Ilmarinen successful in pension fund markets

Excellent result in customer acquisition

Ilmarinen was a strong player in the pension fund markets in 2010. The company was particularly successful in the competition between pension insurance companies for clients. As a result of customer transfers, annual premiums written for TyEL insurance policies increased by EUR 73 million (EUR 12 million in 2009) and for YEL insurance policies by EUR 3 (2) million.

“The transfer result was one of the best in Ilmarinen’s history”, says President and CEO Harri Sailas.

The company also performed well in insuring new businesses and its insurance portfolio developed positively. At the end of the year, the number of people insured with Ilmarinen was approximately 554,700 (524,000) people. About 501,000 (472,000) people were insured under TyEL and about 53,700 (52,200) under YEL. The company’s premiums written increased by 6 per cent to EUR 3.4 billion.

“However, we will only be able to observe a large part of the financial effect of our outstanding market success in 2010 in the figures for 2011. Measured in premiums written, Ilmarinen is expected to strengthen its market position this year”, Sailas forecasts.

The number of pension recipients and the amount of pensions paid both increased. At the end of 2010, Ilmarinen paid out pensions to 296,000 (283,000) people in a total amount of EUR 3.3 (3.1) billion. In 2010, Ilmarinen made 21,000 (22,500) new pension decisions and processed the pension applications received at a speed higher than the industry average.

Return on investments and solvency at a good level

2010 was a challenging year for major investors. While the global economy recovered, the sovereign debt crises faced by some Euro zone countries left their mark on the economic year.

Ilmarinen performed well in this demanding environment, with a return on investments reaching 10.8 per cent.

“Particularly during the latter part of the year, development was surprisingly favourable. Our result puts us among the top-performing pension insurance companies”, Sailas says.

Ilmarinen’s returns were at a good level even when considered in the long term. Real annual return on investments has been on average 4.4 per cent over the past 14 years. The average return thus clearly exceeds the 4 per cent real return mark used by the Finnish Centre for Pensions as a basis when making forecasts of the pension insurance contribution level.

The value of Ilmarinen’s investments at the end of 2010 totalled EUR 28.1 (25.2) billion.

The company’s solvency continued to improve. At the end of 2010, the solvency capital used to measure the company’s solvency amounted to EUR 6.6 (4.9) billion, which is 29.7 (24.0) per cent of the technical provisions and 2.6 times the solvency border. Excluding the temporary legislation concerning the solvency of pension institutions, the solvency rate would have been 24.5 (19.1) per cent and the solvency position 2.1 (2.2).

Finland a profitable focus

Ilmarinen retained in 2010 its strong focus on Finland in its investment strategy. Domestic equities and shares rose to 43.5 (40.9) per cent of Ilmarinen’s investments in listed equities and shares. Finnish equities and shares generated a return of 30.3 (46.7) per cent.

“Focusing on the shares of Finnish companies that benefit from the growth of emerging markets proved to be quite a successful strategy. We will continue along the same lines this year”, says Sailas.

Clients benefit from good performance and cost-efficiency

Ilmarinen’s clients will benefit from the company’s good performance, as more client bonuses can be paid than in the previous year. Ilmarinen will allocate EUR 71 (52) million to client bonuses, which is 0.5 (0.4) per cent of the insured payroll.

The ratio of operating expenses to the expense loading components available for them improved and stood at 74 (76) per cent. This development will contribute to increases in client bonuses.

An active year for well-being at work services

For Ilmarinen’s well-being at work services, 2010 was the most active year ever. In 2010, Ilmarinen had 485 well-being at work projects underway in co-operation with its clients. In addition, the well-being at work seminars organised by the company gained popularity.

“Over the past few years, employers have increasingly come to realise the concrete benefits that the well-being of their employees can bring to the company. Large corporations can reap the benefits of a reduced risk of disability through lower pension insurance contributions”, Sailas says.

Vocational rehabilitation continued to gain popularity last year: the number of applications received by Ilmarinen increased by more than 11 per cent. The effectiveness of rehabilitation has remained at a high level, with over 70 per cent of the participants in Ilmarinen’s rehabilitation programmes returning to work after completing the programme.

“Successful rehabilitation programmes extend employees’ careers, which is in the interest of the society as a whole”, Sailas emphasises.

Challenges during the next government term

According to Sailas, extending work careers will be the primary mission of Finland’s new government and labour market organisations – first and foremost to secure the overall sustainability of the national economy and also to strengthen the financial basis of the earnings-related pension system.

“I believe that a total solution can be found to the work career issue. It must include the means to reduce disability pensions and to integrate youth more rapidly into the labour market. Even though people currently retire much later than before, I consider it likely that the old-age pension age limit also has to be put under scrutiny. In fact, I believe that in ten years, the retirement age will be higher than the current one”, Sailas says.

According to Sailas, if these measures are not taken, the Finnish economy will not be able to cope with the change in age structure.

For more information, please contact:

Harri Sailas, President and CEO, tel. +358 10 284 3000
Jaakko Tuomikoski, Deputy CEO, tel. +358 10 284 3447, +358 50 66398
Timo Ritakallio, Deputy CEO, tel. +358 10 284 3838, +358 500 536 346
Päivi Sihvola, Senior Vice President, Corporate Communications and Human Resources, tel. +358 10 284 3590, +358 40 757 4992

Attachments:

Report of the Board of Directors (pdf)
Slides pertaining to the financial statements (pdf)