Elo Mutual Insurance Company Interim Report 30.6.2021
0 likes445 views
This interim report provides key figures and information for Elo Mutual Pension Insurance Company for the period of January 1 to June 30, 2021. Some of the key highlights include: - Investment assets totaled 27.8 billion euros with a 10-year nominal return of 6.0%. - Premiums written totaled 1.98 billion euros while pensions and other benefits paid totaled 2.01 billion euros. - The solvency ratio was 126.6% and solvency capital increased to 5.96 billion euros. - Investments generated a return of 7.8% for the period, with listed equities and private equity investments performing strongly.
Elo Mutual Insurance Company Interim Report 30.6.2021
- 1. Interim report 1 January – 30 June 2021 Elo Mutual Pension Insurance Company
- 2. Interim report 30 June 2021 Key figures January – June 2021 27.8EUR billion Investment assets % Solvency ratio 6.0% 10-year nominal return 2,011EUR million Pensions and other benefits paid 1,981EUR million Premiums written 7.8% Return 126.6 2
- 3. • The COVID-19 situation improved, which was favourably reflected in the development of the TyEL payroll from March onwards. • At the end of June, the TyEL payroll was 4.7 per cent higher than at the corresponding time last year. • Customer satisfaction, as measured by NPS scores, improved year-on-year and was again excellent. • In May, we launched a wage calculator that helps our customers estimate the TyEL insurance contributions arising from hiring employees, for example. The impact of the pandemic levelled off Interim report 30 June 2021 3
- 4. • The number of new disability pension decisions decreased by 13 per cent year-on-year. • Psychological and musculoskeletal disorders accounted for more than 60 per cent of the new disability pensions. • The impact of COVID-19 was already reflected in the form of a few applications for disability pension. The overall long-term impact of the COVID-19 pandemic on work ability is being monitored. • Effectiveness is the main objective of rehabilitation measures. Employer services have been adapted to suit various types of companies. Rehabilitation services for self- employed persons, in particular, have been studied during the first half of the year and development work has begun. • Pension processing times remain quick and performance indicators suggest that customer satisfaction is at a good level. A decline in disability pensions Interim report 30 June 2021 4
- 5. Interim report 30 June 2021 Pension decisions by pension type Pensions paid by pension type 2017–6/2021 The number of pension decisions was largely unchanged 2,615 2,736 2,872 2,999 1,491 1,535 307 304 305 309 155 157 193 196 200 204 102 103 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2017 2018 2019 2020 6/2020 6/2021 EUR million Retirement pensions Disability pensions Survivor's pensions Part-time pensions Partial early old-age pensions Career pensions 1-6/2021 1-6/2020 Retirement pensions 4,048 3,991 Partial early old-age pensions 1,149 1,152 Disability pensions 6,046 6,629 Survivor's pensions 1,142 1,131 Decisions on rehabilitation 1,033 1,057 Career pensions 22 14 Total 13,440 13,974 5 • The total number of new decisions on disability pension was 3,042 (3,489).
- 6. Interim report 30 June 2021 Premiums written and pension expenditure 2017–6/2021 67 5 53 -276 -29 -500 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 2017 2018 2019 2020 6/2021 EUR million Premiums written Pension expenditure Differential between premiums written and pension expenditure 6
- 7. Interim report 30 June 2021 Investment income exceeded EUR 2 billion EUR million 1.1.–30.6.2021 1.1.–30.6.2020 1.1.–31.12.2020 Total surplus 904.6 -1,077.2 0.7 Insurance business surplus 5.8 -19.2 -8.0 Investment surplus at fair values 883.0 -1,070.1 -30.0 Net investment income at fair values (+) 2,007.5 -1,037.8 900.9 Yield requirement on technical provision (-) -1,124.5 -32.2 -930.9 Loading profit 15.1 13.0 33.2 Other income 0.6 -1.0 5.5 Distribution of surplus 904.6 -1,077.2 0.7 Change in solvency 904.6 -1,077.2 -27.0 Change in provision for future bonuses -163.2 -347.2 -55.1 Change in valuation differences 1,067.8 -730.0 28.1 Change in accrual of closing entries 0.0 0.0 -0.1 Profit for the financial year 0.0 0.0 0.0 Transfer to client bonuses 0.0 0.0 27.7 7
- 8. Interim report 30 June 2021 Key solvency figures Solvency ratio and position 2017–6/2021 Solvency capital increased by approximately EUR 900 million and now amounts to nearly EUR 6 billion • The amount of solvency capital increased from the beginning of the year by EUR 903.4 million. • Elo’s solvency ratio, i.e. pension assets in relation to technical provisions, was 126.6% • Elo’s solvency position, i.e. solvency capital in relation to the solvency limit, was 1.6 125.9 % 120.6 % 124.4 % 123.7 % 126.6 % 1.6 1.6 1.6 1.6 1.6 0.0 2.0 4.0 6.0 100% 110% 120% 130% 2017 2018 2019 2020 6/2021 Solvency ratio, % Solvency position 8 4,816 3,935 5,082 5,055 5,959 0 2,000 4,000 6,000 8,000 10,000 12,000 2017 2018 2019 2020 6/2021 EUR million Solvency capital Maximum amount of solvency capital Solvency limit
- 9. Interim report 30 June 2021 Operating expenses as a percentage of loading component Operational efficiency 9 80.9 % 74.9 % 73.4 % 72.0 % 75.1 % 0% 20% 40% 60% 80% 100% 2017 2018 2019 2020 6/2021
- 10. Development of responsibility • Elo was ranked second in the category of large organisations in Oikotie’s report on the most responsible employers in Finland. • Elo joined 457 investors in signing The Investor Agenda’s 2021 Global Investor Statement to Governments on the Climate Crisis, which calls on all governments to commit to more ambitious climate policy action by UN COP26 climate summit. • Elo will continue to work in accordance with its climate strategy roadmap. The goal for 2021 is to set targets for climate change mitigation and adaptation solutions and for the climate risks of sovereign bonds and private equity investments. Interim report 30 June 2021 10
- 11. • Stimulating economic policy and improved vaccination coverage strengthened expectations of the recovery of global demand in the period under review. • Inflation and uncertainty regarding the duration of its acceleration were the dominant theme in the financial markets. The acceleration of inflation in the early summer and signs of demand and supply imbalances in the US economy have increased volatility, especially in the fixed income market. • Several industries are suffering from a shortage of factors of production and these constraints were reflected in the global economy in higher producer and raw material prices as well as the acceleration of consumer price inflation. • In Finland, economic growth was supported by the quick progress of COVID-19 vaccinations, the gradual lifting of restrictions and strengthened global demand. Unemployment decreased. The service sector still waited for the resumption of normal operating conditions and uncertainty regarding the economic outlook was reflected in the low level of investment, except in the construction industry. Consumption provided a strong foundation for demand during the review period.Interim report 30 June 2021 Economic environment 11
- 12. Interim report 30 June 2021 Key figures for the period 6/2021 6/2020 2020 Investment assets at fair value, EUR million 27,778.3 23,978.0 25,898.1 Net return from investment on capital employed, % 7.8 % -4.1 % 3.6 % Average nominal return, over 10 years 6.0 % 5.1 % 5.3 % Average nominal return, over 5 years 6.9 % 3.9 % 5.5 % Premiums written, EUR million 1,981.3 1,753.6 3,615.6 Pensions and other benefits paid, EUR million 2,010.6 1,928.4 3,891.9 Technical provisions, EUR million 23,261.7 21,346.4 22,381.4 Number of TyEL policyholders 50,200 47,400 48,300 Number of YEL policyholders 83,600 82,600 83,600 Number of pensioners 244,000 241,800 243,600 Loading profit, EUR million 15.1 13.0 33.2 Operating expenses as % of loading component 75.1 % 77.6 % 72.0 % Solvency capital, EUR million 5,958.7 4,002.9 5,055.4 Solvency position 1.6 1.4 1.6 Solvency ratio, % 126.6 % 119.4 % 123.7 % 12
- 13. Interim report 30 June 2021 Development of investment assets 2011–6/2021 Investment asset allocation 30 June 2021 Steady growth in investment assets 27,778 0 5,000 10,000 15,000 20,000 25,000 30,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 6/2021 EUR million 33 % 47 % 12 % 8 % Fixed-income Equities Real estate Other investments Equities include listed and unlisted equity investments, private equity investments and infrastructure investments. 13
- 14. Interim report 30 June 2021 Return on investments by asset class 1 January – 30 June 2021 Record-strong performance in private equity fund investments 14 1.6 % 0.8 % -0.2 % 15.0 % 16.2 % 13.3 % 2.0 % 7.0 % -2.0 % 0.0 % 2.0 % 4.0 % 6.0 % 8.0 % 10.0 % 12.0 % 14.0 % 16.0 % 18.0 % Loans Bonds Other money market instruments and deposits Listed equities Private equity investments Unlisted equity investments Real estate Other investments
- 15. Investments generated a return of 7.98 % Interim report 30 June 2021 Return Volatility EUR million % % % Fixed-income investments 9,200.6 33.1 9,534.1 34.3 0.6 Loans 438.5 1.6 438.5 1.6 1.6 Bonds 6,844.7 24.6 6,292.8 22.7 0.8 6.4 Public bonds 3,181.4 11.5 2,362.6 8.5 -1.3 Other bonds 3,663.3 13.2 3,930.2 14.1 2.0 Other money market instruments and deposits incl. any receivables and liabilities related to 1,917.4 6.9 2,802.8 10.1 -0.2 Equities 13,074.6 47.1 12,935.7 46.6 15.2 Listed equities 9,362.5 33.7 9,223.6 33.2 15.0 16.7 Private equity investments 3,111.7 11.2 3,111.7 11.2 16.2 Unlisted equity investments 600.4 2.2 600.4 2.2 13.3 Real estate 3,434.2 12.4 3,434.2 12.4 2.0 Direct real estate investments 2,470.8 8.9 2,470.8 8.9 1.7 Real estate funds and joint investment companies 963.4 3.5 963.4 3.5 2.6 Other investments 2,068.8 7.4 2,115.8 7.6 7.0 Hedge fund investments 2,061.7 7.4 2,061.7 7.4 6.2 6.4 Commodity investments 0.1 0.0 52.5 -0.2 - Other investments 7.0 0.0 1.5 0.0 - Total investments 27,778.3 100.0 28,019.7 100.9 7.8 7.1 Effect of derivatives -241.4 -0.9 Total 27,778.3 100.0 27,778.3 100.0 The return on foreign currency derivatives is estimated for asset classes in proportion to the average foreign currency-denominated assets during the reporting period. The total return includes returns, expenses and operating expenses not allocated to investment classes. The modified duration of bonds is 3.5. The open currency exposure is 22.9% of market value. EUR million Actual risk position Basic allocation by market value 15
- 16. Finland 27 % Europe 37 % North America 20 % Emerging markets 14 % Other regions 2 % Interim report 30 June 2021 Development of asset allocation 2017–6/2021 Geographical distribution of investments 30 June 2021 The geographical diversification of equity investments suited the market situation well 35 39 34 36 33 43 40 46 44 47 12 13 12 13 12 10 8 7 7 8 0 % 20 % 40 % 60 % 80 % 100 % 2017 2018 2019 2020 6/2021 Fixed-income Equities Real estate Other investments 16
- 17. Interim report 30 June 2021 The second quarter’s return on investments 3.8 per cent Return 1 January – 30 June 2021 was 7.8% 2.7 % 1.8 % 2.9 % 1.5 % 1.6 % 1.3 % -0.4 % 1.2 % 1.4 % -3.5 % 5.2 % 1.9 % 2.0 % 3.3 % -9.5 % 5.9 % 2.6 % 5.3 % 3.9 % 3.8 % -12% -8% -4% 0% 4% 8% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 2019 2020 2021 17
- 18. Interim report 30 June 2021 Investment returns 2011–6/2021 Average return on investments over time Development of investment returns over time -2.4 % 9.6 % 7.1 % 6.2 % 5.0 % 5.6 % 7.4 % -1.4 % 13.0 % 3.6 % 7.8 % -4% 0% 4% 8% 12% 16% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 6/2021 5.9 % 6.9 % 5.0 % 6.0 % 0% 2% 4% 6% 8% 5-year real return 5-year nominal return 10-year real return 10-year nominal return • The pension asset return expectation that the Finnish Centre for Pensions uses in its calculations is an annual real return of 2.5 per cent until 2028, after which the real return expectation will be 3.5 per cent per year. 18
- 19. • The economic cycle in Europe lags slightly behind the US. At the same time, the strong industry-driven recovery in the US also supported European economic growth during the spring. The reopening of the service sector will support economic growth during the remainder of the year. • In Asia, the new wave of COVID-19 has slowed down economic activity. The slowdown of investments and overall economic growth in China is likely to be reflected in a deterioration in the global industrial cycle in the second half of the year. • New COVID-19 variants create uncertainty for the growth outlook of the global economy. Increasing vaccination coverage is a critical factor for growth and investment prospects. • The global economy is expected to grow by 6 per cent this year. The growth forecast for Finland is 2.6 per cent. • If the COVID-19 pandemic remains under control, the simultaneously recovering global economy will strengthen Finland’s exports and industry during the remainder of this year and through next year. Improving confidence will allow the release of pent-up consumer demand as well as investment demand. The increased savings in the private sector will maintain strong domestic demand in Finland in 2021–22. Interim report 30 June 2021 Future outlook 19