Unit-linked premium income reaches new high despite challenging beginning of the year
Mandatum Life’s result for the 2016 financial year improved from the previous year’s, thanks especially to an excellent investment result.
Mandatum Life Group’s result before taxes for 2016 was EUR 210 million (181). Comprehensive income after taxes, taking into account changes in market values, was EUR 232 million (168).
Premiums written on Mandatum Life Group’s own account amounted to EUR 1,116 million (1,144). Although the early part of the year was rather muted, premium income in the fourth quarter reached a record EUR 446 million (306), and unit-linked premium income hit a new high of EUR 973 million (968). Mandatum Life’s market share in Finland grew to 24.1 per cent (17.7).
The expense result and risk result remained at a good level. Mandatum Life Group’s expense result was EUR 26 million (27) and the risk result was EUR 31 million (33). The return on equity was 15.9 per cent (12.7).
The net return on investment assets, excluding the return related to unit-linked insurance, amounted to EUR 356 million (391). Income from unit-linked insurance amounted to EUR 276 million (239). The fair value reserve grew during the year to EUR 596 million (532).
Mandatum Life Group’s total technical provisions increased to EUR 11.3 billion (10.9). Unit-linked technical provisions increased to EUR 6.4 billion (5.9) at the end of 2016, and accounted for 57 per cent (54) of the total technical reserves. The with-profit portfolio decreased according to plan and stood at EUR 4.8 billion (5.0) at year-end. The higher guarantee with-profit portfolios (4.5 and 3.5 per cent) shrunk by EUR 213 million and amounted to EUR 2.9 billion. The assets covering Mandatum Life’s original with-profit liabilities on 31 December 2016 amounted to EUR 5.4 billion (5.5) at market values. The return on investments at fair values was 7.2 per cent (6.9). The value of investments covering the segregated portfolio was EUR 1.2 billion (1.2), and the return on the segregated portfolio’s investments at fair values was 4.7 per cent (3.8).
Mandatum Life strengthened its technical provisions by EUR 28 million due to the low interest rate level, and by the end of the year, a total of EUR 273 million (244) had been reserved for lowering the discount rate; of that total, EUR 225 million is allocated for the years 2017–2019. The figures do not include items related to the segregated portfolio. The discount rate was lowered to 0.25 per cent for 2017, to 0.50 per cent for 2018 and to 2.25 per cent for 2019. In November 2016, the discount rate applied to the segregated group pension portfolio was lowered from 0.75 per cent to 0.50 per cent, which subsequently increased the reserve for lowering the discount rate to EUR 275 million (257).
In 2016, Mandatum Life paid out a total of EUR 418 million in pensions to 68,000 pensioners, as well as other indemnities for death, accidents, serious illness and disability, totalling some EUR 88 million.
Statement by CEO Petri Niemisvirta:
“2016 was a good year for Mandatum Life in many respects. Unit-linked premium income reached an all-time high in the company’s history, despite a challenging first half of the year. The market situation was difficult in the first quarter, but growth accelerated in all our sales channels towards the end of the year. Sales growth was particularly strong in wealth management, thanks to the high demand for alternative investment products. In the corporate customer segment, Mandatum Life solidified its position as a market leader, increasing its market share to 50.7 per cent (41.4).
After an upward trend in recent years, customer satisfaction declined, but recovered significantly by the end of the year. Ensuring a high level of customer satisfaction is at the core of the company’s development projects, and this is reflected in the growing investments, for instance, in developing digital services.
In October, Mandatum Life decided to discontinue its insurance distribution agreement with Danske Bank Oyj’s Finnish service network. We had good, long and fruitful co-operation with Danske Bank. The evaluation of the insurance portfolio and the planning of its transfer are currently under way, but customer service continues as usual. Finns continue to have a great need to ensure their financial preparedness.
In 2016, Mandatum Life made great strides in assessing the environmental impacts of its investment activities by measuring the carbon footprint of the unit-linked equity and fixed income investment baskets under its management and its full-mandate wealth management. The annual carbon footprint of Mandatum Life’s investments was 22 per cent in relation to the benchmark indices. Guiding investment assets to companies with lower emissions means we not only have sensible investment operations, but that we are also doing our part to foster an operating environment where more responsible business thrives. Mandatum Life Investment Services Ltd also joined the UN’s Montréal Pledge and will disclose the carbon footprint of its investments annually.
Employee satisfaction is one of Mandatum Life’s long-term strategic targets. Last year, employee satisfaction remained at the same excellent level of the previous years. In the annual Great Place to Work personnel survey, as much as 92 per cent of Mandatum Life’s personnel in Finland considered their workplace a very good place to work.
The focus in 2017 will be on growth and profitability. We are in a good position to achieve very successful business operations and we have confidence in our prospects for the rest of the year.”
Key figures 2016
Premiums written, own account: €1,116 million (1,144)
Profit before taxes: €210 million (181)
Return on equity: 15.9% (12.7)
Solvency ratio: 160% (158)
Return on investments: 7.2% (6.9) and on the segregated portfolio 4.7% (3.8)
Average number of staff: 543 (522)
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