RETURN ON INVESTMENTS REACHED 5.7 PER CENT
The return on Ilmarinen’s investment portfolio for 1 January–30 September 2014 was 5.7 per cent, i.e. EUR 1.8 billion (6.5 per cent, i.e. EUR 1.9 billion on 30 Sep 2013). At the end of September, the market value of investment assets came to EUR 34.1 (31.5) billion.
Interim Report 1 January to 30 September 2014
“The third quarter of the year was a good one for Ilmarinen’s investment portfolio. Equities and shares did particularly well but as a result of declining interest rates, we also brought home good returns from our fixed income investments. Real estate also yielded a stable return,” says Deputy CEO and Chief Investment Officer Timo Ritakallio.
Ilmarinen’s listed equity investments produced a return of 8.8 (14.1) per cent, fixed income investments 3.1 (3.2) per cent, and direct real estate investments 4.0 (3.3) per cent.
Ilmarinen’s long-term investment return since the start of 1997 is still at a good level, with the real return standing at 4.1 per cent. 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.
Ilmarinen’s solvency strengthened. At the end of September, Ilmarinen’s solvency capital was EUR 8.0 (6.5) billion, which is 30.3 (25.8) per cent of the technical provisions and 1.9 (1.9) times the solvency limit.
In the third quarter, the number of Ilmarinen’s customers increased by some 500 new self-employed and corporate customers.
Investment portfolio reflects economic uncertainty
Various geopolitical crises, once again, created an uncertain investment environment.
“The consequences of the Ukraine crisis have begun to clearly make their mark on the economic situation in Russia and Europe. The economic outlook for both economic areas has weakened,” Ritakallio assesses.
Ilmarinen has few Russian investments but the indirect impacts of the Ukraine situation can also be felt in Ilmarinen’s investment portfolio.
“The drawing out of the crisis and the economic sanctions are further weakening Russia’s economy and also indirectly affecting the profit outlook of many of the listed companies owned by Ilmarinen,” says Ritakallio.
The economic development of EU countries has also been weaker than expected. According to Ritakallio, the Finnish economy is not expected to improve for the time being.
“The weakening of the euro will, however, improve the competitiveness opportunities of Finnish export companies on the global markets in the long term,” he predicts.
Due to the recent negative financial news the market outlook has become very uncertain and Ritakallio forecasts that 2015 will be another difficult year for the pension investor.
“A low interest rate level and an uncertain equity market outlook are a cause for concern.”
“Pension agreement will improve the financial markets’ confidence in Finland”
Ritakallio considers the pension reform agreement reached in September to be good news for Finland in economic terms.
“The pension agreement will improve the financial markets’ confidence in Finland’s public finances, even though its credit rating fell. The pension reform will also improve the long-term outlook for Finland’s economy,” he says.
As part of the pension reform the labour market organisations also agreed on a reform of the solvency regulations of pension companies that would make it possible to increase an investment portfolio’s equity weight up to 60 per cent. According to Ritakallio, the changes will affect Ilmarinen’s long-term investment strategy.
“We do not expect sudden changes to the equity weight, however,” he concludes.
The figures in this release are unaudited.
For further information, please contact:
Timo Ritakallio, Deputy CEO, Chief Investment Officer, 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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