Tapiola Group continued growing during the first half of 2006. The operational results were satisfactory and the companies’ realized results almost at the level of 2005. The total results were decreased by changes in the difference between current value and book value regarding investments especially due to increased interest rates.
Operations
Tapiola General developed its products, services and customer bonuses. This was possible due to good results previous years and a solvency that is among the best in the business. Tapiola General also reduced the prices on home and motor liability insurances. An important adjustment was also the 7 percent reduction on premiums for workers’ compensation insurance carried out during the first half of the year. The claims services and risk management had a strong development and the millionth motor liability insurance was sold this summer.
Tapiola life insurance companies offered better bonuses and rebates albeit the decreased investment income. The life insurance companies have during the previous years offered an interest rate of 4.5–4.7 percent on customers’ life assets, and the present rate on the life insurance savings policy was increased to 5.0 percent. In addition, the technical rate of interest for the technical provisions was lowered to ensure good return in the future. The demand on personal pension schemes has increased due to discussions on the statutory pension sufficiency.
The development of Tapiola Bank has been significant both regarding deposits and credit granting. The prime interest rate was raised twice during the first half year presently being 3.0 percent. The funds offered by Tapiola held up well in the challenging market situation and the loss in value was below average. In May Tapiola introduced a new fund investing in Japan. In July the ownership of Tapiola Asset Management Ltd was transferred to Tapiola Bank with the intension to merge the financial services with the bank group thus clarifying the organization.
Growth
The premiums written of Tapiola General increased by 3.5 percent in comparison with the same period last year. When considering the effect of the bonuses and rebates distributed to customers, the growth corresponds with the general growth of the business. The number of private household customers exceeded 762,300 (734,100 at the end of 2005).
The growth of the Tapiola Life group (employees’ group life insurance excluded) reached 6.3 percent which is better than the estimated growth of the business.
The goals regarding the growth of Tapiola’s bank and investment business were reached. Tapiola Bank serves over 63,500 customers. The number of customers increased by almost 15,000 from the beginning of the year. The total funds on deposit increased by 25 percent and the credit portfolio by 35 percent. The fund management company held its position as the eight largest fund management company in Finland and Tapiola Assets Management Ltd is the fifth largest asset management company in Finland.
The average number of personnel in the Tapiola Group increased by 115 employees in the beginning of the year totalling 2,485 employees (2,370 in 12/2005). The number of personnel has increased regularly the last ten years by about 90 employees a year.
Results
The operating profit of Tapiola General group was EUR 67.2 million (EUR 61.3 million). The total result of the group, i.e. operating profit and changes in the difference between current value and book value, was EUR 14.8 million (EUR 92.4 million). The changes in the difference between current value and book value decreased the total result by EUR 52.4 million, which previous year had the opposite effect increasing the result by EUR 31.1 million. The combined ratio of the group excluding expenses resulting from the technical rate of interest was 103.5 percent (105.5%). The operating expenses grew slightly due to significant investments in customer service and development of customer benefits, and the solvency is among the best in the business.
The operating profit of Tapiola Life group was EUR 13.6 million (EUR 34.4 million). The operating profit of Tapiola Life decreased by the provisions of EUR 30.2 million (EUR 13.0 million) made for future rebates. Tapiola Life used the provisions to lower the technical interest rate of the accumulated liabilities in order to prepare for a sufficient customer rebate level in the future. The operating profit of Tapiola Corporate Life was decreased by the provisions of EUR 5.0 million. The total result of the group showed a loss of EUR 47.0 million (profit of EUR 76.3 million). The changes in the difference between current value and book value decreased the group’s total result by EUR 60.6 million (increased the result by EUR 41.8 million). The expense ratio decreased, and the solvency ratio is among the best in the business.
In banking and investment services, the operating loss of Tapiola Bank decreased to EUR 3.6 million (EUR -4.7 million). Tapiola Fund Management Company Ltd’s operating profit remained at the same level, i.e. EUR 0.7 million. Independent fund rating companies gave again high ratings especially for Tapiola equity funds. Tapiola Asset Management Ltd’s operating profit was EUR 0.5 million, and the development of results remained positive. The assets under management are EUR 4.8 billion.
Investments
The return on investment at current value of Tapiola General during the first half year was 1.5 percent (5.9%). The investments at current value were EUR 2,343.9 million (EUR 2,260.7 million 12/2005). The net return on investment at current value was EUR 34.1 million (EUR 119.9 million).
The net return on investment at current value of Tapiola Life during the first half year was 1.3 percent (5.5%). The investments at current value were EUR 1,691.2 million (EUR 1,708.6 million 12/2005). The net return on investment at current value was EUR 22.3 million (EUR 88.4 million).
The net return on investment at current value of Tapiola Corporate Life during the first half year was 0.9 percent (5.1%). The investments at current value were EUR 762.4 million (EUR 768.4 million 12/2005). The net return on investment at current value was EUR 7.2 million (EUR 36.5 million).
Additional information
Markku Paakkanen, Director, Financial and Data Administration Services, tel.: +358 9 453 2500
www.tapiola.fi/tulos (in Finnish)