The investments of employment pension company Elo generated excellent returns during the first half of the year
Return on Elo’s investments was 4.4 per cent for January–June (1.0% for 1 January–30 June 2016). The market value of Elo’s investments was EUR 22.6 billion (EUR 20.8 billion on 30 June 2016).
The first half of the year was favourable for Elo. Solvency strengthened and the solvency ratio was 126.1 per cent. The overall result was EUR 436.6 million.
- Our investments generated excellent returns. The pension decision service times remained at the top of the industry and Elo strengthened its market position, says Elo’s CEO Satu Huber in summing up the past six-month period.
Elo issued a total of approximately 14,300 pension decisions on the basis of applications during the first half of the year. The partial early old-age pension, which was introduced at the beginning of the year, was a particularly popular form of pension. During the first half of the year, such pensions were issued to 1,536 customers.
- The volumes of the new partial early old-age pension were higher than expected, but Elo succeeded in keeping its average pension processing time the quickest in the industry. According to a survey by Elo, those receiving a partial old-age pension are aware of the impacts of this new type of pension on the amount of their final old-age pension, Huber reports.
Elo is the market leader in both TyEL and YEL pension insurance in terms of the number of policies. Elo’s profit from pension transfers has been the largest ever in 2017. The premiums written for TyEL insurance policies grew by EUR 12.2 million (EUR 5.3 million) as a result of transfers.
Listed equities yielded a return of 8.9 per cent
Elo’s investments yielded a return of 4.4 per cent (1.0 per cent) during the first half of the year. At the end of June, the value of the investments was EUR 22,607 million (EUR 20,827 million). As of the beginning of the year, listed equities yielded a return of 8.9 per cent (-4.0 per cent), fixed income investments -1.0 per cent (3.0 per cent) and real estate investments 3.1 per cent (3.7 per cent). Elo’s equity investments succeeded particularly well in emerging markets and Europe. In an environment of low interest yield, real estate investments also yielded steady returns.
- What was noteworthy about the first half of the year is that the US dollar weakened by almost 10 per cent against the euro in the currency market. However, the share of Elo’s open currency risk of investments was kept at a moderate level during the first half of the year, says Elo’s Chief Investment Officer Hanna Hiidenpalo.
During the last 12 months, return from investments was 9.2 per cent. The average 5-year real return of Elo’s investments was 6.1 per cent and average 10-year real return was 3.0 per cent.
- The global investment market, especially the equity market, has yielded extremely good returns since March 2009. This has been the second-longest streak of good returns from investments since World War II. During the first half of the year, the investment market developed positively again, Hiidenpalo says.
Future economic outlook
The economic outlook for the remainder of the year is optimistic, similarly to the first half. The outlook of the Finnish economy is quite bright at last, driven by recovered domestic demand and exports. Continued and strengthening growth requires that growth in the euro zone and emerging economies will remain at a sufficient level.
Measures by central banks and expectations of them continue to have an essential effect on the development of the global economy and investment environment. Political uncertainties in all major economic areas cause risks. In addition to this, the valuation levels of many investments have continued to rise, and central banks’ efforts to neutralise their fiscal policies may cause nervousness in the investment market. Interest rates of public loans were still increasing clearly in June, while estimates of a tightening of the fiscal policies of central banks have strengthened in the market.
Elo Interim Report presentation 1 January - 30 June 2017 (pdf) >
CEO Satu Huber, tel. +358 20 703 5811
CIO Hanna Hiidenpalo, tel. +358 20 703 5668
CFO Sarianne Kirvesmäki, tel. +358 20 703 5134