Interim report 1 January–30 June 2018: Return on investments 1.1%, integration proceeded as planned
In January–June, the return on Ilmarinen’s investment portfolio was 1.1 per cent (3.8 per cent 1 Jan–1 Jun 2017). At the end of June, the market value of investments stood at EUR 46.3 billion (30 Jun 2017: EUR 38.5 billion). In the long term, investments have yielded an average annual real return of 4.2 per cent.
Solvency weakened slightly during the first half of the year but remained good. At the end of June, solvency capital was EUR 9,781 (8,949) million and the solvency ratio was 126.6 (130.1) per cent.
Premiums written for H1 stood at EUR 2.7 billion. Measured in premiums written, net customer acquisition was EUR 44 million during the first half of the year. Pensions were paid in a total amount of EUR 2.8 billion to 470,000 pension recipients.
The implementation of the integration proceeded as planned and, based on the first six months, it appears that the synergy targets will be reached. Pension insurance company Etera merged with Ilmarinen as of 1 January 2018.
The 2017 comparison figures presented in the report are Ilmarinen’s figures from before the merger with Etera.
President and CEO Stefan Björkman:
“Fears of a trade war and other political risks shook the markets during the first half of the year. In the second quarter, investment returns became positive and during the whole of H1, investments returned 1.1 per cent. The best returns came from non-listed equity investments. The full equity portfolio returned 2.4 per cent and real estate investments 2.9 per cent. The return on fixed income investments fell to a negative –0.1 per cent. The long-term average real annual return was 4.2 per cent, which clearly exceeds the 3.0 per cent return assumption used by the Finnish Centre for Pensions in its calculations. The solvency ratio weakened slightly during the first half of the year but remained good at 126.6 per cent.
Premiums written for H1 stood at EUR 2.7 billion. Measured in premiums written, net customer acquisition was EUR 44 million during the first half of the year. At the end of June, the number of pension recipients came to almost 470,000 and we paid a total of EUR 2.8 billion in pensions in the first part of the year. OP Financial Group announced in June that OP-Eläkekassa, which manages the Group personnel’s statutory pension insurance, has decided to begin negotiations to transfer some EUR 1,100 million in pension liability to Ilmarinen. The decision was preceded by competitive bidding. The final decision will be made during the summer, after which the transfer will require official approval.
Customer satisfaction in Ilmarinen’s work capacity services is extremely high, with nine out of ten people saying they would recommend our services. We launched the new ‘Energy in the work community’ (Työyhteisövire) study that provides a comprehensive overview of the work community’s strengths and improvement areas. The first Masters in Work Capacity trained by Ilmarinen graduated in April. The Master in Work Capacity training programme is designed for experts responsible for our customer companies’ work capacity management models and their development. The training programme has been extremely popular and upcoming programmes are already fully booked.
Ilmarinen received global recognition for its promotion of responsible investment. Our Sustainability Report came second in the competition organised by the international publication Responsible Investor, which included 2,500 responsible investment reports from around the world. In addition, the AODP climate organisation’s Winning Climate Strategies report highlighted Ilmarinen as a best practice example of taking climate issues into account in investment operations.
The implementation of the merger of Ilmarinen and Etera, which took place at the start of the year, moved ahead according to plan. The new organisation was launched on 1 March and the personnel arrangements related to the reorganisation were carried out mainly in the spring. For customers, the changes made in Q2 are visible as unified services. The web service for private customers and the customer service hours were unified in May. We now process new pension applications through a single IT system. The integration of IT systems will continue in stages during the remainder of this year and next year, while we also prepare for the introduction of the national incomes register. The finalisation of the integration still requires plenty of work, but will significantly increase the effectiveness of the operations.
The first half of the year has shown that the synergy benefits targeted through the integration are coming to fruition. Our objective is to annually save at least EUR 20 million in total expense loading and EUR 20 million in investment operation costs, beginning in 2020. Improving cost-effectiveness will materialise in the future as better client bonuses.
The role of President and CEO of Ilmarinen will transfer to Jouko Pölönen on 1 August 2018. My term as acting President and CEO is ending and I will take on a new position as head of Konstsamfundet during the autumn. I wish to extend a warm thank you to Ilmarinen’s customers, personnel, administration and other partners for their invaluable co-operation. It has been a joy to help build Finland’s leading pension company and I believe that Ilmarinen will continue its strong development.”
For more information, please contact:
Stefan Björkman, acting President and CEO, tel. +358 50 632 19
Mikko Mursula, CIO, tel. +358 50 380 3016
Jaakko Kiander, Chief Communications Officer, +358 050 583 8599