In 2016, we started implementing Ilmarinen’s new strategy and made rapid progress towards the goals we had set. In accordance with our strategy, we focus on investing successfully, growing profitably, offering digital services and energising our work community.
Our new development concept called Wauhdittamo, designed to initially engage our own personnel in developing new services, provided us with new momentum. Towards the end of the year, we launched the second phase of Wauhdittamo which also involves our customers in generating ideas and developing services. Through bold, agile and open development Ilmarinen wishes to take on a new role in supporting the growth and success of Finnish companies.
Our goal is to be the most attractive earnings-related pension partner.
The operating environment in 2016 was in many ways challenging for pension insurance companies and investment operations.
The first part of the year was marked by a strong decline in share prices. In June, the Brits voted to leave the European Union and in late autumn, the US presidential election created suspense. Both resulted in share price volatility and uncertainty on the markets. Interest rates were at an all-time low, and long-term interest rates also sunk into negative territory for the first time ever. Global economic growth was modest.
Despite this difficult environment, we performed well. Our investments yielded 4.8 (6.0) per cent and their market value rose to EUR 37.2 (35.8) billion. The good result is attributable to our long-term investment strategy, according to which we continued the diversification of investments across various asset classes and geographic regions. We reduced fixed income investments and increased investments in real asset classes. In real estate investments, we continued the diversification of the portfolio outside of Finland. Ilmarinen’s long-term real annual return on investments since 1997 has been on average 4.2 per cent.
Our solvency remained strong. By the end of the year, our solvency capital rose to EUR 8.5 (8.2) billion and our solvency ratio was 29.2 (29.6) per cent.
Ilmarinen is known as a forerunner in responsible investment, in both Finland and on an international scale. We continued this work by, among other things, adopting a new climate policy. The long-term energy savings targets for our properties were exceeded by 30 per cent. We are an active owner and want to help ensure that our investees operate sustainably. For us, responsible investment is part of risk management.
Ilmarinen is a mutual pension insurance company owned by its clients. We develop our business operations and seek growth in a way that also benefits our existing customers.
More than 10,000 new companies or self-employed persons took out insurance with Ilmarinen last year, which we are particularly pleased with. In customer retention, however, we fell short of our target and will consider it our priority during the current year. At the end of the year, 563,500 (562,000) people were insured with Ilmarinen. Premiums written grew slightly and stood at EUR 4.3 (4.3) billion.
Close to 330,000 people received pensions from Ilmarinen at the end of the year. Last year, we paid a total of EUR 4.6 billion (4.4 billion) in pensions, of which around EUR 400 million (418) in disability pensions.
Our cost-effectiveness remained at a good level. Total operating expenses were 2.3 per cent lower than the previous year and the ratio of operating expenses to the expense loading components available for them, measuring cost-effectiveness, improved to 74.9 (75.5) per cent. Thanks to good solvency and cost-effectiveness, the amount of client bonuses rose to a record-high level, at 0.61 (0.59) per cent of the total payroll of the insured.
High-quality and cost-effective management of our statutory task is the cornerstone of our corporate responsibility. We are responsible for the pension cover of close to 900,000 Finns, and our task is to ensure that the personnel of our client companies receive the pension they earned from employment.
Offering digital services
We prepared for the pension reform that entered into force at the start of 2017 by renewing our information systems. The renewal of the pension processing system caused delays in the processing of pension applications early in the year, but towards year-end, the situation improved and we managed to clear the backlog. Thanks to the new system, pension processing will be automated, which will make it faster and will enable us to produce even better digital services for our customers.
A total of 26,500 (22,800) new pension decisions were made, an increase of more than 16 per cent on the previous year. This number can partly be explained by the renewal of the pension processing system, as it meant that the granting of new pension decisions was distributed unevenly.
2016 was another active year for well-being at work services. We organised 43 seminars on well-being at work for our customer companies throughout Finland, attracting more than 2,500 participants. During the year, more than 2,100 (1,900) projects supporting well-being at work were underway and these covered 150,000 (160,000) people. Their effectiveness will further increase with the launch of new digital services.
We also support the management of disability risks and longer careers in our client companies through vocational rehabilitation. More than 6,300 benefit decisions related to rehabilitation were made in 2016, which was a 7.9 per cent increase on the previous year.
During the year, we launched a number of new digital services for our customer companies. The Better Working Life virtual control room supports companies’ work capacity management and improves the predictability of disability risks. The ‘Parempi vire’ mobile app encourages employees to take care of their well-being.
Digital services make data protection all the more important. For us, data protection is a key area of corporate responsibility, and one that also our stakeholders place great importance on.
Energising our work community
We wish to be a responsible employer and show through our own operations that work can be a source of energy. An energising work community supports productivity and innovation and ultimately results in a better customer experience. In 2016, we completed the modernisation of our premises. The feedback on the modernised multi-purpose office space has been positive. According to surveys, the most positive aspects are straightforward interaction and improved flow of information.
The new premises have also had an impact on our operating culture. We have made the move towards an almost paper-less office, telecommuting is increasingly popular and we have introduced a more agile development approach. Our new multi-purpose office space has also garnered interest among our customers. We openly share our experiences, which is yet another way for us to participate in developing Finnish working life.
We have supported our employees’ well-being and good energy in a number of ways. For example, recruiting a full-time work community activation coach incorporates physical exercise into the workday, also helping individual employees find a way of being active that suits them.
At Ilmarinen, responsibility is part of every employee’s job profile. One testament to this is that each Ilmarinen employee completed the Code of Conduct training in 2016. In line with our values, we operate openly and responsibly and achieve success through teamwork.
Timo Ritakallio, President and CEO