Fennia Annual Report 2015

Report of the Board of Directors

Report of the board of directors

2015 was a good year for Fennia Mutual Insurance Company. The development of the company’s underwriting result was positive and the combined ratio fell.

Insurance business

Premiums written for non-life insurance before the reinsurers’ share amounted to EUR 429 million (EUR 430 million). Premiums written for the comparison year included a one-off item of patient insurance premiums equalling EUR 16 million. Premiums written for direct insurance increased to EUR 429.0 million (EUR 413.6 million), with comparable growth at four per cent. Premiums written for reinsurance assumed came to EUR 0.4 million (EUR 0.4 million). Credit losses amounted to EUR 2.3 million (EUR 1.8 million).

The company lowered the technical rate of interest used in the discounting of technical provisions to 2.4 per cent (2.5 per cent). As a result, technical provisions grew by EUR 7 million and increased the company-level loss ratio and combined ratio by 1.7 percentage points. Claims incurred during the comparison year included EUR 17 million in non-recurring growth in technical provisions for patient insurance, which in turn increased the premiums written for fully experience-rated public sector insurance to EUR 16 million. These items did not have a significant impact on the loss ratio and combined ratio for the comparison year.

The company’s combined ratio fell, amounting to 98.5 per cent. The comparable combined ratio was 96.7 per cent (99.3%), claims accounting for 65.9 per cent (68.0%) and operating expenses and claims handling expenses for 30.9 per cent (31.2%). The company’s loss ratio declined to 73.9 per cent (75.5%). The decline resulted from the profitability measures implemented by the company in recent years.

Premiums written for statutory accident insurance remained unchanged at EUR 89 million. The loss ratio for the line grew to 90 per cent (85%). Premiums written for other accident and health insurances increased 10 per cent to EUR 44 million (EUR 40 million). As a result, the loss ratio for the insurance line fell considerably to 82 per cent (92%). The result was impacted by systematic pricing that targets a level corresponding to the risk.

Premiums written on traffic insurance were EUR 82 million (EUR 78 million). The profitability of this insurance line improved. The loss ratio was 65 per cent (68%). Premiums written for voluntary motor vehicle insurance increased 7 per cent to EUR 76 million (EUR 71 million). In recent years, the company has taken factors affecting the line’s risk premium into closer account and the line’s loss ratio has developed favourably and is now 69 per cent (75%).

Premiums written for fire and other property insurance for companies remained unchanged at EUR 47 million for the third consecutive year. Premiums written for home insurance, including liability and legal components, increased 5 per cent to EUR 49 million. The claims incurred by households and the private sector were moderate.


The company’s return on investments at current values amounted to EUR 59 million (EUR 89 million), i.e. 3.9 per cent (6.2%) on the invested capital. The company’s net income from investments was EUR 95 million (EUR 84 million).

At year-end, the current value of Fennia’s investments stood at EUR 1,561 million (EUR 1,496 million). Bonds and long-term fund investments accounted for 30 per cent of the investment portfolio, and money market investments and deposits for 24 per cent. Shares, equity fund investments and private equity funds accounted for 20 per cent, real estate investments for 23 per cent and other investments for 3 per cent.

Fennia, parent company investment portfolio 31.12.2015 EUR 1.561 million (EUR 1.496 million)

Return on investments 3.9% (6.2%)
Equities and holdings20.1%
Investments in land and buildings23.1%
Other money market instruments23.7%
Other investments3.3%

Result and solvency

Fennia’s operating profit was EUR 88 million (EUR 74 million). The technical underwriting result continued to develop favourably.

The company’s equalisation provision grew by EUR 44 million and stood at EUR 268 million (EUR 224 million) at year-end. The company’s solvency margin amounted to EUR 330 million (EUR 335 million), and solvency capital rose to EUR 599 million (EUR 559 million). The solvency ratio, i.e. the solvency ratio in relation to the premiums earned stood at 143.5 per cent (133.8%).

Administration and staff

During the year under review, the members of Fennia’s Board of Directors were Managing Director Mikael Ahlbäck (Chairman); Matti Pörhö (Vice Chairman); Managing Director Jussi Järventaus; Managing Director Lars Koski; Professor Eva Liljeblom; CEO Timo Salli; and CEO Paul Stucki.

The Board of Directors held a total of 9 meetings during the year under review. The attendance rate of the members was 95 per cent.

Antti Kuljukka acted as Managing Director.

In the Annual General Meeting on 20 April 2015, Chairman of the Board Risto Finne, Chairman of the Board Matti Kurttio, CEO Raimo Puustinen and CEO Risto Tornivaara were elected as new members to the Supervisory Board.

The company employed an average of 1,043 people (1,077) in 2015.


The starting point for remuneration at the Fennia Group is to provide encouraging, fair, and reasonable remuneration for management and personnel that is in line with the short- and long-term interests of both the Group and Group companies. Fennia’s remuneration schemes are based on achieving pre-defined targets that are derived from the Group’s strategic targets. In order to achieve this objective, remuneration principles (pay policy) have been drawn up for the Group. Fennia Group’s pay policy defines all of the principles related to salary and rewards for Fennia employees. At Fennia, the pay policy is viewed as a whole that is influenced not only by an interesting and sufficiently challenging field of tasks, but also by good leadership, personnel benefits and monetary rewards. The pay policy also defines how each Fennia employee can influence the development of their salary by developing themselves and their work, as well as the responsibilities related to salary and rewards within the company.

In line with the pay policy, rewards have been built in such a way as to prevent unhealthy risk-taking. Fennia’s remuneration schemes include, among other things, pre-defined maximum amounts of remuneration and a force majeure clause, which gives the Board of Directors the right to amend the schemes during the period if the company’s financial position is jeopardised or if the circumstances have otherwise changed considerably. Remuneration decisions are made according to the ‘one above’ principle; i.e. the person making the decision is the supervisor of the supervisor of the employee in question.

Group Structure

The Consolidated Financial Statements of the Fennia Mutual Insurance Company include Fennia Life Insurance Company, in which the Company has a 100 per cent holding, on the basis of the sub-group financial statements.

eFennia was consolidated to the Consolidated Financial Statements. Fennia owns 20 per cent of the company and holds 63.6 per cent of the voting rights. The Group also includes Fennia Asset Management Ltd, which is wholly owned by Fennia Life.

At the end of 2015, the Group also included 29 real estate companies, 13 of which belonged to the Fennia Life sub-group. The associated undertaking Uudenmaan Pääomarahasto Oy was also consolidated to the Group.

Consolidated Financial Statement

The Group’s life insurance business’s operating profit was EUR 3 million (EUR 9 million). Life insurance premiums written grew strongly for the second consecutive year, amounting to EUR 200 million (EUR 153 million). Claims paid came totalled EUR 83 million (EUR 78 million). Operating expenses for life insurance were EUR 13 million (EUR 12 million). The expense ratio (of expense loading) was 112.0 per cent (120.4 %).

Fennia Life continued to increase the technical provisions, which will help prepare for the costs brought by the technical interest rate that will be credited to life insurance. An interest rate supplement of EUR 70 million (EUR 14 million) was transferred from the result to the technical provisions.

The profitability of Fennia Asset Management improved during the year and the company recorded a profit for the financial year. The amount of client assets managed by the company grew and equalled EUR 234 million (EUR 193 million) at the end of the year.

The Group’s operating profit was EUR 87 million (EUR 82 million). Net investment income amounted to EUR 212 million (EUR 146 million), of which unit-linked insurances accounted for EUR 47 million (EUR 35 million). The Group’s valuation difference fell to EUR 140 million (EUR 216 million).

The Group’s non-restricted capital and reserves stood at EUR 293 million (EUR 255 million), and solvency capital was EUR 646 million (EUR 656 million).

Risk management and solvency management

The risk management and solvency management principles that are approved by the Boards of Directors of the Group companies serve as the foundation for the Fennia Group’s risk management and solvency management. In the Fennia Group, risk management means co-ordinated strategies, processes, principles and measures to identify, measure, monitor, manage and report risks faced by the Group and the Group companies. Solvency management, on the other hand, means strategies, processes, principles and measures to steer and determine the Group’s and the Group companies’ risk-bearing capacity, risk appetite, risk tolerance and restrictions of their essential risks.

The steering of the risk management system is based on a three-defence-line model, which is described in more detail in the note concerning risk management. A risk management committee has been set up for the Group’s insurance companies to prepare, steer and co-ordinate tasks related to risk and solvency management and to communicate information.

Investment activities are based on the investment plans approved by the Boards of Directors, which determine, among other things, the allocation of investments and the rights and responsibilities of those involved in investment activities. The companies’ risk-bearing capacity is taken into account in determining investment allocation.

A Note to the Financial Statements concerning risks and the management of risks and solvency has been drawn up, detailing the Fennia Group’s most significant risks and general principles concerning risks and solvency management.

Outlook for the current year

The uncertainty in the investment markets will continue also during the current year. This presents challenges to achieving investment returns in line with the targets.

Fennia will continue developing its basic business and process automation. The company’s goal is to achieve and maintain solid profitability. Good partnerships have helped to enable positive growth in the customer base. The company will continue and deepen its operations in these areas. Fennia will strive to be the most recommended insurance company in Finland also in the future.