Elo Interim Report 1 January – 30 June 2014: Elo Mutual Pension Insurance Company well received

The first half of the year went according to plan for Elo Mutual Pension Insurance Company, which commenced operations at the start of 2014. “At this point in the year we can say that Elo, which was created out of a merger between LocalTapiola Pension Company and Pension Fennia, has been well received. Our first customer satisfaction surveys indicate positive feedback especially for our staff’s service attitude, professional skills and quick decision-making. In the first half of the year, the processing of pension applications was faster at Elo than the average for the industry,” says Lasse Heiniö, Managing Director at Elo.

“In co-operation with our partners LocalTapiola and Fennia, we have been able to secure a good level of customer service despite our staff being exceptionally busy with the changes brought by integrating the companies. In the planning stages of the merger, we paid special attention on ensuring that our customer service continues without interruption over the merger phase, and the launch of Elo’s operations did proceed according to plan,” Heiniö says. “Our operating costs have also remained at a moderate level despite the integration costs.”

Strong performance on investment markets

The first half of the year was challenging for the global economy. The conflicts in Ukraine and the Middle East, and concerns about the state of China’s real estate market caused global uncertainty. In the euro area, the economy seems to be gradually returning to a growth track, but in Finland, signs of nascent growth remain weak.

Strong performance was seen on the investment markets in the first half of the year. “The central banks’ measures to keep interest rates low for the near future were the main reason for the market strength. The European Central Bank’s announcement in early June to keep the refinancing rate near zero for at least the next two years was a major factor causing long-term interest rates to decline throughout the euro area,” says Hanna Hiidenpalo, Director and Chief Investment Officer at Elo.

“The announcement supported other asset classes because it caused them to become relatively more attractive investments. The equity markets performed strongly. The government and corporate bond markets also produced good returns as long-term interest rates declined and risk premiums decreased globally.”

All asset classes produced positive returns

At the end of June, the total value of Elo’s investments was EUR 19,339 million. The return from investment operations was 3.6 per cent in the first half of 2014.

From the start of the year, equity investments were the best performing asset class, with returns reaching 5.4 per cent. Returns on US equities were especially good, at 23.3 per cent. Returns on unlisted shares and private equity investments were also excellent, with the former at 9.6 per cent and the latter at 7.5 per cent. Returns for fixed income investments totalled 2.9 per cent. In other asset classes, returns on hedge fund investments were at a good level, at 3.2 per cent. Returns on property investments totalled 2.3 per cent.

The five-year average nominal return on Elo’s investments was 6.7 per cent (1 July 2009 – 30 June 2014), and the ten-year average nominal return was 5.4 per cent (1 July 2004 – 30 June 2014). The calculation used the investment returns of LocalTapiola Pension Company for the period 2004–2013.

Elo’s solvency capital remained at a sustainable level and was EUR 4,042 million at the end of June, and 26.2 per cent in relation to technical provisions. The solvency ratio, which is the ratio of solvency capital to the solvency limit, was 2.1. Elo used 80.4 per cent of the expense loading included in the insurance contributions for operating expenses.

Elo Mutual Pension Insurance Company Interim Report 1 January – 30 June 2014 (pdf) >

Further information: 

Lasse Heiniö, Managing Director, tel. +358 20 703 5101
Hanna Hiidenpalo, Director and Chief Investment Officer, tel. +358 20 703 5668