​Ilmarinen posts 3.7% H1 return; CEO urges solvency framework reshape

Ilmarinen, Finland’s biggest pensions insurance company, reported a 3.7% return in its first half report this morning, while its chief executive officer used the opportunity to reiterate his call for an overhaul of the solvency framework.

Jouko Pölönen, president and CEO of the €58.2bn Helsinki-based pensions firm, said the investment return, €2.1bn in absolute terms, was due to the strong performance of the equity markets, fixed income and credit risk investments.

Listed equities were the best-performing asset class for the earnings-related pension provider with a 7.6% return according to the January-to-June results, with year-to-date returns for real estate only just in positive territory at 0.1%, having lost some of the narrow gains the asset class won in Q1.

“Stock prices rose in the United States, especially driven by major tech companies, and the rise was also strong in Europe, although stock price performance was negative in Finland,” the CEO said.

Solvency is creeping higher after the big 2022 decline, the results showed, with the solvency ratio reaching 126.4% at the end of June compared to the end-2022 ratio of 125.8%.

Pölönen said the new programme of the Finnish government included earnings-related pension policy targets such as achieving an adequate level and coverage of pensions, intergenerational fairness, and sustainable financing.

“The significance of investment returns from the perspective of the sustainability of long-term financing of the pension system highlights why the solvency framework for earnings-related companies must be reshaped so as to enable them to seek better long-term returns,” the CEO said.

The need to overhaul the solvency framework has become a frequent call from the earnings-related pension sector.

Pölönen also addressed the politically-charged issue of immigration in today’s interim report, from a pensions angle.

“The Finnish welfare society and earnings-related pension system are especially challenged by the decline in the working age population and weakening of the age dependency ratio,” he said.

Increasing labour immigration was necessary, he said, for Finland’s economy and the pension system.

“Many sectors require more workforce, and in order to attract it, Finland must be an open society that is safe for all and where discrimination is not tolerated,” Pölönen said.

Finland is in the throes of a political shift to the right after the leadership of left-wing Prime Minister Sanne Martin came to an end.

The conservative National Coalition, winner of April’s parliamentary election, has formed a majority government with the anti-immigration, eurosceptic Finns Party and two smaller groups.

Contributions to Ilmarinen’s pension scheme increased by 6% from the same period last year, amounting to to €3.49bn - growth which the firm said followed in the increase in payroll for employees insured with the provider.

Looking ahead, though, Ilmarinen said it expected that pace of growth to slow.

“Employment development appears, however, to be decelerating as the number of employees began to fall at a rate of 0.3% in June for the first time in more than two years,” the CEO said.

Varma, Ilmarinen’s closest rival, is set to publish its first half 2023 report on Friday.

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