Elo had a strong beginning of the year – return on investments was 5.2 per cent
Elo Mutual Pension Insurance Company’s Interim Report 1 January−31 March 2019:
In January–March, return on Elo Mutual Pension Insurance Company’s investments was 5.2 per cent, or EUR 1,160 million. The market value of Elo’s investments at the end of March was EUR 23.4 billion. In the equity market, this was one of the highest return periods since the autumn of 2009, even if uncertainty about global economic development increased.
“In Elo’s investment operations, the first quarter was extremely strong, after a challenging last year. The introduction of the income register went well. Customer satisfaction and service times remained at a good level regardless of the extensive service transformation,” says Elo’s CEO Satu Huber.
At the end of March, the value of Elo’s investments was EUR 23.4 billion (EUR 23.3 billion). Return on investments was 5.2 per cent (-0.4 per cent). The solvency ratio increased to 122.4 per cent and solvency capital was 1.6 times the solvency limit.
Elo administered 46,200 TyEL and 83,000 YEL insurance policies. In the period under review, the total number of self-employed persons and employees insured by Elo was over half a million.
Listed equities generated a return of 12.6 per cent
During the first months of the year, equity investments generated the highest return of all asset classes, with a return of 12.6 per cent from the beginning of the year. In Elo’s equity portfolio, Finnish equity generated the highest returns.
“The strong upward trend in the equity market in the first quarter of 2019 turned the return on Elo’s investment operations clearly positive. In the equity market, this was one of the highest return periods since the autumn of 2009,” says Elo’s Chief Investment Officer Hanna Hiidenpalo.
“During the reporting period, returns on all the main asset classes were positive. The quarter was one of the best in Elo’s history,” adds Hiidenpalo.
The return on bonds was also at a good level, 3.2 per cent. The development of the return on hedge fund investments during the reporting period was positive, with the return being 2.7 per cent. Of unlisted investments, the highest return was generated by real estate investments. The return on real estate investments was 1.6 per cent. Private equity investments generated a return of 0.4 per cent and loan receivables a return of 0.7 per cent.
The average 5-year nominal return was 5.3 per cent and the average 10-year nominal return was 6.4 per cent. The average 5-year real return was 4.8 per cent and the average 10-year real return was 5.1 per cent.
Economic growth has declined, but only moderately
Global economic growth has declined, but quite moderately thus far. The estimate for global economic growth this year has declined slightly and is now 3.4 per cent, compared to 3.7 per cent last year. Growth in the euro zone is expected to decline to 1.2 per cent this year. In Finland, economic growth outlook has declined to 1.7 per cent.
“It is also worth noting that the long growth cycle and the resulting good employment rates have not resulted in significant wage inflation. Consumer inflation expectations have remained moderate,” says Hiidenpalo.
Expansionary monetary policy has been the tool used to react to weaker growth prospects. The equity market reacted positively immediately after the turn of the year and the measures taken by central banks have resulted in falling interest rates. Consequently, all other main asset classes have also generated good returns in the first quarter.
Lot of uncertainty in future outlook – is there enough time for economic policy to react to a sufficient degree?
The weakening of economic growth has been moderate thus far. The main concerns in the global economy have been related to trade disputes, emission regulations applicable to the European automotive industry, Brexit and the weaker global economic outlook. However, employment rates have strengthened, which has contributed to consumption demand, a key element of economy.
“Easing of monetary policy supports expectations concerning the continuation of global economic growth. The essential question is whether there is enough time for economic policy to react to a sufficient degree and to enable the continuation of growth,” notes Hiidenpalo.
The number of pension decisions increased when compared to last year
Elo issued a total of 7,240 (6,478) pension decisions on the basis of an application in January–March. The number of old-age pension decisions issued in January–March was 2,274 (1,743), or approximately 30 per cent more than in the corresponding period last year. This was attributable to the gradual increase in the pensionable age, due to which during the corresponding period last year, there was no age group that would have reached the minimum pensionable age.
The number of partial early old-age pension decisions has stabilised, with 701 (593) decisions issued in early 2019. The number of disability pension applications increased by approximately 5 per cent year on year. The number of occupational rehabilitation applications was on a par with the previous year’s level.
The income register was introduced successfully
Elo made the system changes required by the national income register on schedule and with high quality. Elo’s customer communications concerning the income register was successful and, for instance, the number of error notifications and customer service calls has remained low. Customer service has performed excellently throughout the first quarter. Examples of this include the facts that the response rate of the insurance telephone service was approximately 98 per cent in the first quarter and the insurance service’s NPS (an indicator of customer satisfaction) has remained very good, approximately 85 during the first months of the year.
Customer experience remained at an excellent level in pension services, too, despite the major pension processing changes introduced by the income register. The NPS for the telephone service was 72 and the NPS for the online service related to pension and rehabilitation matters was 58. During the first months of 2019, Elo made pension decisions on average approximately 26 per cent faster than the overall average for other employment pension companies. For instance, a partial early old-age pension decision was issued on average in five days.
CEO Satu Huber, tel. +358 20 703 5811
CIO Hanna Hiidenpalo, tel. +358 20 703 5668
CFO Sarianne Kirvesmäki, tel. +358 20 703 5134