Report of the Board of Directors

Report of the board of directors

Fennia Mutual Insurance Company’s result for the year 2017 was good. The risk ratio improved on the comparison year, and investment operations were successful. In the financial statements, the underwriting result includes a few non-recurring items, which increased the company’s combined ratio.

Insurance business

Premiums written for non-life insurance before the reinsurers’ share amounted to EUR 394 million (EUR 417 million). Direct insurance premiums written decreased to EUR 393.3 million (EUR 417.0 million). Premiums written for reinsurance assumed amounted to EUR 0.4 million (EUR 0.3 million). Credit losses amounted to EUR 1.4 million (EUR 2.0 million).

The company lowered the technical rate of interest used in the discounting of technical provisions to 1.5 per cent (2.0%). As a result, the technical provisions and claims incurred grew by EUR 52 million. Other changes in the bases for calculating the technical provisions were also implemented during the financial year, resulting in a reduction of just under EUR 52 million in the technical provisions and claims incurred. In addition, the lowering of the discount rate led to an increase in subrogation receivables for accident insurance, which in turn reduced the compensation recovered by EUR 1.6 million. These changes in the bases for calculating the technical provisions improved the company-level risk and loss ratio by 0.3 percentage points for the financial period. The changes made in the calculation bases in the comparison year increased the technical provisions by EUR 20 million, which weakened the risk and loss ratio during that year by 4.8 percentage points.

The company’s operating expenses decreased to EUR 100 million (EUR 103 million). The company recorded EUR 13.1 million in information system investment write-offs in its financial statements, of which EUR 6.4 million related to claims handling expenses. This non-recurring, extraordinary item weakened the company’s operating expense ratio by 3.3 percentage points.

The company’s combined ratio excluding unwinding of discount was 96.6 per cent (100.9%). The company’s combined ratio excluding changes in the calculation bases and the information system write-offs declined and was 93.6 per cent (94.7%), with claims (risk ratio) accounting for 61.4 per cent (62.2%) and operating expenses and claims handling expenses (operating expense ratio) for 32.2 per cent (32.5%).

Premiums written for statutory accident insurance (workers’ compensation) remained at the previous year’s level of EUR 82 million. The profitability of the insurance line improved significantly, and the comparable loss ratio decreased to 73 per cent (89%). Premiums written for other accident and health insurance decreased by 2 per cent to EUR 44 million (EUR 45 million). Although persistent risk-based pricing has improved the line’s loss ratio for several years, the loss ratio for the insurance line now weakened slightly to 81 per cent (76%).

Premiums written for motor liability insurance decreased to EUR 67 million (EUR 78 million). The considerable reduction in premiums written results in particular from increasing competition relating to no-claims bonuses in the markets. In October, the company launched a new motor liability insurance product which provides the highest maximum no-claims bonus on the market. This novelty clearly boosted the sales of motor liability insurance policies. Despite the tightening competition, the loss ratio of the insurance line remained very good, at 55 per cent (55%). With the development of motor liability insurance, premiums written for voluntary motor vehicle insurance decreased to EUR 71 million (EUR 77 million). Unlike motor liability insurance, the result for voluntary motor vehicle insurance was weak. The loss ratio was an unsatisfactory 77 per cent (78%).

Premiums written for fire and other property insurance for companies amounted to EUR 44 million (EUR 46 million). The 4 per cent drop in premiums written can be explained by the difficult economic outlook. The financial period saw the largest fire loss in our entire history. Premiums written for home insurance, including liability and legal components, also decreased by 3 per cent to EUR 49 million (EUR 50 million). The loss ratio for the business sector grew in these lines, whereas the loss ratio for households even improved slightly.


The company’s return on investments at current values amounted to EUR 79 million (EUR 42 million), i.e. 4.7 per cent (2.7%) on the invested capital. The company’s net income from investments was EUR 59 million (EUR 17 million).

At year-end, the current value of the company’s investments stood at EUR 1,706 million (EUR 1,618 million). Bonds and long-term fund investments accounted for 28 per cent of the investment portfolio, and money market investments and deposits for 17 per cent. Shares, equity fund investments and private equity funds accounted for 24 per cent, real estate investments for 25 per cent and other investments for 5 per cent.

Fennia, parent company investment portfolio 31.12.2017 EUR 1.706 million (EUR 1.618 million)

Return on investment 4.7% (2.7%)
Sarake 1
Real estate investments25.4
Shares and participations24.1
Other debt securities17.2
Other investments5.1

Ancillary activities

During 2017, Fennia Asset Management Ltd was granted authorisation by the Financial Supervisory Authority to act as a representative for the manager of alternative investment funds. The authorisation means that Fennia Asset Management can act as the asset manager and clearing house for the alternative investment funds managed by it. The other Group companies made the necessary amendments approved by the Financial Supervisory Authority to their Articles of Association to enable the above-mentioned activities.


The company’s operating profit was EUR 61.2 million (EUR 0.1 million). The technical underwriting result continued to develop favourably. The growth in operating profit was particularly influenced by higher gains on the realisation of investments than in the comparison year. In addition, the technical underwriting result in the comparison year was burdened by the change in the calculation bases for technical provisions, which lowered the operating profit by EUR 20 million.

The company’s equalisation provision grew by EUR 30 million to EUR 312 million (EUR 281 million).

Administration and staff

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

The Board of Directors held a total of 12 meetings during the year under review. The attendance rate of the members was 90 per cent.

Antti Kuljukka, Group CEO, acted as Managing Director.

The company employed an average of 892 people (935) in 2017.


The starting point for remuneration at the Fennia Group is to provide encouraging, fair, and reasonable remuneration to management and personnel that is in line with the short- and long-term interests of 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 remuneration principles, 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 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 2017, the Group also included 26 real estate companies, 12 of which belonged to the Fennia Life subgroup. The associated undertaking Uudenmaan Pääomarahasto Oy was also consolidated to the Group.

Consolidated Financial Statements

The Group’s life insurance business’s operating profit was EUR 21 million (EUR 11 million). Life insurance premiums written amounted to EUR 167 million (EUR 207 million). Claims paid totalled EUR 104 million (EUR 90 million). Operating expenses for life insurance were EUR 15 million (EUR 14 million). The expense ratio (of expense loading) decreased and was 103.6 per cent (103.9%).

Fennia Life decreased the interest rate supplement reserved previously by EUR 11 million. A sum of EUR 3.8 million was reserved for future bonuses.

Fennia Asset Management’s profitability improved, and the company’s profit for the financial year was EUR 1.0 million (EUR 0.8 million). The amount of external client assets managed by the company grew and amounted to EUR 242 million (EUR 192 million) at the end of the year. Group investment assets were transferred under the management of Fennia Asset Management during 2017. As a result, the amount of Group internal client assets grew to EUR 2.6 billion.

The Group’s operating profit was EUR 82 million (EUR 11 million). The growth in operating profit was mainly due to the improvement of the balance on technical account, investment income and the subsidiary’s result. Net investment income amounted to EUR 128 million (EUR 106 million), of which unit-linked insurances accounted for EUR 55 million (EUR 63 million).

The Group’s non-restricted capital and reserves stood at EUR 329 million (EUR 289 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. The Group has a risk management executive group 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.

Statement of non-financial information

Fennia will publish a separate statement of non-financial information simultaneously with the report of the Board of Directors. The report will be published on Fennia’s website

Solvency and Financial Condition Report

Fennia’s, Fennia Life’s and Fennia Group’s Solvency and Financial Condition Reports will be published on Fennia’s website on 15 June 2018 at the latest.

Outlook for the current year

The companies belonging to the Fennia Group are expected to report strongly positive results for 2018. We expect the combined ratio for non-life insurance to weaken slightly from the 2017 level. The result for life insurance is expected to be on a par with 2017. The impact of asset management by Fennia Asset Management on its result will remain low.

However, the investment result may differ significantly from the estimate if the market outlook changes. The current discussion on plans concerning the taxation of savings products may weaken demand for such products.

Fennia’s Board of Directors has decided to establish a subsidiary called Fennia-palvelu Oy. The purpose of the subsidiary is to offer value added services to current and potential insurance customers. The value added services will improve the management of risks relating to customers’ financial security. Fennia has submitted a notification on ancillary activities to the Financial Supervisory Authority and updated its Articles of Association with respect to ancillary activities.