Elo guided its operations towards customer orientation and growth - investment return for 2022 was -3.7%

Key figures January–December 2022

• The result of investment operations at fair values was EUR -1,493.2 million (EUR 1,562.8 million).
• Net investment income was -3.7 (14.0) per cent. 
• The market value of the investments was EUR 28.2 (29.4) billion.
• The solvency ratio was 121.4 (128.1) per cent and solvency capital was 1.5 (1.6) times the solvency limit. 
• Premiums written amounted to EUR 4.3 billion. The amount paid in pensions and other benefits was nearly at the same level, EUR 4.1 billion. 
• The expense loading ratio was 71.1 (72.4) per cent and comparable estimate 79 per cent to 2021.

Year of changes

Elo’s personnel, Executive Group and Board of Directors worked on the strategy for 2023–2025. Over the next three years, Elo aims to become the most preferred company in the industry. To achieve this goal, the focus will be on five strategic objectives: the most customer-centered and fastest growing, strong performance in services, excellent employee experience, a trailblazer in work ability services and adequate solvency.
“In 2022, Elo focused on clarifying its operations. We renewed our governance model and enhanced operations. With the changes made, we will respond to changes in the operating environment and customer behaviour,” says Carl Pettersson, CEO of Elo. 

Despite the weakened prospects, investments in Finnish companies increased

Economic growth slowed down towards the end of the year due to tighter financing conditions and weaker real income due to inflation. Food and energy prices increased sharply as a result of Russia’s war of aggression in Ukraine.

Despite the challenging operating environment, Finland’s economic growth remained relatively good and consumption increased, due to the consumption of services. Exports were reduced by the slowdown of growth in our main export countries and the collapse of Russian exports. 

“Despite companies’ weakened future expectations, investments continued to grow due to strong residential construction and the need to replace capital stock, such as machinery and equipment,”  Pettersson says.

Fixed income and equity portfolios showed weak returns, unlisted investment returns were at a very good level

Economic growth slowed down during the year, and strong inflation led to rising interest rates. Russia’s war of aggression in Ukraine challenged the investment market, even when the crisis caused by COVID-19 had not yet been completely passed. 

“The total return on Elo's investments in 2022 remained negative, as the returns of most listed asset classes were weak. In the last quarter of the year, we already achieved a positive return. The return on investments was improved by diversification into real estate and infrastructure investments, which generated a positive return,” commented Hanna Hiidenpalo, Deputy CEO of Elo.

Equity investments generated a return of -6.9 (26.6) per cent. Unlisted equity investments generated a return of 20.2 (24.6) per cent, further mitigating the negative return on equity investments. Fixed income investments generated a return of -2.8 (1.7) per cent since the start of the year. Interest rate hedges continued to help to mitigate losses from strongly rising market rates.

The change in the economic situation slowed down trading in the real estate market towards the end of the year, and real estate yield requirements rose. The return on real estate investments was 5.3 (7.5) per cent. Investors’ interests have shifted to safer sectors, such as housing and public sector real estate.

Elo’s climate policy ensures sustainable returns on investments

Elo’s view is that only sustainable business can create sustainable results over the long term and responsible investors generate sustainable returns. Responsibility which is strongly integrated into the investment process plays an essential role in managing the risks associated with investments and achieving good and sustainable returns on investments.

“We have systematically developed our responsible investment practices and will continue their development. In 2022, we worked on the responsibility programme and objectives of Elo’s direct Finnish real estate investments. In addition, we updated the climate policy, which includes a climate road map until 2030,” says Hiidenpalo.

Central banks raise interest rates and Europe’s growth outlook is overshadowed by the energy crisis

The economic growth and inflation prospects are uncertain at the beginning of 2023, and growth is expected to be limited. The effects of the tightening of monetary policy in the United States and the euro zone will be visible in the economy with a delay, and expectations are split between recession and increasing overheating. Such an environment maintains the fluctuation in investment returns. 

Central banks will raise interest rates in the early part of the year until the threat of overheating in the labour market has receded. The war in Ukraine and associated energy crisis overshadow Europe’s growth outlook, especially during the winter. In addition, the euro zone’s export demand has suffered from weak growth in China and Asia as a whole.

According to growth forecasts, the Finnish economy will fall into a short recession in 2023 due to the decline in consumer purchasing power and the resulting weakening of confidence. The upside of the forecasts is that the recession is expected to be short-term and mild.

The comparison figures in brackets are figures for 31 December 2021.

Further information:
CEO Carl Pettersson, interview requests Communications Manager Sara Salomaa, tel. +358 44 550 5450
Deputy CEO, CIO Hanna Hiidenpalo, tel. +358 20 703 5668
CFO Sarianne Kirvesmäki, tel. +358 20 703 5134

- Finacial statements 2022 >
- Key figures 2022 >