Solvency remained strong in spite of investment market unstability

Customer base and premiums in strong growth

Ilmarinen’s premiums for 2008 are expected to increase exceptionally quickly, by approximately 14 per cent, which strengthens the company’s market share substantially.
Despite the weak development of the investment market, solvency remained good; solvency capital amounted to EUR 4.5 billion, accounting for 22.3 per cent of technical provisions.
Return on investments calculated at their market value was -4.9 per cent in the January to June period.
Due to the negative result from investment activities, the overall result remained EUR 1,687 million in the red.

At the end of June, Ilmarinen’s investment assets totalled EUR 25.2 billion, calculated at fair value (12/2007: 23.7). As a result of falling share prices and active decisions, the proportion of equities decreased to 40 (47) per cent while the proportion of fixed-income investments excluding loan receivables increased to 45 (38) per cent. Hedge funds included in equities accounted for 3 (3) per cent of Ilmarinen’s investments at the end of June. The share of real estate investments was 10 (9) and loan receivables 5 (5) per cent.

According to Ilmarinen’s long-term investment strategy, the company aims to further increase the proportion of equity investments of the investment portfolio. The high proportion of share investments is also in line with the objectives of the changes made during recent years to the regulations concerning employment pension investments. Under difficult market conditions, however, the proportion of equities has been kept at a level lower than the long-term objective.

The decrease in share prices and increasing interest rates affected the result of Ilmarinen. The return on Ilmarinen’s investment portfolio at market value decreased to -4.9 per cent during the first half of the year, compared with 5.3 per cent in the corresponding period a year earlier.

According to Harri Sailas, President and CEO, the result of an employment pension company should be assessed over a span of several years. – Ilmarinen’s solvency, high proportion of equity investments and good return on investments in the long term form a combination that inevitably leads to an above-average fluctuation in results. The selected strategy results in poor short-term result figures when the investment market is on the decline, but the company’s good solvency withstands the anticipated fluctuations in share prices well. It allows Ilmarinen to utilise the positive trend in the stock market once it eventually sets in, he says.

Market share in strong growth

Ilmarinen’s sales result for the previous year significantly increases the number of insured employees and payroll in 2008 compared to the previous year. At the end of June, approximately 460,000 employees were insured by Ilmarinen under a TyEL policy and approximately 53,000 self-employed persons. The total number of insured was thereby 513,000, which is over 40,000 persons more than at the end of the previous year. In terms of the number of insured persons, Ilmarinen was on 30 June 2008 the largest employment pension company. The company's premiums in 2008 are expected to increase by 14 per cent on the previous year to approximately EUR 3.2 billion.

– Our own sales work and the efforts of our partners have produced good results, which has translated into a larger number of customers and a stronger market position. We believe that our market share has increased considerably compared to 2007, Sailas states.

In June, Ilmarinen paid out pensions to approximately 270,000 (260,000) recipients. The number of new pension decisions made in January–June was about 11,000, which was 8 per cent more than a year earlier.

Solvency position is still good

The net return on Ilmarinen’s investments decreased in January-June to EUR -1,255 (1,245) million. The interest credited to technical provisions amounted to EUR 453 (511) million. The investment result, calculated as the difference between the two figures above, amounted to EUR -1,709 (734) million.

The overall result, which includes the result from underwriting activities, the investment result and the loading profit, was EUR 1,687 million negative. During January-June in the previous year, it was EUR 699 million positive. The loading profit, which is an indicator of cost efficiency, amounted to EUR 12.0 (6.5) million. The ratio of operating expenses to the expense loading components available for them was good, improving to 79 (87) per cent.

Solvency capital, which serves as a buffer against fluctuations in investment values and returns for the investments of earnings-related pension insurance companies, decreased from EUR 6,069 million at the end of 2007 to EUR 4,473 million at the end of June. Solvency capital was 22.3 per cent in relation to technical provisions at the end of June and was 1.9 times in relation to the solvency limit. At the end of 2007, the figures were 32.5 per cent and 2.0. These figures show that Ilmarinen’s solvency continues to be very strong and sufficient to cover the company’s investment risks.

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

E-mail: firstname.lastname@ilmarinen.fi

Attachments:

Overview of Ilmarinen’s operations and financial performance 1 January to 30 June 2008 (pdf)

Key figures and tables (pdf)