Ilmarinen's return on investment 4.9 per cent, and market uncertainty increased

The 4.9% return on the portfolio was driven by the listed stock market. Equity market returns were generally positive globally. However, there were large regional and sectoral differences in returns. The US stock market (S&P 500 index) returned 15 per cent in January-June. Europe’s STOXX 600 index’s return for January–June was 9 per cent. The Helsinki Stock Exchange’s return on investments was 3.5 per cent for H1. Expectations of interest rate cuts during H1: in June, rate cuts totalling just under 0.5 percentage points were expected for the rest of the year by both the ECB and the Fed. 

“The last couple of weeks have seen exceptionally large movements in the market. Fear of a recession has increased and expectations of a fall in key interest rates have been revised higher. Geopolitical tensions and the potential escalation of armed conflicts are adding to market turmoil and, together with falling consumer confidence, are casting a shadow over the growth outlook for the global economy. However, the consensus still expects the global economy to grow by more than 3% this year and the Finnish economy is expected to get back on track towards the end of the year,” says Ilmarinen's Chief Investment Officer Mikko Mursula. 

Ilmarinen's long-term average return on investments was 5.8 per cent as of 1997. The market value of investments grew to EUR 61.1 billion.

Ilmarinen's business cycle index paints a bleak picture of employment trends 

In January–June, the number of employees in the companies included in Ilmarinen's business cycle index fell by 2.8 per cent year-on-year. Of the industries monitored, labour hire, construction, and accommodation and food service fell the most.

The number of employees in Ilmarinen’s business cycle index has been falling for over a year now. In July, there was a year-on-year decline of 3.2 per cent, as all the industries we follow fell.

Within the bleak employment trend, positive developments have been seen for some time in the employment of people aged 55–64, which has already reached the average employment rate. Unfortunately, at the same time, youth employment rates have declined and the downturn has led to fewer summer jobs for young people than before. We hired a record number of summer workers at Ilmarinen and this summer we have 52 of them, says Jouko Pölönen, CEO of Ilmarinen. 

Cost-effectiveness of operations improved further

The cost effectiveness of Ilmarinen's operations continued to improve, with premiums written up 2% and operating expenses financed using loading income down 6%. The growth in premiums written was due to the increase in customers’ payroll. We paid out €3,845 million in pensions to around 450,000 pensioners. 

“Ilmarinen's productivity has improved significantly over the past six years through a continuous improvement approach. Our improved cost-effectiveness means directly lower premiums for our customers. We have again applied to the Ministry of Social Affairs and Health for an average 10 per cent lower tariff for the administrative cost component from the beginning of next year,” says Jouko Pölönen. Ilmarinen has reduced the annual costs of managing pension insurance by a third, or almost EUR 50 million, since 2018. Over the same period, premiums written have increased by 34%. 

“Pensions are part of public social security and we want to manage them more and more efficiently," says Jouko Pölönen. 

January–June performance in brief:  

• The return on Ilmarinen’s investment portfolio was 4.9 (3.7) per cent, or EUR 2.9 billion. The market value of investments grew to EUR 61.1 (58.9) billion. The long-term average return on investments was 5.8 per cent as of 1997. This corresponds to an annual real return of 3.9 per cent. 
• The total result rose to EUR 995 (605) million. 
• Premiums written rose by 2 per cent to EUR 3,551 (3,493). Pensions paid rose by 7 per cent to EUR 3,845 (3,594) million. 
• Net customer acquisition was EUR 51 (70) million and rolling customer retention for the previous 12 months was 96.6 (96.4) per cent. 
• Operating expenses financed using loading income decreased 6 per cent to EUR 47 (50) million and were 0.33 (0.35) per cent of the TyEL payroll and YEL income of the insured. 
• Solvency capital increased to EUR 13.2 (12.2) billion, and the solvency ratio strengthened to 126.7 (125.4) per cent.
• Future prospects: Ilmarinen’s premiums written are expected to grow as the earnings level rises.

Read more:

• Ilmarinen's interim report 1 January–30 June 2024 (PDF)
• Interim report picture supplement (PDF)