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.
As a result of the negative return on investment operations, the total result for January–June fell to EUR -3.4 (2.6) billion. Premiums written rose by 13 per cent to EUR 3.3 (2.9) billion thanks to strong growth in payrolls and the 0.45 percentage point increase made in TyEL contributions. EUR 3.3 (3.2) billion was paid in pensions.
Net customer acquisition was EUR 91 (116) million and customer retention was 97.1 (97.2) per cent. Loading profit was EUR 27 (28) million and the ratio of operating expenses to expense loading components was 66 (66) per cent, despite the 9.5 per cent reduction in the expense loading rate. Operating expenses financed using loading income fell to EUR 52 (55) million. Solvency capital was EUR 13.1 (16.5) billion and the solvency ratio was 129.3 (136.7) per cent.
Outlook: Ilmarinen’s premiums written are expected to grow in 2022, due to higher payrolls and the 0.45 percentage point increase in the TyEL contribution. Loading income will decrease as a result of the lowering of the premium rate in the insurance contribution’s administrative cost component. The loading profit is nevertheless expected to grow thanks to increasing cost-effectiveness.
President and CEO Jouko Pölönen:
“The first half of the year on the investment markets was challenging due to accelerating inflation, central banks’ tightening monetary policy and the war begun by Russia. Ilmarinen’s return on investments in H1 was -6.2 per cent, i.e. EUR 3.8 billion negative. Solvency remained strong despite the challenging market situation, premiums written grew strongly and cost-effectiveness improved as costs fell.
Economies recovered rapidly from the Covid crisis in the first half of the year. Nevertheless, global trade has suffered from production chain bottlenecks and China’s Covid restrictions. The economic impacts of Russia’s war are reflected in tightening sanctions and rising energy and food prices, which has weakened confidence and the economic outlook globally, but especially in Europe. Inflation has accelerated to its highest level in decades, which has led to a fast tightening of central bank monetary policies and rising interest rates. Economic growth forecasts have been reduced several times and the risk of a downturn has grown. Finland’s employment and payroll developed well in H1 as the economy sprang back from the pandemic. The confidence of consumers and industry has, however, weakened in the first half-year and the rise in prices and interest rates weakens consumers’ purchasing power.
In the investment markets, the returns from almost all of the main asset classes were negative due to rising interest rates and the widespread decline in the equity market. The return on equity investments in Ilmarinen’s investment portfolio was -9.6 per cent and on fixed income investments -5.2 per cent. The return on real estate investments was 2.3 per cent and the return on other investments was -1.1. The long-term average nominal return on investments was 5.9 per cent, corresponding to a 4.1 per cent average annual real return since 1997. The solvency ratio remained strong at 129 per cent and the solvency capital was EUR 13.1 billion. The solvency buffers built up through long-term funding and investing protect pension assets during market volatility.
Premiums written grew by 13 per cent to EUR 3.3 billion. Behind the strong growth is the brisk increase in the payroll of employees insured with Ilmarinen and the 0.45 percentage point increase made in the pension contribution. The fixed-term increase will be used to collect back the temporary discount made in employers’ insurance contributions during the Covid crisis. The number of employees in the companies belonging to Ilmarinen’s business cycle index increased by 4.0 per cent year-on-year during January–June. Recovery has been strong especially in the restaurant and hospitality sector and in staff leasing services, which suffered from the Covid crisis.
EUR 3.3 billion was paid in pensions to some 454,000 pensioners. In H1, Ilmarinen received close to 4 per cent more disability pension applications than in the previous year. The positive development seen in disability pension incidence during the Covid-19 pandemic seems to have turned. The most common reason for disability pensions is still mental health issues.
The loading profit for January–June was EUR 27 million and the ratio of operating expenses to expense loading components was 66 per cent. Thanks to strong growth in premiums written and improved cost-effectiveness, the loading profit and the ratio of operating expenses to expense loading components remained at last year’s levels, despite the 9.5 per cent reduction in the expense loading rate. Operating expenses financed using loading income came to EUR 52 million, i.e. EUR 3 million less year-on-year.
Just over 22,000 children were born in Finland in January–June, which is the lowest figure ever recorded. The positive trend in the birth rate that occurred during the Covid-19 pandemic appears to have reversed based on H1 figures. This development is worrying in terms of the long-term sustainability of pension system financing, and it further highlights the need to boost employment and work ability among the working aged population and increase labour immigration. In addition, solvency regulation must be reformed to ensure that the best possible long-term return can be sought for pension investments. The latest Pension Barometer released by the Finnish Centre for Pensions shows that the most popular method for strengthening the financing of pensions is increasing labour immigration, which is supported by more than 60 per cent of Finns.”
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 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 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.