Year-end report 2016
The Folksam Group came out of 2016 stable despite several challenges. The low interest rates continue to shape our existence. Uncertainty is being fuelled by Brexit, bank turbulence in Europe, the decline in world trade, the slowdown in China and the emergence of populist and nationalist policies around the world. And of course the US and its new administration.
Regulatory pressure is high as well, and by all indications will just keep getting higher. In October, the government announced a policy decision enabling us to establish occupational pension companies with their own regulation. Important issues remain to be resolved, such as capital requirements. However, considering the special conditions of the occupational pension industry, this is the best solution for our customers.
The financial activity tax proposal was received in November. This proposal entails a 15 per cent increase in salary costs and also impacts pension companies, especially mutual pension companies like the Folksam Group. If this proposal is adopted, our customers and pensioners will be the losers, because the increase in costs would directly impact them.
This would be a great shame.
The total premium volume of the Folksam Group is growing according to plan. Our strong non-life insurance offering continues to drive demand, while premium inflows into the life insurance business remain more controlled. We reduced the guarantee and the guaranteed rate of our traditional life insurance to make room to continue pursuing an active investment strategy and thus excellent pensions for our customers. However, we raised the bonus interest rate in the autumn, and then raised it again as of February 2017. Now the bonus interest rate is five per cent.
The reason we can raise the bonus interest rate is that – in spite of negative interest – we generated a healthy return during the year. In total, the Folksam Group’s return reached SEK 28 billion in 2016. This represents outstanding appreciation on customer assets.
We also surpassed SEK 400 billion in assets under management. If we include our unit-linked insurance assets as well, our customers’ total assets amounted to nearly SEK 525 billion. That is more than ever. And this is a show of enormous confidence in us which we need to manage successfully.
Every single day.
The Folksam Group continued investing in green bonds. So far we have invested nearly SEK 7 billion and also raised the limit to SEK 12 billion. Another investment we made which suits us well was Volvo Cars. We were one of three institutional investors to put in SEK 1 billion, making Volvo Cars more Swedish in one fell swoop.
The Folksam Group continued its efforts to become more modern, consolidated and efficient in 2016. We have worked on getting costs under control and generating a return on ongoing IT investments. This has, to a certain extent, resulted in re-prioritisation in the development portfolio and a lower rate of growth.
2017 poses challenges and opportunities. We are well equipped for both. This mainly requires the small improvements and continuing to pinch pennies in our day-to-day activities to be a little more efficient and create security for customers. Because there is no doubt in our minds that our goal is to have the most satisfied customers in the industry.
President and CEO