Fennia Life Annual Report 2016

Report of the Board of Directors

Report of the board of directors

Fennia Life Insurance Company increased its premium income compared to the previous year. The risk level of investments was lowered due to the low interest rate level and market uncertainty.

Fennia Life is a wholly owned subsidiary of Fennia Mutual Insurance Company.

Insurance business

Fennia Life’s total premium income, including the reinsurers’ share, increased to EUR 207.1 million (EUR 199.8 million). Of the company’s total premiums written, life insurance accounted for EUR 170.2 million (EUR 165.4 million) and pension insurance for EUR 36.8 million (EUR 34.4 million). The premiums written for pension insurance taken out by companies continued to grow despite the decline in the premiums written for private pension insurance policies. Premium income on unit-linked insurances increased to EUR 165.0 million (EUR 158.3 million), accounting for 80 per cent (79%) of total premium income. Premiums written on regular premium contracts stood at EUR 57.0 million (EUR 52.9 million), accounting for 28 per cent (26%) of total premiums written.

Claims paid rose to EUR 90.7 million (EUR 83.2 million). Surrenders amounted to EUR 40.4 million (EUR 30.6 million). The repayment of benefits amounted to EUR 6.4 million (EUR 3.4 million). Pensions were paid in the amount of EUR 34.6 million (EUR 33.7 million) and death and disability benefits in the amount of EUR 5.1 million (EUR 11.5 million).

Operating expenses amounted to EUR 14.0 million (EUR 13.5 million). Taking into account fee and commission income from funds which form the investments of the unit-linked insurance, the expense ratio was 94.8 per cent (100.8 per cent).

The total return on with-profit insurance savings varied between 1.0 and 4.5 per cent in 2016, depending on the line of insurance and quarter of the year. Client bonuses granted totalled EUR 2.4 million, of which EUR 0.4 million was funded from provisions for bonuses reserved earlier. The company continued to increase the technical provisions, which will help prepare for the costs of the technical rate of interest that will be credited to life insurance.


The company’s return on investments at current values amounted to EUR 30.5 million (EUR 34.7 million), i.e. 4.3 per cent (5.0%) on the invested capital. The company’s net investment income was EUR 91.8 million (EUR 122.1 million), of which unit-linked insurances accounted for EUR 62.7 million (EUR 46.7 million). The risk level of the investment portfolio was reduced further during the financial year. The investment result of the comparison year includes an exceptionally large amount of capital gains.

At year-end, the current value of investments stood at EUR 756 million (EUR 749 million). Bonds and long-term fund investments accounted for 39 per cent of the investment portfolio, and money market investments and deposits for 30 per cent. Shares, equity fund investments and capital trusts accounted for 15 per cent, real estate investments for 15 per cent, and loan receivables and other investments for 1 per cent. Assets covering unit-linked insurances grew strongly to EUR 903 million (EUR 723 million).

Distribution of FenniaLife’s investment portfolio 31.12.2016 EUR 749.3 (720.5) million

Return on investments 4.3 (5.0) %
Sarake 1
Other debt securities30.1
Real estate investments14.9
Shares and participations14.7
Other investments1.4


The company’s operating profit was EUR 12.8 million (EUR 3.0 million). The Group’s operating profit was EUR 10.2 million (EUR 2.6 million). The company transferred an interest rate supplement of EUR 20 million (EUR 70 million) from the result to the technical provisions at the end of the financial year. At year-end, the supplementary provision for the guaranteed interest rate stood at EUR 136 million.

Administration and staff

During the year under review, the members of Fennia Life’s Board of Directors were: Mikael Ahlbäck (Chairman); Matti Ruohonen (Vice Chairman); Managing Director Antti Kuljukka; CEO Juha-Pekka Halmeenmäki and Deputy Managing Director Eero Eriksson.

The Board of Directors held a total of 9 meetings during the year under review. The attendance rate of the members was 100 per cent.

Seppo Rinta acted as Managing Director.

The company employed an average of 53 people (54) in 2016.


The starting point for remuneration at Fennia Group and thus also at Fennia Life is to provide encouraging, fair and reasonable remuneration to management and personnel that is in line with the short- and long-term interests of both the Group and Group companies. Fennia Life’s remuneration schemes are based on achieving pre-defined targets that are derived from the company’s strategic targets. Fennia Group’s pay policy defines the principles related to salary and rewards. At Fennia, the pay policy is 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 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

Fennia Asset Management Ltd, in which the company has a 100 per cent holding, is included in the consolidated accounts.

In addition, at year-end, Fennia Life Group included twelve real estate companies wholly owned by the company.

Asset Management

The company’s profitability improved during the financial year. The profit for the financial year was EUR 0.8 million (EUR 0.3 million). The company’s capital and reserves grew and at the end of the financial period amounted to EUR 2.1 million (EUR 1.4 million).

The Group’s solvency at the end of the financial period was good, the solvency ratio was 35.7 per cent and the company’s own funds amounted to EUR 2.1 million (calculated minimum requirement for own funds is EUR 0.5 million).

The amount of client assets managed by Fennia Asset Management grew, standing at EUR 286 million (EUR 234 million) at year-end. The new capital was mainly allocated to a fund investing in business premises because the low interest rate level and volatile equity market steered investors’ focus towards real estate investments.

Risk management and solvency management

The risk management and solvency management principles that are approved by the boards of directors of Fennia Group companies serve as the foundation for Fennia Life’s risk management. 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 plan approved by the Board of Directors, which determines, among other things, the allocation of investments and the rights and responsibilities of those involved in investment activities. The company’s risk-bearing capacity is taken into account in determining the allocation of investments.

A note to the financial statements concerning risks and the management of risks and solvency has been drawn up, detailing Fennia Life’s most significant risks and general principles concerning risks and solvency management.

Solvency and Financial Condition Report

Fennia Life’s Solvency and Financial Condition Report will be published on 19th May 2017 on Fennia’s website www.fennia.fi.

Outlook for the current year

A moderate rise in the interest rate level combined with the gradual recovery of the economy will bring stability to business operations. However, the current discussion on plans concerning the taxation of savings products and the decision that has already been made regarding the taxation of death benefits may cause instability in the life insurance market.