The return on Elo’s investments was 9.4 per cent

29.10.2019

In January–September, the return on Elo Mutual Pension Insurance Company’s investments was 9.4 per cent (1 January–30 September 2018: 2.2 per cent) or EUR 2.1 billion. The market value of Elo’s investments rose to EUR 25 billion (EUR 24 billion). In the third quarter, return on investments was 2.0 per cent (1.4 per cent).

“The year in investments has been excellent thus far with regard to the returns. This has strengthened our solvency, creating a foundation for the sustainability of financing the employment pension system and meeting economic challenges,” says Elo’s CEO Satu Huber.

“On the whole, the global equity markets have generated very good returns throughout the year. Listed equities generated the highest returns at 17.3 per cent. Fixed income investments also generated excellent returns. The measures taken by central banks have helped the investment markets to significantly this year,”says Elo’s Chief Investment Officer Hanna Hiidenpalo.

Equity market returns in the major markets were relatively flat in the third quarter, but there were major fluctuations within the markets that reflect increased uncertainty. The return on fixed income investments has exceeded all expectations this year in an exceptional environment.

No change to slower growth on the horizon


Concerns over global economic growth continued after the summer, with no relief to the prevailing uncertainty regarding trade policy and geopolitical development. The global economic growth forecast for the current year has been lowered to nearly three per cent.


Among the main economic areas, economic growth in the United States has held it’s level, with growth in excess of two per cent expected this year. Growth in the euro zone is expected to decline to just over one per cent this year. The significant weakening of the German economy is particularly concerning.


“Global inflation expectations have declined to a worryingly low level as economic growth has slowed down,” Hiidenpalo points out. –

The development of the Finnish economy is currently vulnerable to risks


The uncertainty in the global economy has continued and affected the outlook for industry sector. The central risk is that the originally moderate industrial recession would, in the coming months, deepen  and turn into a broad global depression that would threaten to weaken employment as well. Weaker employment, in turn, would influence consumer attitudes and further weaken the uncertain outlook. 


The domestic outlook of the Finnish economic environment remains positive for the remainder of the year, but the challenges associated with global economic development increase the risk of economic development being weaker than the current forecasts would suggest.


“The development of the Finnish economy during the remainder of the year will involve exposure to the risks and fluctuations of the global economy due to the significance of export sector. Increasing the employment rate will be a big challenge in the years to come,” Hiidenpalo adds.

A look at responsibility


In September, Elo published a survey study “Non-discrimination in working life – does it exist?”, focused on Finns’ experiences regarding non-discrimination in working life. According to the survey, more than one third of Finns have experienced unequal treatment in working life related to factors such as age, reduced work ability or ethnic background. Two out of five respondents nevertheless indicated that diversity is valued more than before in today’s working life.


The PRI (Principles for Responsible Investment) assessment of the responsibility of Elo’s investment activities in 2018 was published in August. The responsibility of Elo’s investments was again rated very good. The PRI rated the full range of Elo’s investment activities in the best possible categories. Elo received the highest possible grade of A+ for its strategy of responsible investment, the management of responsible investment and the company’s direct equity investments. The grade received for the other asset classes was A.

Strong focus on digital services is reflected in customer satisfaction


In the period under review, the total number of self-employed persons and employees insured by Elo was over half a million. Premiums written by Elo have continued to develop favourably in 2019. At the end of September, the year-on-year growth of premiums written was 9.1 per cent.


“Our strong focus on digitalisation in the development of the customer experience and our efforts to develop personal service have produced good results, as evidenced by our customer satisfaction indicators for insurance services as well as pension services,” Huber says.


The development of Elo’s electronic services continues. For example, new features introduced in the online service for managing TyEL and YEL insurance include a work community indicator, a tool for monitoring the development of TyEL payments and information on the company’s average age of retirement on old-age pension.


Elo’s performance has been improved by developing automation and processes, which is reflected in faster processing times for pension applications, among other things. As of the end of the third quarter, we had issued pension decisions approximately 29 per cent faster on average than the overall average of other employment pension companies.

Careers need to be extended at both ends


The financial sustainability of the employment pension system is affected by several factors, including employment, the birth rate and return on investments.


“The low birth rate seen in the recent years could even be characterised as surprising. If the birth rate remains low, it will have a long-term impact on the sustainability of the employment pension system. We need to focus on the employment and work ability of the working age population. In addition, young people should be able to enter working life at an earlier stage and there shouldn’t be obstacles — at least not in the form of attitudes — in the way of people of reduced working capacity remaining at work”, Huber says.


Labour market organisations have initiated a number of related assessments on various topics, such as the potential for improving the return on investments and the development of disability pensions.

 

Elo Interim Report 1 June - 30 September 2019 >

Elo Interim Report 1 June - 30 September 2019 Presentation >

 

Further information:
CEO Satu Huber, tel.
+358 20 703 5811
CIO Hanna Hiidenpalo, tel. +358 20 703 5668
CFO Sarianne Kirvesmäki, tel.
+358 20 703 5134