14 August 2008
PRESS RELEASE
Tapiola’s new benefit programme has contributed to increase the business volume of the group. In November 2007 Tapiola introduced a new benefit programme that rewards customers for a comprehensive approach to handling their financial affairs. Thanks to the benefit programme, the number of customers who concentrate their finances and insurances to Tapiola has increased significantly during the period 1 January 2008 - 30 June 2008.
The increased number of concentrating customers has boosted the cross-selling between the group companies and as a consequence, the business volume of the companies has continued to grow during the first half-year. For example the number of customers in Tapiola Bank increased significantly and thus, also the deposits and lending have grown faster than planned. In addition, the premium income of Tapiola Life increased faster than the average premium income of the entire industry. Tapiola has invested to increase the competitiveness by raising the benefit percentages for concentrating customers on 1 June 2008.
Tapiola Bank has continued its steady growth during the spring which becomes evident in the increased number of customers as well as the fast upswing in deposits and lending. During the interim period, Tapiola Bank Ltd increased its number of customers by 23,000 to 138,000. The operating profit of Tapiola Bank Ltd was EUR 0.3 million (operating loss of EUR 2.8 million).
The premium income of Tapiola Group non-life and life insurance continued to grow during 1 January 2008 - 30 June 2008. Tapiola Life Group’s premium income increased by 4.0 percent to EUR 103.2 million and clearly outperformed the industry in general. According to the Federation of Finnish Financial Services, the decrease in premium income of the life insurance companies was 14.2 percent in January through May. Tapiola General Group’s premium income increased by 2.1 percent to EUR 438.8 million (EUR 429.8 million).
The unstable investment market affected the companies’ results and each of them made loss during the first half-year. Tapiola General Group’s operating loss was EUR 57.7 million (profit of EUR 68.7 million). Tapiola Life Group’s operating loss was EUR 1.6 million (profit of EUR 92.4 million).
The President’s Comments
The launch of the new benefit programme was a success, which becomes evident in the increased number of customers who concentrate their finances and insurances to Tapiola. This fact contributed to increase the business volume of the group.
– We have successfully increased the volumes of Tapiola Bank and Tapiola Life in the beginning of the year. I am especially satisfied that the customers’ interest in the new bank has continued to increase. In six months Tapiola Bank got over 20,000 new customers, Tapiola Group President Asmo Kalpala comments.
The stock market plunge had a significant impact on the insurance companies’ results. However, the group has prepared for the unstable investment environment by improving the solvency.
– Producing long-lasting benefits to owner-customers is the core of Tapiola’s operations. Therefore, some of the surplus from past years has been used to improve the solvency. Consequently, fluctuations on the investment market will not fully affect the customer benefits in the future either. Tapiola’s customer benefits are based on perseverance and predictability, not on temporary campaign discounts, Kalpala states.
The ongoing development in Tapiola plays a part in the insurance companies’ increased operating expenses during the first half-year 2008. In the past few years, Tapiola has made big investments to improve competitiveness, i.a. by recruiting new employees and renewing services. The number of employees has increased by 2,565 to 2,848 as from year 2005.
– We have earlier reported that the development will initially result in an increased expense ratio, but we expect the growing volume to decrease it after the transitional stage, Kalpala says.
Competitiveness Supporting Development
Tapiola has improved competitiveness by two separate projects. At the end of 2007, a two-year project was brought to its conclusion, improving Tapiola's private customer services even further. The project resulted among other things in a new benefit programme and an electronic claims service.
In 2005 Tapiola launched a telephone claims service in the entire country. The service makes it possible for customers to initiate their claim with a single telephone call and often even have the claim handled during the call.
The customers have been extremely satisfied with the telephone claims service and therefore Tapiola decided to develop a similar electronic service. The starting point in developing the electronic service was children’s insurance medical treatment claims, since families often find it burdensome to claim compensation for children’s medical expenses. In practice, the concept of the electronic claims service is similar to the telephone claims service – customers can claim compensation for medical treatment expenses on their home computer immediately after the medical treatment. Often the compensation is paid already the next weekday.
The project also resulted in the best benefit programme in the industry, Omaetu. In June 2008 Tapiola improved the premium discounts.
– We improved the customer benefits, and therefore Tapiola is the most profitable alternative in Finland for concentrating customers. The customer benefits have already before been top-notch. Last year we distributed about EUR 119 million customer benefits to private customers. At its best, the new benefit programme rewards concentrating customers with a 17 percent premium discount as from 1 June 2008, Kalpala states.
According to a consumer research by Statistics Finland, private households pay annually an average of EUR 664 in premiums. Thus a 17 percent means EUR 112 in cash. An important aspect of the benefit programme is that the basic price of products and services are beneficial already without the discounts.
There is also a current project at Tapiola focusing on the vigorous development of the competitiveness of the corporate business. As a result of this work, the services offered to corporate customers will be considerably improved so that, from the customer's viewpoint, Tapiola’s services are comprehensive and in line with the customer’s needs. Also, Tapiola Bank has started to offer bank services to corporate customers. The bank offers companies overdraft facility, guarantee and payments traffic basic services.
Investment Operations
Both Tapiola General’s and Tapiola Life’s investment income decreased during 1 January 2008 - 30 June 2008. Since investments play a major role in the insurance companies result, the unstable investment market had a negative impact on the companies’ results.
The uncertain investment markets of early 2008 became evident especially in the return on equity. According to Investment Director Jari Eklund, already at the end of 2007 the allocation between different asset categories was modified by reducing the proportion of equities. This action was taken in order to prepare for the unstable market development of 2008. As to the different asset classes, outstanding loans and real estate investments brought the best return during the interim period.
The Tapiola General Parent Company net investment income at current value was -2.6 percent (4.0 percent) during the interim period. Net investment income at current value showed a loss of EUR 70.0 million (profit of EUR 100.2 million). The investments at current value were EUR 2,503.3 million (EUR 2,558.4 million 2007-12). Tapiola-Life’s investment income at current value was -1.8 percent (3.1 percent) during the interim period. The net investment operations income at current value was EUR -31.1 million (EUR 54.5 million). The investments at current value were EUR 1,691.0 million (EUR 1,772.0 million 2007-12). Tapiola Corporate Life’s investment income at current value was -2.0 percent (2.8 percent) during the interim period. The net investments operation income at current value was EUR -16.3 million (EUR 22.0 million). Investments at current value were EUR 778.4 million (EUR 802.0 million 2007-12).
Results
Non-Life Insurance Business
Tapiola General’s premium income increased by 2.1 percent to EUR 438.8 million (EUR 429.8 million). Tapiola General’s direct business premium income increased by 2.3 percent to EUR 398.7 million (EUR 389.9 million).
The operating loss of Tapiola General Group’s insurance business amounted to EUR 57.7 million (profit of EUR 57.8 million). The Group’s overall result, i.e., operating loss and the change in the difference between current and book value of investments, totalled a loss of EUR 134.7 million (profit of EUR 68.7 million).
The change in the current and book values weakened the insurance business total result by EUR 77.0 million (improvement by EUR 10.9 million).
The group's combined ratio was 117.9 percent (106.8 percent). The combined ratio is among other things affected by the fact that there were more major losses than normal in the beginning of 2008. Also, the combined ratio is affected by the significant investments in the development of services, products and customer benefits to ensure Tapiola's strong position in the ever-tightening competition in the financial industry. Tapiola General has increased the customer benefits and reduced the prices.
The solvency capital of Tapiola General group insurance business, which measures solvency and describes risk carrying capacity, amounted to EUR 1,226.5 million (EUR 1,371.3 million 2007-12).
The solvency ratio, that is the solvency capital in relation to premiums earned, was 202.3 percent (228.3 percent 2007-12) in the end of the interim period. The sharply declined equity rates in early 2008 became apparent as smaller difference between current value and book value which decreased the solvency capital. The solvency is still among the best in the industry.
Life Insurance
Tapiola Life Group’s premium income increased by 4.0 percent to EUR 103.2 million and clearly outperformed the industry in general. According to the Federation of Finnish Financial Services, the decrease in premium income of the life insurance companies was 14.2 percent.
The business volume in life insurance increased especially within pension insurances, since premium income grew both in group pension insurances and individual pension insurances when compared with spring 2007.
The premium income from individual pension insurances increased by 9.8 percent, i.e. faster than in the industry in general. The premium income from individual pension insurances is affected by the fact that in spring 2008 persons employed in the private sector received their first pension records containing details on accrued pension.
– The pension records have launched discussions concerning subsistence after retirement. Therefore, many people have taken out voluntary pension insurances. This can be observed from the spring sales statistics, says Managing Director Juha-Pekka Halmeenmäki.
The strong sales are expected to continue towards the end of the year, since the pension records are being mailed throughout the entire year.
Tapiola Mutual Life Assurance Company’s operating loss was EUR 1.6 million (profit of EUR 92.4 million). Because the technical rate of interest for the technical provisions was lowered for the rest of the year, the operating result was burdened by EUR 22.8 million. The change in the current and book values weakened the result by EUR 109.8 million (EUR -53.5 million). The overall result was EUR -111.4 million (EUR 38.8 million).
The Group’s solvency capital was EUR 257.0 million (EUR 354.3 million 2007-12), and solvency ratio (solvency capital in relation to premiums earned) was 11.3 percent (15.4 percent 2007-12). The sharply declined equity rates in early 2008 became apparent as smaller difference between current value and book value which decreased the solvency margin. Tapiola Life’s solvency was sufficient.
Banking and Investment Services
Ever since the bank was founded, the growth in number of customers has been fast. During the first half of 2008 the bank’s clientele grew by 23,000 to 138,000. Due to new customers the bank’s lending and deposits statistics increased clearly faster than expected. The bank’s lending rose to EUR 852.0 million (EUR 679.6 million 2007-12) and deposits to EUR 1,069.9 million (EUR 840.0 million 2007-12). As a result of increased business volumes Tapiola Bank’s result showed a profit of EUR 0.3 million (loss of EUR 2.8 million). According to Tapiola Bank’s Managing Director Harri Lauslahti the growth exceeded expectations partly due to Tapiola’s new customer benefit programme that benefits for premiums, bank service fees and fond-unit subscription fees.
The complex market conditions have become apparent in the household investment behaviour. In accordance with the statistics compiled by the Bank of Finland, the deposits of Finnish households grew by EUR 1.9 billion during the first half of 2008. At the same time, fund units were sold for EUR 1.4 billion. The unstable market conditions showed as increased number of deposits to Tapiola Bank and in Tapiola Asset Management Ltd as decreased fund assets.
Tapiola Asset Management Ltd is in charge of Tapiola Group’s asset management and mutual fund services. Tapiola Asset Management recorded an operating loss of EUR 0.497 million (profit of EUR 0.397 million). The total assets managed by Tapiola Asset Management totalled EUR 5,334.7 million (5,630.5 million 2007-12) at the end of the interim period. In the mutual funds managed by Tapiola Asset Management Company, the fund capital decreased since the turn of the year from EUR 1,435.8 million to EUR 1,219.8 million.
Despite the demanding market conditions, the independent mutual fund ratings by Morningstar and Eufex have remained on a sufficient level.
– We find also positive that we were able to increase the number of customers also in the difficult market conditions during the first half of 2008, states Tom Liljeström, Managing Director of Tapiola Asset Management. The number of unitholders in Tapiola Asset Management increased to 29,219 (29,109 in 2007-12).
The operating loss of Tapiola General Group’s bank and mutual fund services amounted to EUR 0.5 million (loss of EUR 2.0 million). The result from bank and mutual fund services is decreased by investment in IT systems that develop service.
Real Estate Business
Tapiola Group’s real estate operations were incorporated on 1 January 2007 into Tapiola Real Estate Ltd. The company’s result in the first six months of 2008 showed a profit of EUR 0.3 million (EUR 0.4 million). The company’s turnover was EUR 3.3 million (EUR 3.1 million). The market value of the real estate property managed by the company increased to EUR 2,020.1 million (EUR 1,955.3 million 2007-12).
FURTHER INFORMATION:
Markku Paakkanen
Director
Financial and Data Administration
(09) 453 2500