Elo’s investment return was 2.8% and cost efficiency improved significantly

23 August 2023

Elo publishes on its website:

Investment market returns were better than expected thanks to good economic development. Stock market returns differed strongly, especially in late spring, both geographically and by sector. Interest income was positive at the beginning of the year, despite the central banks’ interest rate hikes. Our operating expenses decreased for the second year in a row, and we thus improved our cost efficiency.

Key figures January-June 2023

• The investment result at current values ​​was EUR 34.1 (–1,141.3) million.
• The net return on investment was 2.8 (–4.5) percent. 
• The market value of the investments was EUR 29.0 (28.0) billion. The solvency ratio was 121.0 (123.6) percent and the solvency capital was 1.5 times (1.5 times) the solvency limit.
• Insurance premium income was 2.2 billion euros. Pensions and other compensations were paid approximately the same amount. 

– We have nicely reduced our operating expenses, and thus improved our cost efficiency. Thanks to the increased efficiency, we are paying 7 million euros back to our customers as treatment fee refunds. The effect can be seen in our customers’ bills for February-March 2024, along with customer rebates, says Elo’s CEO Carl Pettersson .

The entrepreneur’s pension legislation changed in terms of specifying the definition of the entrepreneur’s income and the regularity of the examination of the income. We started the statutory revisions at the beginning of June.

– The implementation of our new strategy continued and we progressed according to the action plan by developing service processes and management. The positive change has also been noticed by our customers, from whom we have received good feedback, states Pettersson.

Investment market returns better than expected

– The yield development in the stock and interest markets reflects investors’ expectations of a gradual slowdown in inflation without a significant decline in economic growth. This would probably mean a turn in the central banks’ monetary policy, Elo’s vice president Hanna Hiidenpalo estimates .

The return on Elo’s equity investments was 4.3 (-8.2) percent. Listed shares returned 6.7 (-17.2) percent in the beginning of the year. Among the listed stocks, the US stock market performed best, driven by growth companies. The return on Elo’s capital investments was 1.7 (11.2) percent.

Central banks’ rate hikes continued steadily in the first half of the year. In the United States, interest rates were raised three times, and the European Central Bank raised its interest rate no less than four times. The shortest market interest rates rose along with the policy interest rates, but the longer interest rates stayed the same or even fell slightly. Elo’s fixed income investments yielded 2.2 (−3.5) percent.

The uncertain outlook of the economic situation and the rise in interest rates affected the real estate investment market. Trading continued quietly, construction decreased and yield requirements rose. The general market situation was also reflected in the return on Elo’s real estate investments, being 0.2 (3.4) percent.

Disability pensions were applied for at the beginning of the year 6 percent more than last year

In particular, the number of disability pension applications for people over the age of 60 increased. There was an increase especially in the transport, construction, industry and trade sectors. Serious mental health illnesses did not increase quantitatively, but disability pensions were applied for even more due to milder mental health challenges. As many as 38% of applicants for new mental health-based disability pensions were under 34 years old. In 2022, the corresponding share was 35 percent.

Near-term prospects

The economic outlook is still affected by the impact of rising interest rates on economic growth and employment. The main risks of the investment market are the acceleration of inflation and the continuation of the rise in interest rates.

– Both the housing trade and construction have weakened and we cannot see a clear turn for the better in construction without a recovery in real incomes or a drop in interest rates. Finnish companies’ expectations of the future operating environment have weakened, but employment has remained at a good level, says Hiidenpalo.

Source: Elo