Elo and Veritas, two of Finland’s four pension insurance companies, have reported the same rate of investment return for the first quarter – 1.6% – but solvency levels are revealed to be no higher than at the end of last year.
The larger of the two earnings-related pension providers, Elo, said in its quarterly report released yesterday that most of its asset classes generated positive returns in the three-month period, in what had been a challenging market.
Economic growth had continued to be solid, and inflation remained at a high level during the first quarter, Elo said.
“In March, however, uncertainty in the financial market increased and expectations for economic growth weakened, as certain banks ran into difficulties as a result of rising interest rates,” it said.
Hanna Hiidenpalo, Elo’s deputy chief executive officer, said: “Reduced energy prices and the opening up of China maintained the good dynamics of the economy and the equity market, and thus equity investments generated good returns.”
While equity investments overall made a 2.6% return in the period, the company said, listed equities – whose weighting within the overall asset class had remained moderate – produced a 4.6% gain.
Fixed income investments returned 1.3% in the quarter, Elo said. It said the interest rate sensitivity of its investments had increased in the US market in particular.
“Due to the rise in interest rates, the real estate investment market is still in a period of transition, which is why transaction volume continued to be low,” the provider said, reporting a -0.3% return for real estate investments.
Elo’s solvency ratio dipped to 121.2% at the end of March from 121.4% at the end of December – and its 126.1% level at the end of March 2022. Its total assets at the end of the first quarter were valued at €28.7bn, down from €29.0bn three months before.
Veritas CIO says positive mood has continued despite banking sector tremors
The value of Veritas’ investments, meanwhile, edged higher in the first quarter to €4.3bn from €4.2bn, according to the Turku-based provider, which covers entrepreneurs.
Contributing to the 1.6% Q1 investment return, Veritas said in its quarterly report today that fixed income assets produced a 2.0% return, equities had made 2.4% and real estate generated 1.1%.
Kari Vatanen, chief investment officer of Veritas, said: “The positive mood in the investment market has persisted although the problems experienced by certain banks caused turbulence in March.”
Veritas’ solvency ratio edged down to close March at 123.1% from 123.5% at the beginning of the period, according to the report.
Carl Haglund, Veritas’ CEO, commented about Finland’s tight labour market in the report, saying in particular that something had to be done about the high numbers of younger people retiring on disability pensions.
“In 2021, eight people under the age of 35 retired on disability pension for mental health reasons every day,” he said.
The largest two pension insurers in Finland’s earnings-related pension system, Ilmarinen and Varma, are due to report Q1 results tomorrow.