PRESS RELEASE
16 February 2011
Tapiola companies
• Tapiola General’s premium income increased by 2.5 per cent to EUR 691.9 million (EUR 675.1 million). Increased losses and supplementation of provisions in motor liability and statutory accident insurance had an impact on the company’s result. The company’s operating profit was EUR 7.2 million (EUR 83.0 million). The overall result was EUR 51.6 million (EUR 149.1 million). The company’s solvency ratio (solvency capital in relation to premiums earned) rose to 206.7 per cent (203.6%).
• Tapiola Life’s income from insurance increased by 9.9 per cent to EUR 256.1 million (EUR 233.1 million). The company’s operating profit was strained by additions to lower the technical interest rate in life insurance and provisions for future losses from the medical insurance stock. Operating profit amounted to EUR 4.1 million (EUR 66.8 million), and the overall result was EUR 28.5 million (EUR 123.8 million). The solvency ratio rose to 18.1 per cent (17.3%).
• Tapiola Bank Group’s operating profit rose to EUR 4.0 million (EUR 2.1 million). The Bank Group gained approximately 27,000 new customers in 2010 and now has 218,400 customers. The Group’s lending and fund-raising from customers also increased. The number of unit holders of funds managed by Tapiola Asset Management increased by about 6,000 to 50,900, and the fund capital of mutual funds managed by Asset Management increased to EUR 1,810.4 million (EUR 1,594.2 million).
• Tapiola Pension’s return on investment operations at current value was 10.8 per cent (13.5%). The company’s overall result was EUR 575.4 million (EUR 583.1 million). Tapiola Pension’s solvency ratio rose to 29.6 per cent (23.7%). The company’s solvency margin was 3.0 times (3.0 times) the solvency limit.
• The turnover of Tapiola Real Estate rose to EUR 8.8 million (EUR 7.5 million), and operating profit was EUR 0.6 million (EUR 0.7 million).
Review by the President
“In an uncertain economic operating environment, balance sheet risk management has been a particular focus area in the Group. Tapiola Group companies’ solvency is among the best in the financial industry, and the solvency further improved from the previous year," says President of Tapiola Group Asmo Kalpala.
“As a result of extreme weather conditions and several major losses, 2010 was a year of high losses, following a year of only minor losses. In addition, we strengthened our balance sheet in both non-life and life insurance operations in conjunction with the financial statements by preparing for an increased life expectancy for the population, and for the continuing low interest rate levels,” says Kalpala.
“Tapiola Group wants to participate in creating stability in the Finnish financial market.”
Results
Tapiola General
Tapiola General’s premium income grew by 2.5 per cent to EUR 691.9 million (EUR 675.1 million). Direct business (underwritten) premium income increased by 2.7 per cent to EUR 646.7 million (EUR 629.5 million). According to a survey published in December by the Federation of Finnish Financial Services, “Finnish insurance market. Estimate of 2010 performance”, the sector’s premiums written are forecast to grow by two per cent. Tapiola Pension’s direct business premium income is also likely to increase by two per cent.
The greatest growth was seen in premium income from voluntary accident and health insurance and statutory accident insurance.
The company's operating profit was EUR 7.2 million (EUR 83.0 million) and its overall result was EUR 51.6 million (EUR 149.1 million) The change in the current and book values improved the overall result by EUR 44.4 million (EUR 66.1 million).
“The biggest reason for the reduction in operating profit and overall result is to be found in the damage caused by storms and several other major losses, as well as the supplementation of provisions in motor liability and statutory accident insurance,” says Juha-Pekka Halmeenmäki, Managing Director of Tapiola General.
Because of a longer life expectancy for the public in general, the Federation of Accident Insurance Institutions and the Finnish Motor Insurer's Centre have updated the so-called “mortality model” used by insurance companies. According to the report, life expectancy has risen from the previous update, prepared in 2004, by 1.5 years. As a result of the change, Tapiola General increased the provision for pension claims payable from motor liability and statutory accident insurance by a total of EUR 20.7 million.
The claims paid totalled EUR 525.1 million (EUR 451.5 million), up 16.3% on the year before. According to the monthly non-life insurance premium and claim statistics of the Federation of Finnish Financial Services, compensation paid in the industry increased by 6.4 per cent from the previous year.
Net investment income at current value was 5.4 per cent (7.2%).
The company’s solvency capital rose to EUR 1,355.9 million (EUR 1,317.0 million), and solvency ratio (solvency capital in relation to premiums earned) rose to 206.7 per cent (203.6%).
The combined ratio before unwinding of discount expense – a measure of the company's profitability – rose to 112.4 per cent (102.7%). The combined ratio is affected by benefits given to owner-customers. Without the effect of customer bonuses, the combined ratio before the unwinding of discount would have been 103.4 per cent (94.7%).
The overall value of the benefits given to Tapiola General Group’s owner-customers rose to EUR 84.4 million (EUR 82.5 million), including customer bonuses, loyalty discounts, service benefits and discounts based on co-operation agreements. The figure includes benefits granted through Tapiola Bank, the value of which increased to EUR 11.0 million (EUR 10.0 million). The bank’s benefits were granted as loyalty benefits and as interest rates that are more favourable than the market rates.
Tapiola Life
Tapiola Life’s income from insurance increased by 9.9 per cent to EUR 256.1 million (EUR 233.1 million). “Tapiola Life increased its premium income in all its key business areas: risk insurance, savings life insurance and group pension insurance. In particular, an excellent result was achieved in new sales of risk insurance, which is based on the supply of products and services driven by customer demand,” says Managing Director Minna Kohmo.
The company’s operating profit was EUR 4.1 million (EUR 66.8 million) and overall result EUR 28.5 million (EUR 123.8 million). The operating profit was strained by additions to lower the technical interest rate in life insurance and provisions for future losses from the medical insurance stock. The change in current and book values improved the overall result by EUR 24.4 million (EUR 57.0 million)
Claims paid increased by 14.0 per cent to EUR 244.2 million (EUR 214.3 million).
Tapiola Life’s net investment income at current value was 4.9 per cent (7.0%).
The solvency ratio, or solvency capital in relation to technical provisions, rose to 18.1 per cent (17.3%). Customer bonuses totalled EUR 8.4 million (EUR 9.8 million).
Tapiola Bank Group
Tapiola Bank Group’s operating profit rose to EUR 4.0 million (EUR 2.1 million). According to Managing Director Harri Lauslahti, the growth in the Bank Group’s customer numbers was more moderate than before. “Generous interest rates that are based on the daily balance have increased the number of current account customers more quickly than expected.”
In banking operations, customer numbers increased by about 27,000, reaching 211,000 at the end of the year. The number of account customers grew by 11,900 to 163,700.
Loans and other receivables grew by EUR 169.4 million to EUR 1,381.9 million (EUR 1,212.5 million) and fund-raising from customers by EUR 201.2 million to EUR 1,434.7 million (EUR 1,233.5 million.
The low interest rate level had an impact on the interest margin of banking operations. The interest margin was EUR 13.7 million (EUR 12.8 million). The Group’s solvency ratio remained strong and at the end of the financial year it was 12.1 per cent (13.4%).
The customer funds managed by the Bank Group increased to EUR 7,380.6 million (EUR 6,821.7 million) by the end of the financial year.
The Tapiola Bank Group is adopting the international IFRS financial statements practice (International Financial Reporting Standard), starting from its 2010 financial statements.
“The Group is adopting the IFRS practices because it wants to strengthen its position on the capital market. It is Tapiola Bank’s intention to start issuing bonds and debentures during the coming spring, which will enable the Bank to expand its fund-raising methods,” says Lauslahti.
The funds managed by Tapiola Asset Management Ltd belonging to the Tapiola Bank Group gained about 6,000 new unit holders during the year. At the end of the year, the number of unit holders was 50,900. The total fund capital in the mutual funds managed by asset management increased by 13.6 per cent, rising to EUR 1,810.4 million (EUR 1,594.2 million).
The company’s market share in the fund market was 2.9 per cent (2.9%). Tapiola Asset Management is still the ninth largest Finnish fund management company.
“Our fund-raising concepts, which are based on our own vision, gained numerous new customerships from both institutions and private asset management customers. I am also very pleased to say that we received subscription issues for nearly all of our funds,” says Managing Director Tom Liljeström.
At the start of the review period, Tapiola Asset Management signed the United Nations’ Principles for Responsible Investment. The company commits to complying with and promoting aspects connected with the environment, society and good corporate governance in investment analysis, investment decisions and ownership policies.
Tapiola Pension
Tapiola Pension’s return on investment operations at current value was 10.8 per cent (13.5%). Investment income at current value stood at EUR 525.0 million (EUR 591.2 million). Shares and holdings brought the best return, more than 21.0 per cent (39.4%).
“Particularly notable in our result is the return on fixed income investments, which exceeded six per cent. It is an excellent achievement in an investment year characterised by the problems of some euro countries,” says Managing Director Satu Huber. The level of Tapiola Pension’s return on both equity and fixed income investments outperformed the market indices.
Tapiola Pension’s premium income increased by 2.7 per cent to EUR 1,425.7 million (EUR 1,388.0 million). The biggest growth was seen in premium income from self-employed person's pension insurance (YEL), which grew by 4.1 per cent compared to the previous year.
The company’s overall result was EUR 575.4 million (EUR 583.1 million).
Tapiola Pension’s solvency ratio rose to 29.6 per cent (23.7%). The company’s solvency margin was 3.0 times (3.0 times) the solvency limit.
For customers, the strengthened solvency means even higher bonuses. The bonuses are expected to increase to 0.44 per cent (0.3%) of total payroll.
Tapiola Real Estate Ltd
According to Vesa Immonen, Managing Director of Tapiola Real Estate, the company’s business developed as planned during the review period. The turnover of Tapiola Real Estate rose to EUR 8.8 million (EUR 7.5 million), and operating profit was EUR 0.6 million (EUR 0.7 million). The real estate assets managed by the company grew by EUR 230.3 million to EUR 2,539.4 million (EUR 2,309.1 million) and the leasable surface was 1.1 million square metres (1.1 million square metres).
The company's equity ratio rose to 67.6 per cent (42.5%) at the end of the year.
During the review period, the company carried out real estate investments totalling EUR 228.7 million (EUR 268.0 million) and real estate sales totalling EUR 15.7 million (EUR 42.7 million) for its customers.
At the start of the review period, Tapiola Real Estate signed the United Nations’ Principles for Responsible Investment. The company commits to complying with and promoting aspects connected with the environment, society and good corporate governance in investment analysis, investment decisions and ownership policies.
The financial figures in this press release are preliminary. Audited financial results of Tapiola Group companies will be published on 23 March 2011.
Additional information
Preliminary financial statement data of Tapiola Group for 2010, PDF (slide package)
Advance Information on Tapiola Pension's Financial Statements for 2010, PDF (slide package)
Timo Laakso
Finance Director
Financial Services
Tel. (09) 453 3048
Sirpa Pönkkä
Controller
Financial Services
Tel. (09) 453 2565