Finnish pension company Ilmarinen returned 3.7 per cent on its investments in the first half of 2023, its half-year report has shown.

This equates to €2.1bn and represents a 9.9 percentage point improvement on its return in H1 2022 (-6.2 per cent).

Ilmarinen attributed the positive returns to strong performances in the equity markets, and fixed income and credit risk investment returns.

The market value of Ilmarinen’s investments grew year-on-year, from €56.3bn to €58.2bn.

Its long-term average return was 5.8 per cent, as of 1997, corresponding to an average annual real return of 3.8 per cent.

The pension company’s solvency capital rose from €11.8bn in H1 2022 to €12.4bn in H1 2023, while its solvency ratio rose from 125.8 per cent to 126.4 per cent over the same period.

During the first half of the year, Ilmarinen paid €3.6bn in pensions to around 455,000 pensioners.

“Ilmarinen’s return on investments rose to 3.7 per cent, solvency strengthened, and cost-effectiveness continued to improve despite the high inflation and uncertain economic development,” commented Ilmarinen president and CEO, Jouko Pölönen.

“The investment markets showed positive performance in the first half of the year, even though central banks have continued their key interest rate hikes and a fast rise in interest rates has created challenges and increasing financial costs for indebted households, companies and the leveraged real estate sector, for instance.

“Inflation and global economic growth have slowed, as a result of which the markets forecast an end to key interest rate hikes by the end of the year.

“An adequate level and coverage of pensions, intergenerational fairness, and sustainable financing are included in the new Government Programme as earnings-related pension policy targets.

“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.”

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