Finnish earnings-related pension provider Elo generated “good” returns in Q1 2024, with its return on investment reaching €1bn, or 3.3 per cent, 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 per cent, corresponding to an average real return of 3.6 per cent.

As a result of this performance, the provider's solvency ratio increased from 121.3 per cent at the end of 2023 to 122.5 per cent, 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 per cent and private equity investments generated a return of 2.3 (-0.5) per cent, although the asset class with the highest return was listed equities, with a return of 7.0 per cent (4.6 per cent).

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 per cent (1.3 per cent).

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

The provider also argued that whilst its return on real estate investments close to zero (0.0 per cent), 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."

More broadly, the report revealed that Elo issued more pension decisions than in the previous year, with particular increases seen in the number of decisions on old-age pensions and partial old-age pensions increased early in the year.

The number of vocational rehabilitation decisions also increased by 22 per cent year-on-year.

In addition to this, it confirmed that whilst Self-Employed Persons’ Pensions Act (YEL) transfers had a "good result" during Q1, Finnish earnings-related Employees Pensions Act (TyEL) transfers fell short of the target, and TyEL credit losses increased slightly on the previous year.

However, Elo said that its TyEL sales activity will still be kept high, emphasising that it wants to increase its market share in TyEL insurance and maintain its position as the market leader in YEL insurance.

Furthermore, whilst Elo acknowledged that the economic growth in the eurozone is "weak" and Finland is in recession, it argued that there is potential for a growth surprise in consumption in Europe if interest rates fall significantly and the global industrial cycle strengthens gradually.

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