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.
As a result of the negative return on investment operations, the total result for January–September fell to EUR -4.8 (2.9) billion.
Premiums written rose by as much as 12 per cent to EUR 5.0 (4.4) billion thanks to strong growth in payrolls and the 0.45 percentage point increase made in TyEL contributions. EUR 4.9 (4.7) billion was paid in pensions.
Net customer acquisition was EUR 159 (230) million and customer retention was 97.7 (97.9) per cent.
Loading profit was EUR 45 (45) million and the ratio of operating expenses to expense loading components improved to 62 (64) per cent, despite the 9.5 per cent reduction in the expense loading rate. Operating expenses financed using loading income fell by EUR 7 million to EUR 73 (81) million.
Solvency capital was EUR 11.8 (16.5) billion and the solvency ratio was 126.3 (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:
This year has been a very challenging one on the investment markets due to accelerating inflation, central banks’ tightening monetary policy and the war begun by Russia. Ilmarinen’s return on investments in January–September was -8 per cent, i.e. EUR 4.9 billion negative. Solvency remained at a good level despite the challenging market situation, premiums written grew strongly and cost-effectiveness improved.
Stock prices fell extensively across all main market areas, interest rates continued to rise and credit risk margins widened. The return on equity investments in Ilmarinen’s investment portfolio was -12.8 per cent and the return on fixed income investments was -5.7 per cent. The return on real estate investments was 4.0 per cent, but rising interest rates are also putting downward pressure on real estate valuations. The return on other investments was -3.3 per cent. The long-term average nominal return on investments was 5.7 per cent, corresponding to a 3.9 per cent average annual real return since 1997. The solvency ratio remained good at 126.3 per cent and the solvency capital was EUR 11.8 billion. The solvency buffers built up through long-term funding and investing protect pension assets during market volatility.
Premiums written grew by as much as 12 per cent to EUR 5.0 billion. Behind the strong growth is the almost 10 per cent 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 is 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 +3.9 per cent year-on-year during January–September. Employment recovery has been strong especially in the hospitality and restaurant sector and in staff leasing services, which suffered from the Covid crisis.
We paid EUR 4.9 billion in pensions to around 454,000 pensioners. Due to the high inflation, an exceptional 6.8 per cent index increment will be applied to current pensions at the turn of the year. Pensioners will benefit from the increment if their pension has begun this year, at the latest at the start of December. The increment also applies to partial early old-age pension, for which the number of applications grew by more than 80 per cent year-on-year in September. During October, the number of applications has grown even faster. Old-age pension applications have also increased.
The loading profit for January–September was EUR 45 million and the ratio of operating expenses to expense loading components, measuring cost-effectiveness, improved to 62 per cent. Operating expenses financed using loading income came to EUR 73 million, i.e. EUR 7 million less year-on-year.
As a responsible real estate investor, Ilmarinen is taking the exceptional energy market situation into account in its operations. The temperature in the business premises owned by Ilmarinen will be lowered by 1–2 degrees and premises that are used less will have their temperature adjusted to the minimum level. We will additionally optimise ventilation systems and reduce lighting. The measures are expected to achieve more than 3,200 megawatt-hours in energy savings annually.
Alongside climate change, biodiversity loss impacts the economy and thus also investment operations. We published a Biodiversity Roadmap, which describes the steps through which we increase understanding of the impacts of biodiversity loss, analyse the investment portfolio’s impacts on and risk exposures to biodiversity, identify measures and ways to make a difference, and develop our reporting.
The Finnish Financial Supervisory Authority (FIN-FSA) completed a multi-year process, which was a thorough look into Ilmarinen’s disability risk management. There was no need for an administrative sanction and we are pleased that the case has now been closed also on the part of FIN-FSA. There is no legal regulation concerning the management of disability risk, and some of the guidelines provided by FIN-FSA have been open to various interpretations. It is important to Ilmarinen that our operations comply with regulations and that we can help our customers prevent disability. Each disability pension prevented is not only important on a human level but also benefits employers, society and the pension system.
In October, the Finnish Centre for Pensions released updated long-term calculations of the development of statutory pension expenditure, the level of benefits and financing. According to the Finnish Centre for Pensions, the long-term outlook for financing pensions has improved from the previous projection made in 2019 due to good return on investments. A low birth rate and decline in the number of working-age people continue to present a challenge to the financing of the pension system and the entire welfare state.
Ilmarinen’s Interim Report 1 January to 30 June 2023: Return on investments rose to 3.7 per cent, solvency strengthened and cost-effectiveness continued to improve
The return on Ilmarinen’s investment portfolio was 3.7 (-6.2) per cent, i.e. EUR 2.1 billion. The market value of investments grew to EUR 58.2 (56.3) billion. The long-term average return on investments was 5.8 per cent as of 1997. This corresponds to an annual real return of 3.8 per cent.
Ilmarinen’s Interim Report 1 January to 31 March 2023: Positive return on investments, premiums written grew and cost-effectiveness improved
The return on Ilmarinen’s investment portfolio was +2.2 (-2.2) per cent, i.e. EUR 1.3 billion, as a result of rising stock prices. The market value of investments grew to EUR 57.5 (56.3) billion. The long-term average return on investments from 1997 onwards was 5.8 per cent. This corresponds to an annual real return of 3.8 per cent.
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.