CAPITULO V: CONCLUSIONES Y RECOMENDACIONES
5.1. Conclusiones y Recomendaciones
The boards of Folksam Life and Folksam General ap- pointed Jens Henriksson as the new President and CEO on 7 May. He succeeded Anders Sundström who had previ- ously notified that he would be resigning to pursue board work. Jens Henriksson entered office on 1 September 2013.
In May 2013, it was decided that a consortium consisting of Folksam, Metso Corporation, Norrskenet AB and Peab AB would each invest USD 25 million for a total of USD 100 million in bonds issued by Northland Resources AB. Through the investment, the consortium obtains the right to appoint four out of a total of seven board members. The aim is to create a requisite influence and to contribute expertise with the assignment to restore confidence in Northland Resources AB. Folksam’s investment is divided across Folksam ömsesidig livförsäkring (Folksam Life) and Folksam ömsesidig sakförsäkring (Folksam General).
The Swedish Financial Supervisory Authority decided that new rules for calculating the insurance companies’ discount rate should begin to apply on 31 December 2013. The new discount rate is based on the principles behind the method in Solvency II. To calculate the rate, market data is used to determine a yield curve for durations up to ten years, after which the yield curve is drawn out between the ten-year point and a set long-term rate. The new method means that the discount rate is not as sensitive to market fluctuations as before since it is both market and model based.
At the same time, the Swedish Financial Supervisory Authority also published new instructions and forms for the Traffic Light supervisory tool, which measures the insurance companies’ various risk exposures.
As one of four companies, Folksam Life was selected in the procurement of traditional insurance for ITP, the collective bargaining agreement regarding pensions that applies to privately employed white-collar workers.
Continued efforts with individual occupational pensions are being pursued in Folksam Life and its subsidiary Folksam Fondförsäkring AB. The efforts with individual occupational pensions comprise offerings in both traditio- nal insurance and unit-linked insurance, through agents and partners, for instance. Folksam has also been chosen as an alternative in UIG 4, Sweden’s largest occupational pension plan outside the collective area.
Future developments
Folksam Life enjoys a good financial position and a history of high returns. Distribution takes place broadly through both its own organisation, cooperation and brokers. De- mand for traditional insurance with equalized bonuses is increasing at the same time that Folksam, through its sub- sidiary Folksam Fondförsäkring and its developed fund offering, can offer the customers the products demanded in various market situations.
In the next few years, Folksam Life is entering a phase of consolidation with a focus on efficiency enhancements and modernisation with its financial strength as a basis. Folksam Life will continue to increase the premium vol- ume and the market share in the competitive market at the same time through the efforts with individual occupational pensions, both through its own sales force and through agency procured pension plans, combined with Folksam Life being selectable in ITP, the collectively agreed pension for private white-collar workers. A strategy review is being begun in 2014 to further strengthen Folksam Life at the same time as a distinct improvement initiative for the operating activities.
Focus in the past five years has been on capital strength and financial stability, which has yielded results and Folk- sam Life has a strong financial position today. Like the rest of the industry, Folksam Life will participate in the work preparing for Solvency II with an introduction date of 1 January 2016. The preparation work comprises Folksam’s own risk and solvency capital assessment, reporting and corporate governance. On the longer term, the new regula- tions entail greater security for the customers and greater consideration of the cost of capital adequacy requirements in both customer offers and investments.
The strategic asset allocation and risk management for the investment portfolio have in recent years strongly con- tributed to the now strong balance sheet, which provides good conditions for the new capital adequacy requirements placed on insurance companies.
In the next few years, Folksam Life has a number of key issues to address that have a material impact on the busi- ness. The Occupational Pension Company Commission, IORP, Solvency II and the Occupational Pension Commis- sion (taxation) are expected to provide clearer playing rules and conditions for the strategic emphasis for the company that currently conducts both occupational pension opera- tions and other life insurance.
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Five-year summary and key ratios
GROUP, SEK million 2013 2012 2011 2010 20091
Earnings
Premiums earned net of reinsurance 670 755 694 700 723
Premiums written net of reinsurance 7,961 6,838 6,473 5,672 6,120
Return on capital, net 9,175 12,977 3,625 14,609 17,952
Claims incurred, net -6,125 -5,558 -4,530 -5,358 -5,627
Change in life insurance provisions -5,745 -2,815 -13,917 -4,528 4,503
Operating expenses in insurance operations -1,193 -1,107 -996 -924 -951
Bonuses and rebates, net -902 -1,167 -932 -603 -261
Profit/loss, insurance operations 15,055 10,569 -8,963 9,268 22,459
Remaining return on capital 228 155 106 308 250
Other -471 -556 -514 -628 -543
Profit/loss for year before tax 14,812 10,168 -9,371 8,948 22,166 Financial position
Investment assets at fair value 206,307 180,428 160,414 157,640 137,004
Technical provisions 159,283 147,150 135,272 118,348 107,114
Solvency capital
Taxed equity 51,382 38,270 30,020 41,478 34,385
Deferred tax liability 760 630 666 576 416
Surplus value in investment assets
Investments in Group companies 207 207 207 207 207
Other financial investment assets 0 0 0 0 0
Total solvency capital 52,349 39,107 30892 42,261 35008
Key ratios
Earnings from asset management
Yield, per cent 2 1.9 2.2 2.4 1.9 2.3
Total return, per cent 7.9 7.1 6.5 8.8 10.6
Financial position
Solvency ratio, per cent 2 253 198 171 24 21
1 Restated owing to change-over to
full IFRS in consolidated financial statements.
2 The yield and solvency ratio have been
restated in accordance with FFFS 2009:12.
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Five-year summary and key ratios
PARENT COMPANY, SEK million 2013 2012 2011 2010 20091
Earnings
Premiums earned net of reinsurance 670 755 694 700 723
Premiums written net of reinsurance 7,899 6,792 6,436 5,639 6,063
Return on capital net in insurance operations 9,268 8,430 6,977 8,941 10,314
Claims incurred, net -6,035 -5,489 -4,487 -5,325 -5,608
Change in life insurance provisions 4,700 2,169 -18,184 382 11,998
Operating expenses in insurance operations -747 -706 -623 -549 -603
Bonuses and rebates, net -902 -1,168 -932 -603 -261
Insurance operation technical result 14,858 10,779 -10,125 8,885 22,650
Profit/loss before appropriations and income tax 14,858 10,779 -10,125 8,885 22,650
Financial position
Investment assets at fair value 135,550 124,467 116,217 112,675 102,978
Technical provisions 86,810 90,416 91,538 73,375 72,896
Solvency capital
Equity 14,926 34,822 26,233 38,831 32,208
Untaxed reserves 1,473 1,748 1,783 1,492 1,238
Deferred tax liability 421 257 193 163 86
Surplus value in investment assets
Investments in Group companies 2,713 2,283 2,379 2,085 1,887
Total surplus values 2,713 2,283 2,379 2,085 1,887
Total solvency capital 52,533 39,110 30,587 42,571 35,419
Collective solvency capital 26,274 22,513 19,713 18,600 14,944
Capital base 51,993 38,590 30,081 42,562 35,453
Required solvency margin 3,958 4,106 4,062 3,387 3,388
Capital base for the insurance group 52,683 38,558 30,002 42,062 34,874
Required solvency margin for the insurance group 5,882 5,980 5,970 4,913 4,921
1) Restated owing to provision for pen-
sions and similar commitments. Earlier years are not recalculated in respect of this change of principle.
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Cont. Five-year summary and key ratios
PARENT COMPANY, SEK million 2013 2012 2011 2010 20091
Key ratios 2
Non-life business
Claims ratio 65 34 -101 83 70
Operating expense ratio 8 9 10 10 9
Combined ratio 73 44 -91 93 79
Life insurance operation
Management expense ratio 3 0.5 0.5 0.5 0.5 0.6
Management expense ratio for savings products 3 0.5 0.5 0.4 0.4 0.5
Acquisition expense ratio 3.7 3.6 3.3 2.4 2.3
Administration expense ratio for savings products 0.3 0.3 0.3 0.4 0.4
Administration expense ratio for risk products 5.8 5.6 6.6 6.4 5.8
Earnings from asset management
Yield, per cent 4 2.7 2.9 3.2 2.6 2.9
Total return, per cent 7.6 7.0 6.5 8.7 10.3
Financial position
Solvency ratio, per cent 253 198 171 24 21
Collective funding level, per cent
Retrospective reserve method 120.4 118.0 115.6 116.0 113.1
Pension supplement method 160.7 153.9 150.9 146.4 139.3
1) Restated owing to provision for pen-
sions and similar commitments.
2 Reported total return is calculated in
accordance with the Swedish Insur- ance Federation’s recommendation for reporting total return.
3) Management expense ratio calculated
in accordance with FFFS 2011:28. This ratio is calculated firstly for the life insurance operation and secondly for the investment products, excluding risk products.
4) The yield and solvency ratio have been
restated in accordance with FFFS 2011:28.