Elo’s Financial Statements for 2016: Elo’s position as Finland’s preferred employment pension company strengthened and the return on investments increased
The overall return on investments in 2016 was 5.6 (5.0) per cent, and the investment assets increased to EUR 21.5 (20.5) billion. Elo strengthened its position as Finland’s preferred employment pension company.
Elo is Finland’s preferred employment pension company and the third largest in terms of its investment assets. Elo is the market leader when measured by the number of insurance policies. At the end of 2016, Elo was responsible for about 45,100 TyEL insurance policies and 84,600 YEL policies, altogether covering nearly 500,000 employees and self-employed persons. The total amount of pensions paid by Elo in 2016 was EUR 2,982 (2,857.6) million.
“Together with our partners, Elo aims to offer the industry’s best customer experience, and we were able to focus on this objective during 2016 once all the major integration projects related to the merger were completed. This past year was Elo’s best ever in terms of transfer business,” states Satu Huber, Chief Executive Officer of Elo. Within transfer business, policyholders can transfer their employment pension policies from one company to another at four points during the year.
The preparation for the pension reform that entered into force at the beginning of 2017 proved to be a major investment.
“Our desire to ensure our customers’ knowledge about the changes that the reform would bring led to considerable investments in communications related to the reform. The entry into force of the pension reform also required changes in our IT systems. Despite those changes, we still managed to provide our pension customers with service at a faster rate than the industry average. For example, Elo processed its pension decisions an average of 16 days faster than the average for other employment pension companies,” says Huber.
The eventful and challenging year ended positively in terms of return on investments
Due to the political and financial uncertainty throughout the year, investment activities saw an exceptional amount of fluctuation. Despite the fact that many political risks were realised, the markets managed to achieve even record levels.
The overall return on Elo’s investments in 2016 was 5.6 (5.0) per cent. The market value of the investments at the end of the year was EUR 21.5 (20.5) billion, which marked an increase of one billion during the year. The risk levels of Elo’s investments were well under control and solvency remained at a good level. The solvency ratio was 24.3 (24.1) and the solvency capital was 1.8 (2.0) times the solvency limit.
“All asset classes had a positive return. The overall return on Elo’s investments exceeded expectations and, in particular, the return achieved on high-risk asset classes was pleasing,” explains Hanna Hiidenpalo, Director and Chief Investment Officer at Elo.
The best performing asset class was equities with a return of 9.3 (13.0 ) per cent. Fixed income investments saw a return of 3.6 (0.0) per cent, and the return on real estate investments was 6.4 (6.9) per cent. The five-year average nominal return (pro forma) on Elo’s investments was 6.7 per cent, and the ten-year average was 4.6 per cent. The five-year real return was 5.6 per cent, and for ten years, 2.9 per cent.
Development in accordance with customers’ needs
“We have invested particularly heavily in the digitalisation of our services, and we introduced, among other services, a new YEL mobile application that enables self-employed persons to easily and conveniently manage their pension insurance matters. The development work on this new service began with the analysis of customer feedback, and the service offers answers to those questions that the customers most often ask from our telephone services,” states Huber.
During 2016, our customers gained even faster access to all our insurance services. The processing times for insurance applications and payment changes were clearly reduced during the year.
Elo also developed new services for disability risk management to support its client companies in improving the quality of working life and extending work careers in Finland. Elo began arranging well-being at work training sessions for employers and self-employed customers, also in the form of webinars to enable more customers to participate in the training.
“Significant changes are taking place in the operational environment. Digitalisation, the health and social service reform and the national income register are issues that will have a significant impact on both Elo’s customers and our own operations in the coming years. We will be actively involved in the common development projects within the pension industry in order to improve Finland’s competitiveness and Finnish working life,” states Satu Huber.
The competitive conditions within the pension market are facing changes. The Ministry of Social Affairs and Health confirmed the calculation bases for client bonuses on 14 February 2017. These bases will enter into force on 1 January 2018 and will have an initial effect on the insurance contributions for 2019.
“We feel it is important that the pension scheme remain sufficiently simplified and transparent, as the competitive conditions are being developed,” says Huber.
The development of the investment markets was positive for the first half of the year, particularly in terms of the equity markets. Expectations concerning global economic growth have also improved and growth is anticipated to rise to a level exceeding 3 per cent. In Finland, the competitiveness pact is anticipated to create the means to take advantage of new export opportunities, but there will be a delay before the favourable effect of the pact will be visible in our economy. The economic outlook for business in Finland has, overall, brightened, particularly in the fields of construction, services and new forms of export, such as the motor vehicle industry.
“The income development in investments during 2017 will reflect the many uncertainties, and the expectations will be lower than we are accustomed to, but, through successful decentralisation, the markets will continue to offer investment opportunities for long-term pension asset investors,” says Hiidenpalo.
Satu Huber, Chief Executive Officer, tel. +358 (0)20 703 5811
Hanna Hiidenpalo, Director and Chief Investment Officer, tel. +358 (0)20 703 5668
Sarianne Kirvesmäki, Director, Finance, tel. +358 (0)20 703 5134