INVESTED PENSION ASSETS YIELD 6.2 PER CENT IN RETURNS
The return on Ilmarinen’s investment portfolio for 1 January–30 June 2015 was 6.2 per cent, i.e. EUR 2.1 billion (3.4 per cent, i.e. EUR 1.1 billion on 30 June 2014). At the end of June, the market value of Ilmarinen’s investment assets amounted to EUR 36.4 (33.5) billion.
President and CEO Timo Ritakallio is happy with the investment return in light of the challenging market conditions.
“The investment environment became extremely challenging during the second quarter due to fluctuating stock prices and the fast growth of long-term interest rates. The culmination of the situation in Greece at the very end of the quarter also gave investors cause for concern,” he says.
Ilmarinen’s equity investments produced a return of 14.0 (5.5) per cent, fixed income investments yielded 0.8 (2.2) per cent, and direct real estate investments 2.6 (2.4) per cent.
Ilmarinen’s long-term investment return remained on a good level. The real return on investments since 1997 was 4.3 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 at the end of June stood at EUR 9.1 (7.5) billion, which is 33.2 (29.0) per cent of the technical provisions and 2.4 (1.9) times the solvency limit.
“Positive signals of economic growth visible in Europe”
The investment markets in the April-June period were characterised by uncertainty following a strong start to the year.
“The interest rate level took an upward turn from an unrealistically low level, diminishing the return on fixed income investments. On the equity markets, particularly in Europe, the falling of share prices steepened at the very end of June,” says CIO Mikko Mursula.
In the latter part of the year investors will be closely monitoring the economic growth in the United States in particular, including any related interest rate hikes, as well as China’s economic outlook. In terms of European economic growth, positive signals have been detected, according to Mursula.
“What we are waiting to see is whether European companies’ results will begin to reflect the impacts of lower interest rates, low oil prices and a cheaper euro. If the recovery of Europe’s economic growth begins in earnest, this will most likely have a delayed positive effect on export-driven Finnish companies,” Mursula says.
Varied first half of year for sales
In the first half of the year, Ilmarinen performed moderately well in the competition between pension insurance companies. Sales for January–June, measured in premiums written, came to EUR 47 million (EUR 53 million on 30 June 2014).
“Customer acquisition performed as planned in the first half of the year. However, we did not quite reach our targets for customer retention. We have already launched measures for improving customer retention,” says Timo Ritakallio.
At the end of June, Ilmarinen handled some 38,300 (38,300) earnings-related pension insurance policies and around 62,200 (61,800) pension policies for the self-employed.
The number of insured private customers declined from the previous year. This resulted from a weakening in employment due to the recession. At the end of June, a total of 541,000 (560,000) persons were insured with Ilmarinen.
The number of pension recipients continued to rise steadily. Ilmarinen paid out pensions to
320,500 (316,100) pensioners in June.
Finland’s weak economic development and employment situation impacted the pension premiums written.
“Growth in premiums written will remain modest this year,” Ritakallio estimates.
The operational efficiency of Ilmarinen’s activities is expected to be at a good level, i.e. at around 77 (76) per cent in 2015.
Rehabilitation numbers still growing
In January–June, 22 per cent more rehabilitation decisions were given than a year earlier. This is due to, not only an increase in the number of submitted rehabilitation applications, but also due to a policy that came into use at the beginning of the year, in which disability pension applicants are given a preliminary rehabilitation decision when they meet the criteria for rehabilitation.
At the same time the number of disability pensions continues along a downward trend. In the first half of the year, Ilmarinen received 3,000 disability pension applications, which is 5 per cent less than a year ago.
“Each disability pension is costly for the individual, their employer and our whole society. That is why we have every reason to be pleased seeing more and more people receiving rehabilitation and avoiding early retirement,” Ritakallio says.
Well-being at work co-operation with clients have been extremely active in H1. Approximately 800 co-operation projects have been underway, and the effectiveness of the activities is monitored on a company-specific level according to agreed indicators.
(The figures in this release are unaudited.)
Attachments: Ilmarinen Q2 2015
For more information, please contact:
Timo Ritakallio, President and CEO, tel. +358 10 284 3838, +358 500 536 346
Mikko Mursula, CIO, tel. +358 010 284 3840, +358 050 380 3016
Jaakko Kiander, Senior Vice President, Finance and Pension Policy, tel. +358 10 284 2599, +358 50 583 8599
Vappu Aura, Communications Manager, tel. +358 010 284 2614, +358 050 560 4450