Varma s Interim Report 1 January 30 June Varma s Interim Report 1 January 30 June 2017

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1 Varma s Interim Report 1 January 30 June 2017

2 Strong result as economy recovers Solvency capital, 11.2 bn Market value of investments, 45.0 bn Return on investments 4.7%

3 Investment returns Investments yielded a return of EUR 2.0 billion * * 1-6/2016 return on investment was -0.3 % The average nominal return on investments over ten years is approx. 4.2%, calculated in accordance with the recommendations issued by TELA.

4 The value of Varma s investments reached a new record of EUR 45 billion

5 Investment return trend 1 6/2017

6 Since 2009, the cumulative return on Varma s investments is 78.2%, i.e billion Post-financial-crisis recovery has been reflected in investments for some time European sovereign debt crisis ECB begins quantitative easing Commodity prices plummet

7 Composition of the investment result

8 Investments classified according to risk 30-June June December Market value Market value Market value Market Value Risk position Risk position Risk position 1-6/ / / m Return Return Return MWR MWR MWR Vola- mill. % mill. % mill. % mill. % % % % tility Fixed-income investments 1 17, , , , Loan receivables 1, , , , Bonds 12, , , , Public bonds 4, , , , Other bonds 7, , , , Other money-market instruments and deposits 4, , , , Equity investments 17, , , , Listed equities 13, , , , Private equity 2, , , , Unlisted equities 1, , Real estate investments 3, , , , Direct real estates 2, , , , Real estate funds Other investments 6, , , , Hedge funds 6, , , , Commodities Other investments Total investments 44, , , , Impact of derivatives 7, , Investment allocation at fair value 44, , , , The modified duration for all the bonds is 4.1. The open currency position is 21.7% of the market value of the investments. 1 Includes accrued interest

9 Investments in Finland 28%, 12.7 bn

10 Investment returns for Varma and the markets % Varma Finnish equities European equities US equities Euro government bonds Euro corporate bonds 06/ Average nominal return 5 years years Since 1999 * Average real return 5 years years Since 1999 * * Varma, as it is today, was founded in mid-1998, so comparison data earlier than 1999 is not available. Finnish equities = OMX Helsinki Cap Index European equities = Stoxx 600 Total Return Index EUR US equities= S&P500 Total Return Index Euro government bonds = IBOXX Eurozone EUR (Total Return) Euro corporate bonds = IBOXX Corporate Overall Performance Index EUR (Total Return)

11 Solvency very strong Solvency capital was EUR 11.2 billion at the end of June (10.2 bn on 1 Jan), and per cent in relation to the technical provisions (130.9% on 1 Jan). Solvency capital was on a sustainable level, i.e. 1.7 (2.0) times the solvency limit. The figures are in line with the legislation in effect at the time.

12 Key figures 6/2017 6/ Premiums written, million 2,444 2,324 4,675 Pensions paid, million ¹) 2,752 2,680 5,345 TyEL-insured 500, , ,890 YEL insurance policies 35,470 36,450 36,000 Pensioners 342, , ,100 Investments, million 44,989 41,242 42,852 Return on investment, million 2, ,953 Return on investment, % Total result, million 1, Loading profit, million Operating expenses as % of loading component Technical provisions, million 35,601 33,392 33,501 Solvency capital, million 11,234 9,136 10,199 Solvency ratio % 2) Solvency capital/solvency limit Average number of personnel, Parent Company ) 2) Before the reduction of received clearing of pay-as-you-go (PAYG) pensions Pension assets in relation to the technical provisions under 11 of the Ministry of Social Affairs and Health s decree governing pension institutions (614/2008). All years are presented in the new format.

13 Latest developments for customers Pensions paid 2.8 bn Pensioners 342,000 Insured employees and entrepreneurs 536,000

14 Latest developments for customers Development of digital services continues. A software robot was taken into use in pension services, freeing up personnel to focus on more demanding expert and customer work. Varma made 13,300 new pension decisions up 17%. Cost-effectiveness at a good level. Varma used 75%, or 50 million, of the assets reserved to cover operating expenses for that purpose. The result of the TyEL transfer round that ended in June was EUR 2.3 million. We published new workability management contracts between 1 April and 30 June 2017.

15 Responsibility

16 Varma s CSR focus areas Responsibility for Varma employees Cost-effective use of funds Open and pro-active communication Ethical and transparent business Responsibility in investment operations Mitigating climate change Securing solvency High-quality implementation of pension provision Promoting workability and longer careers

17 CSR actions in the first half of 2017 Responsibility reflected in share ownership policy Our share ownership policy transparently outlines our principles and expectations as a shareholder Responsibility included as a new part of the policy: we require companies, e.g., to comply with international norms and to report on the impacts of climate change on their business European leader in sustainable equities Varma in top 6 in WWF survey on how well equity portfolios are aligned with the Paris Climate Agreement Varma has excluded investments in coal mines and in energy companies who rely on coal for more than 1/3 of their electricity production 5,000 new solar panels, 250 charging stations for green cars Varma will 7 build solar power systems at several of its properties around Finland, including its head office Charging of electric and hybrid cars possible at 250 spaces in the company s Salmisaari parking facility

18 Current economic issues

19 Current economic issues The global economy appears to be recovering on a large scale. Finland has finally made it on board the global economic recovery. Growth is strong and steady and is boosted by exports, private consumption and investments. We still need to see stronger growth in employment. The strengthened economic growth has not yet significantly improved the labour market situation.

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