Ilmarinen’s Interim Report 1 January to 30 June 2021: Return on investments was 8.9 per cent, solvency capital grew to more than EUR 15 billion and customers’ payrolls started to rise
The return on Ilmarinen’s investment portfolio was 8.9% (-2.0%) or EUR 4.7 billion thanks to the strong performance of the equity markets. The market value of investments grew to EUR 57.5 (53.3) billion. The long-term average return on investments was 6.1 per cent. This corresponds to an annual real return of 4.6 per cent.
Thanks to the good performance of investment activities, the total result for January–June grew to EUR 2.6 (-1.1) billion. Premiums written grew to EUR 2.9 (2.7) billion as customers’ payrolls started to rise. EUR 3.2 (3.1) billion was paid in pensions. Net customer acquisition rose to EUR 116 (76) million thanks to excellent customer retention and successful customer acquisition
Loading profit improved to EUR 28 (21) million and the ratio of operating expenses to expense loading components to 66 (74) per cent. Improved cost-effectiveness reduced operating expenses to EUR 55 (61) million. Solvency capital strengthened to EUR 15.1 (12.5) billion, and the solvency ratio to 134.6 (130.2) per cent.
Future prospects: Following the recovery of the economy and the expiry of the temporary reduction in TyEL contributions, Ilmarinen’s premiums written are expected to increase clearly in 2021. The rise in payroll is expected to improve loading income and the loading profit compared to last year.
President and CEO Jouko Pölönen
“The first half of the year was strong for Ilmarinen, both with regard to investment activities and customer acquisition, and customers’ payrolls began to grow. In January–June, Ilmarinen’s return on investments was 8.9 per cent, or EUR 4.7 billion, the solvency capital rose to more than EUR 15 billion and investment assets came to EUR 57.5 billion.
The momentum on the investment markets was strong in H1. The dramatic global economic recovery from the downturn caused by the coronavirus, companies’ strong earnings performance, and massive financial and monetary policy stimulus measures have supported the positive performance of the equity markets. Of the main asset classes in Ilmarinen’s investment portfolio, equity investments generated the best return at 16.9 per cent. The return on fixed income investments was 2.6 per cent, on real estate investments 2.1 per cent and -0.5 per cent on other investments. The long-term average nominal return on investments was 6.1 per cent, corresponding to a 4.6 per cent annual real return.
Premiums written grew to EUR 2.9 billion. The decline in employment caused by the coronavirus pandemic still weakened premiums written early on in the year, but from April onward, the payroll and premiums written of client companies switched to a strong growth trajectory compared to the previous year. Employment is on the rise as the coronavirus pandemic eases: Ilmarinen’s customer companies included in Ilmarinen’s business cycle index had 4.8 per cent more employees in June than a year ago. The strongest growth took place in the hospitality sector, where the number of employees also fell the sharpest at the start of the pandemic.
We paid EUR 3.2 billion in pensions to around 458,000 pensioners. The number of disability pension applicants fell and 13 per cent fewer disability pension decisions were made compared to the previous year. Disability statistics do not yet show illnesses caused by the coronavirus: during H1, Ilmarinen processed two disability pension applications in which the main diagnosis was disability resulting from the coronavirus. For the time being, no permanent disability pensions have been granted based on Covid-19.
Net customer acquisition rose to EUR 116 million and customer retention was on an excellent level, at 97.2 per cent. Thanks to improved cost-effectiveness, the loading profit rose to EUR 28 million and the ratio of operating expenses to expense loading components improved to 66 per cent. Ilmarinen’s operating expenses financed using loading income came to EUR 55 million, i.e. EUR 6 million less year-on-year.
Together with our client companies, we launched the Tulevaisuuden laboratorio (Lab of the future) project, designed to identify, develop and share good work ability management practices. As part of Ilmarinen’s 60-year anniversary Mielellään töissä (Happy at work) project, we awarded the Tulevaisuuden työnantaja (Employer of the future) award to the Balanco Accounting group, which has not only grown its business but also helped young people find work and engage in working life. The theme of our anniversary year is youth and working life – especially supporting young people in engaging in working life, preventing disability pensions resulting from mental health issues and extending careers.
Ilmarinen’s personnel has to a great extent worked remotely in the first half of the year because of the coronavirus restrictions. Our personnel’s work energy has remained at an excellent level and the employee Net Promoter Score (eNPS) rose to 43 in June. We released our own Paluu tulevaisuuteen (Back to the future) plan in June: after the pandemic our goal is to transfer to a hybrid model, combining the best parts of in-office and remote work. Mostly, at least half of the work will be carried out as in-office work to ensure a sense of community and well-being, and otherwise, personnel can select where they want to work. Departments and teams will also have significant leeway to decide and agree on how work will be arranged.
Ilmarinen’s goal is to achieve a carbon-neutral investment portfolio by the end of 2035. Ilmarinen co-operates with other investors and, in the spring, joined the international Institutional Investors Group on Climate Change (IIGCC) network in which investor organisations work to develop measures for achieving carbon neutral portfolios. Ilmarinen is also part of the Climate Leadership Coalition (CLC) initiative related to the global pricing of carbon and a signatory in the investors’ call to ramp up governments’ climate measures. In April, Ilmarinen joined its asset management partner in a new low-carbon corporate bond fund as a pioneer investor with a sum of EUR 170 million.
A low birth rate, a decline in the number of working-age people and a zero interest rate environment are still creating pressure on pension financing in the longer term. The global economy is experiencing strong growth after the coronavirus crisis, and it is important for Finland to benefit from that growth, accelerate investments and open up travel. At the same time, we must find solutions that enable us to close the fiscal sustainability gap, and increase employment and Finland’s competitiveness also in the longer term. Financing well-being and pensions requires that we retain a competent workforce also in the future, and to achieve this we need to focus on developing competence, maintaining work ability and increasing work-based immigration. Work-based immigration should be made easier and we need to entice skilled labour and foreign students to come to Finland and make sure that they become engaged in working life. The latest pension barometer shows that half of Finns support increasing work-based immigration in order to strengthen the financing of the earnings-related pension system.”
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’s Interim Report 1 January to 31 March 2022: Premiums written grew, cost-effectiveness improved and solvency remained strong in a challenging market
The return on Ilmarinen’s investment portfolio was -2.2 (4.8 per cent), i.e. EUR 1.4 billion negative due to falling stock prices and rising interest rates. The market value of investments fell to EUR 59.1 (60.8) billion. The long-term average return on investments was 6.1 per cent. This corresponds to an annual real return of 4.4 per cent.
Responsibility for pensions is responsibility for the future – Ilmarinen has published its Annual and Sustainability Report 2021
The carbon intensity of direct listed equity investments decreased and the new Climate Roadmap shows our journey towards a net zero carbon investment portfolio. Ilmarinen’s Annual and Sustainability Report provides information on the impacts that managing your pension security has on the economy, people and the environment.
Ilmarinen will not make new investments in Russia
Ilmarinen Mutual Pension Insurance Company has decided that it will not make new direct investments in Russia or in Russian companies.
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