In 2021, Varma's investments returned 18.5%.
Assets fell 4.7% to €56.2 billion ($60 billion) as of Dec. 31 vs. the end of 2021.
Varma also said its diversification provided protection as public equities declined globally in 2022. Equity investments returned -8.7%. In 2021, equities gained 32.2%.
Fixed-income investments lost 5.2% in 2022 compared with a gain of 1.9% in 2021.
Varma's private equity investments yielded 7.9% gain vs. a 49.6% return in 2021.
In the same period, real estate gained 5.7% compared with 5.9% a year earlier, and hedge funds yielded 2.3% compared with 15.3% a year earlier.
"In the last quarter of the year, inflation growth cooled and long-term interest rates fell," CIO Markus Aho said in a news release accompanying the update. "The energy situation in Europe turned out to be better than expected, due to a mild winter and continued good availability of energy. The changes calmed the markets, which was reflected especially in the strong performance of European equities at the end of the year. The reopening of China after its COVID-19 lockdown has also boosted the markets. The worst fears of a recession have not been realized, although we cannot be certain yet how the investment environment will develop."
In 2022, Varma updated its climate targets, setting its current climate goals to cut the entire investment portfolio's absolute emissions by 25% by 2025 and by 50% by 2030.
Separately on Friday, AP2, Gothenburg, Sweden, posted a -6.7% return for 2022.
AP2 said in a news release that in 2022 rising inflation and interest rates had a negative impact on the pension fund's equity and fixed-income returns.
However, AP2's portfolio did show resilience and a relatively moderate negative result, compared with the Swedish Stock Exchange, which declined 13% in 2022 and the MSCI World index, which fell 16%, due to the performance of the pension fund's private assets, CEO Eva Halvarsson said in the news release.
Assets fell 7.7% to 407.1 billion Swedish kronor ($39 billion) at the end of 2022.
"Over time, we've built our portfolio for situations like the one that arose in 2022. We've placed great value on spreading the risks as far as possible between different types of asset classes and markets, between listed and non-listed assets and between different management models," Ms. Halvarsson added in the release.
In 2021, the pension fund's investment return was 16.3%. AP2 generated an annualized return of 7.4% over the past 10 years, while five-year annualized return was 5.2%.