Finnish pension insurance company further strengthens solvency position

Written by Adam Cadle

29/10/2020

Finnish pension insurance company, Elo, has further strengthened its solvency position after the third quarter (Q3), it has revealed.

The return for Q3 was 2.6%, and the solvency ratio at the end of the quarter was 120.6%, 1.4 times the solvency limit.

Between January and September, the provider’s return was -1.6%, compared to 9.4% for the same period in 2019.

Commenting, Elo CEO, Satu Huber, said: “The investment return in the third quarter was positive and our solvency strengthened. The service provided for both insurance and pension customers has been good, despite the exceptional situation caused by low-interest rates and the pandemic.”

Elo believes that Finland has survived the crisis relatively well compared to most other countries. For example, a sharp rise in the unemployment rate has been avoided due to the lay-off system and, in addition, a reasonable balance has been found between preventing the growth of COVID-19 cases and keeping the economy open.

It noted that the recession caused by the pandemic has triggered unprecedented simultaneous global stimulus measures and both monetary and fiscal policy instruments are in place.

“The recovery will keep interest rates at a record low and has significantly raised the return on risky investments from the bottom of March. The outlook for the investment market has been more challenging since the summer, as the coronavirus situation weakens and the pace of economic recovery slows,” Elo investment director, Hanna Hiidenpalo, said.

During the period between January and September, almost all asset classes returned positively, with the exception of equity investments. However, Elo said they have also recovered significantly since March. The result of investment operations at fair value was -€798m, compared to €860.5m for the same period in 2019.

“The stock market has recovered quickly from the sharp decline caused by the interest rate crisis, although the recovery varies depending on the industry and geographical area,” Hiidenpalo said.

The 10-year average nominal return on Elo's investments was 5% at the end of September and the corresponding real return was 3.8%. The five-year average nominal return was 5% and the corresponding real return 4.2%.

“The result of the US election and the economic stimulus line of the next administration will affect market development towards the end of the year. China's economic growth started already in the second quarter of the year. The growth of the world economy may receive the support it needs during the rest of the year. Economic forecasts predict that both the global economy and Finland will grow in 2021,” Hiidenpalo added.

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