Ilmarinen’s Interim Report 1 January to 30 September 2021: Return on investments was 10.5 per cent, solvency capital strengthened to EUR 15.4 billion
The return on Ilmarinen’s investment portfolio rose to 10.5 (1.1) per cent, or EUR 5.6 billion, thanks to the strong performance of the equity markets. The market value of investments grew to EUR 58.4 (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–September grew to EUR 2.9 (-0.1) billion.
Premiums written grew to EUR 4.4 (4.0) billion along with the rise in customers’ payrolls and the expiry of the temporary reduction in the TyEL contribution. EUR 4.7 (4.6) billion was paid in pensions.
Net customer acquisition rose to EUR 230 (149) million thanks to excellent customer retention and successful customer acquisition.
Loading profit improved to EUR 45 (38) million and the ratio of operating expenses to expense loading components to 64 (69) per cent. Improved cost-effectiveness reduced operating expenses to EUR 81 (85) million.
Solvency capital strengthened to EUR 15.4 (12.5) billion, and the solvency ratio to 135.0 (130.2) per cent.
Ilmarinen’s goal is to achieve a carbon-neutral investment portfolio by the end of 2035. A more detailed roadmap has been drawn up for listed equity investments and Finnish real estate investments.
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 the loading income and loading profit compared to last year.
President and CEO Jouko Pölönen:
“Ilmarinen’s January–September result was strong in both investment operations and customer acquisition. The return on investments was 10.5 per cent, or EUR 5.6 billion, and solvency capital strengthened to EUR 15.4 billion. Measured in terms of premiums written, net customer acquisition rose to EUR 230 million thanks to successful customer acquisition and excellent customer retention.
The global economy continued to recover rapidly from the recession caused by the coronavirus pandemic. The quick economic recovery has accelerated inflation and caused bottlenecks in supply chains. During the third quarter, expectations of rising inflation and tightening monetary policy were reinforced, causing more volatility on the investment markets, and the strong rise in share prices early in the year levelled off.
Of the main asset classes in Ilmarinen’s investment portfolio, equity investments generated the best return, at 19.2 per cent. The return on fixed income investments was 3.5 per cent, on real estate investments 4.2 per cent and on other investments -1.7 per cent. 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 4.4 billion, i.e. more than EUR 400 million more than one year earlier. Customer companies’ payroll, which declined during the pandemic, has been growing since April, and in January–September the payroll grew 5.5 per cent. The growth in premiums written has also been affected by the expiry of the temporary reduction that was made to the employer’s TyEL contribution due to the pandemic.
We paid EUR 4.7 billion in pensions to around 457,000 pensioners. The number of disability pension applicants fell and 12 per cent fewer disability pension decisions were made compared to the previous year. Together with Kela, we launched an experimental operating model aimed at preventing prolonged disability by steering clients to vocational rehabilitation earlier than they currently are. The pilot aims to identify customers who meet the criteria for vocational rehabilitation and to actively engage with them if the customer consents to it. The ultimate goal is to improve the effectiveness of the rehabilitation and make it easier for customers to use our service.
The ratio of operating expenses to expense loading components, a measure of cost-effectiveness, improved to 64 per cent, and loading profit increased to EUR 45 million. Operating expenses financed using loading income came to EUR 81 million, i.e. EUR 4 million less year-on-year.
Ilmarinen’s goal is to achieve a carbon-neutral investment portfolio by the end of 2035. In the first phase, we created more detailed asset-class-specific roadmaps for listed equity investments and Finnish real estate investments. As an investor, we promote the transition to a low-carbon economy, for instance, by requiring emission reductions from our investees and engaging with our investee companies either directly or together with other investors, and by investing in new solutions to combat climate change.
According to a recent global study, Finland has one of the best pension systems in the world. Its financial sustainability will, however, face challenges in the medium and long term. Financial challenges should be prepared for well in advance and not left for future generations to deal with. The public proposal to raise earnings-related pensions of less than EUR 1,400 would weaken fairness between generations and would go against the basic principles of the earnings-related pension system. In the earnings-related pension system and society, it is important to engage in a debate on what constitutes a sustainable balance between pension contributions and benefits. Improving employment and work ability, extending careers, facilitating labour immigration and a population policy that supports higher birth rates are in a key position in ensuring the sustainability of the pension system. The development of solvency regulation should ensure that pension institutions can achieve the best possible return on pension assets in the long run, which in turn will help ease the pressure to raise pension contributions.”
Ilmarinen's Interim Report 1 January–30 September 2021 (pdf)
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 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.
Ilmarinen’s Interim Report 1 January to 30 June 2022: Premiums written growing strongly, return on investments negative, solvency remained good
The return on Ilmarinen’s investment portfolio was -6.2 (8.9 per cent), i.e. EUR 3.8 billion negative due to falling stock prices and rising interest rates. The market value of investments fell to EUR 56.7 (60.8) billion. The long-term average return on investments was 5.9 per cent. This corresponds to an annual real return of 4.1 per cent.