Second successive year of good performance for Suomi Mutual

In 2004, the consolidated operating profit of the Suomi Mutual group was EUR 262 million (in 2003, the operating profit was EUR 418 million. The profit for the financial year was EUR 119 million (the profit for the financial year 2003 was EUR 228 million). The results of investment operations remained favourable, which in particular had a positive effect on the good performance. Following the implementation of the new operational model, the company initiated long-standing preparations for distributing new supplementary special benefits to customers. This had a negative impact on the result.

At the end of 2004, the consolidated solvency capital was EUR 951 million (in 2003, EUR 820 million) and the solvency ratio was 16.1 per cent (14.5 per cent).

Slow growth in premiums written

The consolidated premiums written increased from EUR 385 million to EUR 391 million. The company did not reach its targets for underwriting new business, which was due to the preparation of the new operational model. However, the development of domestic premiums written corresponded relatively well to the market trend. The market share calculated on the basis of the domestic premiums written was 12.8 per cent, whereas the corresponding figure in 2003 was 12.9 per cent. Suomi Mutual managed 21.0 per cent of all insurance savings in Finland. A year earlier, the corresponding figure was 21.9 per cent, which means that the company's market share showed a downturn by this indicator.

Cost efficiency improved

The consolidated operating expenses remained on the year 2003 level, at EUR 62 million. Measured by the expense ratio, the operational efficiency improved significantly. The expense ratio of domestic operations declined from 114 per cent to 100 per cent.

Good results from investment operations

The investment portfolio at current values of the Suomi Mutual group stood at EUR 6 675 million at the end of 2004, which was EUR 131 million more than at the end of 2003. Shares including all fund units represented 33 per cent (29 per cent) of the investment portfolio. Various interest-bearing instruments accounted for 60 per cent (61 per cent) and land and buildings for 7 per cent (10 per cent) of the portfolio. The portion of land and buildings declined in 2004 as a result of completing the disposal of the company's residential buildings, which had been launched in 2003.

Net investment income declined from EUR 665 million to EUR 532 million. Return on investments at current values was 8.6 per cent (8.7 per cent in 2003). The performance was good, although it showed a slight downturn owing to the preparation for the portfolio transfer based on an agreement signed earlier with Pohjola. The assets covering the technical provisions transferred mainly comprised instruments equivalent of cash. Therefore, Suomi Mutual already started to lower the equity holdings of its portfolio at the end of summer.

New operational model was implemented

In 2004, Suomi Mutual and Pohjola signed an agreement on a new operational model. Accordingly, Suomi Mutual ceased underwriting new business at the beginning of 2005. At a sale price of EUR 23 million, an insurance portfolio with technical provisions of over EUR 1.2 billion was transferred to Pohjola Life on January 1, 2005. Following the transfer, Suomi Mutual's solvency ratio increased to 19.5 per cent.

The company's solvency capital will be distributed to the policyholders insofar as it is no longer needed for covering the company's risks. The company's Board of Directors has prepared for a model to be used for granting new special benefits. The model will be presented in the Annual General Meeting to be held in the spring, after which policyholders will be informed. On the basis of old resolutions, on the company's Articles of Association, and on legislation, these new supplementary special benefits will mainly be granted to the customers whose policies have been valid at Suomi Mutual since July 1, 1997.

In connection with the implementation of the new operational model, Suomi Mutual increased its holding in Pohjola to almost 50 per cent of Pohjola's share capital.

Suomi Mutual outsourced the management of most of its insurance and investment portfolios. From the beginning of 2005, Suomi Mutual has only 14 employees in Finland.

Suomi Mutual Life Assurance Company

Eino Halonen
President and CEO

ATTACHMENT Financial development of the Group

FOR FURTHER INFORMATION please contact

Mr Eino Halonen, President and CEO, tel. +358 10 559 2000
Mr Markku Vesterinen, Senior Executive Vice President, tel. +358 10 559 2844 or +358 50 348 3502