In Northern Europe, Insurers’ Strategies Vary From Aggressive Growth to Defensive Reserve in 2010

Some of the Nordic region's biggest insurers had a good year in 2009, showing strong recovery from the financial stresses of the previous year. For some, aggressive growth is on tap this year, while others are pulling in the oars to focus on cost-cutting and risk containment.

Norway's Storebrand Group recorded comprehensive income of 1.04 billion Norwegian kroner (130 million euros) for the year, compared with a loss of 2.61 billion kroner in 2008. Denmark's TrygVesta showed a profit of 2 billion Danish krone (269 million euros) in 2009, up from 846 million krone. For Finland's Sampo plc, 2009 profit fell 5% to 641 million euros.

All three companies benefited greatly from recoveries in investment results compared with 2008, when investment losses were significant.

For TrygVesta, a turnaround in investment returns covered a slump in its underwriting technical result, which fell 34.8% to 1.55 billion krone. The nonlife insurance group said the economic downturn hit its commercial underwriting segment due to rising unemployment and bankruptcies. These issues led to a decline in premiums for workers' compensation, vans, liability and building coverage.

Still, TrygVesta is looking expand aggressively this year in its Nordic markets comprising Denmark, Norway, Sweden and Finland. "Premium growth is expected to originate from continued strong organic growth in Sweden and Finland and the implementation of announced premium increases in all four countries," the group said in its report on 2009 results.

As part of its marketing push this year, TrygVesta is proposing its shareholders approve shortening the group's name to Tryg when they meet in April. "Customers will see a more aggressive Tryg," the group said, as it launches a "large-scale branding effort" aimed at raising its profile in Sweden, Norway and Finland.

TrygVesta, which does most of its business in personal lines, noted a number of non-Nordic insurers have been making inroads into the region through brokers, but says it's unconcerned, as those companies are mainly targeting "the largest corporations" as clients.

Storebrand is in the midst of a cost-cutting and restructuring program designed to shield its core life insurance and pensions businesses from further financial shocks. The group, which operates primarily in Norway and Sweden and has a very small property/casualty and health insurance unit, saw its life and pensions operating profit in Norway more than double to 759 million kroner in 2009, while life and pensions profit in Sweden was 147 million kroner, compared with a 2.15 billion kroner loss a year earlier.

In 2008, the Swedish operation suffered 2.5 billion kroner in writedowns on intangible assets. Restructuring in Sweden this year brought more staff reductions as Storebrand seeks to streamline its operations.

The nonlife unit, still in start-up stages, showed an operating loss of 18 million kroner.

Storebrand sees a number of potential threats to its businesses, which are heavily exposed to the workings of financial markets. Looking forward, the group said it will continue to focus on greater efficiency and cost reductions. It is also concerned about regulatory developments, notably pensions reform in Norway beginning in 2011 and the European Union's Solvency II directive, slated for 2012.

For Sampo, the property/casualty insurance subsidiary If P&C boosted its pretax profit 17% to 644 million euros, mainly on a 47% jump on net income from investments. Net premiums were down 4% and the combined ratio ticked up 0.3 point to 92.1. The combined ratios improved in Finland and Norway, but deteriorated in Sweden and Denmark.

Sampo's nonlife book breaks down to 50% private coverage, 29% commercial, 15% industrial and 5% in Baltic and Russian business.

Mandatum Life Group, Sampo's life insurance arm, reported a 52% surges in premiums, though pretax profit fell 13% to 121 million euros due to changes in liabilities for some contracts. Unit-linked premiums nearly doubled, and sales through Sampo Bank "picked up significantly," the group said.

The life unit saw premium income in its Baltic unit rise 32% to 43 million euros. Mandatum's market share in Finland rose to 24.8% from 19.3%, and its market share in the Baltic region rose to 26.6% from 17.9%

For 2010, Sampo expects dampened nonlife premium growth due to economic conditions, while the life unit is expected to continue seeing strong unit-linked growth. The group said it also expects "significant" profit contributions from its affiliated Nordea Bank.

(By David Pilla, international editor, BestWeek: David.Pilla@ambest.com)