Folksam Interim Report January – March 2017
Forward step by step
2017 began stably for the Folksam Group, just as 2016 ended. We continue to work in the best interest of the customers through the small daily improvements and larger change efforts.
The situation in the surrounding world and its challenges remain even if the global economic development looks brighter and important analysts are now adjusting their growth forecasts up. The largest question is the U.S. President Donald Trump and his choices in both U.S. and foreign policy issues.
At the same time, the low interest rates continue to influence the Folksam Group’s situation. Our total premium volume is growing according to plan. Our strong non-life insurance offering continues to drive demand, at the same time that the premium inflows in the life insurance operations remain more controlled. In February 2017, we were able to again raise the bonus rate, from 4 to 5 per cent, and after the end of the quarter, we raised the bonus rate for the occupational pension operations from 5 to 6 per cent. It is the continued good return, despite the interest rate situation, that means that we can feel secure in these increases.
During the year, we continued to make a concerted effort to be a responsible investor and owner, in particular through our investments in green bonds. Fully in line with Folksam’s vision that our customers should feel secure in a sustainable world. These investments provide both secure returns and contribute to building a more environmentally adapted world. In less than a year, we have surpassed SEK 10 billion in green bonds, most recently as the sole investor in an issue from the World Bank. I am proud of this!
During the quarter, we also made our single largest transaction in the Folksam Group’s history. Folksam Life and Folksam General sold 25.6 million ordinary shares in Swedbank AB, corresponding to 2.3 per cent of the capital, as a result of Swedbank’s fantastic development increasing the concentration risk in our portfolios. The Folksam Group’s participating interest decreased from 9.3 to 7.0 per cent, which is our new strategic level. At the same time, the transaction entailed a capital gain of SEK 4.5 billion, which can be compared with the original investment of SEK 4.4 billion. In total, Swedbank has to-date given the customers around SEK 22 billion in returns.
After the end of the year, we also launched our “Drive Safely” service, which is the first connected insurance policy from Folksam. It rewards customers for safe driving with a discount of up to 20 per cent on their car insurance premium. “Drive Safely” is making use of the opportunities offered by digitisation, but at the same time it is also helping to save lives, money and the environment.
On the regulation side, pressure remains high. In November 2016, the proposal was made on a finance tax that would have also affected us in the insurance industry, but in February, the Government chose to withdraw the proposal after extensive criticism. This was a relief for us. At present, the Insurance Distribution Directive (IDD) is being prepared at the Ministry of Finance and this autumn, information is expected on the new occupational pension regulation. These are two new regulations that will entail major changes for our operations.
In terms of regulations, the Swedish Financial Supervisory Authority issued Folksam Life a reprimand and a fine of SEK 10 million after the end of the period after an inspection of the bonus to some customers in group risk insurance for 2013 and 2014. Earlier customers in 2013 and 2014 who did not have a right to bonus were able to share SEK 3 million per year, an average of around SEK 115 per customer. However, our intention to be customer friendly lacked support in our Articles of Association and technical insurance guidelines, which naturally should not occur. We should of course have order in all matters.
We are now continuing to focus on day-to-day operations. We will do things smarter and at a lower cost. To reposition ourselves and close down the old. Consolidate operations and work with what we are best at. This is why we decided, among other things, to outsource our IT operations in Östersund and the operations for scanning and archiving. Step by step, we are accepting upcoming challenges and closing in on the target of having the industry’s most satisfied customers.
Jens Henriksson
President and CEO