Ilmarinen’s investment returns on the right track

Ilmarinen had a positive first half of the year. Investment returns from January to June 2010 were on an upward trend, and solvency remained strong. Ilmarinen also succeeded well in customer acquisitions. The company’s good operational efficiency reflects the cost efficiency of its operations.

Ilmarinen’s investments generated a return of 3.7 per cent in the first six months of 2010, while the figure for the corresponding period in 2009 was 6.6 per cent. The return satisfies President and CEO Harri Sailas:“It’s a good result in a tough market situation.”

Sailas says that the first quarter allowed for even more optimism. “However,” he points out, “uncertainty in the investment markets increased in May and June, weakening investment returns. The markets were clouded by the sovereign debt crisis in the Euro area, which also affected share prices. We are still nonetheless on a good, positive track.”

The most important thing to look at in pension investment returns is the long-term return, Sailas reminds us. And seen even from that perspective, Ilmarinen’s investment returns are at a healthy level. The annual average real return on investments has been 4.2 per cent since 1997, and since then it has been possible to invest more broadly in shares and other higher-risk asset categories. The average return is thus above the 4 per cent real return mark used by the Finnish Centre for Pensions as the basic rate when making contribution-level forecasts.

Investment income boosted solvency

At the end of June, the market value of investment assets totalled EUR 26.1 billion. Private equity funds had the best return among the various asset categories, at 15.2 per cent. Shares and equities accounted for 33 per cent of investments classified according to risk, fixed income investments without loan receivables for 39, real estate for 10 and loan receivables for 12 per cent.

The net income from Ilmarinen’s investments amounted to EUR 927 million in the January–June period, compared to EUR 1,413 million a year earlier. The interest credited to the technical provisions amounted to EUR 317 million, and the investment result, calculated as the difference between the net income and the interest credited, totalled EUR 610 million.

Ilmarinen’s solvency remained strong. At the end of June, the solvency rate was 26.4 per cent, and the solvency capital was 2.8-fold in relation to the solvency border. The corresponding figures a year ago were 18.2 per cent and 2.9-fold. Excluding the temporary legislation, the solvency rate would be 21.4 per cent and the solvency position 2.2. The ratio of operating expenses to the expense loading components available for them continued to be good, at 77 per cent.

Success in client acquisitions

Ilmarinen’s insurance portfolio grew in January–June by more than 300 TyEL insurance policies and 900 YEL policies. By the end of June, a total of 520,000 people were insured by Ilmarinen, 467,000 of whom insured under a TyEL policy and 53,000 of whom were self-employed. As a result of the increase in payroll, premiums written are expected to increase by 5.2 per cent this year to EUR 3.4 billion.

The economic downturn caused the number of insured employees to shrink also at Ilmarinen, while success in liability transfers increased the number. In addition, the number of TyEL-insured employees at Ilmarinen will increase in the autumn by nearly 6,000, when previously agreed liability transfers enter into force.

Ilmarinen also succeeded well in transfers of earnings-related pension insurance policies.Net transfers in the first and second quarters boosted Ilmarinen’s premium income by a total of more than EUR 30 million, thereby further strengthening the company’s position as an earnings-related pension insurance provider.

Pension applications levelled out in the first half of the year, following a record number of applications last year. During the reporting period Ilmarinen made approximately 10,500 new pension decisions, which is 6 per cent less than a year ago,and the company paid pensions totalling EUR 1.6 billion to nearly 288,000 pension recipients.

Ilmarinen takes care of the earnings-related pension cover of more than 800,000 people.

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 66 398
Timo Ritakallio, Deputy CEO, tel. +358 10 284 3838, +358 500 536 346
Eeva Hukka, Communications Manager, tel. +358 10 284 2581, +358 50 502 9908

E-mail: firstname.lastname@ilmarinen.fi

Attachments:

- Supplemental material to the results press release (PDF)
- You can also read Timo Ritakallio’s interview (PDF)

The figures in the results press release and attachments are unaudited.