AB Sweden 5.48% 2,400,000 1,133 1,133
Eli Lilly & Co United States 0.02% 270,000 9,882 10,093
EMC Talotekniikka Oy 6.44% 67,687 170 495
Eni SpA Italy 0.02% 747,000 12,861 13,700
Esperi Care Group Oy 4.44% 31,914 798 1,076
European Aeronautic Defence and Space Co NV The Netherlands 0.05% 400,000 9,953 11,760
Exilion Capital Oy 25.00% 500 33 33
Finnprotein Oy 7.90% 8,889 2,889 2,889
First Quantum Minerals Ltd Canada 0.02% 100,000 867 1,664
Fortum Oyj 0.19% 1,723,629 24,372 24,372
France Telecom SA France 0.05% 1,279,000 10,641 10,641
Futurice Oyj 16.31% 211,508 1,958 1,959
G4S PLC United Kingdom 0.04% 512,525 1,580 1,611
GDF Suez France 0.02% 560,000 8,714 8,714
GlaxoSmithKline PLC United Kingdom 0.01% 590,000 9,644 9,644
Hydroline Oy 19.00% 57 975 975
Kesko Oyj 1.57% 1,549,847 38,297 38,297
Kingfisher PLC United Kingdom 0.07% 1,667,000 5,023 5,795
Konecranes Oyj 0.99% 623,554 12,110 15,926
Lamor Corporation Ab 10.09% 38,777 4,750 4,750
Lemminkainen Oyj 1.09% 214,600 2,587 3,058
Leverator Oyj 11.11% 114,286 11 11
LVMH Moet Hennessy Louis Vuitton SA France 0.02% 83,000 9,837 11,516
Metro AG Germany 0.12% 380,000 7,965 7,965
Metso Oyj 0.54% 817,602 21,546 26,188
Neste Oil Oyj 0.17% 433,051 3,286 4,229
Nokian Renkaat Oyj 0.56% 742,632 16,872 22,316
Orkla ASA Norway 0.16% 1,600,000 10,031 10,538