Ilmarinen’s Interim Report 1 January to 31 March 2021: Return on investments was 4.8 per cent, solvency and net customer acquisition strengthened
The return on Ilmarinen’s investment portfolio was +4.8% (-7.5%) or EUR 2.5 billion thanks to the positive performance of the equity markets. The market value of investments grew to EUR 55.4 (53.3) billion. The long-term average return on investments was 6.0 per cent. This corresponds to an annual real return of 4.5 per cent.
Thanks to the good performance of investment activities, the total result for January–March grew to EUR 1.4 (-2.6) billion.
Premiums written declined to EUR 1.4 (1.5) billion as customers’ payrolls decreased due to the impacts of Covid-19. EUR 1.5 (1.6) billion was paid in pensions.
Net customer acquisition was EUR 93 (35) million as the net transfer rose to an excellent level due to good customer retention and successful customer acquisition.
The decline in Ilmarinen’s customers’ payrolls reduced loading income by EUR 2 million and the loading profit weakened to EUR 11 (13) million. Operating expenses financed using loading income amounted to EUR 29 (29) million.
Solvency capital strengthened to EUR 13.9 (12.5) billion, and the solvency ratio to 132.8 (130.2) per cent.
Outlook: 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
“Strong performance in Ilmarinen’s investment activities and customer acquisition continued during the first quarter. In January–March, the return on Ilmarinen’s investment portfolio was 4.8 per cent, i.e. EUR 2.5 billion. Solvency strengthened to 132.8 per cent and investment assets grew to EUR 55 billion.
The coronavirus pandemic is still spreading globally and, regardless of the ongoing vaccinations, economic restriction measures have been continued in many countries. The expansionary monetary policy of central banks has kept key interest rates at a low level, and stock prices in both the USA and Europe rose sharply during the first months of the year. In January–March, Ilmarinen’s equity investments produced a return of 9.1 per cent, fixed income investments yielded 2.0 per cent and real estate investments 0.8 per cent. The return on other investments was -3.2 per cent. The long-term average nominal return on investments was 6.0 per cent, corresponding to a 4.5 per cent annual real return.
Due to a decline in employment, premiums written for January–March fell to EUR 1.4 billion, which was EUR 103 million less than a year ago. The number of employees at the customer companies in Ilmarinen’s business cycle index in March was 5.5 per cent smaller than a year ago. The decline has been particularly sharp in the hospitality sector and in staff leasing services.
Ilmarinen’s competitiveness has developed positively by all key indicators, and last year we became the most solvent employment pension insurance company. Net customer acquisition rose to EUR 93 million in January–March. Measured in premiums written, insurance transfers from competitors to Ilmarinen amounted to EUR 52 million net, and customer retention was on an excellent level, at 97.2 per cent. The customer experience has also continued to develop positively despite the exceptional circumstances.
In January–March, we paid EUR 1.5 billion in pensions to around 458,000 pensioners. We made 17,232 pension decisions.It is a good idea to take an interest in one’s pension security already during one’s career and regularly check the pension record in our online service, which provides up-to-date information. In February, we published a survey conducted among pensioners. Based on the results, the respondents consider their financial situation to be reasonable and most had also financially prepared for their retirement. However, more than a third of the respondents were worried about their financial situation. According to the survey, two thirds of pensioners would be interested in engaging in gainful employment after retirement, and one out of three has actually done so. Meaningful work was the main source of motivation, but improving their income level was also considered important, especially among women.
In January–March, Ilmarinen’s operating expenses financed using loading income were on a par with last year, at EUR 29 million. Due to a declining payroll, the loading profit for the first quarter fell to EUR 11 million and the ratio of operating expenses to expense loading components, measuring cost-effectiveness, was 72 per cent.
The personnel’s work energy has remained on a good level, regardless of the exceptional circumstances and extensive remote work due to the pandemic, and the employee Net Promoter Score, eNPS, was 34 in January–March. We have looked after our personnel’s well-being and ability to cope during the exceptional circumstances in a number of ways. Early in the year, the Finnish Olympic Committee granted us ’Finland’s most active workplace’ certification for our successful approach to providing physical activity for employees.
Ilmarinen was ranked as Finland’s most responsible pension company in a broad survey for the fourth consecutive time. We reached almost all of the climate targets we had set for the period 2016–2020. The carbon footprint of real estate owned by Ilmarinen decreased 14 per cent, investments in sustainable development nearly doubled and the carbon sinks of forest investments grew 44 per cent. However, we did not reach the target of aligning the investment portfolio with the below-two-degree scenario under the Paris Agreement. The work continues, and our goal is to achieve a carbon neutral investment portfolio by the end of 2035.
During the first quarter, the Financial Supervisory Authority sent Ilmarinen a letter where it touched on some observations it had made in its supervisory work during 2015–2020. Ilmarinen’s Board of Directors has responded to the Financial Supervisory Authority’s letter. Ilmarinen’s governance is reliable and sound. It is important to us that our operations comply with regulations and guidelines. In recent years, we have significantly renewed and developed our governance and ways of operating. We engage in a continuous dialogue with the Financial Supervisory Authority and take its guidelines and recommendations into account in our operations.
This year marks the 60th anniversary of Ilmarinen as a provider of pension security for Finns and as a partner for working life. The theme of the anniversary year is supporting young people to engage in working life and that way extending careers. Disability pensions among young people have shown a worrying growth trend in recent years, with an increase in mental health issues being a key factor. This trend is a cause for concern for both the pension system and society at large. With our anniversary project Mielellään töissä we wish to draw attention to the prevention of marginalisation of young people and to find ways in which both the young people themselves and companies can make it easier for them to enter working life. Our partners in the project are Youth Academy, Youth Mental Health Association – Yeesi and MIELI Mental Health Finland.
An ageing population, a low birth rate and a zero interest rate environment are still creating pressure on pension financing in the longer term. Right now, it is important to get the population vaccinated quickly so that we can lift the Covid-19 restrictions and re-open the economy at a fast pace. The global economy is expected to experience strong growth after the coronavirus crisis, and it is important for Finland to benefit from that growth and accelerate investments. At the same time, we must find solutions that enable us to close the sustainability gap and increase employment and Finland’s competitiveness also in the longer term.”
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
Specialist of the Month: Gerald Esono
At Ilmarinen, we take care of the pension security of more than a million Finns. For almost 60 years we have worked together with employers to create a better working life and promote work ability. But who are the people doing this work? Read on to see what our Specialist of the Month Gerald Esono has to say about his work.
Ilmarinen became a seed investor in a new Low Carbon Fund with 170 million euros
Ilmarinen has become a seed investor in AXA IM’s new mutual fund, the AXA WF US High Yield Low Carbon Bonds Fund, with 170 million euros. The fund is one of the first of its kind globally. The fund’s investment approach is fully ESG integrated and particularly focused on the carbon and water intensity scores of issuers. The investment is part of Ilmarinen’s overall responsible investment strategy.
Ilmarinen reached almost all of its climate targets for 2016–2020 – Annual and Sustainability Report 2020 published
Ilmarinen reached almost all of the climate targets it had set for the period 2016–2020. The most notable success was the 14 per cent decrease in the carbon footprint of real estate. Furthermore, investments in sustainable development nearly doubled and the carbon sinks of forest investments grew 44 per cent. The Annual and Sustainability Report for 2020, which is published today, also presents new forward-looking data and analysis on the climate impacts of investments.
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