Annual Report 2015 Nordea Life Assurance Finland Ltd

Transcription

1 Annual Report 2015 Nordea Life Assurance Finland Ltd

2 CONTENTS ANNUAL REPORT 2015 ANNUAL ACCOUNTS FOR 2015 The 22Nd Year of Operation of Nordea Life Assurance Finland Ltd 3 Premium Income 3 The Investment Portfolio of the Company in Positive Year for Investment Baskets 4 Nordea Life Assurance Finland Group Consolidated Profit and Loss Account 8 Consolidated Balance Sheet 9 Consolidated Cash Flow Statement 11 Claims Paid 4 Expenditures 4 Personnel 5 Profit 5 Technical Provisions 5 Estimate of the Realization of the Principle of Equity from Solvency 5 Risk Management 6 Group Structure and Ownership 6 Future Outlook 6 Administration and Auditors of Nordea Life Assurance Finland Ltd 7 The Proposal of the Board of Directors for Distribution of Profit 7 Nordea Life Assurance Finland Ltd Profit and Loss Account 12 Balance Sheet 13 Cash Flow Statement 15 Notes to the Financial Statements 16 Administration and Auditors of Nordea Life Assurance Finland Ltd 50 The Proposal of the Board of Directors for Distribution of Profit 50 Auditor s Report 51 Definitions for Key Figures 52 Events After the Financial Year 7 Nordea Life Assurance Finland Ltd is part of the Nordea Group. Nordea s vision is to be a Great European bank, acknowledged for its people, creating superior value for customers and shareholders. We are making it possible for our customers to reach their goals by providing a wide range of products, services and solutions within banking, asset management and insurance. Nordea has around 11 million customers, approximately 800 branchoffice locations and is among the ten largest universal banks in Europe in terms of total market capitalisation. The Nordea share is listed on the NASDAQ OMX Nordic Exchange in Stockholm, Helsinki and Copenhagen. Nordea Life Assurance Finland Ltd FI NORDEA Aleksis Kiven katu 9, Helsinki Telephone

3 ANNUAL REPORT 2015 THE 22ND YEAR OF OPERATION FOR NORDEA LIFE ASSURANCE FINLAND LTD In the Finnish life insurance market, the unit-linked premium income increased while traditional premium income declined. The premium income of Nordea Life Assurance Finland Ltd remained at a good level, with an emphasis on unit-linked insurances, as had been expected. During the financial year, the company continued to carry out significant actions with the objective of simplifying and digitalising business processes. The work done in order to improve processes and quality was awarded with ISO9001 certificate which the company received during the third quarter of the year. In addition, World Finance Global Insurance Awards rated Nordea Life Assurance Finland Ltd as the best life assurance company in Finland in As part of preparations for the Solvency II regulations, the company moderately decreased the risk level of the investment portfolio during the financial year. The range of saving and investment products was simplified and as part of this change the company introduced a new endowment policy to the market, Nordea Visio, which was well received by the customers. During the financial year, the company made for years a fixed term supplement of premium provisions worth EUR 87 million concerning endowment policies and pension policies of fixed calculated interest rate. The fixed term supplementary reserve is to decrease the calculated interest rate of the policies in question to 1 per cent for a fixed term for years The provision for unearned premiums of future additional bonuses was decreased by approximately EUR 6.7 million and the equalisation provision of approximately EUR 27.4 million was discharged entirely. During the financial year, the company completed the transfer of group pension insurance portfolio to Fennia Life Insurance Company Ltd in accordance with the agreement made in The transfer of insurance liabilities around EUR 50 million took place on 1 February PREMIUM INCOME Compared to the previous financial year, the premium income for Nordea Life Assurance Finland Ltd decreased slightly, totalling EUR 2,407.2 (2,626.0) million before reinsurers were taken into account. The share of unit-linked premium income of the total premium income remained at a high level, exceeding 96 per cent of total premium income. In euros, unitlinked premium income totalled EUR 2,328.7 (2,538.0) million. The premium income of traditional life insurance in turn accounted for EUR 31.8 (42.7) million and the premium income from risk life insurances amounted to EUR 46.6 (45.3) million. When compared to the previous financial year, the premium income from individual life insurances increased slightly, totalling EUR (793.0) million. The premium income from capital redemption policies decreased from last year, totalling EUR 1,430.6 (1,675.2) million. The premium income from individual pension insurances amounted to EUR 98.4 (106.2) million. The premium income from voluntary group pension insurances totalled EUR 0.3 (6.3) million. The reason behind the decrease of the amount of income from voluntary group pension insurances is the transfer of the group pension insurance portfolio to Fennia Life Insurance Company Ltd during the first quarter of the financial year. THE INVESTMENT PORTFOLIO OF THE COMPANY IN 2015 The long-term strategy of the company has been to keep the overall risk of its investment portfolio relatively low. The low risk level of the investment portfolio has been achieved by comprehensively 3

4 diversifying the portfolio into different asset categories and by selecting products for the portfolio that would react independently of one another in various market situations. This strategy was continued in During the year high risk investments were reduced in the portfolio as the size of the portfolio decreased and the company prepared for the Solvency II regulation coming into effect at the beginning of There were no significant changes to the asset allocation from last year. During the year, the exposure on alternative investments was reduced and the share of bonds and cash was increased in the portfolio. In terms of alternative investments private equity funds, structured bonds and hedge funds were reduced. Also real estate investments were reduced. The performance of the portfolio was adequate when compared with the risk level. When measured in euros, private equity funds, listed shares and direct domestic real estate investments performed best. The return from fixed income investments remained low and the performance of real estate funds was negative. The vacancy rate and market values of properties were almost unchanged when compared to the last year. At the end of the year, the share of fixed income investments of the company s portfolio was 63.3 (68.2) per cent. The share of equities and equitytype investments accounted for 7.4 (6.0) per cent, excluding hedges. The share of real estate investments was 8.0 (9.2) per cent, the share of alternative investments was 9.1 (16.6) per cent and the share of cash was 12.2 per cent. 1 POSITIVE YEAR FOR INVESTMENT BASKETS In 2015, the value of the Yield basket developed positively and increased by 1.6 (6.3) per cent. The year was particularly good for equity investments, which increased by 7.9 per cent. Also the values of real estate investments developed well, increasing by 5.6 per cent. The values of fixed income investments, however, stayed unchanged whereas the values of high risk corporate bonds decreased slightly. At the end of the year, the share of fixed income investments in the Yield basket was 66.8 (59.6) per cent, while equity investments accounted for 17.2 per cent (25.4), real estate investments for 10.5 (11.0) per cent and alternative investments for 5.5 (4.0) per cent. Also the Pension investment baskets developed in a positive manner. The risk profile of the Stable Basket was kept moderate throughout the year. The weight of equity investments in the basket was kept unchanged, and at the end of the year, the proportion of equities in the basket was 6.0 (6.2) per cent. Of fixed income investments, low-risk government and corporate bonds were favoured. With the Return Focus Basket, equity investments were preferred, and they accounted for 73.6 (75.5) per cent of the basket at the end of the year. The value of the basket increased by 2.3 (8.1) per cent during the year. CLAIMS PAID Claims paid remained almost at the same level as last year, totalling EUR 1,124.0 (1,156.9) million. The amount includes surrenders, which totalled EUR (720.9) million. Their share of the technical provisions at the beginning of the year was 5.0 (5.6) per cent. The share of reinsurance was EUR 0.0 (0.0) million. The risk sums of death, permanent disability for work, serious illness and permanent handicap or permanent disability for work caused by an accident accounted for EUR 12.2 (8.6) million. EXPENDITURES The total expenditures of the company were EUR 39.3 (42.3) million. Sales commissions paid totalled EUR 10.0 (10.3) million and salaries and social security expenses EUR 7.8 (9.6) million. 1 Cash is not included in the allocation percentages for the given period. 4

5 PERSONNEL During the financial year, the number of employees at Nordea Life Assurance Finland Ltd was approximately 118 (116). Women accounted for 65 per cent of the work force and men for 35 per cent. PROFIT The balance on technical account of 2015 before taxes was EUR (221.7) million. The investment income, excluding unit-linked investments, was EUR (172.6) million. The profit of the Nordea Life Assurance Finland Group before taxes was EUR (222.3) million. A total of EUR 7.7 (18.6) million was used for customer bonuses. TECHNICAL PROVISIONS The technical provisions of Nordea Life Assurance Finland Ltd increased by 12.1 per cent, amounting to EUR 15,229.1 (13,588.4) million. The share of unitlinked provision of the total provisions increased, amounting to 86.0 per cent (82.2). At the end of the year, the total provision for unearned premiums of the company was EUR 14,910.4 (13,256.2) million, of which EUR 13,066.0 (11,148.8) million was the unit-linked provision. This includes EUR (67.8) million supplemental to the technical provisions and a provision for unearned premiums EUR 5.3 (12.0) million to future bonuses. The provision for claims outstanding was EUR (332.2) million at the end of the year. ESTIMATE OF THE REALIZATION OF THE PRINCIPLE OF EQUITY FROM 2015 During 2015, the levels of return from the insurance policies subject to the equity principle were further adjusted to match the general interest rate trends on the market. The level of customer bonuses paid in 2015 clearly exceeds the level of the yield of a tenyear German government bond, which has averaged to 0.5 per cent. In addition, when defining the bonus level, the continued uncertain economic conditions of the global economy, future changes in the operational environment (i.e. Solvency II regulations) and markets still not demonstrating signs of economic growth or a recovery have also been considered. Therefore, the insurance policies which are subject to the equity principle were credited by a bonus based on the distribution target for the equity principle. The appendices include a chart that represents the total return given for endowment and pension insurances for years as well as the interest rate for the ten-year government bonds issued by Germany for the same time period. SOLVENCY The solvency of insurance companies is assessed in terms of the ratio between their solvency margin and the minimum solvency margin, which was 5.9 (7.4). The solvency margin is the amount of assets in excess of the liabilities which are available for ensuring the continuation of the operations of the company. The solvency margin of Nordea Life Assurance Finland Ltd, which was calculated in accordance with the Insurance Companies Act, was EUR (871.5) million. The minimum solvency margin was EUR (117.6) million. Nordea Life Assurance Finland Ltd has one subordinated loan worth EUR 70 million issued by Nordea Bank AB. The subordinated loan was issued for an undetermined period. The notice period on the part of the creditor is five years and the repayment of the loan is tied to the debtor s solvency. The annual interest rate is tied to a 12-month reference rate plus a margin of 0.85 percentage points. The amount of interest of the subordinated loan in 2015 was EUR 826,

6 RISK MANAGEMENT The objective of risk management is to identify and measure as well as manage the risks directed to the company. At the company level, the most significant risks include the risks associated with the business strategy and operational environment, investment activity risks, risks associated with the structure of the technical provisions, underwriting risks and operational risks. Potential changes in legislation may also significantly affect the operational environment of the life and pension insurance business. The company has a separate Risk Management Department, which is led by the Chief Risk Officer (CRO). The CRO develops and directs the risk management practises of the company. The risk management strategy is updated when necessary at the very least annually. The strategy contains precisely defined principles according to which the risk management measures, follows and reports risks to the executive management. The company has a contingency plan and a business continuity plan, which are tested annually. GROUP STRUCTURE AND OWNERSHIP Nordea Life Assurance Finland Ltd has shares, all of which have the same number of votes in the general meeting. The share capital, as stated in the articles of association, is minimum EUR 20,000, and the maximum EUR 80,000, and the share capital can be increased and decreased within these limits without changing the articles of association. The shares do not have a nominal value and the amount of shares is minimum 120,000 and maximum 480,000. Nordea Life Holding AB is the parent company of Nordea Life Assurance Finland Ltd and it owns 100 per cent of its shares. Nordea Life Holding AB, in turn, is fully owned by Nordea Bank AB publ. The Nordea Life Assurance Finland Group includes 42 (41) Finnish housing and real estate companies as subsidiaries, in addition to a 3rd pillar pension company in Latvia. FUTURE OUTLOOK Solvency is a key factor for a life insurance company, securing the long-term savings of customers. Solvency II regulation that came into effect at the beginning of the year 2016 sets higher solvency requirements for life insurance companies than before. Nordea Life Assurance has been for years preparing for the new Solvency II regulations. The company has been preparing for the challenges of the new solvency regulation by supplementing the provision for unearned premiums, by simplifying its business model, by decreasing the risk level of the investment portfolio, by increasing its solvency following the current (valid at the end of the end 2015) solvency regulations and by putting an emphasis on the share of unit-linked premium income. The low level of interest rates combined with the economic uncertainty particularly creates challenges for investment operations. We believe however, that the measures taken by the company create a steady basis for moving to the new solvency regulation. Despite the economic uncertainty, we believe that the premium income level will remain on a good level. The need for customers to prepare themselves for the future has not disappeared; rather, the planned changes in the pension provision system have further increased the importance of spontaneous saving. As an important strategic project the company will continue to work towards the conversion of its insurance systems. The future objective of the company is to operate with a single insurance system. 6

7 ADMINISTRATION AND AUDITORS OF NORDEA LIFE ASSURANCE FINLAND LTD The Board of Directors of the company consists of the following three members: Head of Life and Pensions, Nils Bolmstrand, Chairman from onwards; Jussi Mekkonen, Executive Vice President, Vice-Chairman of the Board; and Johan Nystedt, Chief Financial Officer of Life and Pensions The Board of Directors proposes that dividends of EUR 2, per share are distributed, resulting in EUR 300,000, and that EUR 182,646, are transferred to the retained earnings account. EVENTS AFTER THE FINANCIAL YEAR No significant events. During the operating year, the Board of Directors has included: Head of Life and Pensions Snorre Storset, Chairman until The Managing Director of the company is Pekka Luukkanen, M.Sc. The Chief Actuary of the company is Sari Martikainen, M.Sc, actuary approved by the Ministry of Social Affairs and Health The auditor of the company is APA Martin Grandell and PricewaterhouseCoopers Oy, with APA Juha Wahlroos acting as the principal auditor. The Annual General Meeting was held on 9 April THE PROPOSAL OF THE BOARD OF DIRECTORS FOR DISTRIBUTION OF PROFIT The retained earnings of Nordea Life Assurance Finland Ltd, including the profit for the financial year of EUR 182,646,133.46, are EUR 464,325, The distributable equity capital of the Nordea Life Assurance Finland Ltd is EUR 465,625,

8 ANNUAL ACCOUNTS FOR 2015 Nordea Life Assurance Finland Group Consolidated Profit and Loss Account Technical provisions statement Premium income Premium income 2,407,164 2,626,044 Reinsurer s share ,406, ,625,866 Investment returns 332, ,598 Unrealized gains on investments 611, ,609 Other technical provision income 11,455 Claims incurred Claims paid -1,124,011-1,160,120 Reinsurer s share Change in the provision for outstanding claims 13,481 30,331 Reinsurer s share -1,110,530-1,129,788 Change in the provision for unearned premiums Change in the provision for unearned premiums -1,654, ,135 Of which transfer of assets 64,235 1,560,272 Reinsurer s share -1,654, ,135 Operating expenses -33,714-35,986 Investment expenses -320,841-1,372,144 Investment revaluation adjustment -23, ,190 Balance on technical account 208, ,284 Non-technical account Investments in associates 2 5 Direct taxes on ordinary operations Taxes for the financial year -45,167-44,020 Taxes for the previous financial years Change in deferred tax 202 Change in depreciation difference Result for the year 163, ,990 The figures presented in the annual accounts are in thousand euros unless otherwise mentioned. 8

9 Nordea Life Assurance Finland Group Consolidated Balance Sheet Assets Intangible assets Intangible rights Consolidated goodwill 4,430 11,288 Other expenses with long-term effects 4,430 11,288 Investments Real estate investments Real estates and real estate shares 119, ,724 Real estate funds 69, , , ,627 Investments in the Group companies and participating interest companies Shares and participations Debt securities and loan receivables in Group companies 39,969 39,969 Other investments Shares and participations 479, ,950 Debt securities and other fixed income securities 1,666,647 1,875,808 Deposits 2,145,857 2,551,758 2,334,768 2,852,354 Assets covering unit-linked insurances 13,078,900 11,175,069 Receivables Arising from direct insurance operations Arising from policy holders 6,215 6,667 Arising from reinsurance operations Other receivables 52,103 12,779 58,352 19,479 Other assets Tangible assets 3,439 3,116 Cash in hand and at bank 380, , , ,054 Accrued income Accrued interest and rent 16,465 10,156 Other prepayments and accrued income 8,888 29,982 25,352 40,137 15,885,941 14,249,380 9

10 Nordea Life Assurance Finland Group Consolidated Balance Sheet Liabilities Equity capital Share capital 24,500 24,500 Issue premium fund 20,657 20,657 Ordinary reserve 46,030 45,824 Reserve of invested unrestriced equity 1,300 7,170 Retained earnings including translation gain 273, ,155 Profit for the year 163, ,990 Dividend 530, ,296 Minority interest Subordinated loans 70,000 70,000 Technical provisions Provision for unearned premiums 1,844,420 2,107,437 Reinsurer s share 1,844,420 2,107,437 Claims outstanding 290, ,531 Reinsurer s share 290, ,531 2,134,431 2,418,967 Provisions for unit-linked insurance Technical provisions 13,094,679 11,169,406 Creditors Arising from direct insurance operations 1 20 Arising from reinsurance operations Deferred tax liability 4,430 11,288 Other creditors 35,166 39,741 5,275 16,725 Deferred income 16,986 16,986 15,885,941 14,249,380 10

11 Nordea Life Assurance Finland Group Consolidated Cash Flow Statement Cash flow from operations Profit/loss from actual operations 208, ,276 Adjustments Change in technical provisions 1,640, ,804 Investment value adjustment -127, ,529 Unrealized exchange gains -38,404 3,534 Depreciations according to plan 3,924-3,402 Cash flow before change in working capital 1,687,761 1,839,742 Change in working capital Change in non-interest-bearing current receivables, increase (-) / decrease (+ -45,401 18,067 Change in non-interest-bearing current liabilities, increase (+) / decrease (-) 38,820-17,309 Cash flow from business operations before financial items and taxes 1,681,181 1,840,500 Direct taxes paid -30,574-62,279 Cash flow from operations 1,650,607 1,778,221 Cash flow from investments Net investments -1,222,115-1,684,151 Intangible and tangible assets, and other asset investments and income from sales -1,044 34,052 Cash flow from investments -1,223,158-1,650,099 Cash flow from financial activities Repaid loans Merger adjustments in equity capital Withdrawal of additional capital Dividends paid -200, ,000 Cash flow from financial activities -200, ,000 Change in funds 227,449-71,878 Funds at the start of the year 328, ,346 Funds at the end of the year 555, ,467 11

12 Nordea Life Assurance Finland Ltd Profit and Loss Account Technical account Premium income Gross premium income 2,407,164 2,626,044 Reinsurer s share ,406, ,625,866 Investment income 328, ,507 Unrealized gains on investments 611, ,609 Other technical income 11,455 Claims incurred Claims paid -1,124,011-1,160,120 Reinsurer s share Change in the provision for outstanding claims 13,481 30,331 Reinsurer s share -1,110,530-1,129,788 Change in the provision for unearned premiums Change in the provision for unearned premiums -1,654, ,135 Of which transfer of assets 64,235 1,560,272 Reinsurer s share -1,654, ,135 Net operating expense -33,559-35,716 Investment expenses -297,676-1,374,915 Investment revalution adjustment -23, ,190 Balance on technical account 227, ,691 Non-technical account Investments in associates Direct taxes on ordinary operations Taxes for the year -45,167-44,020 Taxes for the previous years Result for the year 182, ,191 12

13 Nordea Life Assurance Finland Ltd Balance Sheet Assets Intangible assets Intangible rights Other expenses with long-term effects Investments Real estate investments Real estates and real estate shares 59,096 58,568 Real estate funds 69, ,903 Loan receivables in Group companies 87, ,320 94, ,443 Investments in Group companies and other participating interests companies Shares and participations Debt securities and loan receivables in Group company ,969 40,169 Other investments Shares and participations 479, ,916 Debt securities and other fixed-income securities 1,666,647 1,875,808 Deposits 2,145,820 2,551,724 2,362,340 2,871,336 Assets covering unit-linked insurances 13,078,900 11,175,069 Receivables Arising from direct insurance operations Arising from policyholders 6,215 6,667 Arising from reinsurance operations Other receivables 52,029 12,707 58,278 19,407 Other assets Tangible assets Cash in hand and at bank 379, , , ,051 Accrued income Accrued interest and rent 16,465 15,799 Other prepayments and accrued income 8,863 29,038 25,328 44,836 15,904,782 14,256,699 13

14 Nordea Life Assurance Finland Ltd Balance Sheet Liabilities Equity capital Share capital 24,500 24,500 Issue premium fund 20,657 20,657 Ordinary reserve 46,030 46,030 Reserve of invested unrestricted equity 1,300 1,300 Retained earnings 281, ,488 Profit for the year 182, ,191 Dividend 556, ,166 Subordinated loans 70,000 70,000 Technical provisions Provision for unearned premiums 1,844,420 2,107,437 Reinsurer s share 1,844,420 2,107,437 Outstanding claims 290, ,531 Reinsurer s share 290, ,531 2,134,431 2,418,967 Provisions for unit-linked policies Technical provisions 13,094,679 11,169,406 Creditors Arising from direct insurance operations 1 20 Arising from reinsurance operations Other creditors 24,084 24,229 13,238 13,401 Deferred income 24,631 10,759 15,904,782 14,256,699 14

15 Nordea Life Assurance Finland Ltd Cash Flow Statement Cash flow from operations Profit/loss from actual operations 227, ,691 Adjustments Change in technical provisions 1,640, ,804 Investment value adjustments -131, ,558 Unrealized exchange gains -38,404 3,534 Depreciations according to plan 82 Cash flow before change in working capital 1,698,776 1,837,669 Change in working capital Change in non-interest-bearing current receivables, increase(-)/ decrease (+) -40,676 11,373 Change in non-interest-bearing current liabilities, increase(+)/ decrease (-) 24,700-21,595 Cash flow from business operations before financial items and taxes 1,682,800 1,827,448 Direct taxes paid -23,716-64,813 Cash flow from operations 1,659,084 1,762,635 Cash flow from investments Net investments -1,238,699-1,678,714 Intangible and tangible assets, and other asset investments and income from sales -1,044 34,052 Cash flow from investments -1,239,743-1,644,662 Cash flow from financial activities Repaid loans Merger adjustments in equity capital Withdrawal of additional capital Dividends paid -200, ,000 Cash flow from financial activities -200, ,000 Change in funds 219,341-82,027 Funds at the start of the year 316, ,398 Funds at the end of the year 535, ,371 15

16 NOTES TO THE FINANCIAL STATEMENTS 1. ACCOUNTING PRINCIPLES OF THE FINANCIAL STATEMENTS The financial statements have been prepared in accordance with the current applicable corporate laws as well as the decisions, rules and regulations specified by the Ministry of Social Affairs and Health and the Financial Supervisory Authority. AB, which is fully owned by Nordea Bank AB (publ.). Copies of the Nordea Bank AB (publ.) annual accounts are available at Nordea Bank Finland Plc branches or online at The notes on the financial statements also contain Group-level information, wherever it differs from parent company figures. Consolidated annual accounts The Nordea Life Assurance Finland Group consists of the parent company, Nordea Life Assurance Finland Ltd (domicile Helsinki), 42 (41) housing and real estate companies and a 3rd pillar pension company domiciled in Latvia. The results of corporate acquisitions made during the financial year are included in the financial statements beginning at the moment of purchase and corporate divesti-tures made during the financial year and lasting until the moment of sale. The consolidated financial statements include the combined profit and loss account, balance sheets and the notes on the accounts of the parent company and its subsidiaries. Internal transactions with-in the Group as well as receivables and liabilities within the Group have been eliminated. The Group s internal shareholdings have been eliminated using the acquisition cost method. Holdings in housing and real estate companies in the Yield Basket have been eliminated from assets covering the unit-linked technical provisions. Consolidated goodwill has been allocated to real es-tate property of the subsidiaries. The distribution of land areas and buildings has been done in rela-tion to the estimated market value. Where applicable, the Nordea Life Assurance Finland Group complies with the standardised accounting principles in conjunction with Nordea Bank AB (publ.). Nordea Life Assurance Finland Ltd is owned by a Swedish holding company Nordea Life Holding Book value of investments and book value of assets covering unit-linked technical provisions Shares and participations in other investments were valued on the balance sheet at the acquisition cost or at the lower probable transfer price. The impact on the result of this valuation is entered as depreciation and return on depreciation. Shares and participations considered to be fixed assets are valued at acquisition costs. Bonds that are listed among the financial market instruments are valued on the balance sheet at acquisition cost. The difference between the nominal value and the acquisition price is deferred as interest income or their deduction, or else their deduction and the cash counterpart are recognised as an addi-tion or deduction to the investments in question. Certificates of deposit and commercial papers listed among financial market instruments as well as government bonds are valued at acquisition cost. Assets covering unit-linked technical provisions are valued at the balance sheet at fair value. The difference between the fair value and the original acquisition cost is recognised on the profit and loss account as value additions or returns on value additions to the investment income or value deductions or value adjustments to value additions to the investment expenses. Intangible assets and equipment are recognised on the balance sheet at acquisition cost reduced by depreciation according to plan. 16

17 Premium receivables are recognised on the balance sheet at the probable value and other receivables at the nominal value or at a permanently lower probable value. Fair value of investments The fair value of real estate investments is based on an appraisal given by an independent, licensed real estate appraiser. The properties are each appraised separately. The value is determined based on market price comparisons and the net yield of the property in question. The fair value of equity investments is obtained using the last available buying price on the end date of the financial year or, if none is available, the most recent trading price or, in cases where the end date of the financial year and trade date are not the same, the most recent available price from the date preceding this date. The fair value of bonds is obtained using the last available buying price on the end date of the financial year or, if none is available, the most recent trading price or, in cases where the end date of the financial year and trade date are not the same or there is no price available, the most recent available price from the date preceding this date. The deposits are valued at fair value which equals to nominal value of deposits. The receivables are valued at fair value which equals to nominal value of receivables or the lower probable value. Derivative investments used for hedging If no change in value will be booked in the profit and loss account for balance sheet items being hedged or for items listed in the financial position, or if an item outside the balance sheet is being hedged, then appreciation income or expenses from the hedge agreement will not be recognised in the profit and loss account. However, if a negative change in value exceeds the positive change in value for hedged items, the amount exceeded will be recognised as an expense. The value depreciation entry corresponding to the amount exceeded will be voided if it proves to be unfounded in the subsequent financial statements. Depreciation plan: Intangible assets Consolidated goodwill straight-line depreciation 57 years 57 years Intangible rights 3 years 3 years Other long-term expenditures Software straight-line depreciation 3 years 3 years Rental property renovation expenditures straight-line depreciation 10 years 10 years Tangible assets Residential, office and commercial buildings straight-line depreciation years years Building utilities straight-line depreciation 15 years 15 years Equipment Office machines and equipment straight-line depreciation 5 years 5 years Computer equipment straight-line depreciation 5 years 5 years 17

18 Basis for depreciations according to plan Depreciations are calculated according to plan in compliance with the accounting principles of the Nordea Group concerning life spans based on a financial life cycle. The consolidated goodwill allocated to buildings has been depreciated in accordance with the depreciation plan for buildings. Carrying forward of investment acquisition costs Investments have appreciated and sales results are calculated using the average price. Denominated foreign currency Denominated assets and liabilities were converted into euros using the exchange rate published by Reuters on the date of the annual accounts. Any differences in exchange rates are recognised in the profit and loss account as adjusted income and expenses. policies, both the total amount of bonuses to be given for these policies and the amount and means of surplus generation as pertains to the distribution of said bonuses shall be taken into consideration to a reasonable e tent. The bonuses must not jeopardise the fulfilment of the solvency requirements of the company or the continuity in the level of bonuses. The company has defined its target regarding the equity principle as follows. In the long term, the company aims to reach a bonus level for the insurance policies which include savings and are subject to the equity principle that matches the yield, in normal market conditions, of ten-year government bonds issued by Germany. Regarding risk life insurance policies, the equity principle is applied in the form of increased amount of benefit in connection with the death cover or in the form of premium discounts. Furthermore, the company endeavours over the long term to fulfil the level of required return for the risk capital respective to the owner of the company. Pension cover for employees In compliance with the Employees Pension Act, the company has taken out from Varma Mutual Pension Insurance Company statutory pension insurance for its employees. All insurance premiums paid for the said insurance in 2015 are entered into the 2015 results. Some of the employees have supplementary pension benefits with the Nordea Pension Foundation. Neither the Nordea Pension Fund nor the Nordea Pension Foundation charged for a contribution in Where granted bonuses are concerned, the company makes every effort to maintain their level by setting a target wherein the level of bonuses will not change significantly from year to year more than is required by the solvency of the company and the prevailing market situation. The company annually monitors the fulfilment of the aforementioned targets. The aforementioned additional bonus targets are not binding and are not part of the insurance policy between the company and the policyholder. The equity principle is not applied to the unit-linked share of the policy. Principle of equity Under Chapter 13 (2) of the Insurance Companies Act, life assurance must follow the principle of equity where bonuses are concerned for such insurance policies that are granted the right in insurance contracts to bonuses on the basis of any surplus generated by the insurance policies. This principle requires that, when deciding upon the issuing of bonuses for such Additional bonus targets are valid until further notice and the company reserves the right to change the additional bonus targets in relation to all the life insurance policies issued. The policyholder is not separately notified about the potential changing of additional bonus targets. The chart shown in the notes on the financial statements is an exemplary illustration of the overall 18

19 bonuses for life and pension insurance policies during the period from 2002 to 2015 as well as the reference rates of interest for the same period. The total bonuses issued for the policies have been in accordance with the equity principle of the company for additional bonuses. Preliminary dividend Nordea Life Assurance Finland Ltd may apply a preliminary dividend method to its financial state-ments in which the dividend to be paid from the preceding financial year can, under certain circum-stances, be entered as income for the dividend recipient for the same financial year in which said divi-dend is issued. This requires that the company issuing the dividend enters the corresponding amount as a dividend payment liability and equity deduction. The preliminary dividend method has no impact on the taxation of the company paying the dividend. Calculation principles of technical provisions The acquisition costs of individual life assurance and individual pension insurance policies were not zillmerised in this or the previous annual accounts. Fixed calculated interest rate does not apply to unitlinked insurance. The fixed calculated interest rate for capital redemption policies was 3.5 per cent, 2.5 per cent or 0 per cent, and with other policies it was 4.5 per cent, 3.5 per cent, 2.5 per cent or 0 per cent. Policies with a fixed calculated interest rate of 0 per cent had an annual interest of 1.3 per cent on pension insurance and 1.0 per cent on individual life assurance as well as capital redemption policies. Deferred tax liabilities and assets The company has no material deferred tax liabilities or assets, with the exception of the deferred tax liabilities included in consolidated real estate investments. 19

20 Premium Income of Parent Company and Group Direct insurance Domestic 2,407,164 2,518,775 EEA state 107,269 Reinsurance Life assurance Gross premium income before outward reinsurance premiums 2,407,164 2,626, Parent Company And Group Premium Income From Direct Insurance Life assurance Unit-linked life assurance 818, ,528 Capital redemption plan 1,430,556 1,675,166 Other individual life assurance 59,248 18,490 Employees' group life assurance Other group life assurance 45,334 Total 2,308,432 2,513,518 Pension insurance Unit-linked individual pension insurance 79,518 84,355 Other individual pension insurance 18,892 21,879 Unit-linked group pension insurance 257 5,565 Other group pension insurance Total 98, ,526 Total premium income from direct insurance 2,407,164 2,626,044 Continuous premiums 568, ,458 Lump-sum premiums 1,839,075 1,899,586 Total premium income from direct insurance 2,407,164 2,626,044 Premiums from agreements not entitled to bonuses 46,629 45,334 Premiums from agreements entitled to bonuses 31,847 42,706 Premiums from unit-linked insurances 2,328,689 2,538,004 Total premium income from direct insurance 2,407,164 2,626, Parent Company And Group Claims Incurred Direct insurance Life assurance 1,017,439 1,054,892 Pension insurance 106, ,978 Reinsurance Claims paid total 1,124,011 1,156,870 Of which: Surrenders 681, ,866 Matured savings payable 342, ,610 Other 100, ,395 Total 1,124,011 1,156,870 Unit-linked insurances share of claims paid 924, ,750 20

21 Group Group Parent Company Parent Company Net Investment Income Investment income of traditional insurances Investment income Income from investments in Group companies Dividend income Interest income Income from real estate investments Interest income from Group companies 116 1,971 4,048 Other income from Group companies Other income 32,456 22,213 26,327 18,872 Income from other investments Dividend income 1,819 2,170 1,819 2,170 Interest income 20,529 23,577 20,497 23,577 Other income 112,416 65, ,292 65,553 Total 167, , , ,394 Value readjustments 2,334 6,479 2,334 6,479 Realized gains on investments 76, ,116 76, ,116 Total 246, , , ,989 Investment expenses Expenses arising from real estate investments -21,888-14,359-11,470-15,314 Expenses arising from other investments -31,278-16,841-31,278-16,841 Interest and other expenses on liabilities To Group companies -5, To others Total -58,614-32,310-43,648-33,265 Value adjustments and depreciations Value adjustments -28,668-19,534-28,668-19,534 Depreciation according to plan on buildings Realized losses on investments -12, ,648-1,552 Total -100,180-52,782-80,965-54,352 Net investment income of traditional insurances 146, , , ,637 Investment income of unit-linked insurances Investment income 82,924 71,943 82,924 71,943 Investment expenses Net investment income before revaluations and revaluation adjustments as well as value adjustments and value readjustments 82,924 71,943 82,924 71,943 Investment revaluations 611, , , ,609 Investment revaluation adjustments -23, ,190-23, ,190 Value adjustments -220,661-1,320, ,712-1,320,564 Value readjustments 3,191 6,575 3,191 6,575 Net investment income of unit-linked insurances in profit and loss account 453, , , ,627 Net investment income in profit and loss account 600, , , ,990 Group companies also include Nordea Bank AB Group companies. 21

22 Parent Company And Group Operating Expenses Operating expenses by function Claims paid 3,346 3,250 Operating expenses 33,559 35,716 Investment expenses 2,364 3,340 Total 39,269 42,306 Profit and loss account operating expenses Insurance acquisition expenses Fees for direct insurances 10,048 10,253 Other insurance acquisition expenses 5,598 13,376 Total 15,646 23,630 Insurance policy management expenses 5,836 8,911 Administrative expenses 12,078 3,175 Total operating expenses 33,559 35,716 Expenses of subsidiary (Latvia) and elimination of expenses Amortization of Group goodwill 202 Group operating expenses 33,714 35,986 Personnel expenses Salaries and commissions 6,659 8,011 Pension expenses 988 1,128 Other indirect personnel costs Total 7,840 9,550 Management s salaries, commissions and pension commitments Managing director s salary and commissions Managing director has a statutory and individual pension insurance Personnel, average number by group Business operations Policy and claim handling Other Total Group Group Parent Company Parent Company Depreciation according to plan by function Claims paid Operating expenses Investment expenses 3, , Impact Of Bonuses On The Life Assurance Result Impact of bonuses on the result including change in additional benefit liability in Parent company and Group -1,081-8,232 22

23 8. Change In Calculation Method For Technical Provisions In 2015, EUR 1,081 thousand was transferred to the provision of unearned premiums for assumed additional benefits with regard to individual life assurance, pension insurance and capital redemption plan. Of EUR 11,950 thousand reserved in 2012 and 2014, EUR 7,732 thousand has been discharged during the year Thus, a net decrease of the provision of unearned premiums for assumed additional benefits was EUR 6,650 thousand. A fund supplement worth EUR 67,762 thousand included in the provision for unearned premiums on has been discharged according to calculation methods and its amount in the annual accounts on was EUR 66, 847 thousand. Additionally, EUR 87,000 thousand was added to the fund supplement for a fixed term of three years. The amount is due to be discharged during years In the annual accounts on , the total sum of the fund supplement was EUR 153,847 thousand. The equalization provision in the annual accounts on is EUR Investments Market value and valuation difference on Group company investments Remaining acquisition cost Book value Market value Remaining acquisition cost Book value Market value Real estate investments Real estates 119, , , , , ,073 Other real estate shares Real estate funds 69,668 69,668 70, , , ,892 Investments in Group companies Shares and participations Debt securities 39,969 39,969 39,945 Other investments Shares and participations 479, , , , , ,062 Debt securities 1,666,647 1,666,647 1,951,148 1,875,808 1,875,808 2,075,827 Deposits 380, , ,935 2,715,469 2,715,469 3,089,207 2,852,770 2,852,354 3,315,799 The remaining acquisition cost of debt securities includes the difference between par value and purchase price, entered as net interest income or a decrease in it (+/-) -7,400-7,133 Valuation difference (difference between market value and book value) 373, ,445 Consolidated real estate holdings of the Group include the deferred tax liabilities totalling EUR 11,287, (EUR 8,955,443.59). Market value and valuation difference on parent company investments Remaining acquisition cost Book value Market value Remaining acquisition cost Book value Market value Real estate investments Real estates shares in Group companies 59,096 59,096 87,745 58,568 58,568 88,102 Loan receivables from Group companies 87,555 87,555 87,555 94,971 94,971 94,971 Real estate funds 69,668 69,668 70, , , ,822 Investments in Group companies Shares and participations Debt securities 39,969 39,969 39,945 Other investments Shares and participations 479, , , , , ,062 Debt securities 1,666,647 1,666,647 1,951,148 1,875,808 1,875,808 2,075,827 Deposits 379, , ,935 2,742,276 2,742,276 3,089,407 2,871,336 2,871,336 3,309,929 The remaining acquisition cost of debt securities includes the difference between par value and purchase price, entered as net interest income or a decrease in it (+/-) -7,400-7,133 Valuation difference (difference between market value and book value) 347, ,593 23

24 2015 Real estate investments Real estate shares Loan receivables from companies in the same Group Changes in parent company real estate investments Acquisition cost ,568 94,971 Increases 7, Decreases -7,067-7,587 Acquisition cost ,096 87,555 Subsidiaries owned by the parent company Subsidiary shares Acquisition cost Increases Decreases Acquisition cost Group companies Domicile Holding % Book value Kiinteistö Oy Alfred Helsinki Kiinteistö Oy Hitsaajankatu 4 Helsinki 100 3,118 Kiinteistö Oy Länsituulentie Espoo 100 2,079 Kiinteistö Oy Niittyhovi Espoo 100 1,112 Kiinteistö Oy Vantaan Mestarintie 11 Vantaa 100 3,252 Kiinteistö Oy Helsingin Kuortaneenkatu 7 Helsinki 100 7,360 Kiinteistö Oy Piispankuitti Espoo Kiinteistö Oy Helsingin Lämmittäjänkatu 2 Helsinki 100 1,127 Kiinteistö Oy Mechelininkatu 34 A Helsinki 100 8,269 Kiinteistö Oy Espoon Sinikalliontie 9 Espoo 100 3,174 Kiinteistö Oy Helsingin Annankatu 27 Helsinki 100 9,401 Kiinteistö Oy Strömberginkuja 2 Helsinki 100 1,133 Kiinteistö Oy Heikkilänaukio Helsinki 100 5,677 Kiinteistöosakeyhtiö Espoon Kimmeltie 1-3 Espoo 100 5,461 Kiinteistö Oy Vantaan Tikkurilantie 154 Vantaa Kiinteistö Oy Espoon Keilaranta 9A Espoo 100 1,845 Kiinteistö Oy Helsingin Kiviaidankatu 2 Helsinki 100 4,621 Kiinteistö Oy Helsingin Tyynylaavantie 20 Helsinki AS Nordea Latvijas atklatais pensiju fonds Latvia Total 59,296 Group Companies Belonging To Unit-Linked Assets Domicile Basket Holding % Book value transfer year Asunto Oy Hämeentie 5 B Helsinki ,951 Asunto Oy Munkkiniemen puistotie 14 Helsinki ,301 Asunto Oy Kalliomatti Espoo ,665 Asunto Oy Lapinlahdenkatu 14 Helsinki ,153 Asunto Oy Malminkatu 36 Helsinki ,930 Asunto Oy Helsingin Kapteeninranta Helsinki ,629 Asunto Oy Keravan Heikkilänrinne Kerava ,701 Kiinteistö Oy Helsingin Museokatu 8 Helsinki ,689 Kiinteistö Oy Helsingin Kalevankatu 20 Helsinki ,160 Kiinteistö Oy Kasarminkatu 44 Helsinki ,703 Kiinteistö Oy Turvesuonkatu 17 Tampere ,473 Kiinteistö Oy Vantaan Muuntotie 1 Vantaa ,605 Kiinteistö Oy Helsingin Siltasaarenkatu 16 Helsinki ,018 Kiinteistö Oy Pirkkalan Keidas Pirkkala ,574 Kiinteistö Oy Espoon Portti 1-5 Espoo ,609 Kiinteistö Oy Helsingin Kaisaniemenkatu 6 Helsinki ,636 Kiinteistö Oy Lauttasaaren Horisontti Helsinki ,391 Kiinteistö Oy Pakkalan Kartanonkoski 6 Vantaa ,150 Kiinteistö Oy Ratavartijankatu 3 Helsinki ,486 Kiinteistö Oy Vantaan Vehkatie 29 Vantaa ,429 Fastighets Ab Unionsgatan 17 Helsinki ,734 Oy Helsingfors Saluhallar Ab Helsinki ,313 Kiinteistö Oy Eteläranta Helsinki ,258 Kiinteistö Oy Espoon Retail Park Glomson Espoo ,034 Total 387,595 Total 446,891 24

25 Real estate assets in unit-linked assets have been valued as market value as a part of unit-linked assets. Parent company and Group investments in Group companies and associated companies Debt securities and loan receivables in Group companies Original acquisition cost ,969 Increases Decreases -39,969 Remaining acqusition cost In 2015, one property was sold, Kiinteistö Oy Itätuulentie 8. Two properties were purchased, As Oy Helsingin Kapteeninranta and As Oy Keravan Heikkilänrinne. Other investments Shares and participations owned by the parent company and Group Domicile Holding % Book value Market value Shares SSAB Ab A Sweden % SSAB Ab B Sweden % TeliaSonera Oyj Sweden % 1,378 1,378 Amer Sports Oyj Finland % 607 1,320 Asiakastieto Group Plc Finland % CapMan Oyj B Finland % Cargotec Oyj B Finland % 897 1,059 Caverion Corporation Oyj Finland % Elisa Oyj Finland % 820 1,390 Fiskars Oyj Finland % Fortum Oyj Finland % 2,788 2,788 Glaston Oyj Finland % Huhtamäki Oyj Finland % 592 1,593 Kemira Oyj Finland % 1,018 1,036 Kesko Oyj B Finland % 1,098 1,215 Kone Oyj B Finland % 2,164 3,789 Konecranes Oyj Finland % Lassila&Tikanoja Oyj Finland % Metso Oyj Finland % 1,503 1,503 Neste Oyj Finland % 1,293 1,464 Nokia Oyj Finland % 3,867 3,867 Nokian Renkaat Oyj Finland % Oriola-KD Oyj B Finland % Orion Oyj B Finland % Outotec Oyj Finland % Pihlajalinna Oyj Finland % PKC Group Oyj Finland % Ramirent Oyj Finland % Sampo A Oyj Finland % 2,147 4,328 Stockmann Oyj B Finland % Stora Enso Oyj R Finland % 1,867 2,015 Tieto Oyj Finland % UPM-Kymmene Oyj Finland % 2,573 3,278 Uponor Oyj Finland % 955 1,015 Valmet Corporation Oyj Finland % Wärtsilä Oyj Finland % 1,447 2,177 YIT-Yhtymä Oyj Finland % Retro Henkivakuutus Oy Finland % NV Kiinteistösijoitus Oy Finland % Total 36,545 45,464 CDO investments Goldman Sachs Loan Partners I L.P. Cayman Islands 293 1,395 THL Credit Loan Opportunity Fund Cayman Islands ICG Heureka Senior Lending Credit Compartment Ireland 20,000 20,689 Nordea Ins Inv FIS - Leverage Credit Fund BX-EUR Luxembourg 18,771 24,600 Total 39,469 47,146 25