OP Life Assurance Company

Transcription

Annual Report 2008
OP LIFE ASSURANCE COMPANY • ANNUAL REPORT 2008
Contents
From the Managing Director / 3
The board of directors’ report for 2008 / 5
Income statement – parent company / 16
Balance sheet – parent company / 17
Income statement – group / 18
Balance sheet – group / 19
Cash flow statement – parent company / 20
Cash flow statement – group / 21
Notes to the financial statements / 22
Accounting principles / 22
Premium income / 25
Investment income / 27
Benefits paid and operating expenses / 29
Investments / 30
Property investments / 36
Unit-linked insurance / 37
Shareholders’ equity / 41
Solvency and risk management principles at OP Life Assurance Company Ltd. / 42
Key ratios / 51
Signatures to the financial statements and Board of Directors’ report / 52
Auditor’s report / 53
OP Life Assurance Company is a company wholly –owned by
the OP Pohjola Group.
The Owners 31.12.2008
OP Bank Group Central Cooperative
Pohjola Bank
160 member cooperative banks
Holding (%)
76
9
15
PB 308
00101 Helsinki
Telephone 010 252 010
Telefax 010 252 7893
From the Managing Director
Customer operations in order,
the financial crisis weakened
the result
sult, it is essential to focus on the basics in OP
Life Assurance Company’s operations; that is,
looking after our customers’ needs. The need for
risk insurance will increase. The average deficit in
the life insurance cover of Finnish people is EUR
135,000 (Government Institute for Economic Research 2008). Shortcomings in our statutory pension system create room for individual pension insurance. Employee benefit schemes are increasing
every year. These form a firm ground for facing a
difficult year and focusing our strength more efficiently on serving our customers. After all, OP Life
Assurance Company is, in addition to its 600,000
insureds,managing more than 300,000 insureds of
Suomi Mutual.
I wish to thank all of our customers and partners for the confidence they have shown during
the difficult year.
The company’s owners, member cooperative banks, Pohjola Bank and OP-Pohjola Group
Central Cooperative also deserve to be thanked.
Thanks to their good solvency, the owners created
operational conditions for life insurance in a difficult market position.
I also wish to thank our staff and sales personnel, as well as my predecessor Jukka Ruuskanen
who turned the company into the leading life insurance company in Finland in ten years.
Difficulties in the financial industry were directly reflected on OP Life Assurance Company in
2008. The extent of fluctuations in market values, increases in credit risk margins and the steep
fall on the share market were of historic proportions. Investment values fell sharply and weakened the company’s result to the lowest it had
ever recorded.
Customers’ confidence in OP-Pohjola Group is
very strong. OP Life Assurance Company’s market position remained strong and the company is
clearly the largest life insurance company in Finland with a market share of 29 per cent (31) in premium income.
Even though the company’s result on investment operations collapsed, it did not affect the interest-yield part paid to customers. Depending on
the product, customers received an overall return of
3.5–4.5 per cent on their insurance savings.
In unit-linked insurance products, the decline
in the values of investment funds was directly visible as a fall in the values of customers’ insurance policies. However, insurance savings comprise very long-term operations and the recovery
of the values can be expected in the future. When
the investment horizon is long, we should be patient and wait for the market to settle down.
February 2009
Financial year 2009 will also
be difficult
Jarmo Kuisma
Managing Director
as of 1 January 2009
Even though the worst storm of autumn 2008 has
subsided, the hard times are not over yet. As a re-
3
OP Life Assurance Company’s key figures, EUR million
2004
2005
2006
2007
2008
Premium Income
Insurance savings on 31 Dec.
Savings from unit-linked insurance
Savings from interest-bearing insurance
Share of unit-linked insurance
from insurance savings, %
Technical interest credited to customers
Bonuses paid to customers
Benefits paid to customers
Solvency capital
Minimum amount of solvency capital
Market share of premium income
478
2,655
614
2,042
640
3,312
1,017
2,294
867
5,563
2,084
3,479
859
6,026
2,373
3,653
767
5,358
1,610
3,748
23 %
65
25
161
266
89
17 %
31 %
72
22
199
333
104
20 %
37 %
114
49
458
509
182
28 %
39 %
114
51
558
451
190
31 %
30 %
119
21
730
236
189
29 %
OP Life Assurance Company’s result analysis, EUR million
2004
2005
2006
Premium income
477,6
638,5
658,1
Net income from investments +
increases in value and their adjustments
166,3
301,2
306,5
Benefits paid
-161,4
-198,7
-295,1
Changes in technical provisions before bonuses
and changes in equalisation provision
-410,4
-658,8
-571,7
Operating expenses
-21,8
-25,0
-24,8
Insurance technical result before bonuses
and changes in equalisation provisions
50,4
57,3
73,0
Other income and expenses
0,0
0,0
0,0
Operating profit
50,4
57,3
73,0
Changes in equalisation provisions
0,0
-0,1
-0,1
Bonuses
-25,1
-21,9
-36,6
Profit/loss before appropriations and taxes
25,3
35,3
36,3
Income taxes and appropriations
-4,4
-10,4
-9,1
Profit/loss for the period
20,9
24,8
27,2
4
2007
2008
843,8
738,3
225,7
-559,8
-1,091,0
-728,9
-402,4
-43,0
677,2
-43,3
64,2
-447,7
3,1
67,3
6,1
-441,6
-1,5
-8,8
57,0
-1,7
-11,5
-454,8
-15,1
41,9
76,0
-378,8
The board of directors’ report
for 2008
Development in the life
insurance industry and
operating environment
tive development in the premium income in the
life insurance industry, decreasing by 6.3 per cent
from last year. However, the decline was smaller than the previous year’s fall of nearly nine per
cent. In 2008, premium income stood at EUR 2.6
billion. The financial crisis affected the premium
income of unit-linked life insurance policies, decreasing by 50.1 per cent from the previous year.
The life insurance industry was strained by the
financial crisis which started the previous year.
2008 was the second consecutive year of nega-
Premium income in the industry
2007
2008
Change
2007
2008
Risk-based insurance
241
274
13.3 %
Employees’ group life insurance 40
40
0.5 %
Life insurance
Technical interest
449
490
9.2 %
Unit-linked
992
495
-50.1 %
68.9 %
Total
1,441
985
-31.7 %
Capital redemption policies
Technical interest
48
8
-83.8 %
Unit-linked
26
172
560.1 %
35.3 %
Total
74
179
143.2 %
Individual pension insurance
Technical interest
258
253
-1.7 %
Unit-linked
465
500
7.4 %
64.4 %
Total
723
753
4.2 %
Group pension insurance
Technical interest
218
328
50.6 %
Unit-linked
50
53
6.9 %
18.6 %
Total
268
382
42.5 %
Total all
Technical interest
1,253
1,391
11.1 %
Unit-linked
1,533
1,220
-20.5 %
55.0 %
Total
2,786
2,612
-6.3 %
5
50.2 %
95.7 %
66.4 %
14.0 %
46.7 %
The share of unit-linked insurance from the total
premium income decreased from 55.0 per cent to
46.7 per cent. The premium income of unit-linked
capital redemption policies increased significantly. Similarly, the premium income of unit-linked
pension insurance increased, although substantially less. In addition, the premium income of traditional risk-based life insurance and group pension insurance increased significantly.
The financial crisis did not have any impact on
the sale of individual pension insurance policies
and capital redemption policies. The sale of pension insurance increased by 3.9 per cent to 74,000
policies. The sale of capital redemption policies increased by nearly tenfold, but their total share is
very low – only about 1,000 policies within the entire industry in 2008.
The amount of life insurance savings decreased
by 8.5 per cent and stood at EUR 27.7 billion, of
which unit-linked insurance comprised 24.0 per
cent (29.5 in 2007). The decrease was almost solely caused by the strong decline in the market value of unit-linked insurance.
The financial crisis had a profound impact on
the entire insurance industry, reducing the financial strength of companies. The solvency of statutory employment pension insurance companies
was improved through a law amendment, and they
did not need to abandon their risk-carrying share
investments to the extent as would have been the
situation without the amendment. Life insurance
companies have not been provided with any relief
through laws or authority regulations, and the financial strength of the companies has decreased
significantly, even through the means enabled by
valid laws have been exercised for strengthening
the solvency margin.
The new Insurance Companies Act entered into
force at the beginning of October 2008. With regard to life insurance, the act included two significant reforms. After the entry into force of the new
act, solvency is reported to authorities using the
traditional statements and new control reports that
predict financial strength. The new calculations
approach the Solvency II standard being prepared
in the European Union. The Solvency II Directive
will enter into force in 2012 at the earliest. The
second reform related to life insurance is the more
thorough consideration of the principle of equity.
Company’s operations in 2008
OP Life Assurance Company continues to be a
clear market leader measured by premium income.
The company strengthened its market position at
the beginning of the year but the strong decline in
property values which started in October forced
the company to slow down its sales at the end of
the year, particularly regarding life insurance. This
resulted in a fall of the market share of the entire
year’s premium income to 29.3 per cent (30.8).
Insurance operations remained profitable. Even
though less premium income was collected than
the previous year and the rate of sales commissions was increased, the total underwriting result
remained at the previous year’s level.
During the reporting year, the company invested in new insurance systems. The project was
started with Profit Software during spring 2008 as
MARKET SHARE OF PREMIUM INCOME AND
INSURANCE SAVINGS
%
35
30
25
20
15
10
5
0
2004
2005
2006
2007
2008
Premium income
Insurance savings
6
The company’s operating profit without bonuses stood at EUR -441.6 million (67.4). The impact
of bonuses on the result totalled EUR 11.5 million
(8.7). Guaranted interest on insurance amounted
to EUR 118.7 million (114.8).
The company’s underwriting result continues
to produce a positive result. Total result, including the management of Suomi Mutual insurance
portfolio, stood at EUR 54.4 million in 2008 (53.0).
The highly negative result was caused by impairment in investments. The impairment (a total of EUR -425.1 million) mainly comprised unrealised decreases in value. Realised sales losses
amounted to EUR -153.2 million and sales profit
stood at EUR 74.6 million. The sales losses were
mainly caused by sales and currency hedging performed for reducing the share risk.
The company’s balance sheet stood at EUR
5,685.4 million at the end of the year, as it was
EUR 6,563.9 million at the end of the previous year.
The fall was mainly caused by the decrease in value of unit-linked technical provisions and the assets backing up liabilities.
OP Life Assurance Company acquired a software
package. The operations have used their resources significantly in participating in the integration
of the new system and the design of new products. A significant part of the company’s portfolio will be transferred to the new system in stages
over several years.
The management of the investment operations was challenging in the negative market situation during 2008. Only some of the company’s categories in the investment allocation produced positive figures. Negative earnings caused
the largest loss in the company’s history and the
share capital was strengthened for securing solvency. The majority of owners took part in new
issues and the company’s solvency remained at
the statutory level, although below the company’s target values.
In addition to the management of the company’s insurance portfolio, the company is, within
the scope of a separate management agreement,
responsible for the management of Suomi Mutual
insurance portfolio and benefits operations.
OP Life Assurance Company’s
result and balance sheet
The company’s financial statements and consolidated financial statements have been prepared according to Finnish financial statement practices.
The company’s result is consolidated with OP Pohjola Group’s result following the International Financial Reporting Standards (IFRS).
The company’s result was strongly negative
due to the general crisis in investment operations.
Earnings before taxes amounted to EUR -454.8 million (57.0). The result entered in equity after taxes
stood at EUR -378.8 million (41.9) Changes in valuation differences before taxes amounted to EUR
-105.7 million (-56.5). The result with fair value
was -560.5 million (0.5).
SOLVENCY MARGIN, EUR million
SOLVENCY RATIO, per cent
14 %
500
450
12 %
400
350
10 %
300
8%
250
6%
200
150
4%
100
2%
50
0
2004
2005
2006
Minimum solvency capital
Solvency capital
Solvency ratio
7
2007
2008
0%
Company’s solvency
INSURANCE PORTFOLIO, ITEMS
650
The company’s solvency margin amounted to EUR
235.6 million at year-end (431.7). The solvency
margin includes the capital value of EUR 24.7 million of future surplus defined according to the instructions issued by the Insurance Supervisory Authority, and tax receivables worth EUR 76.5 million recognised due to the loss made. The statutory minimum solvency margin was EUR 189.1 million (190.2).
At the end of the reporting year, the company’s
solvency ratio was 6.2% (10.4%). During the reporting year, the company increased its share capital twice by a total of EUR 260 million.
The Board of Directors has the general meeting’s authorisation to increase the share capital further by EUR 100 million, if required. In addition,
shareholder agreements were made at the end of
the year, providing OP Bank Group Central Cooperative with the possibility of investing in the company’s unrestricted equity. The new Insurance Companies Act enabled these proceedings at the beginning of October.
The company develops its ALM management
process together with its main owner, OP Bank
Group Central Cooperative. In order to improve
141 000
3 000
184 000
Savings insurance
the efficiency of development, a management unit
for the solvency of insurance organisations was established within OP Bank Group Central Cooperative, to which the company’s actuary function belongs in the matrix.
Premium income and insurance
portfolio
OP Life Assurance Company’s premium income
decreased by 10.7 per cent to EUR 766.7 million
(858.7). The share of unit-linked insurance from
the premium income of savings products was 46.6
per cent (58.0). The share of unit-linked premium
income from the full premium income decreased
from EUR 462.4 million to EUR 317.4 million.
Savings insurance produced the majority of
the company’s premium income, i.e., EUR 381.8
million (530.1). The premium income of individual pension insurance remained close to the previous year’s level, amounting to EUR 152.3 million (152.1). The premium income of group pension insurance nearly doubled to EUR 126.4 million (65.7).
PREMIUM INCOME, EUR million
900
800
700
600
500
400
300
200
100
0
2004
2005
2006
2007
210 000
2008
Unit-linked
Interest-bearing
8
The majority of the company’s premium income is accrued to insurance taken out by private
people. They represented 78.0 per cent of all shares
in the previous year and 72.1 per cent in the reporting year.
A total of 19,705 new individual pension insurance policies were sold during the year (19,782).
At year-end, the company’s insurance portfolio consisted of some 540,000 policies (500,000).
The number of policies increased by 7.9 per cent
during the reporting year (11.3). The number of individual pension insurance policies increased by
9.0 per cent (12.5) to 184,000 policies (169,000).
The portfolio transfer approved in the 2007
general meeting was carried out on 1 January 2008
and 1 April 2008.
the year (221.0). At the end of the financial period, there were 6,360 individual pensions in payment (4,829). EUR 48.7 million of pensions were
paid during the year (37.2). The figure includes
EUR 17.2 million (14.3) of pensions paid based on
group pension insurance.
Operating expenses
Operating expenses totalled EUR 56.1 million
(53.2). During the reporting year, a total of EUR
26.4 million (26.5) of sales commissions were
paid to sales channels. Operating expenses without items allocated to benefits, investment operations and service sales amounted to EUR 43.3 million (43.0). Cost ratio was 75.2 per cent (73.4).
During 2008, a sales commission reform was
carried out where the structure of sales commissions was changed in a more rewarding direction.
Similarly, OP Pohjola Group implemented the Focus project where non-life insurance salespersons
employed by Pohjola Insurance were transferred
to the service of member cooperative banks. The
project also required changes in the reward system related to the life insurance portfolio.
Benefits paid
During the financial period, the company paid EUR
731.5 million in benefits (560.1). The share of surrenders from the benefits paid was EUR 332,2
million (204.5), increasing by 62.4 per cent. EUR
244.6 million of savings amounts matured during
Investment operations
%
88
86
84
82
80
78
76
74
72
70
68
66
The objective of OP Life Assurance Company’s investment operations is to achieve competitive and
stable long-term return at a reasonable risk level.
The versatile structure of the investment portfolio
and the diversification of investments are aimed
at minimising the impact of market disruptions
on the company’s result and its customers’ insurance return. During the reporting year, the changes in the market were so exceptional that the diversification of investments did not produce the
intended benefits.
Investments are managed according to the investment plan ratified annually by the company’s
OPERATING COST RATIO
2004
2005
2006
2007
2008
9
DISTRIBUTION OF INVESTMENTS
2008
Interest investments
Bonds
24.9%
Other money market instruments 14.5%
Mutual funds
33.9%
Alternative investments
0.4%
Shares and participations
Shares and funds
5.2%
13.0%
Properties
8.1%
Fixed-income instruments
Money market instruments
Property investments
100.0
2007
29.9%
2.1%
31.7%
0.3%
17.1%
12.2%
6.6%
100.0
The book-keeping and market value of investments which served as cover for unit-linked insurance was EUR 1,614.1 million at the end of the
year (2,374.0).
The net return from investment operations
of EUR -1,091.0 million over the reporting year
(225.7) includes EUR -708.3 million (96.8) of impact of investments which serves as cover for unitlinked insurance.
The return of investments did not meet the targets set in the investment plan. The return was
-11.4 per cent (2.6). The return fell 0.8 percentage
points behind its benchmark. The realised volatility was 4.3 per cent (2.2), falling below the volatility of the benchmark.
The result of investment operations (excluding
the impact of investments which serves as cover
for unit-linked insurance) includes a total of 86.1
million (116.3) of sales gains and returns on impairment from previous financial periods.
The company’s investment plan allows the use
of derivatives that were exercised for protection
against currency and share risks and as non-hedging instruments in the management of the interest risk.
At the end of 2008, the Board of Directors ratified a temporary investment plan for 2009 where
the risk level is kept at a low level. The objective is
to specify the investment plan during spring 2009.
Board of Directors. Predictions concerning the
company’s technical provisions and benefits paid
are taken into account when preparing the investment plan. With regard to liquid investments, the
plan defines benchmark where the investment return is compared.
The operative management of the investment
operations was carried out by the OP Central Bank
Group Cooperative’s investment unit for insurance
organisations. The unit was terminated at the end
of the year. Responsibility for investment operations will be tied more clearly to the company’s
business operations and, as a result, a Chief Investment Officer will be hired to the company. The
company purchases investment risk management
services from the OP Bank Group Central Cooperative’s solvency management unit for insurance
organisations.
During 2008, share investments were hedged
and changes were carried out following the Board
of Directors’ authority.
The investments which served as cover for insurance with guaranteed interest was EUR 3,888.2
million at fair value at the end of 2008 (4,192.4). It
was divided as follows:
10
Determination of fair values using
the mark-to-model method
from the previous year. The share of unit-linked
insurance from the technical provisions was 29.6
per cent (38.7).
Non-linked technical provisions stood at EUR
3,829.4 million (3,758.8) and unit-linked technical provisions amounted to EUR 1,610.2 million
(2,373.2) at year-end. EUR 21.4 million (19.7) has
been entered in the equalisation reserve.
It was difficult to find a market price for some
bonds because no liquid market existed. As a result, a group of bonds have been valued using
model prices. The total amount of the nominal values of these bonds was EUR 364.5 million. Their
price received from the market was EUR 288.4 million at year-end. Their price following the model
was EUR 322.1 million.
The pricing model has been executed together
with external consultants and auditors.
The prices obtained using these models are
used in the assessment of solvency, eligible funds
and income from investment assets. However, the
market prices have been used in accounting. Defining the fair values by means of these models has
not affected the accounts, because bonds are recognised and valued at amortised cost.
Technical provisions 2008
The company’s technical provisions amounted to
EUR 5,439.6 million at year-end (6,132.0). The
technical provisions decreased by 11.3 per cent
70 %
60 %
50 %
4 000
40 %
30 %
3 000
20 %
10 %
2 000
0%
1 000
0
-10 %
2004
2005
2006
2007
2008
47.6%
21.7%
Pension insurance
14.0%
7.0%
7.1%
0.2%
Capital redemption policy
1.1%
0.7%
Other
0.6%
0.0%
Total
70.4%
29.6%
According to the Insurance Companies Act, life insurance companies are to distribute an equitable
part of the surplus produced by insurance to policies that, according to agreement terms, are entitled to bonuses.
OP Life Assurance Company’s Board of Directors has, in compliance with the Insurance Companies Act’s principle of equity, approved to apply
the following objectives to the insurance policies
that, according to their terms, are entitled to bonuses provided on the basis of the surplus accumulated by the insurance portfolio.
80 %
5 000
Life insurance
Targets for the distribution of
bonuses
TECHNICAL PROVISIONS, EUR million
6 000
Unit-linked
Guaranteed interest on insurance with insurance income is determined according to the year
of taking out the insurance throughout the insurance period.
Bonuses and their impact on the company’s result are described in the notes.
Technical provisions, guaranteed
interest and bonuses
7 000
Non-linked
-20 %
Interest-bearing
Unit-linked
Growth %, prev year
11
Customer bonuses are not differentiated according to customer groups, only according to
products. For example, identical policies of private persons and companies produce similar bonuses. Not prevented by this, deviating proceedings can initially be agreed upon with regard to
single agreements.
Customer bonuses and other bonuses can be
granted in various forms. Options include added
savings with varying character, an increase in risk
cover, a reduction in premiums, a “dividend” paid
in money or other valuable benefit.
Customer bonuses and other bonuses are subject to consideration. The company grants them if
the insurance portfolio have produced a surplus.
Assets accumulated from insurance premiums are invested so that a good return is aimed
at. However, this is limited by a risk which is
measured using variables that represent fluctuation in return and the company’s risk-bearing
capacity. Interest promised for insurance savings
is first paid from the return, i.e., guaranteed interest. If any profit remains, bonuses are paid to
customers from the surplus and return is paid to
the owner as a response to the owner having tied
assets to insurance operations. If the company’s
solvency needs to be strengthened, some of the
surplus is left in the company’s balance for securing undisturbed payment of promised insurance benefits.
When aiming at a good return, the result will
vary from one year to another. Customer bonuses
will also vary correspondingly. OP Life Assurance
Company is to alleviate the fluctuation in customer bonuses by evening out the bonuses from profitable and unprofitable years. As a result, the legal requirement for the continuity of the bonus level is followed. This will also advance the maintenance of solvency.
Ordinary life insurance and other risk insurance are priced in a sufficiently securing manner.
This will ordinarily produce a risk surplus. As a result, benefits larger than promised can be paid or
lower premiums charged the following year.
Guaranteed interest ranges from 4.5 per cent
to 1.5 per cent depending on the granting period and insurance type. The company’s objective
is that the total interest credited does not depend
on guaranteed interest which will be credited in
any case throughout the validity of the insurance.
Long-term and tied savings, such as pension
insurance, are compensated for more than shortterm insurance savings sensitive to surrender.
Management of risks and
solvency, and the company’s
risk position
The objective of risk management is to support the
achievement of the objectives set in the company’s
strategy by controlling that any risks taken or faced
by the company are in the right proportion to the
company’s risk tolerance. The task of risk management is to identify the threats that could endanger
OP Life Assurance Company’s profitability or solvency, or that could have an adverse impact on
the company’s operational conditions or the fulfilment of its strategy. The company’s future result
conditions and capital structure, together with effective risk management and the owners’ commitment towards the company’s operations, will secure the company’s risk tolerance.
The company’s Board of Directors ratifies the
solvency management principles annually, on the
basis of which the company’s risk management is
guided. In addition, separate operating principles
have been prepared for the risk management of the
company’s investment operations when handling
the investment plan.
The company’s product selection covers all insurance needs of private and corporate custom-
12
ers. Insurance risks are limited through the selection of risk, sufficiently concervative technical basis and reinsurance.
The most significant risk included in technical
provisions is the guaranteed interest requirement
of insurance with interest income and related interest risk. The average future duration of nonlinked technical provisions is less than 10 years.
The largest investment risk is the market risk,
including the value change risk and interest risk.
These risks are prepared for allocating investments into different categories, or instruments,
both geographically and by industry. The value
change risk is measured through the expected
risk of share and interest investments. The interest rate risk is monitored by means of modified
duration in relation to the duration of the reference portfolio.
The investment market was exceptionally challenging in 2008. Market volatility increased significantly, while negative correlations of different categories vanished occasionally. The realised risk of
the company’s investments increased from 2.2 per
cent to 4.3 per cent.
Valuations on the stock market decreased significantly. For example, OMX Helsinki Cap decreased by 47.3 per cent and Eurostoxx 50 by 44.4
per cent. At the same time, the stock market risk
nearly doubled as the average volatility increased
above 40 per cent on almost every market.
The year was also difficult for alternative investments. Particularly, the return of hedge funds
remained at a historically low level, at about -24
per cent. These investments did not produce the
benefits of diversified risks during the financial
year.
A significant decrease occurred in interest rate
levels but the credit risk margins were high, having an impact on all interest investments with loan
risks.
For risks, the company has assets exceeding the liabilities equalling the solvency margin.
However, the statutory minimum solvency margin represents the company’s actual risks poorly (Solvency I). The new, more risk-related Solvency II standard will only be introduced after
a few years, but the new Insurance Companies
Act has already prescribed an early warning report which reacts more sensitively to risks. On
the basis of this, expanded solvency margin and
its objective value will be established which, as
a concept, is close to the concept of economic
capital. During 2008, the company has prepared
early warning report and, above all, developed
this reporting.
The company’s Board of Directors receives regular reports on the company’s risks and the development of the risk indicators.
Relating to risks and risk management, notes to
the financial statements have been prepared, describing the general principles of the company’s
solvency and risk management, the responsibilities and supervision of risk management, organisation and the measurement and indicators or risk
tolerance.
Personnel
The company employed an average of 146 (136)
people. At the end of 2008, the company’s personnel consisted of 141 people, of which four were
fixed-term employees. At the end of the year, 134
people were present.
The company acts in close cooperation with
OP Bank Group Central Cooperative’s departments and subsidiaries. The company has also outsourced some of its functions to OP Bank Group
Central Cooperative.
OP Life Assurance Company applies the salary
and incentive systems agreed upon within the OP
Pohjola Group. A short-term result bonus is paid
to the personnel if the agreed annual indicators set
for the operations are met. Long-term rewards include payments to the personnel fund and bonus-
13
es for the management according to the principles
agreed upon in advance.
A work satisfaction survey is conducted annually for the entire personnel in the company. According to the 2008 survey, the working atmosphere was at a good level. The personnel’s work
satisfaction index calculated from the responses
was 3.69 (3.97, scale 1–5).
The Annual General Meeting ratified that the
Board of Directors consists of nine members. At
the end of the reporting year, the Board members
were the following:
Tony Vepsäläinen, President, OP Pohjola Group
Central Cooperative,
Chairman of the Board of Directors
Harri Nummela, Senior Vice President, OP Bank
Group Central Cooperative,
Vice Chairman of the Board of Directors
Jussi Huttunen, Senior Vice President,
Helsinki OP Bank plc
Sini Kivihuhta, Client Relations,
Ilmarinen Mutual Pension Insurance Company
Harri Luhtala, CFO,
OP Bank Group Central Cooperative
Hannu Routamaa, Senior Vice President,
Tampereen Seudun Osuuspankki
Helinä Saarela, CIO,
Oulun Osuuspankki
Mikael Silvennoinen, CEO,
Pohjola Bank plc
Jarmo Somero, President,
Ylivieskan Osuuspankki
Ownership and changes in the
Group structure
At the end of the year, the shareholders of OP Life
Assurance Company included 160 member cooperative banks, Pohjola Bank plc and OP Bank
Group Central Cooperative.
OP Life Assurance Company is part of the OP
Bank Group Central Cooperative Group. Its ownership of the company’s shares was 76 per cent,
while Pohjola Bank owned 9 per cent and the remaining 15 per cent was divided between different member cooperative banks. OP Bank Group
Central Cooperative slightly increased its share
from the previous year through new issues.
The company has a total of 559,357 shares that
all represent an equal number of votes in the general meeting.
The Board convened 16 times during the year.
In addition to the Annual General Meeting,
a extraordinary general meeting convened two
times. The meetings were held on 21 May 2008 and
28 October 2008, both deciding upon an increase
in share capital. The latter meeting also amended
the articles of association and authorised the Board
of Directors to decide on any new share issue.
The company’s Managing Director was Jukka
Ruuskanen until 31 December 2008 and the Deputy Managing Director was Jarmo Kuisma until
31 December 2008. Jarmo Kuisma continued as
the Managing Director starting on 1 January 2009.
The company’s chief actuary was Onerva Savo
lainen, SHV.
Administration
The company’s administration is determined on
the basis of the regulations of the Insurance Companies Act and the Companies Act, as well as the
articles of association ratified for the company.
The general meeting which exercises the highest power of decision held the Annual General
Meeting on 26 March 2008. The meeting agenda
included all issues to be handled in the Annual
General Meeting according to the articles of association.
14
Auditors
Board of Directors’ proposal on
the distribution of profit
The company’s auditors are KPMG Oy Ab, Authorised Public Accounting Organisation, and Timo
Nummi, Authorised Public Accountant. The chief
auditor issued by KPMG was Mikko Haavisto, Authorised Public Accountant.
Deputy auditors were Eija Kauppi-Hakkarainen, Authorised Public Accountant, and Juha-Pekka
Mylén, Authorised Public Accountant.
Supervisory auditor was Timo Nummi, Authorised Public Accountant, with Jaakko Nyman, Authorised Public Accountant, as his substitute.
On 31 December 2008, the parent company recorded a loss of EUR 223,310,006.90 and the Group
a loss of EUR 230,133,435.85, and therefore the
Board of Directors states that there are no distributable funds.
Outlook
In 2009, the focus of sales will move more strongly towards unit-linked insurance. In addition,
risk and pension insuring is estimated to continue increasing. The objective of OP Life Assurance
Company is to maintain its leading position in the
changing market.
The company’s strategy will be specified during spring 2009.
The assessment of the 2009 operating environment in the financial industry includes an exceptional amount of uncertainty. The investment environment is also estimated to be difficult this year.
The solvency position comprises the central area
that the Board of Directors and the management
will monitor closely.
Insurance operations are expected to be very
profitable, even though the premium income of the
company and the entire industry is not predicted
to increase significantly.
15
Income statement
Parent Company
Jan. 1–Dec. 31, 2008
Jan. 1–Dec. 31, 2007
Insurance technical account
Premium income
Premium income
766,730
858,729
Reinsurers’ share
-28,428
738,302
-14,909 843,820
Investment income
511,092 475,211
Unrealised increases in the
value of investments -696,951 -51,986
Benefits paid
Benefits paid
-731,469 -560 069
Reinsurers’ share
2,571 -728,898
232 -559,837
Changes in claims reserve
-51,811
-39,703
Reinsurers’ share
3 -780,706
-6 -599,546
Changes in provision for
unearned premiums
Changes in life
insurance provision
690,770 -384,832
Reinsurers’ share
25,038
715,808
11,762 -373,070
Operating expenses
-43,306 -43,002
Investment expenses -905,164 -197,573
Insurance technical result -460,923
53,853
Non-insurance technical
calculation
Other income
17,949
14,488
Other expenses
Depreciation on goodwill
-2,916
-2,916
Other expenses
-8,884
-11,801
-8,422 -11,338
Income taxes for actual operations
Taxes for the period and
previous periods
75,972
-15,141
Profit for the period -378,803
41,862
Amounts in thousands of euros.
16
Balance sheet
Parent Company
Dec. 31, 2008Dec. 31, 2007
Assets
Intangible assets
Other long-term expenditure
7,441
1,845
Goodwill
17,498
24,939
20,414
22,259
Investments
Properties and property shares
148,624
147,194
Loan receivables
from Group companies
33,012
181,636
33,012 180,206
Investments in Group
companies and affiliated companies
Shares and participations in Group companies
10,915
8,061
and loan receivables
285,951
296,866
25,877
33,938
Other investments
2,184,305 2,406,986
1,112,634 1,297,863
Deposits
0 3,296,939 3,775,441
158,000 3,862,849 4,076,993
Investments as cover
for unit-linked insurance 1,614,106 2,373,965
Receivables
From direct insurance operations
From policyholders
21,293
9,230
From reinsurance operations
127
842
Other receivables
43,226
64,646
23,400
33,472
Other assets
Tangible assets, equipment
58
77
Cash in hand and bank receivables
108,785
108,843
30,538
30,614
Tax receivables
76,500
0
Accrued income
Interest rates and rents
18,364
24,053
Capitalised acquisition cost
of insurance policies
2,521
2,133
Other accrued income
25
20,910
419
26,604
Total assets 5,685,385 6,563,907
Liabilities
Shareholders’ equity
Share capital 145,433
77,911
Share premium account
249,559 175,644
Other reserves
118,264
0
Retained earnings
37,229
35,530
171,682
41,862 330,947
Subordinated loans
90,765
90,687
Insurance technical provisions
Life insurance provision
3,538,299 3,517,189
Reinsurers’ share
-37,896 3,500,403
-12 858 3,504,331
Claims provision
291,137
241,561
Reinsurers’ share
-7
291,130 3,791,533
-4 241,557 3,745,888
Technical provisions for
unit-linked insurance
Life insurance provisions 1,610,192 2,373,210
Liabilities
712
242
From reinsurance
2,402
2,448
Other liabilities
10,667
13,781
10,783
13,473
Accrued expenses
7,432
9,703
Total liabilities 5,685,385 6,563,907
17
Income statement
Group
Jan. 1–Dec. 31, 2008
Jan. 1–Dec. 31, 2007
Insurance technical account
Premium income
Premium income
766,730
858,729
Reinsurers’ share
-28,428 738,302
-14,909 843,820
Investment income 508,352 471,964
Unrealised increases
in the value of investments -696,951 -51,986
Benefits paid
Benefits paid
-731,469
-560,069
Reinsurers’ share
2,571 -728,898
232 -559,837
Changes in claims provision
-51,811
-39,703
Reinsurers’ share
3 -780,706
-6 -599,546
Changes in provision for
unearned premiums
Changes in life
insurance provision
690,770 -384,832
Reinsurers’ share
25,038 715,808
11,762 -373,070
Operating expenses
-43,306 -43,002
Investment expenses -907,565 -194,038
Insurance technical result -466,065
54,141
Non-insurance technical
calculation
Other income
17,949
Other expenses
Depreciation on goodwill
-2,916
-2,916
Other expenses
-8,884
-11,801
-8,422
Income taxes for actual operations
Taxes for the period
and previous periods
75,972
-15,141
Deferred tax
183
76,154
-185
Minority interest
28
18
14,488
-11,338
-15,326
48
42,013
Balance sheet
Group
Dec. 31, 2008Dec. 31, 2007
Assets
Intangible assets
Other long-term expenditure
7,441
1,845
Goodwill
17,498
20,414
Consolidated goodwill
5,530
30,469
5,678
27,937
Investments
178,799 182,175
Investments in Group companies
and affiliated companies
Shares and participations in Group companies
10,915
8,061
and loan receivables
285,951
296,866
25,877
33,938
Other investments
2,184,305 2,406,986
1,112,634 1,297,863
Deposits
0 3,296,939 3,772,605
158,000 3,862,849 4,078,962
Investments as cover for
unit-linked insurance 1,614,106 2,373,965
Receivables
From policyholders
21,293
9,230
From reinsurance operations
127
842
Other receivables
44,045
65,464
24,419
34,491
Other assets
Tangible assets, equipment
58
77
Cash in hand and bank receivables
109,098 109,156
31,335
31,411
Tax receivables
76,500
0
Accrued income
Interest rates and rents
18,364
24,053
Capitalised acquisition cost
of insurance policies
2,521
2,133
Other accrued income
44
20,929
436
26,622
Total assets 5,689,229 6,573,388
Liabilities
Shareholders’ equity
Share capital 145,433
77,911
Share premium account
249,559 175,644
Other reserves
118,264
0
Retained earnings 38,122
36,448
Profit for the period -383,734 167,644
42,013 332,015
Minority interest
815
843
Subordinated loans
90,765
90,687
Insurance technical provisions
Life insurance provision
3,538,299 3,517,189
Reinsurers’ share
-37,896 3,500,403
-12,858 3,504,331
Claims provision
291,137
241,561
Reinsurers’ share
-7
291,130 3,791,533
-4 241,557 3,745,888
Technical provisions for
Life insurance provisions 1,610,192 2,373,210
Liabilities
712
242
From reinsurance
2,402
2,448
Other liabilities
8,968
9,883
Deferred taxes
6,535
18,618
6,715
19,289
Accrued expenses
9,662
11,456
Total liabilities 5,689,229 6,573,388
19
Indirect cash flow statement
Parent Company
2008
2007
Cash flow from operating activities
Profit (loss) from actual operations / profit (loss) before extraordinary items
Adjustments
Changes in insurance technical provisions Investment impairment and increases in value Unrealised exchange gains/losses
Planned depreciation
Other income and expenses that do not include payments
Other adjustments Cash flow before changes in working capital
-378,803
41,862
-717,373
1,110,466
3,526
3,993
-309
8,124
29,624
412,726
148,645
4,396
4,081
126
-238,587
373,249
Changes in working capital:
Increase (-)/decrease (+) in current non
interest-bearing business receivables
-25,092
interest-bearing liabilities
-1,434
Business cash flow before financial items and taxes
3,098
-240
435,586
-2,228
-528
342
-5,231
-20,407
409,948
342
409,948
-210,699
-82,397
-540,007
258,958
-6,537
-299,633
-30
-281,080
Cash flow from financing activities
Share issue for cash
Paid dividends/guaranteed capital interest and other distribution of profits
259,701
-40,163
219,538
0
-39,911
-39,911
Change in cash flow
-79,752
88,958
Cash and cash equivalents at beginning of period
188,538
99,580
Cash and cash equivalents at end of period
108,785
188,538
Paid interest and payments on other business financing costs
Direct taxes paid
Cash flow before extraordinary items
Cash flow caused by business extraordinary items (net)
Cash flow from investing activities
Investments in investments (excluding cash and cash equivalents)
Proceeds from investments (excluding cash and cash equivalents)
Investments in and proceeds from tangible and intangible
assets and other property (net)
20
62,577
Indirect cash flow statement
Group
2008
Profit (loss) from actual operations / profit (loss) before extraordinary items
Adjustments
Changes in insurance technical provisions Investment impairment and increases in value
Unrealised exchange gains/losses
Planned depreciation
Other income and expenses that do not include payments
Other adjustments Cash flow before changes in working capital
2007
-383,734
42,013
-717,373
1,110,466
3,526
4,709
-5,839
8,096
19,851
412,726
148,645
4,396
4,614
-5,763
-238,635
367,996
-24,892
57,149
-2,113
-7,154
5,686
430,831
-2,228
-528
-9,910
-5,231
-20,407
405,193
-9,910
405,193
-206,462
-82,397
-535,080
258,958
-1,007
-289,865
-140
-276,262
Share issue for cash
Paid dividends/guaranteed capital interest and other distribution of profits
259,701
-40,163
219,538
0
-39,911
-39,911
Change in cash flow
-80,237
89,020
Cash and cash equivalents at beginning of period
189,335
100,315
Cash and cash equivalents at end of period
109,098
189,335
Changes in working capital:
interest-bearing business receivables
interest-bearing liabilities
Business cash flow before financial items and taxes
Paid interest and payments on other business financing costs
Direct taxes paid
Cash flow before extraordinary items
Cash flow caused by business extraordinary items (net)
Investments in investments (excluding cash and cash equivalents)
Proceeds from investments (excluding cash and cash equivalents)
Investments in and proceeds from tangible and intangible
assets and other property (net)
21
Notes to the financial statements
Accounting principles
31 December 2008
line by line with OP-Pohjola Group Central Cooperative’s financial statements. For consolidation purposes, all information has been converted to follow
the IFRS standards. For conversion, OP Life Assurance Company has followed the IFRS accounting
principles that are uniform with OP-Pohjola Group
Central CooperativepConsolidated.
General
The financial statements have been prepared following the Insurance Companies Act, the Companies Act, the Accounting Act, the Ministry of Social
Affairs and Health’s Decree 614/2008 and other decisions, regulations and instructions issued by the
Ministry of Social Affairs and Health and the Insurance Supervisory Authority.
Valuation and classification principles and
methods
Intangible assets and equipment have been recognised in the balance sheet at acquisition cost less
planned depreciation and amortisation.
Property shares and building projects have been
recognised at acquisition cost or a lower fair value
in the balance sheet.
Investment shares and units have been recognised at acquisition cost or a lower fair value in
the balance sheet. Previously made impairment will
be returned as the fair value increases to the original acquisition price at the most. Shares and units
have been recognised following the average price
principle.
Fixed asset shares have been recognised at acquisition cost.
Money market instruments are recognised at acquisition cost in the balance sheet. The difference
between the acquisition cost and nominal value are
matched in interest income or its deduction with acquisition cost as the counter-item during the money
market instrument’s exercise period.
Receivables and investments similar to receivables are presented at their nominal value or a lower fair value.
Derivative agreements are prepared for hedging
purposes. Agreements that are open on the financial statement date are recognised at fair value on
the balance sheet date. Profit or loss resulting from
Accounting principles for consolidated
financial statements
OP Life Assurance Company prepares the consolidated financial statements, including OP Life Assurance Company and its subsidiaries where the parent company holds more than half the voting power.
The companies that belong to the Group are specified in the notes and changes in the Group structure are presented in the annual report.
The consolidated financial statements have
been prepared as combinations of the parent company and subsidiaries’ income statements, balance
sheets and notes. Transactions, receivables and liabilities between the companies have been eliminated. Share ownership within the Group has been
eliminated using the acquisition cost method. The
subsidiaries acquired during the year have been included starting from the acquisition date or the target’s completion date. The difference between the
acquisition cost and the company’s acquisition date
is primarily allocated to the properties of the subsidiaries, and depreciated according to their depreciation plan.
OP Life Assurance Company Ltd. is a subsidiary of OP-Pohjola Group Central Cooperative, and
the company and its subsidiaries are consolidated
22
a hedging agreement is entered in the income statement to the extent it corresponds to the amount entered as income or cost from the item to be hedged.
Loss that exceeds the increase in the value of the
hedged item is, however, entered fully as expenses.
If an agreement has been handled as non-hedging,
negative changes in value will be fully entered in
the income statement, and the unrealised profit will
not be registered at all. Any valuation differences of
derivatives not entered in the income statement and
any maximum losses from derivatives handled as
non-hedging are taken into account in the solvency
margin calculation.
Fund units that serve as cover for unit-linked
insurance have been recognised at fair value in the
balance sheet. Any increases in their value or their
adjustments, impairment and returns have been entered with an impact on result.
Receivables and liabilities denominated in a foreign currency have been converted according to the
buying rate on the financial statement date quoted
by the European Central Bank. Investments have
been recognised at the buying rate on the financial
statement date so that the impact of the exchange
rate and market difference has not been separated in the valuation of investment property shares
and units. Exchange rate differences are presented
in other investment income and expenses.
the fair value of other shares and money market instruments.
The nominal value or a lower probable value is
used as the fair value of loan receivables and deposits.
Depreciation
Depreciation has been calculated according to the
plan, following eliminations based on the financial
lifetime of property items in accordance with the
OP-Pohjola Group Central Cooperative Group’s calculation principles.
The following depreciation plan has been used
when calculating depreciation:
Intangible assets
Intangible rights
Goodwill
IT software
straight-line depreciation
4–5
10
4–5
Tangible assets
Office machines
and equipment IT hardware
4–10
3–4
Properties
Business and
industrial buildings
Intangible rights
for buildings
Activated repair and
modification work
Fair values of property
Property sites are recognised annually on the basis
of their net income, location and market situation.
The company’s own experts and outside expertise
is used in the valuation.
Shares and money market instruments that are
quoted in an official stock exchange or are otherwise targeted by public trading are recognised at the
final buying rate on the financial statement date or,
if it isgnot available, the transaction rate.
The probable redemption price, the mark to
model value determined through valuation methods or the remaining acquisition price are used as
Years
straight-line depreciation 20–50
Depreciation pursuant to the Act on Income from Professional Activities exceeding the plan in accounting
has been presented as changes in depreciation difference as a separate item in the income statement.
Expenses per function and taxes
Business expenses are allocated to functions according to the matching principle. Function-specific expenses are presented in the income statement in
23
business expenses (insurance acquisition, management and administrative expenses), compensation
paid, investment expenses (expenses arising from
the management of property and other investment
operations) and other expenses.
Taxes for the financial period have been calculated based on the result subject to tax to be calculated in accordance with the tax regulations.
Deferred tax liability has not been presented in
the parent company’s financial statements, balance
sheet or separate notes because of the irrelevance
of the amount. The deferred tax liability included
in property investments in the consolidated financial statements has been presented as consolidated goodwill and deferred tax liability in the consolidated balance sheet, and as depreciation on consolidated goodwill and a change in deferred tax liability in the consolidated income statement. The accrued depreciation difference has been divided into
a change in deferred tax liability and result on the
financial period, and into deferred tax liability and
equity less minority share. The share included in
equity does not comprise distributable unrestricted
equity. The tax has been calculated according to a
26 per cent tax rate.
of Directors. The liability for agreements withttechnical interest has been calculated by discounting thettechnical interest which ranges from 4.5% to 1.5%.
Liability for insurance premiums and starting pensions is mainly calculated separately for each insurance. Any unpaid benefit that is known by the company is included in the technical provisions in casu.
In addition, there are collective liability items that are
generated on the basis of insurance statistics.
An increase in liability caused by any customer bonus decisions made is included in the technical provisions.
Technical provisions for unit-linked insurance
are recognised at fair value of property which covers the liability.
Technical provisions have not been reduced
through Zillmer’s calculations, but some of the benefit-type sales commissions related to the acquisition of new insurance agreements are matched over
five years.
The insurance company act’s principle of equity
According to Section 3 of Chapter 13 of the Insurance
Companies Act, life insurance must follow the principle of equity with regard to policies that, according to the insurance agreement, entitle to any bonuses granted on the basis of surplus produced by the
insurance. The principle requires that a reasonable
part of the surplus produced by such insurance is returned to the insurance as bonuses, unless prevented
by solvency requirements. The targets for the principle of equity have been published in the Report by
the Board of Directors in connection with the financial statements and on op.fi. Any additional benefits
will be decided upon by the Board.
The company aims at continuity without endangering the solvency requirements when distributing bonuses.
Pension arrangements
The personnel’s statutory pension cover has been
organised through pension insurance taken out
from OP-Eläkekassa or insurance companies. Insurance premiums have been entered in the financial period’s income statement on an accrual basis.
In addition, some employees belong to the scope of
additional pension cover of OP-Eläkesäätiö or insurance companies. The amount of pension cover has
been fully covered on the financial statement date.
Technical provisions
Technical provisions have been generated according
to invoice criteria approved by the company’s Board
24
Premium income for
the parent company and group
2008
2007
Life insurance
Direct insurance
In Finland
766,618
858,626
Reinsurance
113
102
Premium income before the reinsurers’ share
766,730
858,729
Direct premium income for
Life insurance
Unit-linked life insurance
Other individual life insurance
Unit-linked capital redemption
Other capital redemption
Employees’ group life insurance
Other group life insurance
Total
200,639
251,953
18,763
2,556
12,249
1,762
487,923
353,186
218,388
11,239
38,119
11,305
8,538
640,775
Pension insurance
Unit-linked individual pension insurance
Other individual pension insurance
Unit-linked group pension insurance
Other group pension insurance
Total
93,973
58,341
4,047
122,335
278,695
95,199
56,909
2,797
62,946
217,851
Total
766,618
858,626
Recurring premiums
Lump sum premiums
Total
417,787
348,831
766,618
485,387
373,239
858,626
Premiums from agreements not entitling to bonuses
Premiums from agreements entitling to bonuses
Premiums from unit-linked insurance
Total
66,977
382,219
317,422
766,618
37,077
359,128
462,420
858,626
25
Bonuses/The impact of the
principle of equity on the
financial statements
nus decisions, the financial situation would have
forced a cut in expenses, regardless of the objectives and bonus policy. Despite this, the company
wished to alleviate the profit differences between
different technical interest rates which were 4.5%
at their highest and 1.5% at their lowest.
The entire interest credited in 2008 was financed by borrowing from the company’s capital. The resulting loss (i.e., reduction in equity)
will be amortised through future investment income. The loss was slightly reduced by the liability for future customer bonuses which strained the
2007 result (EUR 10 million) and was fully used
during 2008. Similarly, the interest supplementation of EUR 20.1 million was cancelled. Despite
the turmoil on the financial market, the company’s risk operations produced a surplus as in previous years. On the basis of the surplus, annual
bonuses and premium discounts were confirmed
for the risk insurance portfolio. In this respect,
there was no need to deviate from the previous
years’ standard practices.
No profit for which insurance savings could have
been credited was generated in 2008. It was not
possible to finance the technical interest from
negative investment income. Nevertheless, individual life and pension insurance and group pension insurance policies were credited with technical interest and the discretionary customer bonus. The table below illustrates the average percentage rates and credited amounts in euro. Because of different crediting methods, the total interest on single policies in 2008 may differ from
the average.
The amount of customer bonuses was reduced from the 2007 level so that the total interest formed by the technical interest and customer bonuses reduced by nearly a percentage point.
Even though the company’s customer bonus
target was not confirmed when making the bo-
Total interest credited on insurance
Calculated
interest,
average
Overall
income,
average
Credited
technical interest,
EUR
Impact of
bonuses,
EUR
2008
2007
2008
2007
2008
2007
2008
2007
Individual life insurance
3.1 %
3.7 %
3.5 %
2.9 %
3.2 %
3.8 %
3.5 %
3.1 %
3.6 %
4.5 %
4.5 %
3.7 %
4.8 %
5.0 %
5.0 %
4.1 %
78,509
26,323
10,657
1,917
79,719
22,748
7,904
2,840
11,659
5,287
3,209
419
38,581
7,553
3,713
848
Other interest and bonuses
Average/total
3.3 % 3.3 %
3.9 %
4.8 %
1,253
118,659
1,600
114,811
907
21,481
982
51,677
Change of liability
for future customer bonuses
Impact on results, net
-10,000
11,481
-43,000
8,677
26
Specification of net income from the parent
company’s investment operations
Investment income
2008
2007
Profit from investments in Group companies
Dividend income
341
341
Interest income
837
466
Other income
34,150
35,329
43,323
Profit from property investments
Interest income from Group companies
1,576
1,764
Other profit from Group companies
16,911
16,495
Other profit from other than Group companies
2,286
20,772
1,376
Profit from other investments
Dividend income
34,463
39,207
Interest income
58,153
63,604
Other income
225,777 318,393
36,387
Total 374,494
139,197
202,963
Recoveries on write-downs
Sales gains
Total
11,492
125,107
511,092
1,556
270,693
475,211
Expenses from property investments
-8,325
Expenses from other investments -232,515
Interest expenses and other liability expenses
-5,353
Total -246,192
-12,225
-38,676
-5,537
-56,437
Depreciation and write-downs
Impairment -425,000
Planned depreciation on buildings
-118
Sales losses -233,854
Total -905,164
-96,764
-117
-44,255
-197,573
Net investment income before increases
in value and their adjustment -394,071
277,638
Impairment -696,951
-51,986
Net investment income in the income statement-1,091,022
225,652
44,130
19,635
Investment expenses
Share of unit-linked insurance from
net investment income in the income statement
Investment income
69,256
155,907
Investment expenses
-80,612
-7,102
148,805
Impairment -696,951
-51,986
Net investment income in the income statement -708,307
96,819
27
Specification of net income from
the group’s investment operations
Investment income
2008
2007
Profit from investments in Group companies
Dividend income
341
341
Interest income
837
466
Other income
34,150
35,329
43,323
Profit from property investments
Other income
18,032
Profit from other investments
Dividend income
34,463
39,207
Interest income
58,153
63,604
Other income
225,777 318,393
36,387
Total 371,754
139,197
199,715
Recoveries on write-downs
Sales gains
Total
11,492
125,107
508,352
1,556
270,693
471,964
Investment expenses
Expenses from property investments -10,726
Expenses from other investments -232,515
Interest expenses and other liability expenses
-5,353
Total -248,593
-8,690
-38,676
-5,537
-52,902
Depreciation and write-downs
Impairment -425,000
Planned depreciation on buildings
-118
Sales losses -233,854
Total -907,565
-96,764
-117
-44,255
-194,038
277,925
Impairment -696,951
-51,986
Net investment income in the income statement-1,096,164
225,940
44,130
16,388
Share of unit-linked insurance from
net investment income in the income statement
Investment income
69,256
155,907
Investment expenses
-80,612
-7,102
148,805
Impairment -696,951
-51,986
Net investment income in the income statement -708,307
96,819
28
Benefits paid by
the
parent company and group
2008
Direct insurance
Life insurance 674,030
Pension insurance
57,438
Reinsurance
0
Benefits paid, total 731,469
Of which:
Surrenders
332,236
204,516
Maturity benefits
244,593
221,024
Other
154,640 731,469
134,529
from benefits paid
2007
514,421
45,621
27
560,069
560,069
178,990
122,018
Insurance acquisition costs
Direct insurance fees
26,433
26,520
Other insurance acquisition costs
5,156
31,589
3,109
Change in capitalised acquisition costs of insurance
-388
Insurance management costs
10,653
Administrative expenses
2,424
Outward reinsurance fees and profit sharing
-971
Total
43,306
29,629
-830
12,921
2,095
-814
43,002
Business expenses item
in the parent company
and group’s income statement
Total operating expenses
of the parent company and
group per function
Benefits paid
Operating expenses
Investment management costs Service sale costs
Total
1,431
43,306
4,527
6,875
56,140
1,698
43,002
2,543
5,916
53,159
6,632
1,313
415
8,360
5,997
819
354
7,170
213
418
146
141
136
142
The parent company and
group’s personnel expenses
Salaries and fees
Pension costs
Other indirect personnel costs
Total
Salaries and fees of the parent
company and group’s management
Salaries and fees for the Board of Directors,
Managing Director and Deputy Managing Director
Average number of personnel in
Average number of personnel during the financial period
Number of personnel at end of year
29
Fair value and valuation difference
of the parent company’s investments
Investments on December 31
2008
Remaining
Carrying
Fair
Remaining
Carrying
acquisition cos
amount
value acquisition cost
amount
2007
Fair
value
Properties
5,855
5,855
6,756
5,557
5,557
6,340
Property shares
in Group companies
125,282
125,282 146,761
125,282
125,282 146,761
Other property shares
17,487
17,487
29,499
16,355
16,355
28,142
Loan receivables from
Group companies
33,012
33,012
33,012
33,012
33,012
33,012
Investments
in Group companies
10,915
10,915
12,767
8,061
8,061
11,736
285,951
285,951 285,985
25,877
25,877
25,592
Other investments
2,184,305 2,184,305 2,261,756
2,406,986 2,406,986 2,521,376
1,112,634 1,112,634 984,561
1,297,863 1,297,863 1,237,415
Deposits in the Group
0
0
0
158,000
158,000 158,000
3,775,441 3,775,441 3,761,097
The remaining acquisition
cost of money market
instruments includes:
- the difference of the nominal
value and acquisition price
matched as interest income
(+) or their deduction (-)
Valuation difference
(difference between fair value
and book value)
4,076,993 4,076,993 4,168,373
844
-4,962
-14,344
91,381
30
Fair value and valuation difference of the group’s investments
Investments on December 31
2008
Remaining
Carrying
acquisition cost
amount
Fair
2007
Remaining
Carrying
Fair
value acquisition cost
amount
value
Properties
161,310
161,310 186,829
165,818
165,818 186,413
Property shares
17,489
17,489
29,499
16,357
16,357
28,142
Investments
in Group companies
Shares and participation
10,915
10,915
12,767
8,061
8,061
11,736
285,951
285,951 285,985
25,877
25,877
25,592
Other investments
2,184,305 2,184,305 2,261,756
2,406,986 2,406,986 2,521,376
1,112,634 1,112,634 984,561
1,297,863 1,297,863 1,237,415
Deposits in the Group
0
0
0
158,000
158,000 158,000
3,772,605 3,772,605 3,761,397
4,078,962 4,078,962 4,168,673
The remaining acquisition
cost of money market
instruments includes:
- the difference of the nominal
value and acquisition price
matched as interest income
(+) or their deduction (-)
Valuation difference
(difference between fair value
and book value)
844
-4,962
-11,207
89,711
The Group’s property ownership includes a deferred tax liability of thousands of euros 5,530 (5,678).
31
Shares and participations / parent company and group
Quantity
Carrying
amount
Finnish shares and participations
Group companies
Pohjola Bank plc A
525
Promotion Capital I
1,156
Promotion Equity I
1,462
Real Estate Fund Finland Ky 1
5,897
Group companies, total
3,340
378
1,300
5,897
10,915
Fair
value
% of
shares
Country
5,120
0.33%
378
1,300
5,969
12,767
Finland
Finland
Finland
Finland
Other companies/listed companies
Technopolis Oyj
1,223
3,485
3,485
2.77%
Finland
Other companies/not quoted publicly
Avara Finland Oy E
Retro Life Assurance Company
Leverator Oyj
Tornator Oy
Vicus Oy
1,066
3
114
375
1
5,000
391
11
6,000
100
5,000
391
11
26,550
207
12.44%
3.59%
11.11%
7.50%
1.37%
Finland
Finland
Finland
Finland
Other shares
Other
Other companies, total
All shares, total
14,987
25,902
35,645
48,412
450
16,540
881
239
936
0
2,658
14,162
556
2,620
309
1,869
9,883
17,077
43,804
52,529
87,018
2,820
10,369
3,615
1,555
33,852
7,576
27,911
3,827
7,365
39,877
93,550
178,047
168,659
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Mutual funds
Finnish mutual funds
Bio Fund Ventures II Ky OP
CapMan Hotels RE Ky
Enfia Infrastructure Fund I Ky
Eqvitec Mezzanine Fund III Ky
Eqvitec Technology Fund II Ky
Eqvitec Technology Mezzanine Fund I
Eqvitec Technology Mezzanine Fund II
Evli Japan Quant Index B
Finnmezzanine Rahasto II A Ky
Finnmezzanine Rahasto III B Ky
MB Equity Fund IV Ky
OP-Asia Tigers A (gain)
OP-America A (gain)
OP-Cash Manager A (gain)
OP-Delta A (gain)
OP-Euro B (gain)
OP-Euro B (gain)
OP-Euro Index A (gain)
OP-Europe Value A (gain)
OP-Europe Growth A (gain)
OP-Europe Equity A (gain)
OP-Europe Dividend A (gain)
OP-Focus A (gain)
OP-Japan Index A (gain)
OP-Emerging Market Interest A (gain)
OP-Emerging Market Interest B (yield)
OP-Absolute Portfolio B (gain)
OP-Bond B (yield)
OP-Bond Index B (yield)
1,048
15,888
1,067
239
1,504
0
2,688
194
600
2,150
361
15
195
155
402
3,014
4,992
41
152
29
18
319
170
189
54
73
420
3,512
8,626
1,371
32
450
15,888
881
239
936
0
2,658
14,162
556
2,150
309
1,869
9,883
17,077
43,804
52,529
87,018
2,820
10,369
3,615
1,555
33,852
7,576
27,911
3,827
7,365
39,877
92,119
177,356
167,946
Quantity
Fair
value
Country
OP-Long Bond Index B (yield)
792
79,694
79,694
OP-Raw Material A USD
73
4,776
4,776
OP-Real Interest B (yield)
1,267
124,434
124,434
OP-Finland Value A (gain)
26
2,396
2,396
OP-Finland Small Firm A (gain)
15
1,869
1,869
OP-Russia A (gain)
14
990
990
OP-Corporate Bond B (yield)
1,314
130,684
130,684
OP-Corporate Bond Prima B (yield)
1,193
119,112
120,189
Selected Mezzanine Funds I Ky
2,000
1,809
1,809
Selected Private Equity Funds I Ky
516
211
211
Suomen Yritysjärjestelyrahasto I Ky
970
871
871
Finland Välirahoitusrahasto I Ky
565
555
555
Total 1,294,000 1,299,032
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Foreign investment funds
Lazard Emerging Income Plus Ltd -Class E2 Series 1
MGP Asia Fund III LP
Fairfield Investment Fund Ltd. Series A-2 (FIFL)
Allied Capital Senior Debt Fund Ltd class A2 Ser 1
Allied Capital Senior Debt Fund Ltd class A2 Ser13
Allied Capital Senior Debt Fund Ltd class A2 Ser19
D.E.Shaw Composite International Fund 1
Fairfield Lion Investment Fund ASIA USD Inst Class
Investcorp EMOF CFO Class C Equity Notes
JPMorgan Incubator Fund II
JPMorgan Incubator Fund II Series 03-08
Kenmar Global Resources Fund SPC Ltd A (series 04/
McDonnell Loan Opportunity OPHV
Nylon Flagship Fund Ltd
Oak Hill Credit Opportunities Fund Class B
Oak Hill Credit Opportunities Fund Class B 0207
Ore Hill International Fun Ltd Class E-Initial Ser
Ore Hill Intl Fund Ltd S-Genesis - E- Initial Ser
RMF Emerging Talents Ltd Class SOQ1
RMF Longer Term Opportunities, Class SOR1
Vision Angel Fund I
Vision Asia Maximus Fund - Class D - Series 01
Vision Asia Maximus Fund Class A1
ZAIS CDO Opportunity Fund Ltd Class B Series 3
ZAIS CDO Opportunity Fund Ltd Class B Series Oct07
Zais Matrix VI-A, Ltd Participating Shares
Zais Zephyr A-1 Ltd Participating Shares (10/07)
Access Capital Fund III Mid-market BO Europe LP
Access Capital Fund III Technology Europe LP
Access Capital Fund IV LP - Growth Buy-Out Europe
Access Capital LP
CapMan Buyout VIII Fund A L.P.
CapMan Mezzanine IV Limited Partnership
Coller International Partners V-A LP
Cairn Capital Structured Credit Fund LtdClassB EUR
Crown Global Private EQ plc, Europe BO Sub-Fund
Dimensional Emerging Market Value Fund B
149
3,085
56
8
3
3
0
11
147
0
0
16
31,030
90
17
7
8
7
11
0
22
13
11,148
7
5
14
7
22
17
6,675
2,800
1,875
749
2,727
2,023
4,809
121
18
1,774
33
Carrying
amount
14,488
1,554
5,536
6,220
1,974
1,952
2,726
8,652
3,269
2,826
57
15,341
5,442
9,000
7,497
2,356
3,013
2,452
6,362
83
15,540
8,854
7,802
9,086
6,048
4,980
1,426
11,404
9,524
6,675
2,400
1,875
526
2,467
2,023
3,505
12,166
2,000
14,301
14,488
Bermuda
1,554
Bermuda
5,536British Virgin Islands
6,220Cayman Islands
2,024Cayman Islands
1,993Cayman Islands
4,150Cayman Islands
8,652Cayman Islands
3,269Cayman Islands
2,826Cayman Islands
57Cayman Islands
15,915Cayman Islands
5,442Cayman Islands
9,475Cayman Islands
7,497Cayman Islands
2,356Cayman Islands
3,013Cayman Islands
2,452Cayman Islands
6,362Cayman Islands
132Cayman Islands
8,854Cayman Islands
7,802Cayman Islands
9,086Cayman Islands
6,573Cayman Islands
4,980Cayman Islands
1,426Cayman Islands
9,524Cayman Islands
7,434
Guernsey
2,400
Guernsey
2,363
Guernsey
5,481
Guernsey
2,467
Guernsey
2,158
Guernsey
3,663
Guernsey
15,298
Ireland
2,835
Ireland
14,301
Ireland
Quantity
Euromatrix Fund Plc Class A
Fugu Credit Plc
Fugu Credit Plc C2
Fugu Credit Plc C3
Fugu Credit Plc C4
Fugu Credit Plc C5
Fugu Credit Plc C6
Fugu Credit Plc F1
iShares FTSE 100 (LN gbp) ETF
Montanaro European Smaller Companies Fund EUR
New Star Accelerator Hedge Fund Ltd EUR class
R2 Alpha Strategies I fund - Euro Class I
R2 Crystal Fund - Euro Class 1
York Enhanced Strategies Fund LLC
Access Capital LP II A OP
Access Capital LP II B
Almack Mezzanine I LP
Almack Mezzanine II Unleveraged LP
Bridgepoint Europe IV F
Bridgepoint III C
Europa Fund II LP
ICG European Fund 2006 LP
RREEF Pan-European Infrastructure Fund LP
Nomura Topix ETF (JP jpy)
BlueBay European Credit Opportunity Fund
SVG Diamond Holdings II Limited
Amber Trust II S.C.A.
Amber Trust S.C.A.
BlueBay Emerg Mkt Bond Fund BasePerf EUR I
BlueBay Emerging Market Opp Fund EUR Class I
BlueBay Emerging Markets LC Bond Base Perf I (USD)
BlueBay Emerging Markets Opportunities I (USD)
BlueBay High Yield Enhanced Fund BP1
DCF Fund Baltic States Cap
Fidelity FAST - Europe Fund I Acc
Fortis L Fund-Bond Best Selection World EM IH(EUR)
Franklin Templeton European Real Estate F O F
Invesco US Structured Equity Fund C
JPM Emerging Markets Equity A
Schroder AS Agriculture Fund I Eur Acc
Schroder ISF EM Debt Abs Return I, Acc (EUR hedg)
SISF Japanese Equity Alpha - I ACC
SISF US Smaller Companies
T. Rowe Price-Global Emerging Markets Equity I
T. Rowe Price-Global High Yield Bond Fund Class I
T. Rowe Price-U.S. Large-Cap Growth Equity Fund- I
Alternative Property Income Venture Fund, L.P.
Axa Infrastructure Partners A
Axa Infrastructure Partners B
European Retail Income Venture
European Retail Income Venture II
Aberdeen Indirect Property Partners
Aberdeen Indirect Property Partners II
East Capital Russian Fund
757
3,666
3,667
3,667
2,333
2,333
2,334
7,800
1,626
4,749
24
1
0
7
379
1,481
7,910
9,715
280
8,264
2,588
7,114
7,345
2,162
18,022
10,000
5
1
409
212
455
0
200
3
218
414
14,160
753
397
102
463
1,825
150
356
1,110
927
5,690
4,381
31
9,686
13,810
16,746
8,815
58
34
Carrying
amount
Fair
value
Country
3,391
1,276
1,258
1,236
893
852
902
4,513
7,569
7,493
426
59,771
23,254
3,294
379
1,266
7,910
9,715
280
8,264
2,588
7,114
7,345
15,136
13,232
9,737
5,000
690
34,086
18,175
34,540
9
14,901
2,411
16,530
20,111
11,641
5,864
4,821
10,324
10,079
10,803
5,474
3,501
9,695
5,889
4,969
4,326
0
9,560
7,718
16,577
6,370
2,882
3,391
1,276
1,258
1,236
893
852
902
4,513
7,569
7,493
426
59,771
23,254
3,294
1,602
1,266
10,750
9,715
280
8,769
3,337
7,506
10,330
15,136
13,232
9,737
6,199
1,297
34,086
18,175
34,540
9
14,901
2,411
16,530
20,111
11,641
5,864
4,821
10,324
12,371
10,803
6,133
3,501
9,695
5,889
4,969
4,326
0
9,560
7,718
16,577
6,370
2,882
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Japan
Jersey
Jersey
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
France
France
France
France
France
Sweden
Sweden
Sweden
Quantity
Carrying
amount
3,838
3,816
29,000
4,700
16,496
1,711
7,943
6,682
5,434
10,860
4,070
5,084
1,178
4,699
4,764
1,679
5,345
1,700
49,925
1,675
2,515
2,760
875,318
Eikos
0
Excalibur
4
Helios Euro Fund
185
The Tanglin Hedge Fund
49
Partners Group Direct Investments 2006, L.P.
16,762
Eqvitec Technology Fund III Ky
2,489
Ares Enhanced Credit Opportunities Fund Class B
36
GS Capital Partners V Offshore L.P.
8,065
GS Capital Partners VI Offshore LP
8,200
Ivy Partners Fund I, Ltd - Class C1 - 01Jan2007
18
Ivy Partners Fund I, Ltd - Class C1 - 01Jan2008
8
Lexington Capital Partners VI-A, L.P.
6,993
Lexington Middle Market Investors II, L.P.
1,640
Lexington Middle Market Investors, L.P.
6,389
Paul Capital Partners IX L.P.
6,831
Paul Capital Partners VIII-C L.P.
2,202
Paul Capital Top Tier Investments III LP
9,697
RCP Fund V, L.P.
3,000
SPDR Trust Series 1 ETF
777
Symphony Credit Opportunities Fund
137
Symphony Credit Opportunities Fund merkintä 191108
3,500
TCW/Crescent Mezzanine Partners VC LP
4,267
Total
Fair
value
3,838
Sweden
3,816
Sweden
29,490
Sweden
4,700
Sweden
16,496 Switzerland
1,711
Denmark
7,943
The United States
13,392
The United States
5,434
The United States
10,860
The United States
4,070
The United States
5,286
The United States
1,178
The United States
5,937
The United States
9,609
The United States
2,523
The United States
5,345
The United States
1,700
The United States
49,925
The United States
1,675
The United States
2,515
The United States
3,036
The United States
916,975
INVESTMENT FUNDS, TOTAL 2,169,318 2,216,007
SHARES AND PARTICIPATIONS, TOTAL 2,195,220 2,264,419
35
Country
Specification of property investments/parent 31 December 2008
Properties and
property shares
Property shares in
Group companies
Loan receivables from
Group companies
22,193
3,191
-1,643
23,741
125,282
0
0
125,282
33,012
0
0
33,012
282
118
399
0
0
0
0
0
0
Book value on 1 January
21,912
Book value on 31 December
23,342
125,282
125,282
33,012
33,012
Acquisition cost on 1 January
Increases
Decreases
Acquisition cost on 31 December
Accrued depreciation on 1 January
Depreciation for the period
Accrued depreciation on 31 December
Specification of property investments/group 31 December 2008
Acquisition cost on 1.1 December
182,175
Increases
-3,376
178,799
Group Companies 31 December 2008
Arkadiankatu 23 Kiint Oy
Asuinkartano As Oy
Espoon Omenaterassi As Oy
Espoon Piispanterassi As Oy
Espoon Tietäjäntie 10 Kiint Oy
Kiinteistö Oy Keravan Savirunninkatu 4
Kiinteistö Oy Säästöraha
Kiinteistö Oy Tullikirjurinkuja 2
Kiinteistö Oy Vantaan Linjatie 5
Kiinteistö Oy OPK-Vallila
Piispankalliontie 13-15 Kiint Oy
Säterinkatu 6 Kiint Oy
Domicile
Helsinki
Järvenpää
Espoo
Espoo
Espoo
Kerava
Oulu
Helsinki
Vantaa
Helsinki
Espoo
Espoo
% of shares Carrying amount
Loan share
100%
66.67%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
20,320
2,134
4,267
4,293
1,656
1,408
13,115
1,853
3,520
53,689
8,438
10,589
3,995
0
1,660
1,830
608
1,260
0
252
810
19,566
1,335
1,695
Total
125,282
33,012
The property investments are not in the Group’s own use.
36
Investments as cover for unit-linked insurance
Original 2008
2007
Fair value
(=carrying amount)
Original acquisition cost
Fair value
(=carrying amount)
2,005,627
1,596,319
11,221
10,464
Deposits and bank receivables
7,310
7,323
Total
2,024,157
1,614,106
Investments acquired in advance (-)
-6,732
-3,914
Investments corresponding to technical provisions for unit-linked insurance
2,017,425
1,610,192
2,064,725
0
2,815
2,371,150
0
2,815
2,067,540
2,373,965
-6,368
-11,491
2,061,172
2,362,474
Country
Fair value
(=carrying amount)
90,472
6,123
4,688
12,816
33,684
25,969
1,489
3,386
86,313
192,016
24,643
3,468
60,997
6,108
61,775
3,973
23,149
43,650
19,692
14,203
16,424
8,965
18,549
40,019
64,040
87,570
4,931
4,897
8,793
20,849
22,306
914
3,251
65,573
183,026
23,596
1,909
30,558
3,723
40,446
2,269
11,722
28,174
17,225
11,421
11,424
5,951
12,646
23,295
26,423
acquisition cost
OP-Pohjola funds
OKO Rahasto-Obligaatio II/2007 Loan
OKO RMF Enhanced TM37
OKO-Macro A (gain)
OP-Asia A (gain)
OP-Asia Tigers A (gain)
OP-America A (gain)
OP-America Index A (gain)
OP-Cash Manager A (gain)
OP-Delta A (gain
OP-Euro A (gain)
OP-Euro II A (gain)
OP-Europe Value A (gain)
OP-Europe Growth A (gain)
OP-Europe Equity A (gain)
OP-Europe Dividend A (gain)
OP-Europe Small Firm A (gain)
OP-Focus A (gain)
OP-High Yield A (gain)
OP-Horizon 2015 A (gain)
OP-Climate A (gain)
OP-India A (gain)
OP-Eastern European Fund A (gain)
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
Finland
37
Country
Fair value
(=carrying amount)
OP-Japan A (gain)
Finland
OP-Japan Index A (gain)
Finland
OP-Emerging Market Interest A (gain)
Finland
OP-China A (gain)
Finland
OP-Property A (gain)
Finland
OP-Interest Plus A (gain)
Finland
OP-Interest Portfolio A (gain)
Finland
OP-World II A (gain)
Finland
OP-Medical A (gain)
Finland
OP-Forest A (gain)
Finland
OP-Bond A (gain)
Finland
OP-Bond Index A (gain)
Finland
OP-Pirkka A (gain)
Finland
OP-Pohjola Small Firm A (gain)
Finland
OP-Raw Material A (gain)
Finland
OP-Real Interest A (gain)
Finland
OP-Solid A (gain)
Finland
OP-Spektri A (gain)
Finland
OP-Finland Value A (gain)
Finland
OP-Finland Small Firm A (gain)
Finland
OP-Tactical Portfolio A (gain)
Finland
OP-Technology A (gain)
Finland
OP-Tuotto A (gain)
Finland
OP-Convertible A (gain)
Finland
OP-Russia A (gain)
Finland
OP-Corporate Bond A (gain)
Finland
OP-Corporate Bond Prima A (gain)
Finland
Pohjola Asset Management 20
Finland
Pohjola Asset Management 60
Finland
Pohjola Asset Management E 20
Finland
Pohjola Asset Management E 60
Finland
Total
4,490
2,401
1,053
36,287
7,645
119,842
98,592
5,863
14,750
7,840
139,417
2,069
41,221
15,223
5,073
18,330
46,549
18,331
47,831
21,667
20,010
3,834
142,002
7,101
40,913
16,394
36,686
1,685
2,078
3,690
2,850
1,798,330
3,798
1,304
914
21,052
3,066
110,816
100,368
4,226
8,631
4,011
144,292
2,349
31,438
5,907
2,070
18,426
35,749
13,228
36,532
9,893
15,576
2,525
133,266
5,105
13,423
15,951
37,705
1,400
1,554
3,130
2,080
1,442,678
2,499
2,364
4,301
1,820
1,702
3,751
5,811
2,063
10,073
3,188
1,017
3,888
882
1,237
3,395
1,325
1,213
2,630
5,115
1,724
8,628
2,309
635
2,848
Other funds
Danske Capital Trans-Balkan Equity Fund
Danske Fund - Eastern Europe Convergence - A
Dinvest Total Return Euro FE(Q)
Fidelity America Fund - A USD
Fidelity American Growth Fund - A
Fidelity Emerging markets Fund - A USD
Fidelity Euro Balanced Fund - A
Fidelity Euro Blue Chip - A
Fidelity European Growth Fund - A
Fidelity European Smaller Co. Fund - A
Fidelity Latin America Fund - A USD
Fidelity Pacific Fund - A USD
Finland
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
38
Country
Fair value
(=carrying amount)
Fidelity Portfolio Selector Global Growth Fund - A
Luxembourg
Fides Asset Management Pension
Finland
Fides Asset Management Investment
Finland
FIM EURO
Finland
FIM EURO HIGH YIELD
Finland
FIM Forte Investment Fund
Finland
FIM Russia
Finland
FIM Asset Management Pension
Finland
FIM Asset Management Investment
Finland
JPM Investment Funds - Euro Liquid Market Fund - A
Luxembourg
Odin Finland
Norway
Odin Norden
Norway
OKO RMF Diversified TM36
Cayman Islands
OP-Absolute Portfolio A (gain)
Finland
Pemba European Senior Loan 2XL Fund - A
Cayman Islands
R2 Alpha Strategies I fund - Euro Class I
Ireland
R2 Crystal Fund - Euro Class 1
Ireland
SEB Gyllenberg Euro Bond B
Finland
SEB Gyllenberg Asset Management Pension
Finland
SEB Gyllenberg Asset Management Investment
Finland
Säästöpankki Lyhytkorko B
Finland
Other funds
Total
1,189
5,959
1,066
447
328
6,529
11,031
35,118
32,007
944
7,435
8,231
1,622
3,387
3,802
4,385
694
506
8,677
2,315
1,160
19,424
198,733
914
5,200
916
667
745
5,287
6,393
28,204
23,443
946
5,887
5,645
1,258
2,815
1,888
3,802
652
547
7,796
2,070
1,107
12,942
151,070
Raiffeisen International Bank, Austria
Other shares
Total
4,352
4,213
8,564
897
1,673
2,571
Shares and participations, total
2,005,627
1,596,319
Ford Motor Credit Co 5.75% 12 Jan. 2009 The United States
Man-IP 220 International Ltd EUR 30 Nov. 2018
Bermuda
Pohjola Finland FTD 4/2008 20 Jun. 2009
Finland
Pohjola Eurooppa FTD 14/2008 20 Mar. 2010
Finland
Pohjola Finland FTD 5/2008 20 Mar. 2013
Finland
Pohjola Eurooppa FTD 10/2008 20 Dec. 2009
Finland
Total
90
514
4,715
1,940
3,526
436
11,221
92
600
4,560
1,606
3,242
364
10,464
Deposits and bank receivables
EUR DEPOSIT OPHKI 30/360
Finland
Customer cheque accounts for portfolio insurance, total
Finland
Total
2,083
5,227
7,310
2,096
5,227
7,323
Cover, total
2,024,157
1,614,106
39
Changes in the parent company and group’s tangible and
intangible assets, 31 December 2008
Intangible rights and
non-current expenses Equipment
Goodwill
Total
Acquisition cost on 1 January
4,962
175
29,163
34,300
Increases
6,516
20
11,478
195
29,163
40,836
Accrued depreciation on 1 January
3,116
98
8,749
11,964
Depreciation for the period
920
39
2,916
3,876
Accrued depreciation on 31 December
4,037
137
11,665
15,840
Book value on 31 December
7,441
58
17,498
24,997
Deferred tax liability of thousands of euros 5,530 (5,678) included in property ownership has been activated in
the Group’s intangible rights.
Securities and contingent liabilities of
2008
2007
Contingent liabilities
Investment liabilities
300,701
298,564
VAT deductions
(from new building)
140
3,121
Leasing liabilities
Amount to be paid during the current period
27
23
Amount to be paid later
19
24
Fair value
Value of
Fair value
underlying assets
Value of underlying assets
2008
2007
Derivative agreements (for hedging purposes)
Currency derivatives
Forwards
11,619
252,965
832
Interest rate derivatives
Futures
0
104,235
0
Equity derivatives
Futures
0
-126,966
0
40
-333,557
169,665
73,365
Revised calculation for the parent company’s equity,
31 December 2008
Share capital Reserve fund Accrued earnings
Total
Balance on 31 Dec. 2007
77,911
175,644
77,392
330,947
-378,803
-378,803
For dividend distribution
-40,163
-40,163
Changes during the period
67,522
73,915
0
259,701
145,433
249,559
-341,574
171,682
Revised calculation for the group’s equity, 31 December 2008
Share capital Reserve fund Accrued earnings
Total
77,911
175,644
78,460
332,015
-383,734
-383,734
For dividend distribution
-40,163
-40,163
Changes during the period
67,522
73,915
-176
259,525
145,433
249,559
-345,612
167,644
Distributable funds
Profit for the period
+ Other unrestricted equity
- Other non-distributable items
Distributable funds, total
Parent
Group
-378,803
155,493
0
-223,310
-383,734
156,561
-2,961
-230,133
The parent company and group’s capital loans
2008
2007
90,765
90,687
41
Solvency and risk management principles at OP Life
Assurance Company Ltd.
agement in relation to the nature, extent, versatility and ownership of the company’s operations.
It is essential in solvency management that the
company’s administration has been organised reliably. When setting business objectives and risk
levels, the company takes the objectives and risk
levels of the OP-Pohjola Group Central Cooperative Group into account where applicable.
A reliable administration, internal supervision
and risk management form a larger entity which
is referred to as solvency management within the
OP-Pohjola Group.Solvency management is regulated by the Insurance Companies Act and the
regulations and instructions issued by the Insurance Supervisory Authority.
OP-Pohjola Group’s solvency management
principles are approved by OP-Pohjola Group
Central Cooperative’s Supervisory Board. The
principles define the general framework for meeting the statutory and regulated obligations related to the management of solvency, and the general application of the Financial Supervisory Authority’s standards and the Insurance Supervisory Authority’s instructions at OP Pohjola Group
level and in organisations belonging to OP-Pohjola Group. The solvency management principles of
OP Life Assurance Company have been prepared
following the aforementioned principles.
The objective of solvency management is to
ensure OP Life Assurance Company Ltd’s riskbearing capacity and subsequently its continuity of operations.Solvency management has been
integrated as part of business control and management.
Risk management is carried out independent
of business operations. The application of the independence principle is defined separately in the
company’s internal instructions.
Reliable administration
Compliance with the principles of reliable administration ensures professional management in accordance with sound and careful business principles, as well as reliable and sufficiently transparent operations. OP Life Assurance Company Ltd’s
Board of Directors has ratified the principles of reliable administration as part of the principles of
solvency management.
Compliance operations comprise an essential
part of reliable administration. The objective of
compliance operations is to ensure that all entities within the company comply with laws, official instructions and orders, self-regulation of the
markets and guidelines of the OP-Pohjola Group
Central Cooperative, as well as internal policies
and instructions within the entities. Compliance
operations have been organised by appointing a
Compliance Committee for the company, whose
task is to secure compliance with these regulations. The Committee’s Chairman is the company’s Business Controller and its members are the
Senior Legal Counsel, Actuary and OP-Pohjola
Group Central Cooperative’s Compliance Officer.
General principles
The starting point of OP Life Assurance Company Ltd’s solvency management is the company’s
justified view of the capital required by all significant risks and the level of planned risks, and the
sufficiency of internal supervision and risk man-
42
Internal supervision
ratified by the company’s upper management, are
followed. The risks measurable within the OP-Pohjola Group are limited using the risk and control
limit system which also guides operations at OP
Life Assurance Company Ltd.
Internal supervision ensures that the company’s
goals and objectives are met and its resources are
used economically and efficiently. Internal supervision is part of normal operations and implemented at all organisational levels. Monitoring the fulfilment of the business goals and objectives comprises an essential part of internal supervision.
When preparing the strategy, objectives are set
for long-term performance indicators and indicators for the strategy period. The performance indicators, together with risk limit indicators and stress
tests, form an entity on which the setting of objectives, monitoring and rewards are mainly based.
The Board of Directors regularly monitors the success of operations in relation to the objectives and
risks. The company also prepares earnings estimates and capital plans, the objective of which is
to draw attention to the effect of business decisions
on solvency, earnings development and performance indicators well in advance.
Stress tests
Stress tests are used to assess how various exceptionally serious but potential situations may impact OP Life Assurance Company Ltd. Stress tests
can be used to identify the most essential risks for
the company and assess the vulnerability of the
company’s financial standing according to these
risks.
Scenario analyses are used, in particular, for
analysing the impact of risks in the operating environment. They are derived from the financial
estimate following the valid strategy which is
based on the prevailing levels of different market
variables and the Group’s best estimates on future development. In scenario analyses, this basic estimate is strained using the impact of different risks.
Risk management
The purpose of risk management is to identify
threats and opportunities affecting the realisation
of the company’s strategy. The primary objective
of risk management is to secure risk-bearing capacity and to ensure that the company is not exposed to excessive risk that may endanger the profitability, solvency or continuity of the company’s
operations or those of the entire OP-Pohjola Group.
Risk-taking comprises a significant part of the basic mission of insurance operations.
The risk management process includes the
recognition, measurement and evaluation of risks,
and their limitation, reporting and supervision. OP
Life Assurance Company’s qualitative and other
non-measurable risks are controlled by ensuring
that the general instructions and procedures related to solvency management issued by OP-Pohjola Group Central Cooperative, and the instructions
Measuring solvency and risk-bearing
capacity
The company’s risk-bearing capacity is measured using the traditional solvency ratio pursuant to the Insurance Companies Act and the early warning calculation model included in the Insurance Companies Act which entered into force
in October 2008. The traditional solvency ratio is
monitored at least monthly, and more often if required. Early warning calculations are prepared
quarterly. In addition, financial capital calculations based on OP-Pohjola Group Central Cooperative’s calculation models are utilised when assessing the solvency margin required by the company. The amount and sufficiency of the assets
indicated by these calculations are also reviewed
using stress tests. The company prepares a capi-
43
tal plan at least once a year, including a forecasting preparation plan for the company’s assets that
are kept at a sufficient level compared to the assessed operational risks and the requirements set
by authorities.
In addition to secured operating capacity, the
setting of objectives forerisk-bearing capacity and
solvency takes into account the amount of assets
tied to solvency margin, their capital cost caused
for the company and the requirements caused by
the costs for investment operations. An appropriate capital structure, the company’s result capacity,
the owners’ commitment to the company’s operations and functional risk management secure the
company’s risk-bearing capacity. It is monitored
regularly through the Board of Directors’ monthly reports.
Business Controller
The company’s Business Controller is responsible
for the management of the company’s plannedoperational risks and coordinates the Compliance
operations. The Business Controller reports to the
Managing Director.
Responsible Actuary
The Responsible Actuary is responsible for the appropriateness of the company’s technical basis,
underwriting guidelines, reinsurance planning,
calculations for technical provisions and solvency and other tasks related to internal supervision
and risk management defined for the company’s
actuary in laws. The Responsible Actuary reports
to the Managing Director, Board of Directors and
OP-Pohjola Group Central Cooperative’s solvency
management unit.
Solvency and risk management organisation
and responsibilities
CIO
The CIO is responsible for investment operations
under the authority granted by the Board of Directors within the company’s organisation starting from 2009. The CIO’s responsibilities and authorisations are defined in more detail in the company’s investment plan.
Board of Directors
The highest decision-making body in risk management-related issues is the company’s Board of
Directors which is responsible for the sufficiency of risk management systems and the general principles.
Other management
The company’s Unit Managers are responsible for
the processes and their functionality within their
areas, and reporting the agreed indicators in a fixed
format to the upper management or the company’s
Board of Directors. Until the end of 2008, the CIO
in the matrix organisation was responsible for the
preparation and implementation of the plans required by investment operations, the investment
plan in particular.
OP-Pohjola Group Central Cooperative
OP-Pohjola Group Central Cooperative has a management unit for the solvency of insurance organisations which is responsible for the risk management of investment property and technical provisions, including ALM and financial capital calculation models, and their development.
The company’s organisation
Managing Director
The company’s Managing Director is responsible
for planning, preparing and implementing internal
supervision and risk management according to the
Board of Directors’ decisions.
Internal audit
The Group’s internal audit is responsible for the
company’s internal audit. Its purpose, authority and responsibilities are defined in the Opera-
44
tional Audit Principles description ratified by OPPohjola Group Central Cooperative’s Supervisory
Board. Internal audit reports and their responses
are submitted to the Board of Directors, in addition
to which the Audit Manager is heard in the company’s Board meeting at least once a year.
death of a single person exceeds EUR 0.45 million,
the excess will be reinsured. In addition, certain ordinary life risks related to investment-linked assets
have been reinsured.
The most significant risk in the technical provisions is the technical interest requirement for interest-bearing insurance (binding income promise)
and the return on investment property that covers
it. The attached table describes the interest risk of
technical provisions. Actual investment risks are
discussed later in a separate chapter.
Premature withdrawal of long-term assets reduces the company’s earnings base. In conjunction
with surrender, the company may have to liquidate its investments in a poor market situation, or
may not be able to amortise accelerated business
expenses by the time of surrender. Surrender risk
is managed by means of a suitable product structure, and by means of contract terms and sanctions. Savings insurance and capitalisation agreements are susceptible to surrender. On the other
hand, surrender of pension insurance is only possible under exceptional circumstances.
Risk management risks and processes
Strategic risks
Strategic risk refers to losses incurred as the result
of an incorrectly selected business strategy. These
risks are prepared for and reduced so that definitions in the company’s business strategy are made
on the basis of thorough planning and preparation.
Strategic risks are controlled by monitoring the
realisation of success indicators and by reviewing
the company’s strategic status, if required.
OP Life Assurance Company’s insurance risks
In addition to life and pension insurance intended
for long-term savings, OP Life Insurance Company’s product selection includes risk life and group
pension insurance.
The company analyses the fulfilment of insurance assumptions regularly. Insurance risks refer
to risks related to mortality, disability and other
such factors, and the operating expense risk.
Insurance risks are controlled by defining the
company’s invoice criteria concerning premiums
and technical provisions to provide sufficient security. Updated risk selection instructions, accrual of the equalisation provisions and reinsurance
of ordinary life securities exceeding the retention
amount reduce the probability of insurance losses, or alleviate their impact on results.
OP Life Assurance Company takes part in the
mutual catastrophe reinsurance of Finnish life insurance companies. In addition, the company has
a valid surplus reinsurance agreement which covers risks in the event of death or disability. If the
net risk valid in different insurance policies for the
Investment risks
Significant risks are associated with investment
operations. The Board of Directors confirms separate instructions concerning risk management
and procedures for managing investment risks.
Preparation for investment risks includes an annual investment plan that defines the method and
personnel qualified to handle the risks. The investment plan addresses the desired level of risk
and return, and specifies the annual distribution,
range and benchmark index for investment property, as well as other limitations on investments.
The limitations of the investment plan and the observation of regulations are monitored and regularly reported to the upper management and the
Board of Directors.
Allocation of investments takes into account
the requirements for security, returns and liquid-
45
Life assurance policy and capitalisation portfolio
Technical
interest
Number of
insured people
or agreements
Liability on 31 December 2008,
EUR million
Average
remaining duration
in years
Life insurance/Savings
Technical interest 4.5%
4.50%
Technical interest 3.5 %
3.50%
2.50%
1.50%
Unit-linked
5,134
74,214
128,256
1,961
including the
aforementioned
85
1,435
968
4
9.5
10.6
10.6
7.9
1,179
Total
209,565
3,671
Until the start of the
pension period
4.50%
15,789
271
4.8
3.50%
54,078
372
7.7
2.50%
111,053
120
13.2
1.50%
2,978
0
11.0
including the
Unit-linked aforementioned
383
Total
183,898
1,145
Free-form employee pension
3.50%
3.50%
2.50%
1.50%
Unit-linked
21,000
226
1,153
524
including the
aforementioned
376
3
4
2
Total
22,903
395
-
-
172,274
6,697
75
24
Total
178,971
99
Individual insurance
Group insurance
10
4.50%
0
3.50%
96
24
2.50%
121
32
Pohjola Tuotto
419
4
including the
Unit-linked aforementioned
39
Total
636
Other technical provision items
Total
595,973
46
N.A.
6.6
8.9
7.3
99
30
5,440
N.A.
N.A.
2.3
2.2
0.8
9.8
Distribution of investments, return and risk figures
2008
Market value
Distribution
TWR return
Interest investments 2,848,932
73.3%
Loan receivables
0
0.0%
Bonds 2,284,622
58.8%
Other money market instruments and deposits 564,309
14.5%
Share investments
406,504
10.5%
Quoted shares
201,395
5.2%
Unquoted shares
34,646
0.9%
Capital investments
170,464
4.4%
315,801
8.1%
Direct property investments
216,028
5.6%
Property investment funds and mutual investment companies
99,773
2.6%
Other investments
316,977
8.2%
Hedge fund investments
316,977
8.2%
Other investments
0
0.0%
Total
3,888,213
100.0%
-2.9%
0.0%
-4.8%
4.7%
-18.4%
-45.9%
13.7%
10.3%
0.9%
5.7%
-9.6%
-23.4%
-23.4%
0.0%
-11.4%
2007
Market value
Distribution
TWR return
Interest investments 2,672,548
Loan receivables
0
Bonds
2,584,184
Other money market instruments and deposits
88,364
Share investments
854,411
Quoted shares
718,316
Unquoted shares
31,754
Capital investments
104,341
278,168
Direct property investments
214,254
Property investment funds and mutual investment companies
63,914
Other investments
387,280
Hedge fund investments
387,280
Other investments
0
Total
4,192,407
63.7%
0.0%
61.6%
2.1%
20.4%
17.1%
0.8%
2.5%
6.6%
5.1%
1.5%
9.2%
9.2%
0.0%
100.0%
-0.1%
0.0%
-0.3%
3.4%
8.6%
3.1%
147.1%
4.4%
10.5%
9.2%
14.9%
5.3%
5.3%
0.0%
2.6%
Volatility for investment property, excluding direct property investments, was 4.26%.
The volatility has been calculated using monthly observations from two-year history.
47
ity set by the nature of the underwriting reserves
and the company’s risk-bearing capacity. Achieving long-term return targets requires controlled
risk-taking. The risk level and volatility of investments is monitored by means of the realised standard deviation of returns.
In terms of market risks, the risks associated with changes in value and interest rates have
a particular effect on investments. For this reason, investments are diversified into different
categories and investment instruments, and geographically. In addition, the company may
use derivatives for protecting against the value change risk and managing the interest risk.
The risk of change in value is measured in terms
of the risk realisation for share and interest investments, and it is regularly reported to the Board of
Directors. The interest rate risk is monitored by
means of modified duration in relation to the duration of the reference portfolio.
Value change risk
A value change risk was realised on the share market during 2008. The share market decreased globally, leading to large negative returns on share investments. The company reduced its share investments by selling and hedging share investments
through derivatives.
Sensitivity analysis for investments
2008
Portfolio at fair value
Risk
Change
parameter
Bonds and bond funds
2,613,181
Interest
Shares and alternatives
823,253
Market value
Properties
216,028
Cash return
requirement
2007
Portfolio at fair value
Effect on
operating equity
1 % unit
10%
110,799
82,325
15%
Total
32,404
225,528
Risk
Change
parameter
Effect on
operating equity
Bonds and bond funds
2,745,913
Interest
Shares and alternatives
1,305,605
Market value
Properties
214,254
Cash return
requirement
1 % unit
10%
147,730
130,561
15%
Total
32,138
310,429
Credit risk
Fair value according to the exercise period
or re-pricing date, EUR million
0 to 1 years
> 1 to 5 years
> 5 to 10 years
> 10 to 20 years
> 20 years
Total
Modified duration
Average interest rate, %
31 Dec. 2008
594,964
788,103
749,901
243,687
236,525
31 Dec. 2007
22.8%
30.2%
28.7%
9.3%
9.1%
309,078
889,442
957,176
381,948
208,269
11.3%
32.4%
34.9%
13.9%
7.6%
2,613,181
100%
4.24
5.77
2,745,913
5.38
4.91
100%
48
Credit risk
Credit rating distribution
AAA
AA
A
BBB
BB+ or lower
Not Rated
Total *
31 Dec. 2008
31 Dec. 2007
858,803
596,220
551,902
170,693
346,223
89,339
32.9%
22.8%
21.1%
6.5%
13.2%
3.4%
1,004,473
272,297
771,390
198,948
464,600
34,206
36.6%
9.9%
28.1%
7.2%
16.9%
1.2%
2,613,181
100%
2,745,913
100%
* Including money market investments or deposits, bonds and bond funds
Interest rate risk
The interest market was very volatile in 2008. The
company controlled the interest rate risk actively through derivatives. As uncertainty prevailed
on the interest market, the company strengthened
its liquidity and increased money market investments in the latter half of the year, in particular.
The company’s liquidity risk is taken into account in the allocation of the investment portfolio. Money market investments are mainly used to
cover the liquidity needs.
the end of the year, more than 83.3% (81.8%) of
interest rate investments were invested in bonds
that had an Investment Grade rating, i.e., at least
S&P’s BBB credit rating.
Interest investments involving credit risks produced losses during 2008. The spreading of credit risk margins affected in particular High Yield investments and investments in bonds in developing countries. Negative return on the entire interest portfolio was largely caused by the aforementioned investments.
Credit risk
Credit risk in investments is minimised by limitations that are defined in the investment plan. At
Foreign exchange risk
The company has foreign currency investments
that are partially protected with derivatives.
Foreign exchange risk
Currency position
31 Dec. 2008
31 Dec. 2007
USD
SEK
JPY
GBP
Other
86,431
3,197
25,939
7,569
0
205,674
11,417
37,106
14,298
0
Total
123,136
268,494
Total net currency position
Currency position was 3.2% of the investment stock (6.4%).
49
Foreign currency investments are monitored and
regularly reported to the Board of Directors. The
company may have open foreign currency positions, but a maximum limit has been set for them
in the investment plan.
An increase in volatility could also be seen in
exchange rates and the EUR/USD rate, in particular, experienced large changes during the last quarter. The company used derivatives for hedging foreign currency investments by 67 per cent. The foreign exchange risk open at year-end was 3.2 per
cent of the entire investment property.
The company’s investment plan makes it possible to use derivatives to hedge the value of investments, or use them without any hedging purposes. At the end of the year, derivative agreements had been used for hedging and non-hedging purposes.
At the end of the year, the company had EUR
316 million in property investments at market value, of which 68% comprised property investments
in Finland, mainly in the capital district and regional growth centres. The rest were investments
in unquoted property funds that subsequently invest in European property targets or funds.
The company’s internal processes are planned
and implemented so that operational risks are minimised in advance so that they can be controlled.
The objective is to identify significant operational risks from products, services, functions, processes and systems. The identification and assessment are carried out using risk mapping, i.e., a
process aimed at identifying the operational risks
caused by and related to the company’s operations
and assessing the probability of the risk being realised and the impact caused by any realisation
of the risks.
Any outsourcing of functions takes place according to proceedings applied the Group, ensuring that it will not cause any damage to operations, risk management or other internal supervision. Special attention is paid to securing the continuity of functions.
Any product and service release is preceded
by specifications, planning of operating processes, preparation of guidelines and product approval. The company has a comprehensive long-term
project in progress regarding the renewal of insurance systems. The project includes significant integration shares in the OP-Pohjola Group’s systems.
This project includes the largest operational risks
identified within the company.
Continuity planning secures the continuity of
operations in the event of a serious malfunction.
The company prepares its continuity plan according to instructions issued by the Group. The plan
is ratified by the Supervisory Board.
Operational risks
Operational risks refer to any direct or indirect
losses in income or costs arising for the company
that are caused by imperfect or deficient processes, defects in internal supervision, defective product management, personnel, the realisation of legal
risks, data management, IT or data security, or uncertainty related to the safety of an external threat
or operational continuity. The company is responsible for the management of operational risks related to its business operations using the Group’s
support in securing the reliability and continuity of
centralised operations and services. It is essential
to identify the most substantial operational risks
and protect against them.
50
The parent company’s solvency ratios
Solvency margin
2008
2007
2006
2005
2004
171,682
290,784
289,085
141,677
133,223
-14,344
0
-24,939
90,765
24,651
-12,216
235,600
91,381
-17,000
-22,259
90,687
0
-1,844
431,748
147,864
-9,716
-27,062
90,608
0
0
490,780
155,020
-8,320
-787
45,529
0
0
333,120
89,255
0
-1,291
44,346
0
2
265,535
Equity after the deduction of
the proposed distribution of profit
Valuation difference between fair value and
book value of assets in the balance sheet
Deferred taxes
Intangible assets
Capital loans
Capital value of future profits
Other items
Total
Minimum solvency margin according to Chapter 11,
Section 4 of the Insurance Companies Act
189,083
190,243
181,589
104,028
Solvency margin ratio
125%
227%
270%
320%
Equalisation provision included in insurance technical provisions for years
with numerous claims
21,047
19,656
18,112
215
Solvency capital
256,647
451,404
508,892
333,335
Solvency ratio
6.2 %
10.4 %
12.3 %
88,692
299%
162
265,697
12.8 %
12.0 %
Solvency ratio as percentage of technical provisions, i.e., solvency margin and equalisation provision in relation to the
insurance technical provisions at the company’s responsibility less the equalisation provision and 75% of the technical
provisions for unit-linked insurance.
Distribution of investments
Fair value
2008
Share %
Bonds
Other money market instruments
of which equities and equity funds
bond funds
of which shares and participations
fixed-income instruments
Investments, total
966,742
564,309
1,519,298
201,395
1,317,903
522,063
507,173
14,891
315,801
3,888,213
24.9%
14.5%
39.1%
5.2%
33.9%
13.4%
13.0%
0.4%
8.1%
100.00%
Investments as cover for
1,614,106
51
2007
Fair value
Share %
1,254,299
29.9%
88,364
2.1%
2,048,201
48.9%
718,316
17.1%
1,329,885
31.7%
523,375
12.5%
510,518
12.2%
12,857
0.3%
278,168
6.6%
4,192,407 100.00%
2,373,965
Signatures to the financial statements
and Board of Directors’ report
OP Life Assurance Company Ltd.
Helsinki, 13 February 2009
Tony Vepsäläinen
Jussi Huttunen
Sini Kivihuhta
Harri Luhtala
Harri Nummela
Hannu Routamaa
Helinä Saarela
Mikael Silvennoinen
Jarmo Somero
Chairman of the Board of Directors
Jarmo Kuisma
Managing Director
We have today issued an auditors’ report on the performed audit.
KPMG Oy Ab
Authorised Public Accountants
Mikko Haavisto
Timo Nummi
Authorised Public Accountant
Authorised Public Accountant
52
Auditor’s report
To the Annual General Meeting of
OP Life Assurance Company Ltd
statements and on the report of the Board of Directors based on our audit. Good auditing practice
requires that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance whether the financial statements
and the report of the Board of Directors are free
from material misstatement and whether the members of the Board of Directors of the parent company and the Managing Director have complied with
the Insurance Companies Act.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and the report of
the Board of Directors. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and the report of
the Board of Directors.
The audit was performed in accordance with
good auditing practice in Finland. We believe that
the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit
opinion.
We have audited the accounting records, the financial statements, the report of the Board of Directors, and the administration of OP Life Assurance
Company Ltd for the year ended on 31 December,
2008. The financial statements comprise the consolidated balance sheet, income statement, cash
flow statement and notes to the consolidated financial statements, as well as the parent company’s balance sheet, income statement, cash flow
statement and notes to the financial statements.
The responsibility of the Board of Directors
and the Managing Director
The Board of Directors and the Managing Director
are responsible for the preparation and fair presentation of the financial statements and the report of
the Board of Directors in accordance with the laws
and regulations governing the preparation of the financial statements and the report of the Board of
Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the
control of the company’s accounts and finances,
and the Managing Director shall see to it that the
accounts of the company are in compliance with
the law and that its financial affairs have been arranged in a reliable manner.
Auditor’s Responsibility
Our responsibility is to perform an audit in accordance with good auditing practice in Finland, and
to express an opinion on the parent company’s financial statements, on the consolidated financial
53
Opinion
In our opinion, the financial statements and the report of the Board of Directors give a true and fair
view of both the consolidated and the parent company’s financial performance and financial position in accordance with the laws and regulations
governing the preparation of the financial statements and the report of the Board of Directors in
Finland. The information in the report of the Board
of Directors is consistent with the information in
the financial statements.
KPMG OY AB
Mikko Haavisto
Authorized Public Accountant in Finland
Timo Nummi
Authorized Public Accountant in Finland
54

OP Life Assurance Company

Transcription

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