2016 mid-year result: LocalTapiola Group's non-life insurance operations grew
• LocalTapiola Group's premium income from direct non-life insurance increased by 1.4 per cent to EUR 702.3 million (EUR 692.3 million). The Group's non-life insurance operations generated a profit of EUR 150.3 million (EUR 196.7 million). The Group's non-life insurance operations generated an overall profit of EUR 158.0 million (EUR 191.5 million). The Group’s combined ratio excluding the expenses due to the technical rate of interest was 87.2 per cent (93.7%) Claims expenses decreased during the review period as a non-recurring provision for claims under motor liability insurance in the amount of EUR 15.8 million was unwound. Excluding this item, the combined ratio would have been 90.0 per cent. The non-life insurance business comprises the combined result of LocalTapiola General and the 20 regional companies
• LocalTapiola General’s operating profit during the review period was EUR 111.3 million (EUR 143.2 million). The overall result was EUR 104.1 million (EUR 115.9 million). The combined ratio excluding the unwinding of discount expenses was 79.1 per cent (96.3%). Excluding the aforementioned non-recurring item attributed to claims expenses, the combined ratio would have been 85.7 per cent.
• LocalTapiola Life recorded an operating profit of EUR 43.7 million (EUR 126.8 million). The decreased profit is a consequence of lower investment returns. The overall result was EUR 47.3 million (EUR 89.7 million).
• LocalTapiola Asset Management Ltd's profit during the review period was EUR 2.0 million (EUR 2.5 million). The capital invested in LocalTapiola funds amounted to EUR 3.6 billion (EUR 3.7 billion).
• LocalTapiola Real Estate Asset Management Group's operating profit was EUR 1.8 million (EUR 1.9 million).
Erkki Moisander, Group President:
“LocalTapiola Group's result for the first half of the year was good. LocalTapiola Life's term life insurance continues to grow. We were also highly successful in getting statutory workers’ compensation insurance transferred to us.
Total premium income from direct insurance policies written by LocalTapiola Group's non-life insurance operations – LocalTapiola General Mutual Insurance Company and its 20 regional companies – increased by 1.4 per cent to EUR 702.3 million (EUR 692.3 million). The Group's non-life insurance operations generated a profit of EUR 150.3 million (EUR 196.7 million).
LocalTapiola Group's solvency was strong as measured by the Solvency II framework, which was adopted at the beginning of 2016. LocalTapiola Life's solvency position (the company's own assets in proportion to the solvency requirement) was almost 2.5 times (247%) the required level, while the solvency positions of the regional companies were between 253 and 401 per cent of the required level. LocalTapiola Life's solvency position was 162 per cent of the required level. As such, the solvency of the Group's life and non-life insurance companies can be considered strong.
We continued expanding our business into health and well-being services in accordance with our lifelong security strategy. For this reason, LocalTapiola's life and non-life insurance companies increased their ownership stake in Pihlajalinna Plc to 23.42 per cent. In the future, we aim to provide our customers with an increasing range of preventive health and well-being services to complement their insurance.
More than 7,000 customers in Finland have taken out Smart Life Insurance, which was launched just over a year ago. The package includes an electronic health check, a self-coaching programme, and an activity wristband and application that measure data related to the user's well-being. LocalTapiola's Smart Life Insurance provides financial security as part of the package. Customers who have taken out Smart Life Insurance have responded to a survey, which has shown that, over a one-year period, the insurance has helped customers to change their lifestyles and live more healthily. Almost 90 per cent of respondents said that they have improved their lifestyles.
We also launched a new insurance policy to cover children falling seriously ill. This insurance safeguards the family's finances and livelihood in the event that a child suffers a serious illness. LocalTapiola offers this cover free of charge for the first year to customers with young children. LocalTapiola wants to be involved in making society healthier and more secure by taking tangible actions that include offering insurance cover for children falling seriously ill, Smart Life Insurance and free training in putting out fires, which is known by the name 'Hero training'."
LocalTapiola General achieved a positive result in terms of net transfers of accident insurance policies
LocalTapiola General’s operating profit during the review period was EUR 111.3 million (EUR 143.2 million). The overall result was EUR 104.1 million (EUR 115.9 million). The change in the difference between fair and book values of investments weakened the overall result by EUR 7.2 million to EUR 27.3 million. The change in the difference between fair and book values during the review period takes account of the business transfer that took place on 30 June 2015, when LocalTapiola General handed over the insurance policies, technical provisions and assets used to cover the technical provisions related to its voluntary insurance portfolio in Greater Helsinki to LocalTapiola Greater Helsinki.
Premium income was EUR 399.0 million (EUR 434.4 million) and premium income from direct insurance was EUR 319.1 million (EUR 359.4 million).
Premium income from statutory liability insurance increased by 0.4 per cent to EUR 141.3 million (comparable figure: EUR 140.8 million). Estimated net transfers during the review period led to a profit of EUR 1.9 million.
LocalTapiola has retained its position as the market leader in motor vehicle insurance with a market share of 31 per cent (31.3% in December 2015). Premium income from motor liability insurance decreased by 0.7 per cent to EUR 130.1 million (EUR 131.0 million). "As the market leader in motor vehicle insurance, one of the most important tasks we will face at LocalTapiola in the second half of the year is to prepare for the new Motor Liability Insurance Act, which enters into force at the turn of the year. In addition, we are making investments in areas such as working capacity services in accordance with our lifelong security strategy," says Jari Sundström, Managing Director.
The combined ratio excluding the unwinding of discount expenses was 79.1 per cent (96.3%). The combined expense ratio decreased by 6.6 percentage points when a non-recurring provision for claims under motor liability insurance was unwound. Despite the difficult investment climate, net return on investment at fair value was 1.8 per cent (3.5%). The company's solvency was strong in accordance with the Solvency II framework, which was adopted at the beginning of 2016. The company's solvency position was 247 per cent of the required level.
LocalTapiola Life grew in term life insurance and group pension insurance
LocalTapiola Life recorded an operating profit of EUR 43.7 million (EUR 126.8 million). Lower investment returns were a major factor in the decreased operating profit. The change in the difference between fair and book values of investments increased the overall result by EUR 3.6 million to EUR 47.3 million (EUR 89.7 million).
Net return on investments at fair value during the review period stood at 2.2 per cent (3.6%). However, investment returns corresponded to objectives despite the turbulent market climate and exceeded the technical rate of interest payable on customers' insurance savings.
"LocalTapiola Life grew as planned during the first half of the year, showing faster growth than the market as a whole in its focus areas of term life insurance and group pension insurance. Investments in improving service availability and launching new services boosted sales and accelerated the growth in the number of customers. Sales of savings and investment products have been hindered by challenging climates for investment and finance, as well as uncertainty over the effects of legislation that supports saving," says Minna Kohmo, Managing Director.
Premium income from term life insurance increased by 6.1 per cent to EUR 46.0 million (EUR 43.4 million), while premium income in the sector as a whole decreased by 1.7 per cent. Premium income from group pension insurance increased by 1.3 per cent to EUR 14.0 million (EUR 13.8 million), while premium income in the sector as a whole decreased by 25.9 per cent.
Premium income was EUR 205.1 million (EUR 224.0 million), corresponding to a year-on-year decrease of 8.3 per cent. The change was primarily due to reductions in unit-linked savings. Premium income in the sector as a whole decreased by 37.7 per cent, according to the Federation of Finnish Financial Services.
The company's solvency in accordance with the Solvency II framework remained good throughout the review period and in light of the targets that were set, standing at 162 per cent.
LocalTapiola Asset Management Ltd made a good profit
LocalTapiola Asset Management Ltd's profit during the review period was EUR 2.0 million (EUR 2.5 million), a good result in a turbulent investment climate. The value of assets managed by the company decreased by 0.9 per cent in the first half of the year, ending the review period at EUR 9.4 billion. In the first half of the year, the capital invested in LocalTapiola funds amounted to EUR 3.6 billion (EUR 3.7 billion).
The company's solvency at the end of the review period was excellent. The ratio of solvency margin and core and primary capital to risk-weighted liabilities was 46.6 per cent (36.2%).
During the first half of the year and over the summer, investment markets were characterised by major fluctuations. According to Tom Liljeström, the Managing Director, market trends have a major impact on the company's result. "Expected return on investment has decreased in practically all asset classes. Preparations should be made for more modest development with higher levels of investment risk."
LocalTapiola Real Estate Asset Management Group made further investments
LocalTapiola Real Estate Group’s turnover grew as planned during the first half of the year by EUR 7.7 million (EUR 7.7 million), a rate of growth 0.6 per cent. "The budgeted turnover for the whole year is EUR 14.8 million and we expect to achieve this," says Vesa Immonen, Managing Director.
Operating profit totalled EUR 1.8 million (EUR 1.9 million) and the profit margin was 23.9 per cent (25.2%).
The quick ratio was excellent, standing at 4.8 (5.1 in December 2015). The cost/return ratio was 0.76 (0.75).
According to Immonen, investment and sales operations were busier than ever. In the first half of the year, EUR 129.9 million (EUR 347.2 million in 2015) was invested in real estate and EUR 178.7 million (EUR 25.6 million in 2015) was recorded in sales.
The figures are unaudited.
LocalTapiola General: Income statement, balance sheet and key figures Jan–Jun 2016, PDF (Attachment)
LocalTapiola Life: Income statement, balance sheet and key figures Jan–Jun 2016, PDF (Attachment)
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