By all key indicators, Mandatum Life had a successful 2013. Unit-linked premiums written reached a record-high level, and investment returns were good. In other positive developments, expenses decreased, and the unit-linked technical reserves exceeded the with-profit reserves.
Profit before taxes for life insurance operations increased 12 per cent and amounted to EUR 153 million (136). The comprehensive income of life insurance operations, taking into account market value changes, stood at EUR 220 million (286), reflecting the success of the investment operations. The cost-efficiency programme that was introduced in 2013, coupled with growing fee income, boosted the expense result to EUR 14 million (6). The risk result was excellent, reaching EUR 24 million (19).
The return on Mandatum Life's investment assets was at an exceptionally high level, much like the situation in 2012. The return on investment assets at market values was 7.1 per cent (9.4), which can be attributed to the excellent performance of equity investments. In spite of the rising interest rates at the end of the year, interest rate levels remain considerably low in relation to the average technical rate of interest for technical provisions. For that reason, and because the duration of fixed-income investments is low in relation to the technical provisions, the reinvestment risk of maturing fixed-income investments will continue to be the most significant risk factor in the company's earnings performance in the coming years. The company continued to supplement the reserves for lowering the discount rate, which will help prepare for the costs stemming from the technical interest rate that will be credited to insurance in the future.
Premiums written increased 10 per cent compared to the previous year, and stood at EUR 1,063 million (977). Unit-linked policies accounted for a record-high share of all premiums written, and stood at EUR 909 million (810). Premium income from the Baltic countries amounted to EUR 32 million (33). Despite the high level of premium income, Mandatum Life's market share in unit-linked insurance dropped to 19.3 per cent (26.2), as life insurance premiums written increased substantially in Finland across the sector. Mandatum Life's overall market share of direct business in Finland decreased to 19.2 per cent (24.5).
Mandatum Life Group's technical provisions increased to EUR 8,544 million (7,904). The technical provisions related to unit-linked policies grew in the amount of EUR 784 million, and at the turn of the year reached a historical high of EUR 4,617 million. The unit-linked technical provisions were boosted by the average roughly 7 per cent investment return clients received on their savings.
Technical provisions related to with-profit policies declined to EUR 3,928 million (4,071). In response to the low interest rate level, the technical provisions related to with-profit policies include a reserve of EUR 146 million (118) for decreased discount rates, and some EUR 140 million in technical interest credited to policies and client bonuses. For the first time in the company's history, the unit-linked technical reserves surpassed the company's with-profit reserves. Compensation paid to clients amounted to more than EUR 700 million, of which pensions accounted for roughly EUR 320 million, paid out to some 61,000 pension recipients. A total of more than EUR 400 million in other indemnities were paid to close to 38,000 insured.
Mandatum Life Group's solvency capital amounted to EUR 1,403 million (1,391), which is more than 6 times the minimum requirement of the Solvency I regulations. The solvency ratio remained good, at 27.6 per cent (27.7). The company's adjusted solvency capital clearly exceeded Sampo Group's target level for economic capital.
Statement by CEO Petri Niemisvirta:
"2013 was a very good year for Mandatum Life. We were successful in both increasing our sales and in cutting costs.
The growth in premium income can again be attributed to the robust sales volumes of the Danske Bank network, but also to the brisk growth of Mandatum Life's own sales. The considerable improvement in demand for our wealth management services is indicative of the growing interest in our investment expertise.
We achieved the targets set for the cost-savings programme that was launched in the first half of 2013. From the outset, we engaged our entire personnel to identify areas where savings could be made. We actively followed up on and also reported on the targets.
In 2013 we additionally reinforced our Your money, your life strategy in a number of significant areas. We entered into partnership with BlackRock, the world's largest asset management firm, and we implemented changes to our operating model for corporate sales, while at the same time clarifying our segment approach and integrating our sales units for small, medium-, and large-sized companies into one unit – Corporate Clients – at the end of the year. We also established Finland's most diverse consultation services for employee rewards. We made determined renewal efforts in the area of employee rewards, and at the end of the year we acquired the company Alexander Pay Management as part of our subsidiary Innova."
Key figures 2013
Premiums written, own account: €1,063 mill. (977)
Profit before taxes: €153 million (136)
Return on equity: 18.3% (28.5)
Expense ratio: 106.6% (113.9)
Solvency ratio: 27.6% (27.7)
Return on investments: 7.1% (9.4)
Average number of staff: 541 (545)
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