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Elo interim report 1 January–30 September 2023: Return on investment was 2.7 per cent, as returns were reduced by write-downs on real estate investments

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The financial markets generated moderate returns during the review period. Equity market returns were characterised by geographical divergence. Interest yields were positive in the first half of the year, despite central bank rate hikes. Due to improved cost efficiency, Elo’s projected surplus of EUR 7.7 million will be refunded to customers.

The comparison figures in brackets are figures for 30 September 2022.

Key figures January–September 2023

  • The total surplus was EUR -90.9 (-1,382.5) million
  • Return on investment was 2.7 (-4.9) per cent, or EUR 0.8 billion. The market value of the investments was EUR 28.8 (28.0) billion. The average 10-year return on investment was 5.3 per cent. This corresponds to an average real return of 3.3 per cent.
  • Premiums written amounted to EUR 3.3 (3.3) billion. A total of EUR 3.3 (3.1) billion was paid in pensions and other benefits.
  • The solvency ratio was 120.3 (122.2) per cent and solvency capital was 1.4 (1.5) times the solvency limit. 

– Elo’s year-to-date returns are at a good level. Equity markets and fixed income markets both generated weak returns in the third quarter. The weak returns were due to fears of continued tight monetary policy. Returns in the real estate market were also subject to pressures, and we recognised a write-down of EUR 93 million on direct real estate investments at the end of September, says Elo’s CEO Carl Pettersson.

Equity market returns were characterised by geographical divergence. While the equity markets in the United States and Japan generated good returns, the year-to-date returns for Finland and China were negative by a clear margin. Elo’s year-to-date returns on equity investments were good at 4.0 (-10.1) per cent, although the returns on listed equities in the third quarter were negative. Listed equities generated a return of 4.5 (-20.3) per cent for the year to date, while the return on private equity investments was 3.8 (11.4) per cent. 

Central banks continued to raise their key interest rates, but there were already signs of the hike cycle ending. Longer-term market interest rates in the United States and the euro zone turned upward again, but the number of credit defaults remained low. Elo’s fixed income investments generated a return of 2.4 (-3.2) per cent since the start of the year.

Returns on real estate investments were weighed down by the general situation in the real estate investment market and rising yield requirements. Returns on real estate investments were pushed into negative territory by the review of the values of Elo’s direct real estate investments. The diversification of the real estate portfolio was effective even in the challenging market conditions, and the long-term outlook has remained good. The return on real estate investments was -1.6 (5.3) per cent.

Customers benefit from our cost efficiency

– Elo’s projected surplus of EUR 7.7 million will be refunded to customers. Elo is the only employment pension company to do this. In addition, our improved efficiency means that our customers will pay substantially lower management fees in 2024, Pettersson notes.

The pension legislation for self-employed persons changed at the turn of the year, and Elo initiated reviews at the beginning of June. By the end of the review period, Elo had reviewed the earned income of almost 16,000 self-employed persons. 

– The number of contacts from customers increased to some degree, and the feedback indicated that our review process was perceived to be clear. For some of our customers, the timing of the increases to earned income is difficult, as inflation creates significant cost pressures. Dialogue between the customer and the pension company is particularly important in these circumstances, Pettersson adds.

Near-term outlook

Expectations of economic growth next year are modest, but the forecasts suggest that an extensive recession will be avoided. The sufficient slowing of inflation remains unclear, and further interest rate hikes are also possible. There is no indication of a quick turn towards interest rate cuts by central banks. 

Higher interest rates have had a significant impact on the Finnish economy. The construction sector and the real estate market are in a recession, and a recovery from the recession is contingent on interest rates falling.


Further information:

CEO Carl Pettersson, interview requests Communications Manager Sara Salomaa, tel. +358 44 550 5450


Interim report 1 January - 30 September 2023 (pdf)

Interim report presentation 1 January - 30 September (pdf)


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