Ilmarinen’s Interim Report 1 January–30 September 2020: Return on investments turned positive, cost-effectiveness of operations continued to improve
The return on Ilmarinen’s investment portfolio was 1.1 (8.2 per cent), i.e. EUR 0.6 (3.7) billion. The third-quarter investment portfolio return was 3.2 per cent, driven by the continued positive development in the investment markets. At the end of September, the market value of investments stood at EUR 50.3 billion (31 Dec 2019: EUR 50.5 billion).
Total result in January–September was EUR -107 million (EUR 1,324 million in 1 Jan–30 Sep 2019). The third-quarter result was EUR 992 million.
Premiums written fell to EUR 4.0 (4.3) billion as a result of an increase in temporary layoffs and a temporary 2.6 per cent discount in the employers’ TyEL contribution. Measured in premiums written, net customer acquisition was EUR 149 (174) million. A total of EUR 4.6 (4.5) billion was paid in pensions to 457,937 pensioners.
Operating expenses financed using loading income fell EUR 16 million and the loading profit was EUR 38 (42) million. The ratio of operating expenses to expense loading components improved to 69 (71) per cent thanks to the strong development of cost-effectiveness.
The long-term average nominal return on investments was 5.7 per cent, corresponding to an annual real return of 4.2 per cent.
Solvency capital was EUR 10,605 (10,792) million and the solvency ratio was 126.1 (126.6) per cent.
Outlook: Owing to growing unemployment and the temporary discount on employers’ TyEL contributions, premiums written will fall considerably year-on-year. The declining premiums written and the reduction in the expense loading rate for 2020 will weaken Ilmarinen’s loading income and thus the loading profit and the ratio of operating expenses to expense loading components compared to the year before. Thanks to the improvement in cost-effectiveness, loading profit is expected to be at the same level or better in H2 than it was in H1.
President and CEO Jouko Pölönen:
“In January–September, the return on Ilmarinen’s investment portfolio rose to 1.1 per cent, i.e. EUR 0.6 billion, and solvency strengthened to 126.1 per cent as the investment markets recovered from the sharp stock price plunge caused by the coronavirus pandemic earlier in the year. The third-quarter return was 3.2 per cent, i.e. approximately EUR 1.6 billion. During summer, the measures to contain the spread of coronavirus were successful and made it possible to re-open economies. Central banks and governments have continued their massive stimulus measures, providing extensive support for economies and the investment markets. As a result, economic forecasts have been revised slightly up from the worst-case scenarios, but the IMF’s latest projections expect the world economy to decline by -4.4 per cent. The acceleration of the re-spread of the coronavirus in the course of autumn has led to the introduction of containment measures, casting increased uncertainty over the economic outlook.
The return on equity investments in January–September was 1.4 per cent and the return on real estate investments was 1.1 per cent. At 14.9 per cent, other investments generated the best return. The return on fixed income investments was -2.1 per cent. The long-term average nominal return on investments was 5.7 per cent, corresponding to a 4.2 per cent annual real return. Our responsible investment and climate work garnered international recognition when Ilmarinen was named in the PRI Leaders’ Group for its exemplary reporting on climate measures.
Due to a decline in employment and the temporary 2.6 per cent discount granted on employers’ pension contributions, premiums written for January–September fell to EUR 4.0 billion, which was EUR 363 less than a year ago. The number of employees at Ilmarinen’s customer companies in September was almost 5 per cent smaller than a year ago. The decline has been particularly sharp in the hospitality sector and in staff leasing services. This information can be found in Ilmarinen’s monthly business cycle index.
Ilmarinen’s net customer acquisition in January–September was EUR 149 million. Customer retention is at a very good level, at 96.3 per cent and, measured in premiums written, new customers worth EUR 102 million transferred to Ilmarinen. The customer experience has developed positively despite the exceptional circumstances.
We paid EUR 4.6 billion in pensions to around 460,000 pensioners. Pension processing times have shortened further, and an increasing proportion of pension applications are submitted in electronic format via the online service. In early October, we participated in the celebration of the national Week of Older People and awarded, together with the Finnish Association for the Welfare of Older People, the Senior Deed of the Year. This year, the award was granted to Etelä-Pohjanmaan Muistiyhdistys for its project to make the region’s services more memory- and age-friendly by training local entrepreneurs based on the needs of older people and those suffering from memory disorders.
Our cost-effectiveness has improved as planned and the operating expenses financed using loading income declined by EUR 16 million from the comparison period. The decline in loading income compared to last year is due to lower premiums written as a result of declining payrolls and the 6.9 per cent reduction in the expense loading rate. The loading profit for January–September was EUR 38 million and the ratio of operating expenses to expense loading components was 69 per cent.
Ilmarinen’s operations have proceeded well despite the coronavirus crisis. Our employees have largely worked from home, and we have supported them in many different ways during the exceptional situation. Our personnel’s work energy remained at an excellent level, the employee experience improved and the employee Net Promoter Score (eNPS) rose to a record level of +51 (on a scale of -100 – +100).
Regardless of the challenging operating environment, we have managed to improve Ilmarinen’s operations in terms of all of our strategic indicators. Early in the year, Ilmarinen became the most solvent pension company and our loading profit is the best in the industry. Growth continued and both the customer experience and the employee experience developed in a positive direction. A warm thank you to our customers for their trust and to our personnel for their excellent work despite the exceptional circumstances.
To us, responsible management of pension cover means that we want to continuously improve our operations and our efficiency. This is in the interest of the entire pension system and society at large. The decline in the employment rate due to the coronavirus crisis, uncertain economic prospects and the zero interest rate environment are putting pressure on the financing of pensions – in the future even more so as the population is ageing. What is required now is responsible action and close collaboration involving the whole of society in order for us to rein in the pandemic without extensive lockdown measures, which would further exacerbate the economic crisis and unemployment. In the longer term, we will also need measures to improve employment and strengthen our competitiveness. It is the only way to secure well-being and the financing of pensions also for future generations.”
For more information, please contact:
- Jouko Pölönen, President and CEO, tel. +358 50 1282
- Mikko Mursula, Chief Investment Officer, tel. +358 50 380 3016
- Liina Aulin, Executive Vice President, Communications and Corporate Responsibility, tel. +358 40 770 9400
Ilmarinen will increase contacts with new entrepreneurs when processing YEL applications to set the right level of YEL income
Ilmarinen’s goal is to improve the pension security of its self-employed customers. Self-employed persons deserve the same level of pension and social security as employees right from the start of their career as entrepreneurs. The best way for self-employed persons to ensure their continuous security is to maintain the right level of income under their YEL insurance. YEL insurance is a self-employed person’s most important insurance, because the YEL income is the basis for an entrepreneur’s pension and social security.
Earnings-related pension insurance contributions for 2022 confirmed
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We invest in a sustainable future – the Ilmarinen Climate Roadmap defines our path to net zero carbon pension assets
Climate change poses a risk also to future pensions in Finland. Ilmarinen manages the risks brought about by climate change by seeking to achieve carbon neutrality in the investment of pension assets by the end of 2035. The new Climate Roadmap describes the interim targets, actions and tools to reach the net zero carbon goal.
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