Result improved, unit-linked technical reserves exceeded 50%
Mandatum Life's profit before taxes in January–March increased to EUR 36 million (33). The return on investment assets at fair value was 2.3 per cent (5.2). The comprehensive return on investments measured at fair value declined to EUR 66 million (172), but nevertheless remained at a good level.
The first quarter result was burdened by the EUR 20 million increase in the reserve for decreased discount rates; the increase was in response to the low market interest rates. The increase was used to lower the 2014 discount rate to 2.7 per cent. The discount rate for 2013 had already been lowered to 2.5 per cent. Mandatum Life has, in response to the low interest rate level, supplemented its technical reserves by altogether EUR 128 million.
Mandatum Life Group's premiums written on its own account grew slightly, to EUR 262 million (260). Premiums written in the Baltic countries totalled EUR 7 million (5). Premiums written in the sector increased substantially compared to the previous year and, as a result, Mandatum Life's total market share in Finland dropped to 18.2 per cent (27.0), and its share of unit-linked products, which constitute its primary focus, fell to 18.9 per cent (30.1).
Mandatum Life's solvency position remained strong. The company's solvency ratio as of 31 March 2013 was 27.3 per cent (27.7). The parent company's solvency margin was more than six times the required minimum. The dividend of EUR 100 million paid out to Sampo plc in April 2013 was deducted from the solvency margin at the end of March. Mandatum Life's capital requirement is highly dependent on the with-profit technical reserves and the investments covering these reserves. The with-profit reserves have shrunk by EUR 340 million during the last two years, which has decreased the required capital and contributed to company's ability to pay a dividend. The reserves are expected to decrease by roughly the same amount in the years ahead.
Mandatum Life Group's technical reserves exceeded EUR 8 billion for the first time ever and totalled EUR 8.1 billion (7.9). The with-profit technical reserves reached their lowest level since the start of the 2000s and stood at EUR 4.0 billion. At the same time, unit-linked reserves reached a record high of EUR 4.1 billion (3.8). For the first time in the company's history, unit-linked technical reserves make up more than half of the company's total technical reserves.
Statement by CEO Petri Niemisvirta:
"There are two key points I would like to raise about the first quarter of 2013. I expect to see an even greater improvement in our already increased premium income in the coming quarters, as we have launched a number of new investment products since the start of the year that support our growth expectations. These new additions increase the diversity and comprehensiveness of our investment offering.
Another noteworthy point is the growth in the unit-linked technical reserve to more than four billion euros and more than 50 per cent of the total technical reserves. When we shifted our focus more than a decade ago to unit-linked products, together with risk insurance, our unit-linked technical reserves amounted to roughly five per cent of the total reserves. Reaching our present position has required a lot of hard work and determination on the part of our entire staff, as well as continued interest from our clients and their trust in the services we offer."
Key figures Q1/2013
Premiums written, own account: EUR 262 million (260)
Profit before taxes: EUR 36 million (33)
Return on equity: 22.4% (72.3)
Expense ratio: 120.5% (120.8)
Solvency ratio: 27.3% (12/2012: 27.7)
Return on investments: 2.3% (5.2)
Average number of staff: 566 (530)
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