Ilmarinen’s Interim Report 1 January to 30 September 2012:Equity investments increased return on investment
Ilmarinen’s investment portfolio for 1 January to 30 September 2012 was 5.3 per cent, i.e. EUR 1.5 billion (-5.2 per cent, i.e. EUR -1.5 billion on 30 September 2011). The market value of the investments totalled EUR 29.1 (27.1) billion at the end of September.
“We are quite happy with the return on investments for the early part of the year, especially in terms of private equity and foreign equity investments. However, the return on Finnish equity investments was clearly weaker than that of other markets,” assesses Timo Ritakallio, Deputy CEO and Head of Investments.
According to Ritakallio, the economic stimulus measures of Europe’s and the United States’ central banks created a positive sentiment in the markets.
“This was reflected in a rise in share prices in all of the central markets,” he continues.
Ilmarinen’s listed equity investments generated a return of 5.8 (-19.0) per cent. The return on private equity investments was also good, at 10.7 (14.7) per cent, as was the return on fixed-income investments, at 4.9 (-0.8) per cent. Real estate investments generated a steady return of 3.8 (4.2) per cent.
No significant changes took place in Ilmarinen’s investment portfolio during the third quarter.
“We increased the weight of listed equities somewhat during the summer,” says Ritakallio.
He estimates that, all in all, this investment year will turn out to be better than expected. However, it is still necessary to be prepared for uncertainty.
“During the autumn we are expecting many EU-level decisions related to the eurozone’s future. The markets will very likely experience some turbulence during the conferences,” he assesses.
Long-term return remained on a good level
The real return on Ilmarinen’s long-term investments remained on the same level as at the end of June. Real returns since the start of 1997 equalled 3.6 per cent at the end of September. The Finnish Centre for Pensions uses a 3.5 per cent expected real return rate to estimate the future development of earnings-related pension insurance contributions.
“Our long-term investment return looks good. Although we report our investment returns on a quarterly basis, we should keep in mind that earnings-related pension investment is a long-term effort and our ‘quarters’ are closer to 25 years,” says Ritakallio.
According to him, a financial market tax would threaten pension returns.
“The tax would weaken the long-term return on investment for the entire pension system and we consider this to be worrisome,” says Ritakallio.
Ilmarinen’s solvency remained at a good level and strengthened in comparison to the previous year. At the end of September, Ilmarinen’s solvency capital was EUR 5.4 (4.8) billion. This was 22.8 (21.3) per cent of the technical provisions and 2.2 times (2.2) the solvency border. Excluding the temporary legislation concerning the solvency of pension institutions, the solvency ratio would have been 17.9 per cent and the solvency position 1.8.
Ilmarinen fared well in competition for customers
This year has brought Ilmarinen many new customers. Sales between January and September generated EUR +239 million more in premiums written.
“We are also happy that our customer retention remained at an excellent level. This shows that our customers believe in us and we are pleased with that,” says Ritakallio.
Ilmarinen’s premiums written are estimated to remain higher than the pension expenditure this year.
For more information, please contact:
Timo Ritakallio, Deputy CEO, Head of Investments tel. +358 10 284 3838, +358 500 536 346
Jaakko Kiander, Senior Vice President, Finance and Pension Policy, tel. +358 10 284 2599, +358 50 583 8599
Päivi Sihvola, Senior Vice President, Corporate Communications and Human Resources, tel. +358 10 284 3590, +358 040 757 4992
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