FINANCIAL STATEMENTS 2015: ILMARINEN’S INVESTMENTS PERFORMED WELL DESPITE MARKET TURMOIL
2015 was an excellent year for Ilmarinen. The company achieved good investment returns in challenging market conditions, its solvency was strong and its cost-effectiveness remained good.
In 2015, Ilmarinen’s investments yielded 6.0 (6.8) per cent and the market value of investments rose by EUR 1.6 billion to EUR 35.8 (34.2) billion.
“Last year was challenging for investors. We managed to successfully navigate the difficult conditions and we are happy with our investment result,” says Ilmarinen’s President and CEO Timo Ritakallio.
Ritakallio singles out Ilmarinen’s long-term investment strategy as a key element for success.
“The diversification of the portfolio across different asset classes and also geographically has proven successful. Last year, we also succeeded particularly well in the timing of our investment decisions,” says Ritakallio.
According to Ritakallio, last year was mixed, if not roller coaster-like from an investor’s perspective.
“The early part of the year was positive for investors. After the summer, investors were shaken by uncertainty and concerns about the slowing down of the global economic growth particularly in China. Foreign exchange rates had an exceptionally large impact on the development of investment returns, and the decline in the prices of oil and other commodities increased market turmoil,” he says.
“As a result, the global economic growth rate fell short of expectations last year. The development of the Finnish economy was weak for the fourth year in a row.”
Best return on equities
Among Ilmarinen’s investments, equities and shares performed best in spite of share price volatility. The return on the equity portfolio was 11.6 (10.9) per cent. Listed equities and shares yielded a return of 10.6 (9.8) per cent. Geographically, Finland, Europe and Japan were the best performers. On the other hand, the US equity market return in dollars was modest, and the return on the emerging economies’ equity markets even fell into negative territory.
The low interest rate level could be seen as a modest return on Ilmarinen’s fixed income portfolio, at 1.2 (2.4) per cent. According to Ilmarinen’s CIO Mikko Mursula, a low interest rate level prompts investors to look for alternatives for fixed income investments in real estate, for example. Activity on the real estate markets was indeed brisk in 2015.
“The return on Ilmarinen’s real estate portfolio was 7.8 (5.4) per cent and properties once again proved their worth in our diversified investment portfolio. Last year, we continued to diversify our real estate portfolio outside of Finland and bought properties in Germany, Belgium and the US, among other countries,” says Mursula.
The economic outlook has remained uncertain also in early 2016.
“January was one of the worst months the equity markets have experienced in decades. At present investors should expect a calm period with lower returns. The investment outlook for the current year is yet again full of contradictions, but I believe that a highly volatile market will offer good opportunities to long-term investors,” Mursula says.
Solvency and cost-effectiveness on a good level – focus on customer retention
Ilmarinen’s solvency remained strong. At the end of 2015, solvency capital was EUR 8.2 (7.9) billion i.e. 29.6 (29.8) per cent of the technical provisions. The solvency position was 2.0 (2.0) times the solvency limit.
The ratio of operating expenses to the expense loading components available for them, measuring cost-efficiency, was at a good level, at 75.5 (76) per cent.
On the other hand, the development of customer numbers in 2015 did not reach previous years’ levels. Due to transfers, Ilmarinen’s insurance portfolio grew by some 240 (+ 400) employer TyEL insurance policies and some 160 (+ 800) self-employed persons’ YEL insurance policies. Total sales were close to EUR 250 (290 in 2014) million. In 2015, Ilmarinen’s premiums written totaled just under EUR 4.3 (4.2) billion.
“We can be satisfied with our customer acquisition, but strengthening customer retention will be a focus area in our operations in the future,” Ritakallio says.
Thanks to good solvency and cost-efficiency, client bonuses rose to a record-high level at EUR 98 (93) million. They were 0.6 (0.6) per cent of the payroll of those insured with Ilmarinen.
Pension cover for close to 900,000 Finns – 160,000 covered by well-being at work measures
At the end of 2015, some 562,000 (573,000) people were insured with Ilmarinen. The employees’ share of this was 500,000 (511,000) and that of self-employed persons was 61,900 (61,900) people.
The number of both pension recipients and the amount of pensions paid increased. At the end of the year,
Ilmarinen paid out pensions to 323,200 (318,900) people in a total amount of EUR 4.4 (4.4) billion. The sum is more than EUR 170 million larger than the insurance contributions collected by the company.
The company issued a total of around 22,800 (22,400) new pension decisions. The number of new disability pensions declined from the previous year while a growing number of people made use of vocational rehabilitation. The number of rehabilitation cases increased 24 per cent from the previous year.
“With regards to pensions, topical issues at Ilmarinen last year were the implementation of a new pension processing system and preparation for the entry into force of the pension reform in 2017. We will be able to issue the first pension estimates according to the pension reform to our customers during spring,” Ritakallio says.
For Ilmarinen’s well-being at work services, 2015 was an active year, as were the preceding years. Together with its customers, Ilmarinen participated in more than 1,900 (1,800) projects supporting the development of work capacity. They covered close to 160,000 (130,000) people, i.e. one out of four employees insured with Ilmarinen.
In addition, close to 40 well-being at work coaching sessions were organised around Finland for client companies, with close to 2,000 (2,200) people taking part.
Implementing the strategy
The new strategy completed in early 2015 guides Ilmarinen to focus on four areas: profitable growth, successful investments, digital services offering and energising Ilmarinen’s work community. The importance of these priorities is illustrated by the fact that all development efforts have been focused around them.
Ilmarinen’s own premises are also a tool for implementing the strategy. They were modernised to support good energy and innovativeness.
“The work environment and tools support agile interaction. We also want to engage our personnel in other aspects of our development efforts. We just launched an operating model called Wauhdittamo to engage our personnel and our customers in the development of digital services,” Ritakallio says.
“Ilmarinen wishes to take on a new role in supporting the growth and success of Finnish companies. Wauhdittamo is Ilmarinen’s way to achieve faster and bolder development together.”
For more information, please contact:
Timo Ritakallio, President and CEO, tel. +358 10 284 3838, +358 500 536 346
Mikko Mursula, Chief Investment Officer, tel. +358 10 28 43840, +358 50 380 3016
Päivi Sihvola, Senior Vice President, Corporate Communications and Human Resources, tel. +358 10 284 3590, +358 40 757 4992