Report of the Board of Directors

Report of the board of directors

Fennia Mutual Insurance Company’s result for the year 2018 was unsatisfactory. The risk ratio was very good, although slightly weaker than it was in the comparison year. This was the second-best risk ratio achieved in the past six-year period. The investment markets were challenging, and the uncertainty was especially reflected in the fourth-quarter result.

Fennia acquired the entire share capital of Folksam Non-Life Insurance on 27 November 2018. The transaction increases Fennia’s premiums written on non-life insurance by an estimated EUR 70 million and, once the operations are integrated, it will bring considerable economies of scale in operating costs (Folksam’s operating costs in 2018 were EUR 28.0 million).

It is estimated that Folksam Non-Life Insurance will be absorbed by Fennia Group’s parent company in May 2019. Fennia paid EUR 106 million for Folksam Non-Life Insurance and recorded EUR 74 million in goodwill for the Group. The goodwill will be amortized over a period of ten years. Folksam Non-Life Insurance’s result for 2018 will be combined with the consolidated result only for December 2018. The transaction will thus only have a minor impact on the 2018 consolidated result. As part of the integration, Folksam Non-Life Insurance’s name was changed to Fennia Non-Life Insurance Company Ltd on 27 February 2019.

Insurance business

Premiums written for Fennia’s non-life insurance before the reinsurers’ share amounted to EUR 383 million (EUR 394 million). Direct insurance premiums written decreased to EUR 382.3 million (EUR 393.3 million). Premiums written for reinsurance assumed amounted to EUR 0.5 million (EUR 0.4 million). Credit losses amounted to EUR 1.4 million (EUR 1.4 million).

Changes in the bases for calculating the technical provisions were implemented moderately during the financial year. The provision for claims settlement costs was increased by approximately EUR 2.2 million. The collective provision for motor liability insurance was reduced by EUR 1 million. The technical provisions thus increased by EUR 1.2 million due to the change in the bases. The change increased the loss ratio by 0.3 percentage points.

The company’s operating expenses amounted to EUR 100 million (EUR 100 million). The company’s combined ratio excluding unwinding of discount was 99.7 per cent (96.6 %). The company’s combined ratio, excluding changes in the calculation bases, was 99.4 per cent (93.6 %), with claims (risk ratio) accounting for 63.3 per cent (61.4 %) and operating expenses and claims handling expenses (operating expense ratio) for 36.0 per cent (32.2 %).

In the financial statements, the underwriting result includes non-recurring costs of EUR 1.1 million related to the Folksam Non-Life Insurance transaction; these costs slightly weakened the company’s combined ratio.

Premiums written for statutory accident insurance (workers’ compensation) decreased to EUR 75 million (EUR 82 million). The insurance line’s profitability remained at the level of the previous year, and its loss ratio was 73 per cent. Premiums written for other accident and health insurance decreased by 2 per cent to EUR 43 million (EUR 44 million). The line’s loss ratio weakened for the second year in a row, and was 89 per cent (81 %).

Premiums written for motor liability insurance decreased to EUR 65 million (EUR 67 million). The decline in premiums written that can be attributed to the price competition following the amendments to the act governing motor liability insurance also continued during the 2018 financial year. The company succeeded in terms of the number of insurance policies as the portfolio grew moderately. Despite the increased competition, the insurance line’s loss ratio continued to be very good, at 57 per cent (55 %). Along with the favourable development of the motor liability insurance portfolio, premiums written for voluntary motor vehicle insurance rose to EUR 73 million (EUR 71 million). In contrast to motor liability insurance, the result for motor vehicle insurance was weak. The loss ratio worsened significantly to 84 per cent (77 %).

Premiums written on fire and other property insurance fell 4 per cent to EUR 85 million (EUR 89 million). The decline is due to the decrease in premiums written on corporate insurance policies. Premiums written for home insurance were roughly at the same level as in the previous year. The profitability of the insurance class improved to 75 per cent (78 %). In terms of major losses, the year was favourable for the company.


The company’s return on investments at current values amounted to EUR 28 million (EUR 79 million), i.e. 1.6 per cent (4.7 %) on the invested capital. The subsidiary Fennia Life’s fair value increase was EUR 26 million. The company’s net income from investments was EUR 0.5 million (EUR 59 million). The change in net investment income entered in the company’s result is mainly due to the currency derivatives’ loss of EUR 12 million (profit EUR 19.6 million) and to capital gains on the sale of real estate in the comparison year (EUR 19.7 million).

At year-end, the current value of Fennia’s investments stood at EUR 1,721 million (EUR 1,706 million). Bonds and long-term fund investments accounted for 21 per cent of the investment portfolio, and money market investments and deposits for 22 per cent. Shares, equity fund investments and private equity funds accounted for 27 per cent, real estate investments for 26 per cent and other investments for 4 per cent.

Fennia, parent company investment portfolio 31.12.2018 EUR 1.721 million (EUR 1.706 million)

Return on investment 1.6% (4.7%)
Sarake 1
Real estate investments25.7
Shares and participations26.7
Other debt securities22.3
Other investments4.2


The company’s operating loss was EUR 7.8 million (operating profit EUR 61.2 million). The technical underwriting result weakened slightly compared to the previous year, as premiums earned decreased more than claims incurred. The decrease in operating profit was especially influenced by the lower return on investments in 2018 compared to 2017.

The company’s equalisation provision grew by EUR 24 million to EUR 336 million (EUR 312 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, LL.M. with court training; Lars Koski, Managing Director; Eva Liljeblom, Professor; Jyrki Mäkynen, Managing Director; Timo Salli, Managing Director; and Paul Stucki, Vice Chairman of the Board.

The Board of Directors held a total of 11 meetings during the year under review. The attendance rate of the members was 94 per cent.

Group CEO Antti Kuljukka has served as the company’s Managing Director.

The company employed an average of 859 people (892) in 2018.


The starting point for remuneration in 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 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.

On 1 April 2018, Fennia Mutual Insurance Company acquired the entire share capital of Fennia Asset Management Ltd. from Fennia Life Insurance Company in an inter-group transaction. Fennia Asset Management 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 funds managed by it. Fennia Asset Management Ltd is included in Fennia Mutual Insurance Company’s consolidated financial statements. Fennia Asset Management Ltd’s subsidiary Fennia Property Development Ltd, which was established on 23 April 2018 and which Fennia Asset Management Ltd has a 70 per cent holding in, is also included in the consolidated financial statements.

Fennia Mutual Insurance Company acquired the entire share capital of Folksam Non-Life Insurance in a transaction that took place on 27 November 2018. Folksam Non-Life Insurance is included in the consolidated financial statements for the final month of the 2018 financial year.

Also included in the consolidated financial statements are eFennia, in which Fennia has a 20 per cent holding and 63.6 per cent of the voting rights, and Fennia-service Ltd, which was established on 9 February 2018 and is wholly owned by Fennia.

At the end of 2018, 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 operating profit of the Group’s life insurance business was EUR 24 million (EUR 21 million). Life insurance premiums written amounted to EUR 164 million (EUR 167 million). Claims paid totalled EUR 96 million (EUR 104 million). Operating expenses for life insurance were EUR 15 million (EUR 15 million). The expense ratio (of expense loading) was 101.9 per cent (103.6 %).

Fennia Life decreased the interest rate supplement reserved previously by EUR 10.4 million and the reserve for future bonuses by EUR 0.9 million.

Fennia Asset Management’s profitability improved, and the company’s operating profit was EUR 1.5 million (EUR 1.0 million). The amount of client assets managed by the company grew 10 per cent and amounted to EUR 3.1 billion (EUR 2.9 billion), of which the Group’s internal assets accounted for EUR 2.5 billion.

Folksam Non-Life Insurance’s operating loss was EUR 12.4 million (operating profit EUR 4.5 million). Premiums written amounted to EUR 71.6 million (EUR 74.6 million) and claims paid totalled EUR 66.0 million (EUR 53.8 million). The company lowered the technical rate of interest used in the discounting of technical provisions in its own financial statements to 1.5 per cent (2.0 %), which increased the company’s claims outstanding by EUR 6.2 million.

Folksam’s operating expenses amounted to EUR 19.6 million (EUR 19.7 million). The company’s combined ratio, excluding unwinding of discount, was 117.6 per cent (96.5 %). The combined ratio, excluding changes in the calculation bases, was 108 per cent.

Folksam’s financial statement information is included in Fennia’s consolidated financial statements for one month.

The Group’s operating loss was EUR 1 million (operating profit EUR 82 million).The weakened operating profit was mainly due to lower investment returns and the weakening of the balance on the technical account. The results of subsidiaries improved somewhat compared to the previous year. Net investment income amounted to EUR -53 million (EUR 128 million), of which unit-linked insurances accounted for EUR -58 million (EUR 55 million). The Group’s return on invested capital was 0.2 per cent.

The Group’s non-restricted capital and reserves stood at EUR 309 million (EUR 329 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, manage, monitor and report risks that the Group and the Group companies are exposed to. 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 executive group operates within the Group to prepare, steer and co-ordinate tasks related to risk and solvency management and to communicate related information. A group-level asset-liability committee (ALCO) has been established for the insurance companies’ balance-sheet management.

Investment activities are based on the asset-liability management (ALM) 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 publishes a separate statement of non-financial information. The statement is published on Fennia’s website,

Corporate Social Responsibility Report

Fennia will publish a separate Corporate Social Responsibility Report. The report will be published on Fennia’s website

Solvency and Financial Condition Report

Fennia’s, Fennia Life’s, Fennia Non-Life Insurance’s and Fennia Group’s Solvency and Financial Condition Reports will be published at the latest on 3 June 2019 on Fennia’s website

Outlook for the current year

It is estimated that the non-life business that is part of the Fennia Group will report a combined ratio for 2019 that is slightly weaker than it was in the comparison year 2018. This is mainly due to costs related to the integration of Folksam’s business. The life insurance result for 2019 is expected to be on a par with the comparison year. The significance of asset management on the result will remain small.

A moderate investment result is expected for 2019, but the outcome may differ significantly from the estimate if the market outlook changes.

Fennia initiated co-determination negotiations on 11 March 2019. The objectives of the negotiations are to reorganise non-life insurance operations, eliminate overlapping functions and harmonise models of operation.