Ilmarinen's Financial Statements 2024: The return on investments was 8.6 per cent, or EUR 5 billion – solvency strengthened and efficiency improved

– The year as a whole was excellent. As the result of a strong investment year, return on investments increased to 8.6 per cent, or EUR 5 billion. Investment assets increased to EUR 63.3 billion and solvency capital to EUR 13.9 billion. Despite the decline in employment, our premiums written increased by 2 per cent and operating expenses financed using loading income decreased by 2 per cent. The strong solvency and improved efficiency are directly reflected on our clients as lower prices, says Jouko Pölönen, the President and CEO of Ilmarinen.  

Positive return on investments driven by the stock market

The market value of Ilmarinen’s investments increased to EUR 63.3 (58.9) billion. The return on investments was 8.6 (5.8) per cent, or EUR 5.0 (3.3) billion. 

– The stock market developed favourably during the year, especially in the United States. Our positive return on investments was driven by the stock market. Our return on investments was particularly increased by investments in listed and unlisted shares, says Mikko Mursula, Ilmarinen's Deputy CEO, Investments.    

Stock market returns were generally positive globally. However, there were large regional and sectoral differences. The return on equity investments in the United States was 25 per cent and in Europe 9 per cent. In Finland, the return on equity investments remained at 0 per cent. Short-term interest rates declined as the result of interest rate cuts by central banks. Despite the decrease in short-term key interest rates, the interest rates on long-term government bonds increased moderately during the year. 

Ilmarinen’s equity investments returned 14.1 (10.1) per cent and fixed income investments 4.4 (8.4) per cent. The return on real estate investments was -0.9 (-13.5) per cent and the return on other investments 6.7 (1.8) per cent. The long-term average return on investments since 1997 has been 5.8 per cent. This corresponds to an annual real return of 3.9 per cent.

Solvency capital continued to increase to EUR 13.9 (12.2) billion, and the solvency ratio increased to 127.5 (125.4) per cent. The strong solvency benefits our clients. We pay one per cent of the solvency capital, or EUR 140 (123) million, as customer bonuses.

We reached our climate targets early

For the first time, we reported on our sustainability in accordance with the European Sustainability Reporting Standards (ESRS), and the report is now part of the annual report.

The carbon intensity of Ilmarinen’s direct listed equity investments has decreased by 62 per cent and the carbon intensity of direct listed corporate bond investments by 51 per cent from the 2020 benchmark. The target has been a decrease of 50 per cent by 2030.

– Ilmarinen’s strategy is based on profitable, secure and responsible investments. We have reached a significant share of the climate targets we have set ahead of time. Our goal is to update Ilmarinen’s climate plans in 2025. We will also set new climate targets in this connection, says Mursula.

Premiums written grew and operating expenses financed using loading income decreased  

Ilmarinen’s premiums written grew by 2 per cent to EUR 7.0 (6.8) billion.

– The payroll of Ilmarinen’s clients increased despite the decline in employment. The Employees Pensions Act payroll increased by 1.9 per cent and YEL income by 4.4 per cent. The increased premiums written were also positively affected by our success in customer acquisition, Pölönen says. 

Operating expenses financed using loading income decreased by 2 per cent to EUR 92 million, amounting to 0.33 (0.34) per cent of the Employees Pensions Act payroll and YEL income of the insured. Ilmarinen’s cost-effectiveness has significantly improved since the beginning of 2018: premiums written have increased by 36 per cent and operating expenses financed using loading income have decreased by 36 per cent. 

– The improved cost-effectiveness is directly reflected on our clients as lower premiums. At the beginning of 2024, we decreased the administrative cost component of Ilmarinen’s earnings-related pension contribution by an average of 20 per cent, and it will be further decreased by an average of 10 per cent from the beginning of 2025, Pölönen says.

We paid EUR 7.6 billion in pensions to more than 450,000 pensioners

Ilmarinen paid a total of EUR 7.6 (7.2) billion in pensions, which was 6 per cent more than in the previous year. At the end of the year, there were 454,556 (455,058) pension recipients. 

A total of 41,279 (36,760) new pension decisions were made, which was 12 per cent more than in the previous year. On average, a decision on old-age pension was issued by Ilmarinen in 4 (5) days. 

The average old-age pension age and the starting age of disability pensions increased. The average old-age pension age was 65.1 years (65.0) and the average disability pension age 52.5 years (52.3).

The use of online services increased, and pension records were viewed 763,000 times in our online service, showing an increase of 25 per cent from the previous year. 

– In 2023, we gave our clients the opportunity to go to the Ilmarinen online service to see information about their accrued pension and an estimate of their future pension directly from the mobile bank of Osuuspankki. This way, we can reach young clients in particular, getting them interested in their pension cover, Pölönen explains.

The number of persons starting disability pension was at the same level as in the previous year  

A total of 3,557 persons started to receive disability pension, which is at the same level as in the previous year (3,566). Most disability pensions were granted due to musculoskeletal diseases (35%) and mental health disorders (29%). The underlying reasons behind incapacity for work are strongly linked to age. Mental health disorders were the most common reason for those under 55, while musculoskeletal diseases were the most common reason for those aged over 55.

– A positive fact is that the number of disability pension recipients in our clientele did not increase. The long-term efforts of our clients in supporting the work ability of their personnel and identifying their work ability risks is producing results. We strongly support our client companies in these efforts. We also increasingly utilise digital services and tools. The number of persons using our work ability services is rapidly growing: there were more than 411,000 visitors to our Work Ability Hub during the year. Together with our clients, we are building longer and better careers, Pölönen continues.    

Pension reform provides an opportunity to increase equity investments  

An agreement prepared by the social partners for the next pension reform was published in January 2025. The pension reform will ensure the financial sustainability of the earnings-related pension system and ensure an adequate level of benefits. The agreement stabilises the level of earnings-related pension contributions to 24.4 per cent for the 2026–2030 period.

The reform will strengthen the funding of pensions. The aim is to achieve higher return on pension asset investments in the long term by increasing the possibilities for pension providers to take risks when investing pension assets. The risk level will be increased by relaxing the solvency limit and allowing for a higher equity weighting by increasing the link to equity yield of technical provisions from 20 to 30 per cent. In addition, the leveraging possibility for real estate investments will be extended and the maximum amount of employer’s premium lending will be limited to EUR 10 million. 

A new inflation stabiliser will be introduced in 2030. The increase of the earnings-related pension index used for the index increments of earnings-related pensions paid will be limited to the increase of the wage coefficient over a two-year period. No other changes to pension benefits or retirement age are proposed. For example, the possibility of partial old-age pension will remain as is. 

– It is good that the reform allows for a higher equity weighting in the investment portfolio. In the long term, equities outperform fixed income or real estate investments. Naturally, the simultaneous increase in the volatility of returns must be accepted. However, the investment horizon for pension assets is decades, Pölönen says.  

The next step will the drafting of a bill based on the negotiation results, during which the details and entry into force of the reform will be further specified.

Ilmarinen’s year 2024 in brief:

• The return on Ilmarinen’s investment portfolio was 8.6 (5.8) per cent, or EUR 5.0 (3.3) billion. The market value of investments increased to EUR 63.3 (58.9) billion. The long-term average return on investments since 1997 was 5.8 per cent, which corresponds to an annual real return of 3.9 per cent. 
• The total result increased to EUR 1,804 (579) million. 
• Premiums written increased by 2 per cent to EUR 6,956 (6,822) million. Pensions paid increased by 6 per cent to EUR 7,636 (7,173) million. 
• Net client acquisition amounted to EUR 179 (225) million, and rolling customer retention for the previous 12 months was 96.7 (96.5) per cent. 
• Operating expenses financed using loading income decreased by 2 per cent to EUR 92 (94) million, amounting to 0.33 (0.34) per cent of the Employees Pensions Act payroll and YEL income of the insured. 
• Solvency capital increased to EUR 13.9 (12.2) billion, and the solvency ratio strengthened to 127.5 (125.4) per cent.
• We have reached a significant share of the climate targets we have set ahead of time.
• Prospects: Ilmarinen’s premiums written are expected to increase as payrolls increase.

Read more:

• Ilmarinen’s annual report and financial statements 2024, unauditet (pdf, in Finnish)
• Image appendix to the financial statements  (pdf, in Finnish)