Suomi-yhtiö

Maintaining a Good Level of Solvency Is Seen as Important

The poor development of the investment markets in 2008 was also reflected in the result of the Suomi Mutual Life Assurance Company (Suomi Mutual). The yield on investment activity, -4.0 per cent was weak in terms of the company’s objectives, but given the conditions it was satisfactory at least. Given the uncertain outlook for the global economy, the company’s Board of Directors decided that there would be no return of solvency capital as special additional bonuses for 2008. Over the previous three years the company had returned a total of almost a billion Euros of solvency capital to its clients.

The company stopped selling new insurance policies at the beginning of 2005 since when the insurance portfolio has gradually reduced. At the same time the need for solvency capital has reduced little by little. As a mutual company, Suomi Mutual distributes freed up solvency capital to its policyholders as additional benefits. It has almost 300,000 policyholders.

In 2005, the company published the principles for as even a return of solvency capital as possible. It has primarily been distributed to old insurance policies, to whom a conditional promise of EUR 840 in benefits was made if the company’s situation allowed it. The question is about those policies that are still valid and which were taken out with Suomi Mutual before July 1, 1997. At the end of 2008 about EUR 220 million of this amount promised to old policies remains to be refunded. As a result of the company’s good solvency level, the company started to return solvency capital to other policies as well a couple of years ago.

The investment markets were difficult in 2008 and future development looks gloomy. The company’s Board of Directors decided that there would be no special additional benefits and that another additional benefit of 0.7 per cent would be given only to those insurance savings which had a technical interest rate of 3.5 per cent, i.e. lower that that of the company’s other insurance savings contracts. The total value of the bonus is about EUR 10 million and it will be paid during 2009.

The annual return on the company’s old insurance policy savings has however at its best been over 7 per cent, which is made up of technical interest of 4.5 per cent and a previously declared benefit of 2.7 per cent. Furthermore, a significant proportion of the risk insurances have been granted a 30 per cent reduction in insurance premiums as a permanent additional benefit.

By withholding the payment of special addition benefits for 2008, the company will be able to maintain its solvency at a sufficiently high level. In difficult times, sufficient solvency acts as a buffer to protect customers’ funds and enables good returns to be achieved as the markets recover.

The Group’s solvency capital was reduced by EUR 217 million from the previous year to EUR 997 million. The solvency ratio continued to be good, 19.9 per cent (21.9 per cent in 2007).

Return on investments -4.0 per cent

The investment activities of Suomi Mutual generated a yield of -4.0 per cent during the year under review. The result was weak in terms of the company’s objectives, but at least satisfactory in the conditions of 2008. The result of investment activities in Euro terms was EUR -267 million.

The company was successful in hedging its equity investments. The yield from interest rate swap agreements to hedge its provisions was also substantial in last year’s investment environment.

Suomi Mutual’s investment portfolio at fair value totalled EUR 6,004 million at the end of the financial year.

Insurance portfolio retention improves market share

Suomi Mutual’s insurance premium income was EUR 75 million. Of the consolidated EUR 85 million premium income, EUR 10 million was accounted for by the subsidiaries operating in the Baltic States and Poland. Suomi Mutual sold these companies to the Austrian Vienna Insurance Group at the beginning of the year.

The claims paid by Suomi Mutual rose by EUR 123 million to EUR 536 million.

Suomi Mutual’s market share, calculated by insurance savings, rose to 15.2 per cent (14.7 per cent), even though the company did not sell any new insurance policies. The reason for this is the long-term nature of the company’s insurance portfolio and that Suomi Mutual’s insurance portfolio does not include unit-linked insurance whose values were reduced by the financial crisis.

Suomi Mutual’s operating expenses were EUR 15 million (EUR 21 million). The expense ratio was 100 per cent.

Most functions outsourced, small staff

At the end of the financial year Suomi Mutual employed 11 people (244), all working for the parent company. The Group’s staff reduced significantly when the foreign life insurance companies were sold.

Suomi Mutual has outsourced the management of its insurance portfolio and its investment portfolio mainly to the OP-Pohjola Group. OP Life Assurance Company Limited looks after the insurance affairs of clients. Suomi Mutual’s customers’ dedicated service telephone numbers are 010 253 6110 (Finnish) and 010 253 6111 (Swedish).

Corporate social responsibility

Suomi Mutual provides financial security for its customers and their close relations. The policyholders supplement their statutory social security in the company and save in a secure and productive way.

As a major investor, Suomi Mutual is concerned about how companies will develop in the future. As a responsible owner, it takes part in the development of the Finnish companies in which it has a sizable holding.

The company has published its ownership policy on its website www.suomi-yhtio.fi.

Award for life-time achievement in medicine

It is only natural for a life assurance company to support activities that promote health and safety. Together with the OP-Pohjola Group, Suomi Mutual makes awards annually for significant lifetime achievements by Finnish doctors. The amount of Pohjola Insurance Ltd’s and Suomi Mutual’s prize for medicine is EUR 20,000. In 2008 the prize was awarded to Emeritus Professor of Neurology, Markku Kaste, in recognition of his outstanding research work in preventing and treating cerebral 453circulation disorders. In January 2009, the award was made at the Finnish Medical Convention to Professor of Neurology, Hilkka Soininen in recognition of her outstanding and long-term work in studying the causes of dementia and Alzheimer’s disease and in developing treatment.

As a life assurance company, Suomi Mutual has long been involved in supporting the promotion of safety in the water and life-saving work. The roots of cooperation with the Finnish Association for Swimming Instruction and Life Saving (SUH) go back to the 1950s.

Art on display

Suomi Mutual is a founder member of the Association of Finnish Fine Arts Foundations (STSY) established in 2006, which promotes familiarity with art and artistic endeavour as well as research into art history. The Association’s first exhibition, Our pictures (Meidän kuvamme), opened at the end of 2007 as part of the national programme of celebrations of the 90th anniversary of Finland’s independence and will continue at the Amos Anderson Art Museum in Helsinki until May 2009. STSY has published a book to accompany the exhibition Meidän kuvamme − maa ja kansa (Our pictures – country and people). Further information about the Association can be found on its web pages http://www.stsy.fi/english/esittely.htm.

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