- With its capital investments, Suva generates returns in line with the market and ensures pensions for the long term.
- The investment strategy is based on longevity and broad diversification.
- In addition to the financial aspects, Suva also takes into account ecological, ethical and social minimum standards in its capital investments.
In the 2020 financial year, an overall performance of 5.3 percent was posted on fixed assets, amounting to around CHF 56 billion as of the end of 2020. Thanks to the strong global growth of the stock markets, equity investments achieved the largest contribution to this positive investment performance. Investments in bonds, loans, real estate and alternative investments also contributed to the result with their consistently positive returns. However, money market investments continued to suffer from negative interest rates. The consistent hedging of a large proportion of the foreign currency risks in a year in which the Swiss franc continually increased in value, has paid off.
The purpose of financial investments
Each year, despite major prevention efforts, a large number of occupational and leisure-time accidents occur which lead to disability or even death. In some 1,300 cases, accident victims receive a disability pension or widows/widowers or orphans receive a survivor’s pension. In the year a pension is awarded, Suva defers funds for future pension payments as pension actuarial reserves. This capital constitutes the largest share of fixed assets.
Provisions for short-term insurance benefits, such as treatment costs and daily allowances, as well as reserves make up the remaining assets.
Long-term investment horizon
The investment strategy is based on longevity and broad diversification. It has a balanced investment portfolio. Around half of the assets are invested in interest rate and credit investments, 30 percent are invested in shares and private equity, around 13 percent are invested in real estate and real estate funds, and the remainder is invested in other alternative investments. With this strategy, Suva achieves adequate return on the long-term average. Low-risk, fixed-interest capital investments alone would not meet the return requirements.
To compensate for significant fluctuations in value on capital investments, in good years Suva increases fluctuation reserves. In bad years it releases them again.
the distribution is based on risk premiums. The share ratio also includes private equity and equity-hedged portfolios, for example.
Asset classes have been grouped according to risk premiums as part of the new investment strategy in force since 1 January 2016. This approach allows alternative investments to be compared with traditional investments more easily and used in an even more targeted way.
The «Interest» risk premium includes bonds and loans with high credit ratings.
«Loans» covers all portfolios that entail a credit risk premium, i.e. compensation for assuming default risks. This includes syndicated loans, high-yield bonds and emerging market bonds. The «Private debt» and «Credit-hedged» portfolios previously managed under «Alternative investments» are now also included in this category.
The «Shares» risk premium also includes the «Private equity» and «Equity-hedged» portfolios in addition to the traditional share portfolios.
Three things make this investment strategy possible:
- The legal mandate and the resulting stable number of insurance carriers enables a long-term mindset.
- Premium income covers current payments for pensions and short-term benefits. Thus, there is little risk of having to dispose of long-term capital investments at low prices.
- The underlying liabilities – pension payments – are long-term in nature.
Yield and performance
Suva’s investment strategy can best be compared to that of a pension fund. Thanks to its balanced investment portfolio, Suva is able to survive even the most difficult times. A comparable investment strategy would have achieved an average annual yield of 5.6 percent since 1918. The realised performance since 2000 exceeds similar pension fund indices, e.g. the BVG-25-Index and the CS Pension Fund Index.
The positive performance of CHF 100 invested in accordance with Suva’s investment strategy (blue curve) would have defied all of the financial crises (bars in the negative zone) since 1918.
In addition to the financial aspects, Suva also takes into account ecological, ethical and social issues. The normative basis for this is Swiss legislation as well as the ten basic principles of the UN Global Compact . These follow the Universal Declaration of Human Rights and the Declaration on Fundamental Principles and Rights at Work of the International Labour Organization. They also take into account the principles of the Rio Declaration on Environment and Development as well as the UN Convention against Corruption .
Suva strongly believes that the effects of a responsible investment strategy can be enhanced when different market actors pursue the same goals together.
Suva signed the United Nations Principles for Responsible Investment (UNPRI) in 2014. Its UNPRI membership obliges Suva to prepare a detailed report on its own activities with regard to ecological, ethical and social issues.
Since 2014, Suva has been involved in the Swiss Sustainable Finance (SSF) initiative as a founding member. Its goal is to strengthen sustainability in the Swiss financial centre. The initiative is a platform that brings together a variety of actors such as investors, schools and universities.
In 2015, together with the larger Swiss pension funds, compensation funds and insurance companies, Suva founded the Swiss association for responsible investments (SVVK-ASIR) . The association supports its members in the application of ESG (environmental, social, governance) criteria. In this way, Suva observes its fiduciary duties as efficiently as possible.