ilmarinen: interim report 1 january to 30 september 2014

ILMARINEN JANUARY−SEPTEMBER 2014

24 October 2014

1

INVESTMENT RETURN AT GOOD LEVEL

January−September 2014

• Investment return 5.7%

– Return on equity investments 8.8%

– Return on fixed income investments 3.1%

– Return on real estate investments 4.0%

• Long-term return at a good level

– Nominal return 5.9%

– Real return 4.1%

• Solvency strengthened

2

KEY OBSERVATIONS ABOUT THE OPERATING ENVIRONMENTJanuary−September 2014

• Geopolitical crises created an uncertain investment environment.

• Economic growth in Europe and Finland were weaker than forecast. In contrast, the US economy continued to recover.

• The return on equity markets was good in all the key markets.

• The interest rate level and credit risk margins sank to a record-low.

3

PENSION AGREEMENT• It is good that a conclusion was

reached. The pension agreement...

... increases confidence in the pension

system

... helps achieve generally agreed

working career targets

... decreases the sustainability deficit of

public finances

► It is important that the remaining details be handled carefully in preparing the legislation.

4

28,121.7 27,484.9

29,520.4

32,270.234,092.5

0

5000

10000

15000

20000

25000

30000

35000

40000

31.12.2010 31.12.2011 31.12.2012 31.12.2013 30.9.2014

EU

R m

illio

n

Equities and shares Real estate Other Fixed income incl. effect on derivatives

5

MARKET VALUE OF INVESTMENTS OVER EUR 34 BILLIONAsset allocation according to risk

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

9.0

13.8

16.1

2.8

-1.2 -0.5

8.77.9

12.1

8.5

5.7

-17.7

15.8

10.8

-4.0

7.5

9.8

5.7 5.98.1

9.6 10.5

4.5

1.8 2.4

7.7 7.8

11.18.8

5.2

-14.0

12.9

10.6

-2.3

8.67.6

4.1

-20

-15

-10

-5

0

5

10

15

20

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 17.75years

%

Ilmarinen Other companies* Ilmarinen's annual average real return (17.75 years)

REAL RETURN ON INVESTMENTS IN THE LONG TERM 4.1%

6

Net investment return at current value

Ilmarinen’s annual average nominal return (17.75 years)

REAL RETURN ON INVESTMENTSON 4 PER CENT TRENDCumulative return on investments 1997−30 September 2014

7

0

20

40

60

80

100

-97 -98 -99 -00 -01 -02 -03 -04 -05 -06 -07 -08 -09 -10 -11 -12 -13 9

Ilmarinen's real return 3.5% accumulated real return 4.0% accumulated real return

SOLVENCY STRENGTHENED

8

Solvency development

On 30 September 2014, the solvency ratio was 30.3 per cent (ratio of solvency capital to technical

provisions). The solvency position was 1.9 (solvency ratio in relation to the solvency limit).

16.2

27.2

41.3

35.4

25.5

18.1

22.3

25.6

32.033.7 32.5

14.0

24.0

29.7

21.1

23.9

28.030.3

0

5

10

15

20

25

30

35

40

45

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 30.9.2014

% o

f te

chnic

al pro

vis

ions

Solvency capitalTasausvastuusta toimintapääomaan rinnastettava osaVakavaraisuusrajaProvision for pooled claims treated equal to solvency capitalSolvency limit

RETURN ON INVESTMENTS IN JANUARY−SEPTEMBER 2014 5.7%

9

Asset allocation and return

The modified duration of bond investments is -0.5 year. The total return percentage includes income,

expenses and operating expenses not allocated to any investment types.

Basic

breakdown

EUR mill. %

Risk

breakdown

EUR mill. %

Return

%

Volatility

Fixed-income investments 14,704.1 43.1 13,710.7 40.2 3.1

Loan receivables

Bonds

Public corporation bonds

Other bonds

Other money market instruments and deposits

(incl. investment receivables and payables)

1,526.1

12,741.6

4,898.1

7,843.5

436.4

4.5

37.4

14.4

23.0

1.3

1,526.1

6,561.2

3,680.1

2,881.0

5,623.4

4.5

19.2

10.8

8.5

16.5

3.3

3.0

4.1

2.3

4.7

1.7

Equities and shares 14,018.5 41.1 15,106.4 44.3 8.8

Listed equities and shares

Private equity investments

Unlisted equities and shares

11,179.0

1,695.5

1,143.9

32.8

5.0

3.4

12,267.0

1,695.5

1,143.9

36.0

5.0

3.4

8.0

12.4

10.6

8.1

Real estate investments 3,684.2 10.8 3,684.2 10.8 4.0

Real estate investments

Real estate funds and joint investments

3,164.2

520.1

9.3

1.5

3,164.2

520.1

9.3

1.5

3.6

6.3

Other 1,685.7 4.9 1,878.9 5.5 9.0

Hedge fund investments

Commodity investments

Other investments

450.2

3.0

1.232.5

1.3

0.0

3.6

450.2

-23.4

1,452.1

1.3

-0.1

4.3

6.5

-

-

4.7

Investments total

Effect of derivatives

Investments at current value 34,092.5

100.0 34,380.3

-287.7

34,092.5

100.8

-0.8

100.0

5.7 3.0

5 YEARS REAL RETURN 4.1%

10

% Ilmarinen Finnish equities

and shares

European

equities and

shares

Euro

government

bonds

Euro

corporate

bonds

9 / 2014 5.7 8.6 7.0 10.1 6.8

2013 9.8 31.6 20.8 2.2 2.2

Average return over 5 years 6.3 10.9 10.4 5.5 6.1

Average return over 10 years 5.2 9.7 6.8 5.0 4.6

Average return since 1997 5.9 9.6 6.8 5.5 5.3

Real average return over 5 years 4.1 8.7 8.1 3.3 3.9

Real average return over 10

years 3.2 7.6 4.7 3.0 2.6

Real average return since 1997 4.1 7.6 4.8 3.6 3.4

EQUITIES AND SHARESUNCHANGED

11

Asset allocation development

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

31.12.2010 31.12.2011 31.12.2012 31.12.2013 30.9.2014

Equities and shares Real estate Other Fixed income incl. effect on derivatives

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

EUROPEAN AND CHINESEEQUITIES & SHARES INCREASING

12

Geographical breakdown of listed equities

0

5

10

15

20

25

30

35

40

45

50

Finland Europe USA Japan China Emergingmarkets excl.

China

%

31.12.2010 31.12.2011 31.12.2012 31.12.2013 30.9.2014

FINNISH EQUITY HOLDINGSCLOSE TO EUR 3 BILLION

13

Most significant Finnish equity holdings

EUR million

30 Sep

2014

31 Dec

2013

Nokia Corporation 377.1 351.2

Sampo plc 215.1 151.4

Kone Corporation 179.6 196.0

UPM-Kymmene

Corporation 129.7 127.3

Metso Corporation 122.2 94.3

Citycon Oyj 119.5 101.0

Wärtsilä Corporation 110.6 111.9

Fortum Corporation 94.4 122.3

Finnlines plc 79.6 40.9

Nokian Tyres plc 75.2 112.2

Percentage

30 Sep

2014

31 Dec

2013

Digia Plc 14.58 9.55

PKC Group Plc 11.27 10.97

Suominen


Finnlines plc 10.58 10.58

Technopolis Plc 10.41 10.44

Basware


Talentum Plc 9.73 9.73

Tikkurila Oyj 8.84 10.25

CapMan Plc 8.32 8.42

Martela


CURRENT MARKET TOPICS

• Negative news concerning European economic development continues. Lately also the US has produced more negative economic figures than predicted.

• Geopolitical crises have remained a focal area (especially Ukraine).

• Share prices have clearly taken a downturn following a long upward trend.

• Interest rates have also, once again, begun to fall.

14

FOURTH QUARTER INVESTMENT OUTLOOK• Short-term interest rates continue at a

record-low level and long-term interest rates are not expected to rise rapidly.

• The outlook for the equity markets has turned uncertain and the risk of falling equity prices has grown.

15

CLIENT BONUSESEUR 62 MILLION

2012 2011 2010 2009 2008

Solvency capital, EUR mill. 5,752 4,809 6,578 4,877 2,673

Loading profit, EUR mill. 27 34 32 28 35

Transfer to client bonuses, EUR

mill. 62 55 71 52 31

Transfer to client bonuses of TyEL

payroll, % 0.4 0.3 0.5 0.4 0.2

Transfer to client bonuses per

continuous TyEL employment

contract, EUR 117 107 142 110 65

16

FOR A BETTER

LIFE

ilmarinen: interim report 1 january to 30 september 2014

Economy & Finance