PRESS RELEASE
5 March 2008
The companies in Tapiola Group saw growth in 2007 despite the tough competitive situation. Amongst others, Tapiola General and Tapiola Life achieved good results. Tapiola Bank Group exceeded its targets. Benefits granted to customers were significantly increased and EUR 118.9 million (EUR 99.4 million) was paid as customer benefits. In addition, customer bonuses paid by Tapiola Pension amounted to EUR 19.6 million (EUR 18,0 million).
Producing benefits to owner-customers is the core of Tapiola’s operations. The surplus of Tapiola Group’s operations is used to benefit owner-customers through customer bonuses, premium reductions and development of services. Some of the result is used to strengthen the company’s solvency, thereby securing the payment of benefits to customers and the development of services also in the future.
"As a group of companies owned by its customers, i.e., a mutual group of companies, the most central factor guiding the operations is the benefit of customers. The basis for this is the continuous development of products and services as well as customer benefits”, states Tapiola’s President, Asmo Kalpala.
A total of EUR 118.9 million was paid to the customers as discounts and benefits granted. This is EUR 19.5 million more than in the year before and a little over EUR 35.2 million more than in 2005. Tapiola has increased the benefits granted to customers year by year already for five years running. Customer benefits consist of the companies' customer bonuses, loyalty benefits, discounts, the bank’s interest rate benefit and service benefits. Insurance and banking customers, who centralise their services at Tapiola, receive the best customer benefits in Finland. The benefits are permanent and are not, for example, campaign discounts valid for a short period of time.
Services for customers saw significant development
During 2007, a two-year project was brought to its conclusion, improving Tapiola's private customer services even further. Tapiola is now able to offer and sell a comprehensive service even more effectively. The grouping of Tapiola’s services, customer benefits, payments, online services, customer printouts and customer communications were significantly improved.
As a result of the project, a new private customer benefit programme, Omaetu, was introduced. The new customer benefit programme rewards customers for a comprehensive approach to handling financial matters. In the new benefit programme, customers receive benefits for non-life insurance premiums, savings insurance and unit-linked insurance management fees, bank card annual fees, monthly charges for online services and fund subscription fees. By centralising service needs at Tapiola, a customer may receive a 15 per cent benefit on insurances.
In practice, this can be seen, e.g., as the customer benefits of a family centralising their insurances at Tapiola increasing from EUR 180 to EUR 230 per year. When the family also places their financial affairs with Tapiola, this euro amount is considerably increased by, e.g., the benefits granted by the bank. A family centralising all their service needs at Tapiola can achieve annual benefits worth as much as about EUR 500.
There is also a current project at Tapiola focussing 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.
The roles of those working in the regional organisations have been modified so that Tapiola’s contact persons now have more time for caring for customer relationships and for active customer contact. Also, more corporate risk management experts have been hired at Tapiola.
During the year, Tapiola Bank started the development of services for companies. Services aimed at companies focus on accounts and payment traffic. The Group offers financing to selected companies. As a new product, Tapiola offers banking services directed at small entrepreneurs and self-employed persons.
Tapiola General
Tapiola General's growth continued to outperform the field. The company’s consolidated operating profit, premium income and market share grew. Also, Tapiola General’s solvency improved.
Tapiola General Group’s operating profit grew steeply by 53.3 per cent, to EUR 138.2 million (EUR 90.1 million). The Group’s overall result, i.e., operating profit and the change in the difference between current and book value of investments, totalled EUR 93.6 million (EUR 90.8 million).
The total amount of customer benefits for non-life insurance increased to EUR 83.0 million (EUR 76.7 million) when taking bonuses, centralising rebates, service benefits and cooperation-based rebates into account.
Tapiola General Group’s comparable premium income increased by 5.9 per cent, to EUR 659.8
million (EUR 622.8 million) Market share growth is expected to continue and increase to approximately 19 per cent (18.6%).
“The company’s loss ratio improved significantly even though the number of big accidents increased last year. During 2007, we placed an exceptionally great emphasis on the development of our services, products and customer benefits to ensure Tapiola's strong position in the ever-tightening competition in the financial industry”, says Managing Director Juha Seppänen, describing the result.
During 2007, Tapiola General discounted private household customers' motor liability insurance premiums by 6 per cent. The discount applied both to new and existing policies. The price level of Tapiola’s motor vehicle insurance is very competitive.
Tapiola General Group’s combined ratio before unwinding of discount expense ended at a level of 100.9 percent (107.1%). By eliminating the impact of customer benefits, it was 88.7 percent (94.7%). The combined ratio shows the good efficiency of the mutual company for the customers: Tapiola’s claims and operating expenses are higher than the total of insurance contributions collected, which are reduced somewhat by the healthy discounts paid to the customers of the mutual company.
The return on capital employed at the current value achieved by the parent company Tapiola General was 4.9 per cent (7.1%). The Group’s solvency capital increased to EUR 1,357.5 million (EUR 1,228.4 million), and solvency ratio (solvency capital in relation to premiums earned) was 226.0 per cent (218.3%). Tapiola General’s solvency strengthened further and remained at an outstanding level.
Regarding statutory accident insurance, year 2007 was a success for Tapiola General, and the insurance transfer result was all-time best. Tapiola’s competitive statutory accident insurance tariffs and the services appreciated by the customers contributed to the successful performance.
According to a study by Epsi Rating, the customer service of Tapiola General was the best among Finnish insurance companies in 2007. In addition, for the fourth time in a row Tapiola Group was chosen as the most trustworthy insurance company in Finland in the Trusted Brand survey conducted by Reader’s Digest.
The American A.M. Best Co, the oldest and respected rating institution specialising in the insurance business, awarded Tapiola General the rating A (Excellent). The excellent rating of Tapiola General was due especially to the company’s high solvency and strong risk-carrying capacity as well as the company’s good corporate image in the Finnish market.
Tapiola Life
The result of Tapiola Life was good, and the Group’s operating profit increased significantly by 176.00 per cent to EUR 115.8 million (EUR 42.0 million).
The Group’s overall result, i.e., operating profit and the change in the difference between current and book value of investments, totalled EUR 19.9 million (EUR 35.2 million). The change in the current and book values weakened the overall result by EUR 96.0 million (EUR -6.8 million). Tapiola Life Group’s premium income increased by 1.6%, to EUR 202.4 million (EUR 199.3 million).
Tapiola Life Group reserved a total of EUR 35.9 million (EUR 22.7 million) of the profit for the financial year for bonuses and rebates and the provision for future additional benefits was EUR 34.2 million (EUR 1.0 million), a total of EUR 70.1 million (EUR 23.7 million). An amount of EUR 87.8 million (EUR 53.6 million) has been reserved as the provisions for future additional benefits.
This equals the amount needed to cover approximately three years’ worth of bonuses.
“The finances of Tapiola life insurance companies have a very solid basis, which is also reflected in the return distributed to customers. Thanks to our profitable products combined with the best customer benefits on the market, Tapiola’s life insurance products make an excellent choice for customers. The overall interest paid on 2007 savings will be between 5.4 and 5.8 per cent, depending on the product. During the last seven years, Tapiola has paid the best overall interest in the market to customers who have taken a guaranteed-return policy.
Tapiola Life Group’s market share of premiums written was 7.2 per cent (6.5%) and market share of savings accrued 7.6 per cent (7.7%).
The rate of return on capital employed from the parent company Tapiola Life’s investment operations at current value was 4.0% (6.5%), while the corresponding return from the subsidiary, Tapiola Corporate Life Insurance Ltd., totalled 3.5% (5.5%).
The Group’s expense ratio in proportion to total expense loadings was 110.7 per cent (97.0%). The Group’s solvency capital totalled EUR 354.3 million (EUR 420.0 million) and solvency ratio (i.e., solvency capital in relation to technical provisions) rose to 15.4% (18.8%).
Tapiola Bank Ltd.
The growth of Tapiola Bank is described by the development of bank-customer relationships. The number of customers grew by 36,800 customers to 115,250 customers in 2007.
The bank’s credit portfolio increased by 53 per cent to EUR 679.6 million (EUR 443.6 million) and its deposit base by 72 per cent to EUR 840 million.
“Growth of the bank's volumes was pleasing and in the main clearly better than anticipated”, says the Managing Director, Harri Lauslahti. The bank’s solvency ratio at the end of the financial year was 17.3 per cent (14.9 per cent).
The losses of Tapiola Bank Ltd. decreased to EUR -2.1 million (EUR -7.9 million). The company's result for the first half of 2007 showed a loss of EUR 3.4 million, but result in the second half of 2007 rose to show a profit of EUR 1.3 million. Despite showing a loss, the result is clearly better than anticipated.
At Tapiola Bank, the customers’ benefit is evident, e.g., in the interest rate policy. Tapiola Bank’s interest rate policy, which differs from the competitors, also has an effect on the year 2007 result. During 2007, Tapiola Bank raised its prime rate three times, and the increase also always affected the interest on current and savings accounts, which were raised at the same time. Tapiola Bank’s interest rate policy, which differs from the competitors, also has an effect on the year 2007 result. The full-year result would have shown a profit if account customers were not paid such a good rate of interest. Furthermore, Tapiola Bank pays interest on daily balances of current and savings accounts, not on the month’s lowest balance as banks usually do. This can also be considered a benefit to customers.
Customers’ interest in the new bank has continued to increase, and the service rating given to the bank by customers is very good. Persons about to transfer to a new bank were especially interested in the reasonable service charges and interest rates in line with the daily balance.
Tapiola Bank Group includes Tapiola Bank Ltd. and its subsidiary, Tapiola Asset Management Ltd. In addition, the bank is a shareholder in Ab Compass Card Oy Ltd., founded in 2006.
The Bank Group’s operating losses decreased to EUR 4.7 million (EUR -7.9 million). The result of the Group was strained by goodwill depreciations relating to the acquisition of Asset Management Ltd.
The customer funds managed by the Bank Group totalled EUR 6,437 million at the end of the financial period. Of this amount, the bank’s deposit base was EUR 840 million and customer funds managed by Asset Management Ltd. EUR 5,565.3 million.
At the end of the financial year, the Bank Group’s solvency ratio according to the Act on Credit Institutions was 12.0 per cent (12.4 per cent).
Tapiola Asset Management Ltd.
In 2007, Tapiola Asset Management Ltd. and Tapiola Fund Management Company Ltd. merged. The new company is in charge of Tapiola Group’s asset management and investment fund services. Tapiola Asset Management recorded an operating profit of EUR 0.459 million (EUR 1.419 million). The company’s Pro forma operating profit was EUR 0.520 million (EUR 2.017 million). The Pro forma figures describe the company’s result as if the company had been operating under its current structure at the end of the previous year.
In the mutual funds managed by Tapiola Asset Management Company, the fund capital grew by approximately 9.8 per cent to EUR 1,435.8 million (EUR 1,308.1 million) during the review period. The number of unit holders increased to 29,109 (21,301). In the fund business, the market share grew to 2.2 per cent (2.1%). The managed assets of Tapiola Asset Management increased to EUR 5,565.3 million (EUR 5,262.0 million).
The Managing Director of Tapiola Asset Management Ltd., Tom Liljeström, is satisfied with the development of the company. According to him, the first half of the year until July was a period of steady growth, but in the second half of the year, the uncertainty in the investment markets also had an effect on the savers, some of whom transferred their assets to bank deposits.
“Also 2008 is going to be challenging. On the other hand, uncertainty in the markets also means that customers are increasingly using asset management professionals in their investment decisions.”
Tapiola Asset Management received an international GIPS (Global Investment Performance Standards) quality certificate for its operations in 2007. GIPS is an internationally recognised ethical standard for the consistent calculation of profits and risk figures in investment operations, as well as for the transparent reporting of them.
Tapiola Real Estate Ltd.
Tapiola Group’s real estate operations were incorporated on 1 January 2007 into Tapiola Real Estate Ltd. The company’s result in the first year was EUR 0.045 million positive. The company’s turnover was EUR 5.5 million. The value of the real estate portfolio managed by Tapiola Real Estate is EUR 1,955.3 million. The company’s return on equity was 36.6 per cent and return on investment EUR 19.7 per cent. The company’s solvency ratio is 13.4 per cent.
“During the company’s first year, the increased transactions, i.e. sales and purchases, as well as the active lease business have kept our experts busy. We reached the goals and are very pleased with our performance", states Managing Director Asko Salminen.
Tapiola Pension
At Tapiola Pension, the number of insured and premium income increased and expense ratio was good. Particularly pleasing was the growth of Tapiola Pension’s market share. The overall result of the company was affected by the difficult investment environment and the technical interest rate level, which was higher than the level of return.
The overall result of Tapiola Pension, including unrealised value changes in investment assets, showed a loss of EUR 78.2 million (profit of EUR 168.6 million). According to the Managing Director of Tapiola Pension, Olli-Pekka Laine, all different asset classes, i.e. fixed-income, share and real estate investments, achieved positive returns. “In 2007, the general level of return in the share markets was, however, clearly lower than the previous year, which had an effect on the decrease of the overall return on investments compared to the previous year. The return level of equity and fixed-income investments outperformed the market indexes.”
According to the key figures presented in the financial statements, the return on Tapiola Pension investment portfolio at current value was 4.1 per cent in 2007 (6.8% in 2006). Investment income at current value showed a loss of EUR 50.1 million (profit of EUR 134.2 million).
Of the 2007 result, EUR 19.6 million (EUR 18,0 million) was reserved for premium discounts to be granted to customers.
Tapiola Pension’s premium income increased by 6.9 per cent to EUR 1,273.7 million (EUR 1,191.2 million). The company’s market share is expected to increase to 14.0 per cent (13.6%). Tapiola Pension’s solvency ratio was 21.3 per cent (24.3%) of solvency calculation technical provisions and the solvency margin was 1.8 times (2.2 times) the solvency limit.
The expense ratio remained good, at 81.1 per cent (76.5%) of insurance premium administrative income.
Further information
Markku Paakkanen, Director of Financial and Data Management: tel. +358 (0)9 453 2500