Elo Interim Report 1 January – 31 March 2014: Elo’s operations launched successfully
Elo Mutual Pension Insurance Company’s investments returned 1.1 per cent at fair value in the first quarter of 2014. At the end of March, the total value of investments was EUR 19,050.6 million.
Elo Mutual Pension Insurance Company was established at the beginning of 2014 through the merger of LocalTapiola Pension Company and Pension Fennia. “The merger, which we prepared during 2013, took place successfully according to expectations,” says Lasse Heiniö, Managing Director at Elo.
“Our customers have been happy with the new Elo mutual pension company. During this year and the next, we will continue to improve our new operating practices and services according to plan. The target of all our development work is to guarantee efficient management of employment pension security and ensure that Elo’s customers receive the best possible service,” Heiniö says.
Anticipation of accommodative interest rate policy increases
“On the equity markets, little changed during the first quarter of the year. On the fixed income markets, long-term rates fell in both the USA and Europe. Central bank reactions to the economic trend diverged on the two continents,” says Hanna Hiidenpalo, Director and Chief Investment Officer at Elo.
The slow-paced recovery of the global economy continues. At the same time, European markets are increasingly anticipating an accommodative interest rate policy, while low inflation and the slow economic recovery will ensure low interest rates for a long time to come. The crisis in Ukraine has increased market uncertainty. In China, the central government has sought to restrain lending, which has had an impact on economic growth. On the other hand, China has also invested in infrastructure projects and implemented tax concessions to stimulate its economy.
The most positive development in the first quarter took place in the emerging equity and fixed income markets, where last year’s strong decline halted despite continuing political instability in many countries.
Positive returns in all asset classes
Despite the challenges posed by the markets, all asset classes of Elo’s investments contributed positive returns in the first quarter. The total return on equity investments was 1.1 per cent. The total return of listed equities was 0.6 per cent. Returns for private equity investments totalled 3.7 per cent and returns for unlisted equity investments totalled 7.6 per cent.
In fixed income investments, corporate bonds produced the strongest returns. Returns for the bonds of other corporations totalled an average of 1.9 per cent. The total return of fixed income investments was 1.2 per cent.
Returns on investments in hedge funds amounted to 1.5 per cent. Direct real estate investments returned 0.5 per cent and real estate funds 1.1 per cent. The return from direct real estate investment has been adjusted due to a change in the calculation method. This reduces the return for the first quarter.
The five-year average nominal return of Elo’s investments was 7.2 per cent (1 April 2009 – 31 March 2014), and the ten-year nominal return was 5.1 per cent (1 April 2004 – 31 March 2014). The investment returns of Pension Tapiola/LocalTapiola Pension Company were used for the period 2004–2013.
Elo’s solvency remained at the level of the beginning of 2014. The solvency capital was EUR 3,833 million. The solvency capital before the equalisation provision was EUR 3,357 million. The solvency ratio was 25.2 per cent of technical provisions and 2.3-fold compared with the solvency limit.
Elo Mutual Pension Insurance Company Interim Report 1 January – 31 March 2014 (pdf) >
Lasse Heiniö, Managing Director, tel. +358 20 703 5101
Hanna Hiidenpalo, Director and Chief Investment Officer, tel. +358 20 703 5668