Elo’s investments generated approximately EUR 1 billion in Q1
In January–March, the return on Elo’s investments was 3.9 (-9.5) per cent, or EUR 996.4 million. The market value of Elo’s investments at the end of March was EUR 26.8 billion. The solvency ratio was 125.0 per cent and solvency capital was 1.5 times the solvency limit.
“The growth expectations of the global economy increased in the first quarter in spite of the shadow of COVID-19, and this positivity was also reflected in the equity markets. Investment returns were at a good level and our solvency has improved since the turn of the year,” says Elo’s CEO Hanna Hiidenpalo.
Equity investments generated the highest returns
“The extensive stimulus measures in the US economy have had a significant impact on the investment markets this year. Expectations of higher inflation and the continued rise of interest rates have had an impact on the return differences between asset classes,” Hiidenpalo notes.
Returns on nearly all of Elo’s main asset classes were positive, with only fixed income investments being slightly in the negative. Elo’s equity investments generated a return of 7.8 (-17.4) per cent, fixed income investments -0.3 (-2.9) per cent, real estate investments 0.9 (1.0) per cent and other investments 3.5 (-3.8) percent. The result of investment operations at fair values was EUR 416.3 million (EUR -1,752.0 million).
The equity markets generated good returns in the first quarter. Higher interest rates resulted in significant fluctuations within the equity markets – between sectors, for example – but the differences in returns between geographic regions were nevertheless relatively minor. Unlisted equity investments and private equity investments generated good returns. Returns on fixed income investments were negative due to higher interest rates.
Increased growth expectations for the global economy
The growth expectations of the global economy – and the US economy in particular – increased in the first quarter. This was driven by massive financial policy stimulus measures, COVID-19 vaccinations and the pent-up demand created by saving. Inflation expectations have increased and interest rates have risen during the early part of the year.
In Finland, the COVID-19 situation restricted economic activity in the service sector and led to caution in the behaviour of consumers and businesses. Consequently, a turn for the better was thus not yet seen in the labour market situation. The slow recovery in Europe has had a negative impact on Finnish exports despite the fact that the worst of the decline in demand appears to have already passed.
Better customer service through analytics
“Our multichannel customer service remained smooth in spite of the COVID-19 pandemic. Our customer satisfaction and employee satisfaction have remained at a good level and our service quality has remained high during our year-long use of a hybrid model that combines remote work and in-office work,” Hiidenpalo explains.
Based on performance indicators and customer feedback, Elo’s customer satisfaction was at a good level in the first quarter. Multichannel customer service has been developed based on customer feedback and analytics. The new features developed for our online service include a new analytics-driven feature that guides YEL-insured self-employed persons to check their YEL earned income levels at regular intervals. Elo looks after the level of self-employed persons’ YEL earned income in various ways throughout the insurance life-cycle.
At the end of March, Elo administered 49,100 TyEL and 83,300 YEL insurance policies. Elo is the market leader in YEL pension insurance, and approximately one in three employer companies use Elo to insure their employees. The total number of self-employed persons and employees insured by Elo was almost half a million. Premiums written amounted to EUR 983.1 million. TyEL wages reported by Elo’s customer companies during the three-month period were 0.8% lower than in the corresponding period last year. A total of 242,800 pensioners were paid their pensions by Elo. A total of EUR 905.7 million (EUR 880.2 million) was paid in pensions in January–March. The number of pension decisions issued on the basis of an application was 6,973 (7,305).
Elo’s customers received a decision on old-age pension in two days on average, compared to the industry average of 11 days. The number of new decisions on disability pension and rehabilitation decreased year-on-year. A total of 1,565 (1,704) new decisions were issued on disability pension and 511 (597) on the right to rehabilitation. This represents a notable change, as a few years ago, the number of applications grew particularly with regard to new decisions on disability pension. Assessing the reasons for this development is premature, but we are keeping an eye on the issue.
Progress made in responsibility efforts
Elo joined the CLC (Climate Leadership Coalition) Call on Carbon initiative at the end of March. Call on Carbon is a joint initiative to increase climate investments and achieve efficient carbon pricing. Through the CDP (formerly the Carbon Disclosure Project) Non-Disclosure Campaign, Elo is again involved in engaging with many companies to encourage them to report on climate-related matters.
Elo joined the WWF Green Office network in spring 2020 and passed a Green Office audit in March 2021. Elo is also participating in the Responsible Employer campaign for the second time.
After the review period Elo’s Board of Directors appointed B.Sc. (Econ.), EMBA Carl Pettersson as the company’s new CEO. He will take up his post in autumn 2021.
Elo’s CEO Satu Huber resigned from her position on 16 March 2021. Elo’s Chief Investment Officer Hanna Hiidenpalo serves as interim CEO in addition to her regular duties.
The Financial Supervisory Authority (FIN-FSA) appointed an authorised representative on 11 December 2020 to supervise the activities of Elo. The development of Elo’s corporate governance has continued in cooperation with the authorised representative.
Near-term economic outlook
The growth forecast for the global economy is approximately 6 per cent for this year. The major risks to the fairly positive near-term economic growth outlook are related to the availability of vaccines and their efficacy now that the virus has demonstrated its ability to mutate. The economic outlook in Europe is weaker than in the United States. However, the improving vaccination coverage supports consumption and investments in the near future. The outlook for the remainder of the year is positive in Finland due to the expected release of pent-up consumption and investment demand. The strong housing market is also an indicator of the economy’s recovery from the COVID-19 slump, and employment is expected to recover as a consequence. The growth forecast for the Finnish economy this year is nearly 2–3 per cent.
There is a risk of overheating in the US economy, with the Fed indicating that it will maintain light financing conditions for a long time still. For now, it remains unclear whether a significant and long-term increase in inflation will follow the end of the COVID-19 pandemic or will there be a return to the conditions of slow growth and low inflation.
The comparison figures in the release are for the corresponding period in the previous year.
CEO Hanna Hiidenpalo, tel. +358 20 703 5668 firstname.lastname@example.org
CFO Sarianne Kirvesmäki, tel. +358 20 703 5134 email@example.com