Elo’s result 2023: Return on investment increased to 6 per cent and cost efficiency reached a record high level
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Elo Mutual Pension Insurance Company's preliminary financial statements for 2023 indicate a total surplus of EUR 308 million with a solvency ratio of 121.3%. The report highlights a 10% increase in pensions paid, driven by a 6.8% index increase, while the number of issued pension decisions decreased by 8% from the previous year, notably in old-age pensions. Investment assets exceeded EUR 30 billion, with a return on investment of 6.0%, outperforming the sector's ten-year average, despite challenges from inflation and global economic uncertainties.
Elo’s result 2023: Return on investment increased to 6 per cent and cost efficiency reached a record high level
- 1. Financial statements 1 January – 31 December 2023 Elo Mutual Pension Insurance Company
- 2. 30.0 Key figures 31 December 2023 Financial statements 2023. The figures presented are preliminary and unaudited. Investment assets EUR billion 6.0 Return % 5.4 10-year nominal return % 121.3 Solvency ratio % 1.5 Solvency position 4,5 Pensions and other benefits paid EUR billion (28.2) (-3.7) (5.6) (121.4) (1.5) (4.3)
- 3. Financial statements 2023. The figures presented are preliminary and unaudited. 493.200 Total number of self-employed persons and employees insured 83.500 Number of YEL policyholders Number of TyEL policyholders 46.400 249.800 We pay out pensions to pensioners (84.400) (503.700) (248.000) (47.000)
- 4. • Following the reform of the Self-Employed Workers' Pensions Act (YEL Act), pension companies will review the earned income of YEL-insured entrepreneurs every three years. The review ensures that the earned income is up to date and that the entrepreneur’s livelihood is secured during and after the entrepreneurial activity. • We prepared for the reviews by implementing the YEL earned income calculator, through training and by informing our customers. • We reviewed earned incomes from June to the end of the year. The review of entrepreneurs’ earned income focused on YEL incomes of less than EUR 15,000, which had not been changed for three years. • Employment pension companies introduced a company-specific employee pension insurance expense loading fee from the beginning of 2023. Elo gives its customers a discount based on a long-term customer relationship. Reforms in insurance and pension matters Financial statements 2023. The figures presented are preliminary and unaudited.
- 5. Pensions paid increased by almost 10%. The biggest factor underlying the growth was the index increase of 6.8%. Financial statements 2023. The figures presented are preliminary and unaudited. Pensions paid by pension type Pensions paid by pension type 2019-2023 Type of pension pcs. EUR million Old-age pension 187,959 3,535.6 Disability pension 21,961 325.0 Survivors’ pension 29,649 241.1 Part-time pension 0 0.0 Partial early old-age pension 10,239 88.6 Years-of-service pension 22 0.7 Total 249,830 4,191.0
- 6. A decrease in the number of old-age pension decisions Financial statements 2023. The figures presented are preliminary and unaudited. Pension decisions by pension type • We issued 29,052 pension decisions, which was 8% less than the previous year. • The number of old-age pension decisions decreased by 21%, which was due to the gradual rise in the lowest retirement age per age group. • The number of disability pension decisions is increasing, and we issued up to 10% more decisions than in the previous year. 1–12/2023 1–12/2022 Old-age pensions 7,541 9,505 Partial early old-age pensions 4,066 6,218 Disability pensions 12,923 11,765 Survivor's pensions 2,772 2,409 Decisions on rehabilitation 1,698 1,764 Career pensions 52 52 Total 29,052 31,713
- 7. The number of people retiring on disability pension increased Financial statements 2023. The figures presented are preliminary and unaudited. New disability pension decisions • The number of new disability pensions increased by 4%. • Disability pension decisions increased especially among people over 60 years of age, whose most common reason for the pension was musculoskeletal disease. • Disability pension decisions issued based on mental health disorders increased in all age groups and was the most common reason for disability pension among young people.
- 8. 76% stayed in employment and avoided going on disability pension Financial statements 2023. The figures presented are preliminary and unaudited. Preliminary decisions on vocational rehabilitation • The moderate downward trend in rehabilitation decisions continued. • Of the persons participating in Elo’s vocational rehabilitation, 76% stayed in employment and avoided going on disability pension. • We spent EUR 1.9 million on supporting our customer companies’ disability risk management projects. • A total of 2,808 representatives of our customer companies attended our work ability management webinars. • More than 100 HR representatives of our customer companies started Expert and Super Expert training programmes on work ability management.
- 9. Number of pension decisions by pension type Financial statements 2023. The figures presented are preliminary and unaudited.
- 10. The total number of employees and self-employed persons insured was almost 500,000 Financial statements 2023. The figures presented are preliminary and unaudited. TyEL and YEL insurances TyEL insurance policyholders • In 2022, TyEL insurance policies in which wages and salaries were not paid were terminated from the insurance portfolio. • In 2019, the calculation of TyEL policyholders changed as the Incomes Register was introduced.
- 11. Premiums written amounted to EUR 4.4 billion Financial statements 2023. The figures presented are preliminary and unaudited. • Premiums written (including TyEL and YEL) increased by 1.1%. • Credit losses amounted to EUR 25.0 million during the review period. In 2023, the amount of credit losses increased compared to previous years. • The total TyEL payroll was approximately 2.0% higher than in 2022. • The increase in the total YEL earned income was 3.7%. • Elo revised the earned incomes of more than 24,000 entrepreneurs during the year. Premiums written 2019–2023
- 12. • We have enhanced our cost efficiency, and we will refund EUR 10.4 million to our TyEL customers as management fee refunds. • Over the past five years, operating expenses covered by loading profit have decreased by 25%. • Operating expenses decreased to EUR 74 million and were approximately 9% lower than in 2022. We will refund EUR 10.4 million to our customers Financial statements 2023. The figures presented are preliminary and unaudited. Operating expenses covered by loading profit 2019–2023
- 13. The total result was EUR 308 million Financial statements 2023. The figures presented are preliminary and unaudited. EUR million 2023 2022 2021 2020 2019 Total surplus 308.0 -1,381.1 1,616.5 0.7 1,229.9 Insurance business surplus 25.5 68.8 17.9 -8.0 -17.8 Investment surplus at fair values 267.8 -1,493.2 1,562.8 -30.0 1,207.0 Net investment income at fair values (+) 1,707.9 -1,078.6 3,621.3 900.9 2,915.7 Yield requirement on technical provision (-) -1,440.1 -414.6 -2,058.5 -930.9 -1,708.7 Loading profit 10.9 33.2 34.0 33.2 35.2 Other income 3.8 10.2 1.9 5.5 5.5
- 14. The solvency position remained at the previous year's level and the solvency ratio was 121.3% Financial statements 2023. The figures presented are preliminary and unaudited. Solvency ratio and position
- 15. Summary of key figures Financial statements 2023. The figures presented are preliminary and unaudited. 2023 2022 2021 2020 2019 Investment assets at fair value, EUR million 30,046.7 28,182.3 29,421.9 25,898.1 25,333.8 Net return from investment on capital employed, % 6.0 % -3.7 % 14.0 % 3.6 % 13.0 % Average nominal return, over 10 years 5.4 % 5.6 % 6.9 % 6.9 % 6.9 % Average nominal return, over 5 years 6.4 % 4.9 % 7.2 % 7.2 % 7.2 % Premiums written, EUR million 4,397.5 4,348.3 4,035.9 3,615.6 3,968.5 Pensions and other benefits paid, EUR million 4,461.0 4,147.9 4,030.2 3,891.9 3,915.3 Technical provisions, EUR million 25,733.7 24,252.8 23,750.4 22,381.4 21,876.6 Number of TyEL insured 409,700 419,300 415,500 393,100 410,200 Number of TyEL policyholders 46,400 47,000 51,200 48,300 46,300 Number of YEL policyholders 83,500 84,400 84,500 83,600 83,300 Number of pensioners 249,800 248,000 242,100 239,800 237,100 Solvency capital, EUR million 5,426.2 5,109.0 6,573.4 5,055.4 5,081.8 Solvency position 1.5 1.5 1.6 1.6 1.6 Solvency ratio, % 121.3 % 121.4 % 128.1 % 123.7 % 124.4 %
- 16. • Our sustainability program was completed, and it is based on three focus areas: We insure responsibly, We Build a Humane Work Life and We Invest in the Future. • We underwent an EcoVadis assessment and received the Silver rating in recognition of our responsibility work. We are in the top quarter of assessed companies. • We updated the climate policy for investments and interim targets until 2030 • We worked on a biodiversity roadmap for investments • Elo’s total carbon footprint (excluding investments) was reduced by 9 % year-on-year We provide lifelong security – Our actions for sustainability ENVIRONMENT PEOPLE & SOCIETY GOOD GOVERNANCE Financial statements 2023. The figures presented are preliminary and unaudited. • We prepared human rights principles • We increased awareness of DEI (diversity, equity, inclusion) • We joined PRI Advance, a stewardship initiative for human rights and social issues, as an endorser • We updated our Code of Conduct • We participated in more than 1,100 general meetings • We prepared for the new Corporate Sustainability Reporting Directive by working on a comparison between existing reporting and standards and a description of the value chain
- 17. • The growth outlook for the global economy is uncertain, due to purchasing power eroded by rapid inflation and tight monetary policy, among other factors. Central banks are cautious in guiding the expectations of the public and financial market. • In the euro zone, economic growth is weak and unit labour costs are rising rapidly. • In Finland, private consumption needs household confidence, and the long-term growth outlook is crucial to investments. • Elo’s year 2024 has started well. We will continue the efficient implementation of the employment pension system, and we want, in line with the strategy, to increase market share in TyEL insurance and maintain our position as the market leader in YEL insurance. We will continue to invest in the development of work ability services and create added value for our customers by reducing work ability related risks. According to the strategy, we ensure an adequate solvency in all market situations. Outlook Financial statements 2023. The figures presented are preliminary and unaudited.
- 18. Financial statements 2023. The figures presented are preliminary and unaudited. Investment overview
- 19. • The main themes of 2023 were the moderation of inflation and the differentiation of economic growth between Europe, China and the United States. In early spring, the financial market was challenged by the US banking sector’s liquidity concerns, and in autumn by the conflict in the Middle East. • The moderation of inflationary developments and expectations of monetary policy easing supported the development of returns, especially in the last quarter of the year. • Elo performed well in a varied market environment. The return on investment rose to 6.0%, well above Elo’s and the sector’s ten-year average nominal return. • The returns on listed equity and fixed income investments were strong. Returns on real estate investments were burdened by changes in fair value due to rising market interest rates. Investments performed better than the sector’s 10- year average nominal return Financial statements 2023. The figures presented are preliminary and unaudited.
- 20. Investment assets exceeded EUR 30 billion Financial statements 2023. The figures presented are preliminary and unaudited. Asset allocation Investment assets
- 21. Listed equities provided good returns Financial statements 2023. The figures presented are preliminary and unaudited. Return on investments by asset class
- 22. Return on investments 6.0% Financial statements 2023. The figures presented are preliminary and unaudited. Return Volatility EUR million % EUR million % % % Fixed-income investments 8,642.3 28.8 9,607.2 32.0 6.7 Loans 546.3 1.8 546.3 1.8 6.9 Bonds 6,958.9 23.2 8,616.0 28.7 7.4 4.2 Public bonds 2,344.5 7.8 3,309.5 11.0 7.0 Other bonds 4,614.3 15.4 5,306.5 17.7 7.6 Other money market instruments and deposits incl. any receivables and liabilities related to investments 1,137.1 3.8 444.9 1.5 3.3 Equities 14,855.5 49.4 14,982.9 49.9 8.6 Listed equities 9,114.4 30.3 9,241.9 30.8 12.4 13.9 Private equity investments 5,110.1 17.0 5,110.1 17.0 3.8 Unlisted equity investments 631.0 2.1 631.0 2.1 -1.2 Real estate 3,922.4 13.1 3,922.4 13.1 -2.4 Direct real estate investments 2,581.3 8.6 2,581.3 8.6 -1.9 Real estate funds and joint investment companies 1,341.1 4.5 1,341.1 4.5 -3.4 Other investments 2,626.5 8.7 2,626.5 8.7 4.4 Hedge fund investments 2,623.7 8.7 2,623.7 8.7 4.8 4.7 Commodity investments 0.0 0.0 0.0 0.0 - Other investments 2.9 0.0 2.9 0.0 - Total investments 30,046.7 100.0 31,139.1 103.6 6.0 4.4 Effect of derivatives -1,092.4 -3.6 Total 30,046.7 100.0 30,046.7 100.0 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 4.9. The open currency exposure is 26.9% of market value. Actual risk position Basic allocation by market value
- 23. Nearly one fourth of investments in Finland Financial statements 2023. The figures presented are preliminary and unaudited. Geographical distribution of investments Investments in Finland by asset class and private equity investments
- 24. Bond distributions Financial statements 2023. The figures presented are preliminary and unaudited. Bonds by credit rating Fixed income investments ditribution
- 25. Geographical distribution of bonds and listed equities Financial statements 2023. The figures presented are preliminary and unaudited. Bonds EUR 6 billion* Listed equities EUR 9 billion *Unlisted investments not included
- 26. Positive fourth-quarter return of 3.3% The return for 1 January–31 December 2023 was 6.0% Financial statements 2023. The figures presented are preliminary and unaudited.
- 27. Ten-year return was 5.4% per annum Financial statements 2023. The figures presented are preliminary and unaudited. Investment returns Average return on investments over time
- 28. Cumulative ten-year return around 70% Financial statements 2023. The figures presented are preliminary and unaudited.