Good year for Suomi Mutual

9 March 2007

Suomi Mutual's results were good in 2006. Return on investments was 6.5%, which exceeded the return levels of different benchmark indices and the company's return requirements set for business operations.

Suomi Mutual ceased underwriting new business at the beginning of 2005. The company now focuses on the management of its insurance and investment portfolios for the benefit of the company's customers. In 2006, the consolidated operating profit of the Suomi Mutual group stood at EUR 287 million. The year 2005 operating profit was exceptionally high – EUR 448 million – which mainly resulted from the disposal of the Pohjola shares. For 2006, the company declared a total of EUR 315 million in different special benefits for customers.

Despite the good performance, the company's accounting results were negative. This was due to the fact that solvency capital was declared in special benefits for customers. Therefore, the amount of annual special benefits is intentionally larger than in a situation where the benefits were based merely on the annual performance. The majority of the solvency capital comprises equity accrued for the previous financial years. This can be dissolved in the form of special benefits by showing a loss in the annual accounts.

The consolidated solvency capital increased by EUR 91 million to EUR 1 460 million. The consolidated solvency ratio was 27.4 per cent (25.7 per cent in 2005).

Development in line with expectations

The consolidated premiums written totalled EUR 124 million. In the current situation, the company no longer follows the market share determined on the basis of premiums written. The company's market position is described as the market share calculated on the basis of insurance savings. At the end of 2006, the market share was 14.4 per cent. A year earlier, the corresponding figure was 14.9 per cent.

The amount of benefits paid by the Group increased by over EUR 100 million and stood at EUR 410 million. The growth was mainly explained by an increase in different saving-specific benefits (savings sums, annuities and surrenders). The effect of these benefits on the results was minor.

Consolidated operating expenses totalled EUR 38 million. They increased by EUR 4 million. Operating expenses from domestic operations declined by EUR 0.6 million and were lower than budgeted. The expense ratio measuring operational efficiency was 100 per cent for the domestic business (99 per cent in 2005). The expense ratio for the whole Group improved from 116 per cent to 111 per cent.

Return on investments was 6.5 per cent

At the end of 2006, Suomi Mutual's investment portfolio at current values stood at EUR 6 775 million. The investment portfolio increased by EUR 48 million. Shares, including investments in equity funds, represented 32 per cent (21 per cent) of the investment portfolio. Various interest-bearing instruments accounted for 55 per cent (67 per cent) and land and buildings for 7 per cent (6 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 6 per cent (6 per cent) of all investments. The figures presented here only apply to the parent company.

The parent company's net investment income at current values was EUR 420 million (EUR 1 000 million), which represented a 6.5 per cent (17.5 per cent) return on committed capital. The consolidated return was also 6.5 per cent (17.4 per cent). Return on investments was excellent in view of benchmark indices and of the return target defined on the basis of both insurance savings and the return on equity requirements.

Distribution of solvency capital was extended to the entire insurance portfolio

As a result of the company's favourable performance and excellent financial standing, the company was able to extend the distribution of solvency capital to the entire insurance portfolio through a 2 percentage point increase in the customer bonus declared for insurance savings. A decision was made to declare a 9 per cent supplementary special benefit for policies entitled to such benefits for 2006. Together with the guaranteed technical interest, the above-mentioned customer bonus, and special benefits based on previous decisions, the latest decision will increase the return on these insurance savings to over 18 per cent. The corresponding return on insurance savings not entitled to supplementary special benefits was 6 to 6.5 per cent. Decisions on increasing premium reductions of term insurance were already taken in 2005 in the following manner: as of 2007, supplementary benefits to be granted as reduced term insurance premiums, which are included in the scope of supplementary special benefits, are increased from 20 per cent 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 EUR 464 million remained unfulfilled after the financial year 2006. 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

Eino Halonen
President and CEO

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

FOR FURTHER INFORMATION, please contact
Mr Eino Halonen, President and CEO, tel. +358 10 253 2000
Mr Markku Vesterinen, Senior Executive Vice President, tel. +358 10 253 2844 or +358 50 348 3502
Mr Timo Hukka, Chief Investment Officer, tel. +358 10 253 2002 or +358 40 519 0510