Ilmarinen today reported a -6.6% overall return on its portfolio for 2022, after the Finnish occupational pensions heavyweight recouped some of its investment losses in last year’s final quarter.

Releasing annual results this morning, the mutual pensions insurer also said improved cost-effectiveness in 2022 had allowed it to refund corporate clients.

Mikko Mursula, deputy chief executive officer and chief investment officer at Ilmarinen, said: “Accelerating inflation, tightening monetary policy and concerns over economic growth depressed the investment markets, and performance was broadly negative during the year.”

Equities made a 10.2% loss in Ilmarinen’s investment portfolio in 2022, fixed-income investments lost 5.2% and property returned a positive 1.3%, the firm said.

Total assets shrank to €56.3bn over the year from €60.8bn, and the solvency ratio weakened to 125.8% from 136.7%, though Ilmarinen described the solvency level as strong.

Quarterly returns finally reached positive territory in the fourth quarter of last year, with a 1.5% return for those three months, following negative returns of -2.2%, 14.1% and -1.9% for Q1, Q2 and Q3 respectively, according to the data published today.

Mikko Mursula at Ilmarinen

Mikko Mursula at Ilmarinen

Ilmarinen said its cost-effectiveness improved to a record level during the year, with operating expenses covered under the administrative cost component of contributions decreasing to €99.1m from €126.5m in 2021.

Jouko Pölönen, Ilmarinen’s president and CEO, said: “Based on the excellent loading profit and solvency, Ilmarinen will refund €175m in client bonuses to its customers.”

A law changed in Finland from the start of this year to allow each company in the private sector side of the earnings-related pension system to determine the administrative cost component of employer contributions separately – whereas up to now, this has been the same for all providers.

From 2023 onward, the differences in cost efficiency between the providers could, as a consequence, be more visible upfront to clients.

Pölönen commented that despite the outlook for financing pensions in Finland having improved since 2019, according to the Finnish Centre for Pensions’ long-term calculations, employment and work ability among the working-aged population had to be improved, and labour immigration increased.

“In addition, solvency regulation must be reformed to ensure that the best possible long-term return can be sought for pension investments,” Pölönen said.

Earlier this month, Mursula came out with some specific ideas about how solvency rules could be changed.

Varma, Ilmarinen’s closest peer in the earnings-related pension system, is due to report 2022 results tomorrow.

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