Strong performance in investment operations, cost-effectiveness and growth continued
The strong performance earlier in the year continued in the third quarter, and the total return increased to 1.3 billion, thanks to the good investment return. In January–September, Ilmarinen’s return on investments was 8.2 per cent, or EUR 3.7 billion, and investment assets rose to a record EUR 49.1 billion. The customer base grew, costs decreased and cost-effectiveness improved further.
Ilmarinen’s third-quarter total result grew to EUR 1,324 million (EUR -211 million in 1 Jan–30 Sep 2018), thanks to strong investment returns. Operating expenses decreased, loading profit improved to 42 (25) million and the ratio of operating expenses to expense loading components to 71 (82) per cent.
Premiums written in January–September stood at EUR 4.3 billion (EUR 4.0 billion). Measured in premiums written, the customer base grew by EUR 180 million (EUR 78 million). A total of EUR 4.5 billion (EUR 4.2 billion) in pensions was paid to 460,000 pension recipients.
In January–September, the return on Ilmarinen’s investment portfolio was 8.2 per cent (3.0 per cent in 1 Jan–30 Sep 2018), i.e. EUR 3.7 billion (EUR 1.4 billion). At the end of September, the market value of investments stood at EUR 49.1 billion (31 Dec 2018: EUR 46.0 billion).
The long-term average nominal return on investments was 5.7 per cent, corresponding to a 4.2 per cent annual real return.
Solvency strengthened. At the end of September, solvency capital was EUR 10,105 (8,918) million and the solvency ratio was 125.4 (123.7) per cent.
President and CEO Jouko Pölönen:
“The strong performance earlier in the year continued in the third quarter, and the total return increased to 1.3 billion, thanks to the good investment return. In January–September, Ilmarinen’s return on investments was 8.2 per cent, or EUR 3.7 billion, and investment assets rose to a record EUR 49.1 billion. The customer base grew, costs decreased and cost-effectiveness improved further.
Premiums written in January–September amounted to EUR 4.3 billion. The amount of premiums written transferred to Ilmarinen from other employment pension insurance companies amounted to EUR 55 million, and sales of new insurance were also successful. Measured in premiums written, net customer acquisition was EUR 180 million. We paid a total of EUR 4.5 billion in pensions to 460,000 pension recipients. We focussed on improving the customer experience and boosting the efficiency of our processes, which was reflected in the faster processing times for pension applications.
In January–September, we made close to 27,000 new pension decisions. The number of disability pensions continued to grow, with disability pension applications increasing 3.5 per cent on the previous year. We paid more than EUR 370 million in disability pensions. We aim to prevent disability and lengthen careers by supporting our client companies in work ability management and through vocational rehabilitation. In January–September, we carried out more than 1,800 projects aimed at preventing the disability risk together with our client companies. Our financial support for these projects amounted to more than EUR 2 million. We made 3,300 decisions on rehabilitation. In September, we organised the ‘Happiest Entrepreneur of Finland’ campaign for the seventh time. The campaign aims to shine a spotlight on entrepreneurs’ work ability and well-being. A total of 132,000 votes were registered in the campaign, and among 1,300 candidates, the winner of the title ‘Happiest Entrepreneur of Finland’ was fishing business entrepreneur Olli Ojamo of Merikarvia.
Investment returns developed well in all main asset classes. Share prices rose in Europe and in the US. Despite the slowdown in economic growth, expectations of a persistent very low interest rate level have supported the markets. Ilmarinen’s investments yielded a return of 2.2 per cent in the third quarter, and calculated from the start of the year, 8.2 per cent. Investment assets grew to EUR 49.1 billion. At 14.4 per cent, equity investments generated the best return. The return on fixed income investments was 4.2 per cent, and on real estate investments 3.4 per cent. The long-term average annual return is 5.7 per cent, which corresponds with a real return of 4.2 per cent. Solvency capital increased to EUR 10.1 billion, and the solvency ratio strengthened to 125.4 per cent.
Our long-term sustainability efforts in real estate investments continued. The Mall of Tripla, which opened its doors in Helsinki’s Pasila district in October, received the highest rating level of LEED environmental certification, platinum. Sello Shopping Centre in Espoo became the first Finnish shopping centre to reach carbon neutrality, and it was named the shopping centre of the year. Helsinki’s REDI Shopping Centre won first place in its category in the European Parking Awards, receiving praise for, among other things, the high number of electric car charging stations. Ilmarinen is part owner of the shopping centres. Among our older properties, the Postitalo and Grönqvist buildings in Helsinki’s city centre received LEED environmental certification.
Synergies from last year’s merger are evident as an improvement in cost-effectiveness: operating expenses decreased, loading profit rose to EUR 42 million and the ratio of operating expenses to expense loading components, a measure of cost-effectiveness, improved year-on-year by 11 percentage points, to 71 per cent. Cost-effectiveness directly benefits our customers: we give the loading profit back to our client companies in full in the form of client bonuses.
In September, Statistics Finland published its latest population projection, according to which the reduction in the number of working-age people would accelerate already in the 2040s due to a drop in the birth rate. This is a challenge for the pension system’s financing in the long term. At the same time, the Finnish Government is struggling to meet its 75 per cent employment rate target. In this situation, attention should be focussed not only on creating new jobs, but also on work ability and on keeping the current working-age population at work and capable of working. Last year, approximately 20,000 people retired on disability pension, and the figure continues to grow. If this development continues, more than 80,000 people of working age will exit the labour market during the government’s term of office. Joint efforts to maintain work ability and prevent the disability risk are required from employees, employers, pension institutions and society as a whole.”
For more information, please contact:
- Jouko Pölönen, President and CEO, tel. +358 50 1282
- Mikko Mursula, Deputy CEO, Chief Investment Officer, tel. +358 50 380 3016
- Liina Aulin, EVP, Communications and Corporate Responsibility , +358 40 770 9400
Ilmarinen’s Interim Report 1 January to 31 March 2023: Positive return on investments, premiums written grew and cost-effectiveness improved
The return on Ilmarinen’s investment portfolio was +2.2 (-2.2) per cent, i.e. EUR 1.3 billion, as a result of rising stock prices. The market value of investments grew to EUR 57.5 (56.3) billion. The long-term average return on investments from 1997 onwards was 5.8 per cent. This corresponds to an annual real return of 3.8 per cent.
Ilmarinen’s financial statements 2022: Premiums written grew strongly and cost-effectiveness improved to a record level, return on investments -6.6 per cent and continued strong solvency
“2022 was a year of strong growth and improvement of effectiveness for Ilmarinen. Premiums written grew by as much as 11 per cent and cost-effectiveness improved to a record level. At the same time, the operating environment in the investment markets was very challenging. Russia’s war of aggression in Ukraine, Europe’s energy crisis, accelerated inflation and rapidly tightening central bank monetary policy cast a shadow over the economic outlook, broadly reducing investment market returns. Ilmarinen’s return on investments was negative, but solvency remained strong,” says Ilmarinen’s President and CEO Jouko Pölönen.
Ilmarinen’s Interim Report 1 January to 30 September 2022: Premiums written growing strongly, return on investments negative, solvency remained good
The return on Ilmarinen’s investment portfolio was -8.0 (10.5) per cent, i.e. EUR 4.9 billion negative due to falling stock prices and rising interest rates. The market value of investments fell to EUR 55.8 (60.8) billion. The long-term average return on investments was 5.7 per cent. This corresponds to an annual real return of 3.9 per cent.