2014 was a successful year for Mandatum Life in many areas. The company increased its premiums written, and its unit-linked premiums once again reached a record-high level. During the year, Mandatum Life expanded its operations by establishing fund operations and by acquiring Suomi Mutual's group pension insurance portfolio. At the same time, the company's expense result improved.
Mandatum Life Group's profit before taxes on life insurance operations was EUR 163 million (2013: 153). Comprehensive income before taxes, taking into account changes in the market value of the investment assets, was EUR 149 million (220). In line with expectations, the expense result continued to grow, and stood at EUR 20 million (15). The risk result was EUR 23 million, which is close to the level of the previous year (24).
The return on investment assets at fair value was 4.6 per cent (7.1). The sharp drop in low-risk, long-term interest rates in 2014 was a very negative development for Mandatum Life. Interest rates have continued to weaken in early 2015. The low interest rate level, coupled with the company's with-profit technical reserves, is a substantial risk factor for the company's earnings performance in the years ahead.
Mandatum Life Group's premiums written on its own account grew 4 per cent to EUR 1,105 million (1,063). The main sales channels, Danske Bank and Mandatum Life's Wealth Management unit, showed a strong sales performance, and unit-linked premiums written reached an all-time high of EUR 961 million (909). Premium income from the Baltic countries amounted to EUR 40 million (32). Mandatum Life's market share in Finland was 17.9 per cent, in terms of both overall market share (19.3) and share of unit-linked insurance policies (19.2). The company's market share in the Baltic countries was 11 per cent (10).
Mandatum Life Group's technical provisions increased to EUR 10.4 billion (8.5). Technical provisions related to unit-linked insurance grew to EUR 5.3 billion (4.6) by the end of 2014. The technical provisions of Suomi Mutual's group pension insurance portfolio, which was transferred to Mandatum Life on 30 December 2014, amounted to EUR 1,337 million, as a consequence of which the with-profit technical provisions also increased in 2014, amounting to EUR 5.1 billion (3.9) at year-end. Excluding the transferred insurance portfolio, the with-profit portfolio decreased as expected by EUR 199 million in 2014.
In 2014, Mandatum Life paid out a total of EUR 880 million in various claims of which EUR 320 million was pensions to some 61,000 pensioners.
Mandatum Life Group's solvency capital amounted to EUR 1,403 million (1,403), which is more than five times the minimum requirement of the Solvency I regulations. With the sharp growth in the technical provisions, the solvency ratio decreased to 22.9 per cent (27.6). New solvency regulations (Solvency II) governing the insurance sector will enter into force on 1 January 2016. In its solvency analyses, Mandatum Life will apply the transition provisions enabled by the new regulations; taking these provisions into account, in 2014 the company's assets clearly exceeded also the future capital requirements.
In the course of 2014, Mandatum Life took two significant strategic steps that are expected to improve the company's future outlook. The transfer of Suomi Mutual's group pension insurance portfolio is expected to have a positive earnings impact. It will additionally bring major new customer potential to Mandatum Life in the form of more than 2,000 insurance policies and 30,000 insured, and will reinforce the company's leading position as a provider of life insurance to companies. The second strategic step was the launch of fund operations by establishing a fund management company in Luxembourg. The company's wealth management services are provided to customers primarily through insurance contracts, but now institutional investors also have the opportunity to invest directly in Mandatum Life's funds.
Statement by CEO Petri Niemisvirta:
"2014 was a year of positive changes for Mandatum Life. We realised a significant group pension insurance portfolio transfer from Suomi Mutual, we established fund operations and, all in all, we met our customers' needs through a number of development projects. Our investments to improve customer satisfaction and the customer experience will continue.
Both Danske Bank's and our own distribution channels succeeded in their sales tasks, which resulted in higher premiums written for our core businesses. The expense result for our operations in Finland surpassed the EUR 20 million mark for the first time. Our ongoing strict cost discipline measures are to thank for that, in addition to the positive development seen in recent years in the customer assets managed by us, which has steadily increased our fee and commission income. We are on a solid foundation for highly successful business, and I can look forward to the rest of the year with optimism."
Key figures 2014
Premiums written, own account: €1,105 million (1,063)
Profit before taxes: €163 million (153)
Return on equity: 11.4% (18.3)
Expense ratio: 104.1% (106.6)
Solvency ratio: 22.9% (27.6)
Return on investments: 4.6% (7.1)
Average number of staff: 509 (541)
For a full and detailed account of Mandatum Life's result, please visit: www.sampo.com/result
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