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Entrepreneur’s concerns were characteristic of the first quarter – the coronavirus dominated the investment market

Elo Mutual Pension Insurance Company Interim Report 1 January–31 March 2020:

The first three months of the year were a quarter of adapting to exceptional situation. The coronavirus pandemic had several impacts on the employment pension sector and its regulations during the first quarter. Several customers made use of the offered payment flexibility. The number of pension applications showed signs of an increase. Customer contacts and customer satisfaction increased. The investment market suffered as a result of the coronavirus shock after increasing early in the year.

“The coronavirus pandemic has meant a major change in our lives, and this concern shared by the entire world has become almost the only topic of conversation in everyone’s life. In Finland, the employment pension sector’s jointly agreed exceptional measures aim to improve the operational prerequisites of both pension companies and their customers during and after the crisis. We are now focusing on being able to serve our customers in the exceptional situation in the best way possible and travel together over obstacles towards a normal life,” says Elo’s CEO Satu Huber.
Many entrepreneur and employer customers of Elo are now thinking about ways of coping in the financially challenging times. The elderly have also awoken to think about the options provided by pension security, and signs of an increase in applications for partial early old-age pensions, for example, can be seen. “Flexibility in paying pension contributions and commercial property rents and the possibility of postponing loan instalments are means that we have been able to offer our customers during the crisis. Our services have primarily functioned in the same way as before, but mostly through remote work. I am particularly proud that customer service has received praise from our customers during the difficult times. It also indicates that we are together in this exceptional situation. Now is a time when responsible behaviour and smoothly executing our basic task are emphasised,” Huber continues. The return on Elo’s investments was -9.5 per cent during the first quarter. The decrease in the equity market caused by the coronavirus in February was exceptional. Good previous years and decades for investments have provided a buffer against decreases in returns. – “Getting the pandemic under control globally is now playing a key role in the normalisation of the global economy and investment market. A long-term pension investor has to be able to look forward,” Huber says.

The long-term investment strategy is emphasised during the crisis

The return on Elo’s investments in January–March was -9.5 per cent (5.2 per cent). The solvency ratio was 116.6% and solvency capital was 1.2 times the solvency limit.

“The positive development of equities early in the year turned to a decline after mid-February, which was followed by an exceptionally strong decline in the equity market that lasted for about a month. The last week of March turned the market development to a positive direction,” says Chief Investment Officer Hanna Hiidenpalo.

Private equity investments, unlisted equities and direct real estate investments generated the best returns during the period under review. Market price changes caused by the pandemic affected listed securities. Changes were not yet seen in the value of unlisted investments. Market price changes have been strong during the period under review, but there is no visibility yet into how strongly the pandemic will affect the operations and profit performance of companies in the long term.

“In the current situation, the long-term nature of the investment strategy and suitable risk level in the long term are emphasised. The investment strategy must be profitable in the long term in spite of strong fluctuations in the short-term returns of the equity market,” Hiidenpalo says.

At the end of March, the average 10-year nominal return of Elo’s investments was 4.5 per cent and the average 10-year real return was 3.2 per cent. The average 10-year real return still exceeds the return expectation used in the calculations of the Finnish Centre for Pensions.

Operating environment and outlook

There is major uncertainty concerning the economic outlook for the rest of the year, both globally and in Finland. The recovery of economic growth was fast after the financial crisis of 2009. The recovery of confidence after this crisis as well will lay down the foundation for growth once the vacant production resources are taken back into use.

“Globally, governments and central banks have simultaneously launched exceptionally extensive stimulus measures. The disease situation and related restrictions being prolonged are key factors affecting economic growth and the investment market,” Hiidenpalo comments.

Financial insecurity is likely to increase pension applications

Approximately 240,400 (238,000) pensioners were paid their pensions by Elo during the reporting period. A total of EUR 880.2 million (EUR 845.8 million) was paid in pensions in January–March. The number of pension decisions issued on the basis of an application was 7,305 (7,240).
A total of 2,188 (2,274) old-age pension decisions and 619 (701) partial early old-age pension decisions were issued.

There are indications that the financial insecurity caused by the coronavirus situation is beginning to translate into an increase in the number of applications for old-age and partial early old-age pensions during the second quarter. Elo’s customer service has increasingly received contacts where customers are investigating the possibilities provided by the pension alternatives to their own changed situation in life.

Disability pensions on the rise, psychological disorders are the most common cause

The growth in the number of both applications and new disability pensions granted that began a few years ago continued. A total of 1,704 (1,660) new disability pension decisions were issued, an increase of six per cent year-on-year. For the first time during the existence of Elo, mental health disorders were the most common reason for new disability pensions in 2019. The trend continued during the first quarter of 2020, and psychological disorders were the reason for 36.3 per cent of new disability pension decisions, musculoskeletal disorders for 28.6 per cent.

Customer service has been kept at an excellent level in pension and rehabilitation-related matters in spite of the increase in contacts brought about by the coronavirus situation. The customer NPS for telephone service was 73 (72). We expanded our online service for the insured and pensioners by deploying applications for a rehabilitation plan, among other features. The NPS for the online service related to pension and rehabilitation matters was 63 (58).

During the first months of 2020, we made pension decisions on average approximately 15 per cent faster than the overall average for other employment pension companies. Of our customers who had received a pension or rehabilitation decision, 89.7 per cent (88.7 per cent) gave an excellent grade for the service associated with applying for the pension or rehabilitation.

Elo increased its market share

The first transfer period of 2020 was favourable for Elo. It was positive in all respects; the net increase in TyEL customer accounts was 135 employer customers and approximately EUR 6.2 million in premiums written. As for Self-employed Persons' Pension Insurance customers, the growth was 336 entrepreneur customers. Elo also increased its market share in insuring new entrepreneurs year-on-year. Elo is the market leader in YEL pension insurance, and one in three employer companies use Elo to insure their employees.

Elo administered 46,700 TyEL and 82,900 YEL insurance policies. In the period under review, the total number of self-employed persons and employees insured by was over half a million.


Elo Interim Report 31 March 2020 >
Elo Interim Report Presentation 31 March 2020 >

Further information:
CEO Satu Huber, tel. +358 20 703 5811
CIO Hanna Hiidenpalo, tel. +358 20 703 5668
CFO Sarianne Kirvesmäki, tel. +358 20 703 5134

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