Ilmarinen's Interim Report 1 January to 30 June 2007
Investments and insurance sales bolster performance
- Return on investments calculated at their market value was 5.3 per cent in the January to June period.
- The number of people insured under TyEL (Employee Pensions Act) policy grew to 393,000.
- Solvency remained strong; solvency capital amounted to EUR 6.5 billion, accounting for 36.2 per cent of the technical provisions used for the calculation of solvency.
- The overall result rose to EUR 699 million.
Ilmarinen has pursued its strategy and continued to focus on shares in its investments. The proportion of equities grew to 45 (12/2006: 39) per cent while the proportion of fixed-income investments excluding loan receivables shrank to 42 (12/2006: 46) per cent. Hedge funds included in equities accounted for 2.8 (12/2006: 1.4) per cent of Ilmarinen’s investments at the end of June.
Share prices developed favourably in the first half, allowing Ilmarinen to record a good investment result. Return on investments calculated at their market value rose to 5.3 (1-6/2006: 1.4) per cent in the first half and raised the value of investments to EUR 24.5 (12/2006: 23.0) billion. Return on equities was 12.6 (1-6/2006: 5.0) per cent. The rise in long-term interest rates pushed the return on bonds down to -0.5 (1-6/2006: -1.4) per cent.
The result from the sale of new insurance policies was good and the result from the transfer business was excellent. At the end of June, 393,000 employees were insured by Ilmarinen under TyEL policy and approximately 50,000 self-employed persons, which is almost 7,000 more people insured than at the end of the previous year. The company’s premiums in 2007 are expected to rise to by EUR 80 million from the previous year to approximately EUR 2.7 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. The cooperation with OP Bank Group launched in autumn 2005 has considerably cemented Ilmarinen’s already strong competitive position,” says Harri Sailas, who took over as Ilmarinen’s President and CEO in January.
In June, Ilmarinen paid out pensions to approximately 260,000 (12/2006: 258,000) recipients. The number of new pension decisions made in January-June was about 10,200, which was 3.0 per cent more than a year earlier.
Solvency position very strong
The net return on Ilmarinen’s investments calculated at their market value was EUR 1,245 (1-6/2006: 305) million in the January to June period. The technical interest rate credited to technical provisions amounted to EUR 511 (1-6/2006: 478) million. The investment result, calculated as the difference between the two, amounted to EUR 734 (1-6/2006: -173) million.
Thanks to the good investment result, the overall result, which includes the result from underwriting activities, the investment result and the loading profit, was EUR 699 (1-6/2006: -149) million positive. The loading profit, which is an indicator of cost efficiency, amounted to EUR 6.5 (1-6/2006: 10.5) million, or approximately 13 (1-6/2006: 22) per cent of the expense loading components available for operating expenses.
Solvency capital, which serves as a buffer against fluctuations in the value of employment pension companies’ investments and the return on investments, increased to EUR 6,507 million from the end of 2006. Solvency capital was 36.2 per cent in relation to technical provisions and was 2.2 times in relation to the solvency limit. At the end of 2006, the figures were 33.7 per cent and 2.4 per cent. These figures show that Ilmarinen’s solvency, both in terms of absolute solvency and in relation to the company’s investment risks, continues to be very strong.
Future prospects
It is difficult to forecast the development of the investment market for the remainder of the year. The recent unrest in financial markets has been reflected on the equities markets as significant price fluctuations. Since the end of June, Ilmarinen’s solvency has decreased slightly and the solvency ratio has varied between 37.2 and 32.3 per cent. If the credit markets fail to normalise soon, the uncertainty will begin to affect the real economy, causing a risk of curbing the favourable global economic growth.
“Ilmarinen’s relatively strong solvency provides us with good opportunities for continuing to pursue our return-oriented investment strategy in the future,” says HarriSailas.
Ilmarinen will publish its annual report for 2007 in week 8.
For more information, please contact:
- Harri Sailas, President and CEO, tel. +358 10 284 3000
- Jussi Laitinen, Chief Investment Officer, tel. +358 40 577 1416
- Mikko Mursula, Head of listed securities, tel. +358 10 284 3869 or +358 50 380 3016
- Satu Mehtälä, Senior Vice President, Corporate Communications, tel. +358 10 284 3590 or +358 50 539 8590
E-mail: firstname.lastname@ilmarinen.fi