Elo reveals €1bn return on investments despite 'weak' economy

Written by Sophie Smith

28/08/2024

Finnish pension insurer, Elo, generated “good” returns in Q1 2024, with its return on investment reaching €1bn, or 3.3%, during the period.

The group's interim report revealed that the market value of its investments was €30.9bn, up from €30bn at the end of 2023, while the average 10-year return on investment was 5.7%, corresponding to an average real return of 3.6%.

As a result of this performance, the provider's solvency ratio increased from 121.3% at the end of 2023 to 122.5%, whilst solvency capital was 1.4 times the solvency limit.

According to the group’s interim report, equity investments generated a return of 5.1% and private equity investments generated a return of 2.3 (-0.5%), although the asset class with the highest return was listed equities, with a return of 7.0% (4.6%).

In particular, the provider said that technology companies involved in AI continued to be at the forefront of the rise, with a "significant strengthening" of the profit growth expectations of technology companies.

The provider also stressed the importance of geographical divergence, noting that while the returns were more modest in China and negative in Finland, European, Japanese and US markets performed "excellently".

In addition to this, it said that equity market returns were supported by expectations of monetary policy easing.

Elo said that the persistence of inflation and the strength of economic data also postponed the expected start date and scale of interest rate cuts, which was reflected in negative bond market returns, with Elo’s fixed income investments generating a return of 0.7% (1.3%).

Hedge fund investments were another top performer for the group, delivering an "excellent" return of 6.5%.

The provider also argued that whilst its return on real estate investments was close to zero, the long-term outlook is "good", with expectations of a recovery in the real estate investment market postponed to the end of the year.

“Elo's year started strongly with good investment returns, driven by equity investments," Elo CEO, Carl Pettersson, said.

"Adding to this our first-class customer service, competitive management fee and constantly evolving work ability management services, we can be satisfied with the start of the year."

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