Largest Finnish mutual pension insurer suffers €3.8bn negative return from portfolio in the first half of 2022

The largest of Finland’s pension insurance companies has revealed a 6.2% loss on investments for the first half of this year - with returns having worsened in the second quarter.

In its financial report for January to June 2022, Ilmarinen this morning that its portfolio had suffered a €3.8bn negative return in the six-month period, with the market value of investments ending June at a value of €56.7bn, compared to €60.8bn at the end of 2021.

The figures show investment losses accelerated for Ilmarinen in the second quarter, since the firm reported a €1.4bn loss in the first quarter.

Jouko Pölönen, president and chief executive officer of the earnings-related pension provider, said:

“The first half of the year on the investment markets was challenging due to accelerating inflation, central banks’ tightening monetary policy and the war begun by Russia.”

But he said his company’s solvency had remained strong with premiums written having grown strongly, and costs having fallen.

In the report, Ilmarinen said its solvency capital had diminished to €13.1bn by the end of June from €16.5bn six months earlier, with its solvency ratio dipping to 129.3% from 136.7%.

Pölönen made a number of comments in the report on the Finnish pension system, including a call for solvency regulation to be reformed. This should be done “to ensure that the best possible long-term return can be sought for pension investments,” the CEO said.

Among asset classes, both equities and fixed income ended the January-to-June period with losses for the Helsinki-based pension provider, of 9.6% and 5.2% respectively.

However, Ilmarinen’s real estate investments made a 2.0% gain in the six-month phase, and hedge funds - which make up 7.7% of the portfolio - also bucked the negative trend with a 6.2% return, according to the report.

Regarding its business environment and that of the pension system as a whole, Pölönen also mentioned that two trends, which had been positive during COVID, had now reversed.

In the first half of this year, he said, Ilmarinen had received nearly 4% more disability pension applications than in the previous year.

“The positive development seen in disability pension incidence during the COVID-19 pandemic seems to have turned,” Pölönen said, adding that the most common reason for disability pensions remained mental health.

The other trend he mentioned was Finland’s low birth rate, saying that between January and June, just over 22,000 children had been born in the Nordic country - which he said was the lowest figure ever recorded.

“The positive trend in the birth rate that occurred during the COVID-19 pandemic appears to have reversed based on H1 figures,” he said.

The other two mutual pension insurance companies in the earnings-related pension system, Varma and Elo, are due to report their interim result this Friday and on 26 August respectively.