Ilmarinen’s financial statements 2021: Investment assets and solvency capital rose to record levels and strong development continued in customer acquisition and in improving cost effectiveness
Ilmarinen’s return on investments was 15.3 per cent, or EUR 8.1 billion. The value of investment assets rose to an all-time high, at EUR 60,8 billion, and solvency strengthened.
“2021 was an excellent year for Ilmarinen. Investment assets and solvency capital rose to record levels and strong development continued in customer acquisition and in improving cost effectiveness. Our customers benefit from the excellent result through our client bonuses, which amounted to a record high EUR 209 million,” says Ilmarinen’s President and CEO, Jouko Pölönen.
Performance in the investment markets was strong, especially thanks to the sharp rise in the equity markets. The return on Ilmarinen’s investments at current value was 15.3 (7.1 in 2020) per cent, i.e. EUR 8.1 (3.5) billion. Investment assets grew to EUR 60,8 (53.3,3) billion, solvency capital rose to EUR 16.5 (12.5) billion and the solvency ratio strengthened to 136.7 (130.2) per cent. The long-term average annual return on investments since 1997 is 6.2 per cent, which corresponds to a real return of 4.6 per cent. Ilmarinen’s total result grew to a record EUR 4.2 (1.8) billion thanks to an excellent return on investments
Ilmarinen’s premiums written grew to EUR 5.9 (5.2) billion. The increase in premiums written is attributable to a 6.4 per cent rise in customers’ payroll and the ending of the temporary reduction in TyEL contributions granted to employers in 2020. The increase in premiums written was also supported by very strong performance in customer acquisition. Measured in premiums written, Ilmarinen’s net customer acquisition rose to EUR 329 million and customer retention was on an excellent level, at 97.3 per cent. At the end of the year, 64,000 employers had chosen Ilmarinen as their earnings-related pension provider, and 591,000 employees and 77,000 self-employed persons were insured with the company.
Ilmarinen paid EUR 6.3 (6.1) billion in pensions to 456,000 pensioners. A total of 34,000 new pension decisions were made. The proportion of electronic services grew and around 75 per cent of old-age pension applications were received electronically. More than half of old-age pension decisions were issued within less than two days.
Operating expenses covered with the administrative cost component totalled EUR 126.5 (118.7) million. The operating expenses financed using loading income included EUR 18 million in write-downs for intangible assets and effects of a change in the amortisation period. Without the one-time write-downs, the operating expenses financed using loading income decreased by EUR 10 million year-on-year due to the improved cost effectiveness of the operations. The loading profit was EUR 41.9 (43.2) million and the ratio of operating expenses to expense loading components was 75.1 (73.3) per cent. Without the one-time write-down, the corresponding figures were EUR 60.1 million and 64.3 per cent.
A year of strong growth for the investment markets
“In 2021, the global economy continued to recover from the depression caused by the Covid-19 pandemic. Investment market performance was very strong, driven by economic growth, expansionary monetary policy and companies’ improved earnings,” says Ilmarinen’s Deputy CEO and Chief Investment Officer, Mikko Mursula.
“At Ilmarinen, the investment year was one of the best ever. We gained the best returns from equity investments, with exceptionally good returns from private equity investments. The return on listed equities and shares in the main market areas was excellent, and in fixed income investments, especially the return on investments with a higher credit risk was good. In absolute return investments, the positioning was fairly defensive during the year, as a result of which their performance in a highly positive market environment was weaker than in the previous year,” Mursula says.
The return on Ilmarinen’s equity investments was 28 (12.4) per cent. The total return on fixed income investments, i.e. bonds, fixed income funds, other financial market instruments and loan receivables, was 3.9 (-0.4) per cent. Real estate investments returned (8.8) 0.4 per cent. The return on other investments was -2.0 (20.2) per cent; this category includes commodity investments, investments in absolute return funds and currency investments.
“We invest pension assets profitably, securely and responsibly. Last year, we published Ilmarinen’s climate roadmap, which describes the interim targets, means and indicators on our journey towards a carbon neutral investment portfolio by 2035. At the initial stage, more detailed asset-class-specific roadmaps have been prepared for direct listed equities and shares and Finnish real estate investments,” Mursula says.
Fewer disability pensions than before
The number of disability pension applications continued to fall at Ilmarinen in 2021. The company received 5 per cent fewer new applications than in the previous year, and the number of persons transitioning on a disability pension or cash rehabilitation benefit decreased by 10 per cent to 3,404.
Of the persons retiring on a disability pension, 32 (34) per cent were granted pension due to mental health reasons, while musculoskeletal diseases were the main reason in 29 (29) per cent of the cases and other illnesses in 39 (36) per cent of the cases. For many years already, depression has been the most important single diagnosis leading to disability pension. Four disability pensions were granted based on long Covid, one of which was a permanent disability pension. A total of EUR 473 (480) million was paid in disability pensions.
“The decline in disability is a positive development, but it is too early to draw the conclusion that this is a more permanent trend, because the year was exceptional due to the Covid-19 pandemic,” Pölönen points out.
Ilmarinen supports the anticipation and management of disability risks in its client companies through risk-based, systematic and goal-oriented co-operation. In addition to specialist support, the company offers digital services, learning environments and tools, which are available in Ilmarinen’s Work Ability Hub. During the year, a total of EUR 6.9 million was spent on the management of disability risks, of which EUR 1.5 million was spent on supporting customers’ work ability projects aimed at reducing disability risks.
“2021 was a very strong year for the pension system as a whole. Return on investments was excellent and the amount of pension assets grew to a record high. In addition to declining disability, the retirement age and the employment among senior citizens also developed favourably last year. Our pension system is currently in very good shape. In the longer term, the ageing of the population and the low birth rate will challenge the sustainability of the pension system’s financing. That is why it is important to find ways to improve employment and extend careers, create a population policy that increases the birth rate and facilitate labour immigration. In addition, solvency regulation should be developed to 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,” Pölönen says.
For more information, please contact:
Jouko Pölönen, President and CEO, tel. +358 50 1282
Mikko Mursula, Deputy CEO and Chief Investment Officer, tel. +358 50 380 3016
Liina Aulin, Executive Vice President, Communications and Corporate Responsibility, tel. +358 40 770 9400
Ilmarinen expands its climate targets
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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.
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