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Advance information on the 2014 Financial Statements of LocalTapiola Group companies: A profitable year
Published: 27-Feb-2015 10:07 am
- LocalTapiola General's combined ratio was 107.8 per cent (88.5 %). When the combined ratio is adjusted to eliminate the effects of changes to the calculation bases for technical provisions, the combined operating ratio was 96.2 per cent (94.5%).
- The combined ratio before unwinding of discount expenses in the Group's non-life insurance business (the regional companies and LocalTapiola General together) improved to 94.4 per cent (97.1%).
- LocalTapiola Life yielded a good result. The life insurance company's operating profit was EUR 85.6 million (EUR 37.0 million) and its overall result was EUR 79.1 million (EUR 44.9 million).
- The customer funds managed by LocalTapiola Asset Management Ltd grew by 5.6 per cent to EUR 9,078.1 million (EUR 8,593.4 million).
- LocalTapiola Real Estate Asset Management Ltd's turnover rose to a record high of EUR 14.3 million.
- LocalTapiola had a successful year in its investment business, producing reasonable returns. The return in relation to risk was particularly good.
- Cooperation with the S Group began in June.
"In 2014, we succeeded in improving the profitability of our non-life insurance business. The combined ratio of the non-life insurance business was 94.4 per cent, which is in line with the strategic goal. The life insurance company yielded a good result. The asset management company had a successful year and the amount of customer assets under management increased by 5.6 per cent," says Erkki Moisander, President of LocalTapiola Group.
The total premium income from primary insurance policies written by LocalTapiola Group's non-life insurance operations – LocalTapiola General Mutual Insurance Company and its 19 regional companies – increased by 3.5 per cent to EUR 1,093 million (EUR 1,056 million). The Group's solvency remained excellent.
"In 2014, we decided to incorporate our group services. LocalTapiola Services Ltd began operating in January 2015. The service company develops and provides centralised services and support functions and provides customer service and claims-handling services. Additionally, we decided to incorporate the businesses in the Greater Helsinki area during 2015," says Moisander.
"In 2014, we laid the foundation for the Group's growth. 2014 was a favourable year in terms of claims, which translated into a good result. The partnership with S Group brought new customers, efficiency measures brought savings and our solvency improved," says Moisander.
S Group and LocalTapiola initiated strategic cooperation in spring 2014. As a part of this cooperation, customers began to accrue S-bonus from their insurance premiums. Additionally, S Bank merged with LocalTapiola Bank to form a new S Bank and LocalTapiola Asset Management sold its mutual fund business to FIM Asset Management Ltd, a subsidiary of S Bank.
LocalTapiola General strengthened its leading position in road traffic insurance
"We strengthened our leadership of the motor liability insurance market. LocalTapiola aims to cross-sell its products and we focused on enabling the good pace of motor liability insurance sales to provide a boost to sales of voluntary insurance," says Jari Sundström, CEO of LocalTapiola General.
"We achieved a good net transfer of statutory non-life insurance policies: measured by premium income, more new customers come over to LocalTapiola than those who left. We were particularly successful in attracting larger customers. However, the challenging economic environment affected the growth of premium income from statutory non-life insurance policies as companies cut their workforces and salaries increased only marginally," says Sundström.
LocalTapiola General's operating profit was EUR 72.3 million (EUR 234.1 million). After eliminating the effect of changes to the calculation bases, which occurred in 2013 and 2014, and the integration costs, which were booked in 2013, the comparable operating profit was EUR 134.6 million (EUR 183.0 million). The overall result was EUR 61.5 million (EUR 222.7 million) and the comparable overall result was EUR 123.9 million (EUR 171.6 million). Changes in the differences between book values and current values weakened the overall result.
Premium income was EUR 585.6 million (EUR 903.6 million*). Premiums written in primary insurance came to EUR 512.7 million (EUR 838.7 million*).
"Premium income was affected by the transfers of insurance policies between LocalTapiola General and the regional companies that took place at the beginning of last year. Due to the transfers, most of the key indicators are not comparable with those of the previous year," Sundström says.
"Claims developed favourably. Driving conditions were better than in previous years and major storm damage was avoided. Claims development was also rather good in statutory non-life insurance, which was a result of reduced economic activity and improved risk selection," Sundström says.
The combined ratio excluding the unwinding of discount expenses was 107.8 per cent (88.5%). During the financial period, changes were made to the calculation bases for technical provisions for pension-like claims outstanding. The technical rate of interest was reduced from 2.1 per cent to 1.8 per cent. There were also changes to the calculation bases for collective provisions and provisions for claims outstanding under patient insurance. After eliminating the effects of the aforementioned items on the combined expense ratio, the comparable expense ratio was 96.2 per cent (94.5%). The effects of changes to the calculation bases and the integration costs have been correspondingly eliminated from the comparable combined expense ratio for the previous year.
The return on capital employed at current value was 4.1 per cent (4.0%).
The company’s solvency capital totalled EUR 1,685.7 million (EUR 1,646.2 million). The solvency ratio (solvency capital in relation to premiums earned) was 307.8 per cent (234.6% before business transfers). The solvency margin was 8.5 (8.2) times the minimum value.
Good result in life insurance
"The result for 2014 was good for LocalTapiola Life. Market share also increased in the focus areas of term life insurance and group pension insurance," says Minna Kohmo, Managing Director of LocalTapiola Life.
"Operational efficiency improved as planned: business expenses decreased and the profits set aside to cover business expenses increased. The result in terms of risk premiums improved significantly, particularly as a result of long-term profitability efforts related to medical expenses insurance."
LocalTapiola Life's operating profit was EUR 85.6 million (EUR 37.0 million). The overall result was EUR 79.1 million (EUR 44.9 million). The change in current and book values weakened the overall result by EUR 6.5 million (improvement of EUR 7.9 million).
Premium income fell by 8.1 per cent to EUR 389.1 million (EUR 423.3 million). The decrease in premium income is due to reduced sales of unit-linked capital redemption contracts and savings life insurance policies in comparison with the previous year. However, premium income increased in the focal areas: premium income from term life insurance increased by 10.8 per cent and premium income from group pension insurance increased by 6.4 per cent.
The amount of claims and pensions paid was EUR 276.9 million, which was 2.2% less than in the previous year.
The return on capital employed at current value was 5.3 per cent (4.6%).
The expense ratio was 120.2 per cent of the total expense loadings (138.3%). If bonus payments had been taken into consideration, the expense ratio would have been 113.3 per cent (131.6%).
The solvency ratio – solvency capital in relation to technical provisions – was 26.3 per cent (23.7%). The solvency margin was 4.0 (3.7) times the minimum value.
Customer assets managed by LocalTapiola Asset Management increased
"The result for 2014 was good for LocalTapiola Asset Management. The customer funds managed by LocalTapiola Asset Management Ltd grew by 5.6 per cent to EUR 9,078.1 million (EUR 8,593.4 million). The result was very good: EUR 8.9 million (EUR 3.7 million). Turnover was EUR 25.3 million (EUR 22.1 million).
"Growth continued throughout the year, particularly among Private Banking customers. The sale of the mutual fund business to FIM Asset Management gave rise to a non-recurring gain. Additionally, investment markets showed signs of recovery, which played a part in ensuring that the result was good," says LocalTapiola Asset Management's Managing Director, Tom Liljeström.
"Since the mutual fund business was sold, LocalTapiola Asset Management has applied for a new operating licence and changed from a fund management company into an investment services firm. Investments in LocalTapiola funds will continue to be managed in accordance with outlooks based on LocalTapiola Asset Management's own analysis," Liljeström says.
During the year, LocalTapiola Asset Management won praise from independent bodies for its mutual funds and the responsibility and customer service of its investment operations. The unaffiliated mutual fund rating agency Lipper selected LocalTapiola's World 80 and Corporate Bond funds as the best Nordic funds in 2014. Scandinavian Financial Research (SFR) conducted a study that selected LocalTapiola Asset Management as Finland's best asset manager in terms of responsible investment. LocalTapiola Asset Management was awarded joint second place in terms of service quality for institutional investors. In the spring, members of the public can attend LocalTapiola Asset Management's investment tour, which has gained considerable popularity among customers, to listen to the company's investment analyses.
Record turnover for real estate asset management
"Turnover grew to a new record. Despite the challenging market environment we succeeded in new investments as well as renting and maintenance," says LocalTapiola Real Estate Asset Management's Managing Director, Vesa Immonen.
LocalTapiola Real Estate Asset Management Group's result improved thanks to the growth in the mutual fund business and the success of rental activities. LocalTapiola Real Estate Asset Management Group increased both its turnover and operating profit compared to the previous year. The Group's turnover rose by 12% to EUR 14.3 million (EUR 12.7 million). The Group's operating profit increased to EUR 3.7 million (EUR 2.5 million).
The market value of the real estate assets managed by the company was EUR 3,170 million (EUR 3,195 million). At the beginning of 2014, management of the indirect real estate investments made by LocalTapiola General and LocalTapiola Life (EUR 337 million) was transferred to the owner companies but new sites were added to the portfolio in almost the same amount. The majority of the growth in the portfolio consisted of new investments in real estate capital funds.
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