Suomi Mutual's customer bonuses up on the previous year

11 March, 2008

Suomi Mutual achieved a return of 5.6 per cent for its 2007 investments. The company's good result and solvency enabled the payout of high customer bonuses to policyholders, rising in total from 314 to 411 million euros.

Suomi Mutual ceased underwriting new business three years ago. The company now focuses on the management of its insurance and investment portfolios for the benefit of the company's customers. In 2007, the consolidated operating profit of the Suomi Mutual group stood at EUR 262 million (EUR 287 million in 2006). For 2007, the company declared a total of EUR 411 million in different special benefits for customers, up by EUR 97 million on year. 

The amount of special benefits was high, as the company returned solvency capital to policyholders. Most of the solvency capital is equity capital. When the special benefits are financed through equity capital, the company's accounting results become negative so you get a better picture of the operational result by looking at the sum of solvency capital and the amount of special benefits paid out put together: EUR 165 million (406) in the Group.
 
The consolidated solvency capital was EUR 1,214 million and the solvency ratio 21.9 per cent (27.4).

High customer bonuses raised market share in insurance savings

The consolidated premiums written totalled EUR 117 million (124). The amount of claims paid totalled EUR 424 million (410).

In 2007, the parent company's market share of insurance savings stood at 14.7 per cent (14.4). Indeed, Suomi Mutual's market share of insurance savings actually increased, although the company no longer underwrites new business. This is explained by the large special benefits.

Consolidated operating expenses totalled EUR 39 million (38). Expense ratio remained at 111 per cent. 

 
Return on investments was 5.6 per cent

At the end of 2006, Suomi Mutual's investment portfolio at current value stood at EUR 6,989 million (6,896), up by EUR 93 million.

28 per cent (32) of the parent company's investments were in shares and various equity and venture capital funds. Various interest-bearing instruments accounted for 57 per cent (55 per cent) and land and buildings for 8 per cent (7 per cent) of the portfolio. Land and buildings here also include investments in mutual funds and joint investment companies investing in real estate properties. Alternative investments, i.e. mainly investments in absolute return funds accounted for 7 per cent (6 per cent) of all investments.
The portfolio was protected actively during the year through derivatives.

The parent company's net investment income at fair value was EUR 366 million (420), which represented a 5.6 per cent (6.5 per cent) return on committed capital. Return on investments was satisfactory, compared with the benchmark index and the 5.7 per cent return target index defined on the basis of both insurance savings and the return on equity requirement.

Distribution of solvency capital to the entire insurance portfolio

The company's good result and solvency made it possible to distribute solvency capital to the entire insurance portfolio like last year. The parent company used a larger sum than the year before on customer bonuses, up from 314 to 411 million euros.

The insurance savings will receive a bonus of at least 2.5 per cent. Insurance taken out before 1 July 1997 with Suomi Mutual receive a special bonus of 11 per cent, which means that such insurance can receive a total annual profit of over 20 per cent (technical interest 4.5%, previously decided special bonus 2.7%, special bonus 11% and customer bonus 2.5%).

The total annual profit for other insurance saving ranges from 6.5 to 7.0, depending on the technical interest. The special bonus for term insurance polices was already set in 2005, being a reduction in insurance premiums. From the beginning of 2007, the reduction in premiums rose from 20 to 30 per cent.

Old policies (currently valid policies which were already in force at Suomi Mutual on 1 July 1997) were earlier given a conditional promise on supplementary special benefits, of which some EUR 200 million remained unfulfilled after the financial year 2007. Supplementary special benefits will, also in the future, be declared at a pace allowed by the company's solvency. To the extent that the benefits can be granted in excess of the amount described above, these benefits will be granted as increased customer bonuses in the manner specified separately. The company will not give any preliminary estimates on the amounts or schedules for the distribution of further supplementary special benefits.

Suomi Mutual Life Assurance Company

Markku Vesterinen
President and CEO

ATTACHMENT Financial development of the Group (solvency, investment mix, net investment income, analysis of profit, key figures)

ADDITIONAL INFORMATION
Mr Markku Vesterinen, President and CEO, tel. +358 (0)10 253 2844 or +358 (0)50 348 3502
Mr Timo Hukka, Chief Investment Officer, tel. +358 (0)10 253 2002 or +358 (0)40 519 0510