Elo achieved the best result in its history – return on investments EUR 1.6 billion

The overall return on Elo’s investments in 2017 was 7.4 per cent. Elo’s pension assets increased by EUR 1.6 billion. Listed equities generated an excellent return of 17.0 per cent. Pension decisions were issued faster than the industry average. Premiums earned increased by 5.7 per cent.

“The return on investments for 2017 was the best in Elo’s history. Global economic growth was a positive surprise and inflation remained moderate. Perhaps even a bit surprisingly, the year turned out to be an excellent year for pension investors, compared to expectations,” says Satu Huber, Elo’s CEO.

The value of Elo’s investments was EUR 23.1 (21.5) billion at the end of 2017. The overall return on investments was 7.4 per cent (5.6 per cent). Pension assets increased by approximately EUR 1.6 billion (EUR 1.1 billion). Solvency was at a good level, and the solvency ratio was 125.9 per cent (124.3 per cent). Operating expenses from the loading profit amounted to 80.9 per cent (76.7 per cent). The loading profits for 2016 and 2017 are not comparable because the pension insurance companies expense loading decreased by approximately 7 per cent in 2017. As of 2017, the loading profit will be distributed to customers in full as premium reductions.

“Finland also saw better than expected economic growth in 2017. The pickup in the economy and the success of Elo’s customers were visible in premiums earned,” Huber says.

The increase in premiums earned was 5.7 per cent. In 2017, TyEL policyholders’ payroll amounted to EUR 12,717.0 million (EUR 11,943.7 million) and entrepreneurs’ YEL confirmed income amounted to EUR 1,824.2 million (EUR 1,861.6 million).

Year of equities

“2017 was a year of equities with returns reaching excellent levels. The good return from equities contributed significantly to Elo’s overall return on investments. In equity markets, the year was also marked as exceptional due to their steady performance with no major fluctuations seen during the year,” says Hanna Hiidenpalo, Elo’s Chief Investment Officer, describing the investment year.

Elo’s listed equities generated a return of 17.0 per cent (9.0 per cent). Investments in emerging markets generated the best returns. Direct equity investments in emerging markets were particularly successful, beating market returns by more than 20 percentage points with a total return of almost 50 per cent. 

“We increased the diversification of our investments globally and added allocation in well performing equity investments throughout the year. Successful foreign exchange strategy had a positive impact on Elo’s overall profit, alongside equities,” Hiidenpalo continues.

Economic growth was strong in all main economic areas. Inflation remained moderate and central banks were able to maintain a highly stimulating monetary policy. These factors also supported the development of investment markets significantly.

“In every asset class, Elo’s portfolio management outperformed or matched market returns,” Hiidenpalo says.

Elo’s fixed income investments generated a return of 1.4 per cent (3.6 per cent). The global corporate bond market performed well with, for example, returns of over 2 per cent in European investment-grade corporate bonds and over 6 per cent in European higher-risk corporate bonds. The return from corporate bonds was 3.5 per cent (6.5 per cent). The overall return from bonds was 1.5 per cent (4.1 per cent).

The real estate investment market was very active and transaction volumes in Finland again broke records. The year was busy for Elo’s real estate investment operations in Finland, with divestments amounting to approximately EUR 160 million and new investments to approximately EUR 120 million. Direct real estate investments returned 7.4 per cent (6.5 per cent) and real estate investment funds 8.2 per cent (6.3 per cent).

Investment outlook for 2018

At the beginning of 2018, the expectations of economic development are quite positive. Consumer confidence is record-high worldwide, and indicators measuring companies’ outlooks suggest that the favourable economic cycle will continue. Inflation expectations remain very low, but it seems that the threat of deflation has receded. In spite of the positive mood in the economy, the markets have been more uneasy at the start of the year than in a long time.

Strong development will continue

Elo has chosen the strong development of services as its strategy. Among other things, 2017 saw the launch of new tools in Elo’s online service helping the human resources of Elo’s customers prevent and manage risks related to incapacity for work and the resulting costs. Insurance services focused on making their services easier and faster to use. To focus our efforts, customers were consulted and the collected feedback was utilised in the development work.

“In addition to quality and convenience, the customer experience includes speed. Throughout Elo’s existence, we have made pension decisions approximately 20–30 per cent faster than the industry average. It is important to us that there are no interruptions in the customers’ livelihood. We have set the industry’s best customer experience as our target and will continue to work for it,” says Huber.

Pension reform, income register and the EU’s General Data Protection Regulation

The pension reform that entered into force in 2017 was also felt in customer service. Customers were interested in the effect of the pension reform on their own pension cover. In addition, partial early old-age pension, a new type of pension, turned out to be in high demand. Elo issued more than 2,300 partial early old-age pension decisions, while approximately 600 of its former equivalents, part-time pensions, were issued in 2016.

During 2017, preparations were made for the adoption of the income register as of the beginning of 2019. The preparations will continue in 2018. In the future, employees’ income data will only be reported to a single income register. Elo also prepared for the EU’s General Data Protection Regulation in 2017. The Regulation will take effect as of 25 May 2018. The work will continue during this year.

Advance information about Elo's financial statements 2017, slides (pdf) >

In the reported asset class-specific returns, the return from foreign currency derivatives is estimated in proportion to the foreign currency-denominated assets in the financial statements. The information is unaudited advance information concerning Elo’s financial statements. Elo will publish the financial statements and the Report of the Board of Directors in the week beginning Monday 19 March 2018.

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