2008-11-06 10:30:00 CET
2008-11-06 10:30:32 CET
REGULATED INFORMATION
Pohjola Pankki Oyj - Interim report (Q1 and Q3)
CORRECTION: OP-Pohjola Group January-September 2008
This is a correction of the Interim Report published today on 6 November at 8 am. The translation has been corrected only on page 1. The second heading "Premiums written in Non-life Insurance increased—combined ratio clearly up" was changed to "Premiums written in Non-life Insurance increased—combined ratio clearly improved". The second item under the second heading was changed from "Non-life Insurance combined ratio increased by 3 percentage points and operating combined ratio increased to 90%" to "Non-life Insurance combined ratio improved by 3 percentage points and operating combined ratio to 90%". The second footnote (**) was changed from "The official combined ratio fell from 96.0% to 92.9%" to "The official combined ratio improved from 96.0% to 92.9%". Please find the corrected Interim Report below. OP-Pohjola Group Central Cooperative Interim Report 1(35) 6 November 2008 at 11.30 am Finnish time (GMT +2) OP-Pohjola Group January-September 2008 Basic banking operations continued to grow with stable earnings. The financial crisis sank the market value of assets especially in life insurance operations. The Group's capital adequacy and financial position and risk exposure remained at a healthy level. Banking and Investment Services continued its robust growth and the earnings remained stable.* - Deposits continued to grow briskly. Total deposits increased by 17% and investment deposits by almost 40%. - Loan portfolio up by 15%—home mortgages by 13% and corporate loans by 22%. - Owing to the extremely unstable investment markets, mutual fund capital shrank by 25%. - Earnings before tax of EUR 473 million were slightly below last year's record figure (EUR 536 million). - Bonuses charged to expenses and paid to customers grew by almost 58% to EUR 98 million. - Non-performing loan losses were 0.4% of the loan and guarantee portfolio, unchanged from last year. Premiums written in Non-life Insurance increased—combined ratio clearly improved - Non-life insurance premium revenue rose by 9% and those from private customers by 12%. - Non-life Insurance combined ratio improved by 3 percentage points and operating combined ratio to 90%. ** - In Non-life Insurance, earnings stood at EUR 73 million (125). Financial crisis eroded Life Insurance earnings - The market share of Life Insurance premiums written increased by 1.3 percentage points year on year. - Loss before tax from Life Insurance was EUR 13 million (earnings of EUR 89 million). Performance for the report period was burdened by a sharp fall in the market value of assets. Group earnings before tax were EUR 466 million—stable risk exposure - OP-Pohjola Group's earnings before tax came to EUR 466 million (757). - Own funds were 1.7 billion euros above the statutory minimum. - Liquidity and the availability of funding remained good in the report period despite the exceptionally challenging operating environment. - As uncertainty in the investment market continues and the financial crisis is beginning to affect the real economy, OP-Pohjola Group's earnings before tax for 2008 will fall below the record earnings of 2007. Executive Chairman's comments A Divided Year—Solid Growth of Customer Business OP-Pohjola Group's financial indicators for the first three quarters are clearly of two types. Our business has grown well, and indeed expectionally quickly, aided by the integration of banking and non-life insurance businesses which has proceeded according to plan. Our market position improved and customer business profits remained good. At the same time, the Group's overall earnings were affected by the fall in market values of our investment assets in an extremely challenging market environment. So far the global financial crisis has had a marginal effect on our financial operations. The important role of deposits improves our financial position. We have increased our lending steadily and despite the extreme operating environment, our above-average capital adequacy is invaluable. Towards the end of the year and especially in 2009, the effects of the financial crisis will probably also be reflected in the real economy. Businesses and households will become increasingly cautious, which will result in lower demand for credit. We are prepared for an economic slowdown and an increase in customers having difficulties keeping up with their payments, which is typical during economic cycles like this. Our financial buffers are strong and our ability to respect long-term customer relationships and agreements is good. Reijo Karhinen * Changes are based on a year-on-year comparison. ** The official combined ratio improved from 96.0% to 92.9%. OP-Pohjola Group's Interim Report for 1 January-30 September 2008 OP-Pohjola Group's key indicators -------------------------------------------------------------------------------- | | Q1-3/200 | Q1-3/2007 | Change* | 2007 | | | 8 | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings before tax, EUR | 466 | 757 | -38 | 1,005 | | million | | | | | -------------------------------------------------------------------------------- | Banking and Investment | 473 | 536 | -12 | 706 | | Services | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | 73 | 125 | -42 | 181 | -------------------------------------------------------------------------------- | Life Insurance | -13 | 89 | - | 129 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonuses paid to customers | 98 | 62 | 58 | 83 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on equity (ROE),% | 8.0 | 14.0 | -6.0 | 13.7 | -------------------------------------------------------------------------------- | Return on equity at fair | -1.7 | 12.2 | -14.0 | 10.9 | | value,% | | | | | -------------------------------------------------------------------------------- | Cost/income,% | 50 | 48 | 2 | 49 | | (Banking and Investment | | | | | | Services) | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Average personnel | 12,575 | 12,339 | 1.9 | 12,378 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | 30 Sep | 30 Sep | Change* | 31 Dec | | | 2008 | 2007 | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total assets, EUR billion | 75.5 | 64.9 | 16.3 | 65.7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital adequacy ** | 12.4 | 14.1 | -1.7 | 13.8 | -------------------------------------------------------------------------------- | Tier 1 ratio,%** | 12.4 | 12.7 | -0.3 | 12.6 | -------------------------------------------------------------------------------- | Ratio of own funds to minimum | 1.48 | 1.54 | -0.06 | 1.52 | | amount of own funds*** | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-performing loan losses | 0.4 | 0.4 | 0.0 | 0.3 | | within loan and guarantee | | | | | | portfolio,% | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Market share,% | | | | | -------------------------------------------------------------------------------- | Of loan portfolio | 31.6 | 31.4 | 0.2 | 31.1 | -------------------------------------------------------------------------------- | Of total deposits | 33.5 | 33.2 | 0.3 | 32.3 | -------------------------------------------------------------------------------- | Of capital invested in mutual | 22.0 | 21.7 | 0.3 | 21.4 | | funds | | | | | -------------------------------------------------------------------------------- | Of insurance savings through | 19.5 | 19.8 | -0.3 | 19.9 | | life and pension insurance | | | | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | Q1-3/200 | Q1-3/2007 | Change* | 2007 | | | 8 | | | | -------------------------------------------------------------------------------- | Of premiums written in life | 30.5 | 29.2 | 1.3 | 30.8 | | and pension insurance,% | | | | | -------------------------------------------------------------------------------- * Percentage point change, except for earnings before tax, customer bonuses, total assets and average number of personnel, for which the change is stated in percentages, as well as the ratio of own funds to the minimum amount of own funds, for which the change is stated as a change in the ratio. ** Pursuant to the Act on Credit Institutions. *** Pursuant to the Act on the Supervision of Financial and Insurance Conglomerates. Operating environment The continued uncertain mood in financial markets intensified during the third quarter. Interbank funding markets were severely hit by Lehman Brothers Holdings Inc.'s filing for Chapter 11 in mid-September, causing financial market liquidity to plunge. The rapidly increasingly lack of confidence in financial markets made short-term market rates, liquidity and risk premiums and the volatility of equity, foreign exchange and commodity markets rise sharply. In order to secure financial-market stability, central banks around the world boosted liquidity and several governments jointly and severally announced large-scale efforts to bail out the banking sector. The global financial crisis has led to a number of restructuring measures within the US and European financial sectors and many financial institutions have had to rely on government bailout programmes. In October, the Finnish government alongside the other EU governments agreed to guarantee interbank lending, if necessary, and make fixed-term capital investments in banks. However, Finnish banks have announced that they are in no need of financial aid in the current situation. Measures taken by central banks and governments to bail out the financial sector are gradually reflected in reviving interbank trading and falling short-term market rates although it is still difficult to assess the ultimate effects of these measures on the financial markets. The global financial crisis has resulted in a much bleaker outlook for the world economy. The crisis originating in the US housing market has spread across other sectors with the result that the US economy is heading into recession. The economic situation within the EU has also worsened considerably and several member states expect their output to shrink. Emerging economies too are experiencing slowing growth, for weaker export prospects will be only partly offset by domestic demand. The financial crisis has weakened Finland's economic outlook further, with economic forecasts predicting a downward trend. Of the main sectors, manufacturing industries expect lower output and construction output is on the wane, and trends in the service sector too have fallen below the normal level, albeit there is still moderate growth. Consumers have much less confidence in economic improvement and employment prospects but nevertheless consider that they will be able to save money. Demand for bank credit was strong in the early autumn despite increasing interest rates. However, people are becoming more cautious especially with regard to home mortgages, although house prices are showing signs of falling. On the other hand, demand for corporate loans has actually increased. As a result of the financial crisis, stock prices have plunged and swung dramatically. Fund capital and life insurance premiums written have contracted, whereas deposits have grown at a good rate. Bleaker economic prospects have not been reflected in growth in non-life insurance premiums written, but there are early signs of a slowdown in growth in claims expenditure. OP-Pohjola Group's earnings and total assets January-September Earnings before tax came to EUR 466 million (757)*. Earnings by the Banking and Investment Services before tax and before the EUR 36 million increase in OP bonuses, which are comparable to surplus refunds, fell somewhat short of last year's record figures. Non-life insurance reported a much better combined ratio than a year ago. Nevertheless, the sharp depreciation of market values in the report period caused by the financial crisis diminished the result made by the non-life and especially life insurance segment and other non-business segment operations to such an extent that the Group's earnings before tax fell short of last year's record level. Net interest income rose by 13% to EUR 873 million (771). As other income contracted, total income fell by 9,6% year on year. Other income declined by 29%, or EUR 262, to EUR 639 million (901). Net commissions totalled EUR 320 million (324), which is almost the same as last year, despite diminished asset management commissions. Net income from Non-life Insurance amounted to EUR 274 million (306) and that of Life Insurance to EUR 4 million (117). The net investment income during the comparison period contained EUR 11 million in non-recurring items, whereas such income was not included in the report period profits. The contraction of other income can be largely attributed to impairment losses on life and non-life investment instruments and the market value changes in notes and bonds through profit and loss in the Group's liquidity reserve. The negative effect of these value changes to earnings before tax was EUR 89 million. During the financial crisis, there has been no proper market for many investment instruments, which has reduced the reliability of available market price sources. However, OP-Pohjola Group did not adopt any of its own market valuation models. Nor has the Group measured any debt securities issued to the public at fair value. The Group has nevertheless taken the opportunity made available in October to categorise certain property items in a new way. See under 'Changes in accounting policies' for more details. The reclassification improved Group earnings after tax by almost EUR 40 million. Expenses stood at EUR 899 million (826), up by 8.8% on the previous year. A significant part of this increase was due to higher personnel costs. The 8.1% rise in personnel costs resulted not only from an increase in staff numbers and the payroll bill but also by pension costs which had risen at a much higher rate than wages and salaries. A significant part of the growth in other administrative expenses was caused by ICT expenses in the process of integrating banking and insurance operations. Other operating expenses year on year included a non-recurring expense of EUR 10 million. Bonuses paid to owner-members and OP bonus customers rose by 58% and totalled to EUR 98 million (62). Net impairment losses on receivables increased to EUR 27 million (9.6). New impairment losses in gross terms totalled EUR 49 million, or 83% more than the year before. The biggest single impairment loss, EUR 9 million, was recorded in relation to Lehman Brothers. Value readjustments and cancellations of impairment losses totalled EUR 22 million, or 28% more than the year before. Impairment losses on receivables remained low, at 0.07% of the loan and guarantee portfolio. Return on equity stood at 8.0%, down from last year's 14.0%. Pre-tax loss at fair value was EUR 80 million (earnings of EUR 663 million)* as a result of a fall in market values of available-for-sale securities. Banking and Investment Services reported a profit of EUR 473 million (536) before tax. This was somewhat below last year's figure if you eliminate the effect of higher bonuses to owner-members and OP bonus customers. Non-life Insurance earnings before tax were EUR 73 million (125), showing a 42% year-on-year decrease. Non-life Insurance's combined ratio improved to 92.9% (96.0) and operating combined ratio** to 90.0% (93.0). Life Insurance recorded pre-tax losses of EUR 13 million (earnings of EUR 89 million). The results of both life and non-life insurance operations were weakened by falling net investment income. * Comparatives for 2007 are given in brackets. For income-statement and other aggregated figures, January-September 2007 figures serve as comparatives. For balance-sheet and other cross-sectional figures, figures on the previous balance sheet date (31 December 2007) serve as comparatives. **The combined cost ratio excluding amortisation on intangible assets arising from the Pohjola acquisition and allocated to the business segment without the effect of changes in calculation bases. In the autumn of 2005 in connection with the Pohjola acquisition, the then OP Bank Group announced that it would seek income and cost synergies of about EUR 91 million by the end of 2010. It is estimated that the decisions made by the end of the report period will yield cost savings of over EUR 55 million in 2008. In 2010 the cost savings are estimated to rise to over EUR 65 million. Revenue synergies achieved to date are estimated to amount to about EUR 30 million per year. Estimates of the total amount of synergy benefits already achieved or to be achieved by the end of the report period will therefore exceed the target set in 2005. Immediate integration costs concerning the report period totalled EUR 3 million (13). Project expenses related to information system integration, including internal personnel costs, totalled some EUR 11 million. Earnings analysis -------------------------------------------------------------------------------- | EUR million | Q1-3/20 | Q1-3/20 | Change, | Change, | 2007 | | | 08 | 07 | milj. e | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings before tax | 466 | 757 | -291 | -38.4 | 1,005 | -------------------------------------------------------------------------------- | Gross change in fair value | -546 | -95 | -452 | | -207 | | reserve | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax | -80 | 663 | -743 | | 798 | | at fair value | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on equity (ROE),% | 8.0 | 14.0 | | -6.0 * | 13.7 | -------------------------------------------------------------------------------- | Return on equity at fair | -1.7 | 12.2 | | -14.0 * | 10.9 | | value,% | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income | | | | | | -------------------------------------------------------------------------------- | Net interest income | 873 | 771 | 101 | 13.2 | 1,048 | -------------------------------------------------------------------------------- | Net income from Non-life | 274 | 306 | -32 | -10.3 | 427 | | Insurance | | | | | | -------------------------------------------------------------------------------- | Net income from Life | 4 | 117 | -113 | -96.3 | 172 | | Insurance | | | | | | -------------------------------------------------------------------------------- | Net commissions and fees | 320 | 324 | -5 | -1.4 | 430 | -------------------------------------------------------------------------------- | Net trading and investment | -40 | 72 | -112 | | 65 | | income | | | | | | -------------------------------------------------------------------------------- | Other operating income | 80 | 78 | 2 | 2.1 | 109 | -------------------------------------------------------------------------------- | Share of associates' | 0 | 2 | -2 | -87.6 | 3 | | profits/losses | | | | | | -------------------------------------------------------------------------------- | Other income, total | 639 | 901 | -262 | -29.1 | 1,206 | -------------------------------------------------------------------------------- | Total income | 1,512 | 1,672 | -161 | -9.6 | 2,254 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Expenses | | | | | | -------------------------------------------------------------------------------- | Personnel costs | 440 | 407 | 33 | 8.1 | 553 | -------------------------------------------------------------------------------- | Other administrative | 230 | 211 | 20 | 9.3 | 303 | | expenses | | | | | | -------------------------------------------------------------------------------- | Other operating expenses | 228 | 208 | 20 | 9.8 | 273 | -------------------------------------------------------------------------------- | Total expenses | 899 | 826 | 73 | 8.8 | 1,129 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Impairment losses on | 27 | 10 | 18 | | 13 | | receivables | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Returns to owner-members | | | | | | | and | | | | | | | OP bonus customers | | | | | | -------------------------------------------------------------------------------- | Bonuses | 98 | 62 | 36 | 58.0 | 83 | -------------------------------------------------------------------------------- | Interest on ordinary and | 22 | 18 | 4 | 21.9 | 24 | | supplementary cooperative | | | | | | | capital | | | | | | -------------------------------------------------------------------------------- | Total returns | 119 | 80 | 40 | 49.9 | 107 | -------------------------------------------------------------------------------- * Percentage point(s) On September 30, OP-Pohjola Group's total assets stood at EUR 75.5 billion (65.7), up by 15% from those on 31 December 2007. During the period, receivables from customers increased by 12% to EUR 50.2 billion (44.8), deposits by 14% to EUR 33.0 billion (29.0) and debt securities issued to the public by 13% to EUR 15.8 billion. Equity capital decreased by 3.0% to EUR 5.5 billion (5.6) owing to the lower fair value reserve. The fair value reserve, adjusted for deferred tax assets, was EUR 415 in the negative (minus EUR 10 million). The main reason for the decrease in the fair value reserve during the reporting period was a dip in the market value of securities. On 30 September, the cooperative capital investments and supplementary cooperative capital investments of the member cooperative banks' owner-members totalled EUR 685 million (689). Member banks paid a total of EUR 25 million in interest on the ordinary and supplementary cooperative capital for the financial year 2007. The Annual General Meeting of Pohjola Bank plc (OKO Bank plc until 29 February 2008) resolved that the company will pay a dividend of EUR 0.65 for each Series A share and EUR 0.62 for each Series K share for 2007, totalling EUR 131 million (131). July-September Earnings before tax in the third quarter amounted to EUR 128 million (234). Total income shrank by 10% mainly as a result of poor investment performance. Other operating income did not include any non-recurring capital gains, while a year ago the figure was EUR 6 million. Reported expenses grew by EUR 25 million. Year on year, third-quarter personnel costs increased by 6.3%, accounting for EUR 7.7 million of growth in total expenses. Returns to owner-members grew by EUR 15 million. Impairment losses on receivables came to EUR 18 million, or EUR 14 million higher than a year earlier. The fair value reserve (gross) shrank by EUR 187 million, while a year ago it decreased by EUR 51 million. Earnings before tax in the third quarter were EUR 29 million lower than in the second. Third-quarter earnings analysis -------------------------------------------------------------------------------- | EUR million | Q3/2008 | Q3/2007 | Change, | Q2/2008 | Change, | | | | | % | | % | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings before tax | 128 | 234 | -45.2 | 157 | -18.5 | -------------------------------------------------------------------------------- | Gross change in fair | -187 | -51 | | -108 | 73.3 | | value reserve | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax | -59 | 183 | | 50 | | | at fair value | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on equity (ROE),% | 6.2 | 12.6 | -6.4* | 8.3 | -2.0* | -------------------------------------------------------------------------------- | Return on equity at fair | -3.8 | 10.0 | -13.8* | 2.5 | -6.2* | | value,% | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income | | | | | | -------------------------------------------------------------------------------- | Net interest income | 305 | 263 | 16.1 | 296 | 3.1 | -------------------------------------------------------------------------------- | Net income from Non-life | 97 | 100 | -3.1 | 89 | 8.4 | | Insurance | | | | | | -------------------------------------------------------------------------------- | Net income from Life | -43 | 20 | | -6 | | | Insurance | | | | | | -------------------------------------------------------------------------------- | Net commissions and fees | 97 | 98 | -1.6 | 103 | -6.3 | -------------------------------------------------------------------------------- | Net trading and | -22 | 6 | | 12 | | | investment income | | | | | | | | | | | | | -------------------------------------------------------------------------------- | Other operating income | 26 | 24 | 7.7 | 27 | -3.7 | -------------------------------------------------------------------------------- | Share of associates' | 0 | 1 | -47.3 | 0 | 70.8 | | profits/losses | | | | | | -------------------------------------------------------------------------------- | Other income, total | 155 | 249 | -37.9 | 225 | -31.1 | -------------------------------------------------------------------------------- | Total income | 460 | 512 | -10.2 | 520 | -11.5 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Expenses | | | | | | -------------------------------------------------------------------------------- | Personnel costs | 130 | 122 | 6.3 | 158 | -17.6 | -------------------------------------------------------------------------------- | Other administrative | 61 | 64 | -3.9 | 86 | -28.8 | | expenses | | | | | | -------------------------------------------------------------------------------- | Other operating expenses | 80 | 61 | 32.1 | 72 | 11.6 | -------------------------------------------------------------------------------- | Total expenses | 272 | 247 | 10.0 | 316 | -14.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Impairment losses on | 18 | 4 | | 7 | | | receivables | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Returns to owner-members | | | | | | | and | | | | | | | OP bonus customers | | | | | | -------------------------------------------------------------------------------- | Bonuses | 34 | 22 | 56.7 | 33 | 3.5 | -------------------------------------------------------------------------------- | Interest on ordinary and | 8 | 6 | 45.2 | 8 | 5.3 | | supplementary cooperative | | | | | | | capital | | | | | | -------------------------------------------------------------------------------- | Total returns | 42 | 27 | 54.3 | 40 | 3.9 | -------------------------------------------------------------------------------- Changes in accounting policies During the third quarter, the Group reclassified some of the notes included in this liquidity reserve, with a view to providing a clearer picture of the actual purpose of notes. This reclassification was enabled by Commission Regulation (EC) No. 1004/2008 of 15 October 2008 applying to IAS 39 and IFRS 7 and the Regulation is aimed at making it easier to reclassify certain financial instruments in rare circumstances. The underlying reason for adopting this Regulation lay in the current financial turmoil which is why reliable market prices were not available to all financial instruments on 30 September. OP-Pohjola Group has reclassified some notes in its liquidity reserve to have their purpose correspond better with how they were treated in the accounts. Liquidity reserves can be converted into cash in a liquidity crisis or used as collateral for central bank funding, enabling reclassification into notes held to maturity. Reclassifying financial instruments is based on their fair values on 1 July 2008. The carrying amount of the reclassified notes totalled EUR 2.2 billion and they were upon initial recognition classified as financial assets held for trading. In the financial statements for 2007, these notes were reclassified for purposes of clarity out of the financial assets held for trading category into the financial assets at fair value through profit or loss at inception category, under which they have also been presented in interim reports following the financial statements. The effect of the reclassification on the fair value reserve was minus EUR 7 million and earnings before tax plus EUR 40 million. The reclassification has no effect on the results recorded for previous periods. In its letter dated 27 Octorber, the European Commission requested that the International Accounting Standards Board (IASB) broaden the application of the amendment to the standard and consider the concept of embedded derivatives and impairment loss regulations. OP-Pohjola Group has investment instruments containing embedded derivatives mainly in the life insurance operation's available-for-sale financial assets. The Group follows these changes closely and will implement any reclassification of instruments containing embedded derivatives in its 2008 financial statements once the IASB amendments have been confirmed. Capital adequacy Two sets of capital adequacy ratios are calculated for OP-Pohjola Group. OP-Pohjola Group operates in compliance with the Act on Cooperative Banks and other Cooperative Institutions. Owing to the regulations on joint responsibility and security conditions prescribed in the Act, a minimum amount of own funds has been set for the amalgamation of the cooperative banks calculated according to the regulations for capital adequacy specified in the Act on Credit Institutions. The amalgamation of the cooperative banks comprises its central institution (OP-Pohjola Group Central Cooperative), the central institution's member credit institutions and companies belonging to their consolidation groups. Although OP-Pohjola Group's insurance companies do not belong to the amalgamation of the cooperative banks, investments made in them nonetheless have a major impact on capital adequacy calculated in accordance with the capital adequacy regulations for credit institutions. This capital adequacy figure is called the amalgamation of cooperative banks' capital adequacy. OP-Pohjola Group is also a financial and insurance conglomerate, pursuant to the Act on the Supervision of Financial and Insurance Conglomerates. The conglomerate is governed by specific provisions of the capital adequacy requirement. In view of both capital adequacy requirements, OP-Pohjola Group's risk-bearing capacity is strong. Transition to the capital adequacy calculation measurement in accordance with Basel II OP-Pohjola Group Central Cooperative will publish annually, as part of the financial statements, the full information required by Pillar III of the capital adequacy framework and the Financial Supervision Authority standards. In its calculation of capital requirement for credit risk, OP-Pohjola Group will phase in the Internal Rating-based Approach (IRBA). The Financial Supervision Authority granted OP-Pohjola Group permission to use the Internal Ratings Based Approach (IRBA) in its capital adequacy measurement for credit risks as of 30 September 2008. This permission concerns liabilities granted to Pohjola Bank plc's corporate and institutional customers. Otherwise the capital requirement is calculated using the Standardised Approach. The adoption of IRBA will reduce OP-Pohjola Group's capital requirement. The use of internal ratings, however, makes the capital requirement more susceptible to market fluctuations. As to market risks, OP-Pohjola Group will continue to use the Standardised Approach. The capital requirement for operational risks will be calculated using the Basic Indicator Approach (BIA), with the objective of adopting the Standardised Approach in 2010. Capital adequacy of the amalgamation of cooperative banks On 30 September, OP-Pohjola Group's capital adequacy ratio under the Act on Credit Institutions stood at 12.4% (13.8) and Tier 1 capital adequacy ratio at 12.4% (12.6). -------------------------------------------------------------------------------- | Own funds | Basel | Basel | | | Reported | Reporte | | | II | II* | | | | d | -------------------------------------------------------------------------------- | EUR million | 30 Sep | 31 Dec | Change, | Change, | 30 Sep | 31 Dec | | | 2008 | 2007 | EUR | % | 2007 | 2007 | | | | | mill. | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Own funds | | | | | | | -------------------------------------------------------------------------------- | Tier 1 capital | 4,743 | 4,846 | -103 | -2.1 | 4,719 | 4,826 | -------------------------------------------------------------------------------- | Tier 2 capital | 0 | 44 | -44 | , | 893 | 802 | | | | | | | | | -------------------------------------------------------------------------------- | Deduction items | - | - | | | -355 | -360 | | from combined | | | | | | | | Tier 1 and Tier | | | | | | | | 2 capital | | | | | | | -------------------------------------------------------------------------------- | Total own funds | 4,743 | 4,890 | -147 | -3.0 | 5,257 | 5,268 | -------------------------------------------------------------------------------- * Converted into comparable figures On 1 January 2008, OP-Pohjola Group adopted a method recommended by the Financial Supervision Authority to include insurance company investments in the calculation of capital adequacy as referred to in the Act on Credit Institutions. After this change, the balance sheet value of the insurance company investments will be deducted from the company's own funds. The investments will be deducted from Tier 1 and 2 capital in equal proportions in accordance with the Basel II Capital Accords. As a result of this change, the company's own funds on 31 December 2007 converted into comparable figures were reduced by some EUR 378 million, which lowered the capital adequacy ratio by about 0.9 percentage points to 12.9%. The change had no major effect on the amount of Tier 1 capital. The actual adoption of capital adequacy calculation according to Basel II did not affect the financial group's own funds. Tier 1 capital amounted to EUR 4,743 million on 30 September. Comparable Tier 1 capital stood at EUR 4,846 million on 31 December 2007. The result for the reporting period less the estimated dividend payout is included in Tier 1 capital. OP-Pohjola Group's Tier 1 capital increased by 2.1% during the report period. The amount of Tier 2 capital were reduced to zero following deductions from the item during the report period. Deductions in excess of the Tier 2 capital were made from Tier 1 capital. Comparable Tier 2 capital stood at EUR 44 million on 31 December 2007. At the end of the report period, own funds were reduced by a fair value reserve that was EUR 415 million in the red (EUR 10 million in the red). In March, Pohjola Bank plc issued a EUR 170 million debenture loan, classified as lower Tier 2 capital, with a maturity of ten years. On 30 September, insurance company investments, deducted in equal proportions from Tier 1 and 2 capital, came to EUR 1,632 million (1,511). On the basis of the exemptions granted by the Financial Supervision Authority, investments by OP-Pohjola Group entities in venture capital funds, managed by OKO Venture Capital (Pohjola Capital Partners since 1 March 2008), are treated in the capital adequacy calculation in the same way as investments in shares in business or industrial corporations. On 30 September, the ratio of hybrid capital to Tier 1 capital was 3.7% (4.6). Tier 1 capital does not include equity capital growth resulting from the IFRS-compliant measurement of pension liabilities and the assets covering them, or from the measurement at fair value of investment property. -------------------------------------------------------------------------------- | Capital adequacy | Basel | Basel I | | | Reported | Report | | | II | | | | | ed | -------------------------------------------------------------------------------- | EUR million | 30 | 30 Sep | Change, | Change, | 30 Sep | 31 Dec | | | Sep | 2008 | EUR | % | 2007 | 2007 | | | 2008 | | mill. | | | | -------------------------------------------------------------------------------- | Risk-weighted | | | | | | | | receivables, | | | | | | | | investments and | | | | | | | | off-balance-sheet | | | | | | | | commitments | | | | | | | -------------------------------------------------------------------------------- | Receivables and | 35,06 | 42,070 | -7,010 | -16.7 | 31,643 | 33,306 | | investments* | 0 | | | | | | -------------------------------------------------------------------------------- | Off-balance-sheet | | | | | 4,243 | 4,328 | | items | | | | | | | -------------------------------------------------------------------------------- | Market risk | 521 | 776 | -256 | -32.9 | 1,395 | 611 | -------------------------------------------------------------------------------- | Operational risks | 2,765 | - | 2,765 | | - | - | -------------------------------------------------------------------------------- | Total | 38,34 | 42,846 | -4,501 | -10.5 | 37,280 | 38,245 | | | 5 | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital adequacy | 12.4 | 11.1 | | | 14.1 | 13.8 | | ratio,% | | | | | | | -------------------------------------------------------------------------------- | Ratio of Tier 1 | 12.4 | 11.1 | | | 12.7 | 12.6 | | capital | | | | | | | | to total | | | | | | | | risk-weighted | | | | | | | | items, | | | | | | | | % (Tier 1 ratio) | | | | | | | -------------------------------------------------------------------------------- * Credit and counterparty risk September 2008 Capital adequacy under the Act on the Supervision of Financial and Insurance Conglomerates OP-Pohjola Group's capital adequacy pursuant to the Act on the Supervision of Financial and Insurance Conglomerates is calculated using the consolidation method, whereby assets included in own funds but not included in equity capital, under the regulations for the banking or insurance industry, are added to the equity capital in the conglomerate's balance sheet. Own funds may not include items not available for covering the losses of other companies belonging to the conglomerate. Based on its interpretation issued on 31 March 2008, the Finnish Financial Supervision Authority altered the manner in which OP-Pohjola Group Mutual Insurance Company's equalisation provision is to be applied in capital adequacy calculation. As a result of this change, the capital adequacy referred to in the Act on the Supervision of Financial and Insurance Conglomerates was reduced by EUR 196 million on 31 March. However, this has no material effect on the Group's actual risk-bearing capacity. On 30 September, OP-Pohjola Group's own funds, calculated according to the Act on the Supervision of Financial and Insurance Conglomerates, exceeded the minimum amount specified in the Act by EUR 1,656 million (1,753). Changes in the capital adequacy calculation as specified in the Act on Credit Institutions increased the possibilities of using Tier 2 capital, which in effect compensates for the negative effect of the interpretation concerning OP-Pohjola Group Mutual Insurance Company. The insurance companies' equalisation provision is not included in the financial and insurance conglomerate's own funds. On 30 September 2008, the combined equalisation provision less the non-life and life insurance tax liabilities stood at EUR 484 million. The equalisation provision acts as a buffer for insurance companies in case of years with heavy losses and is therefore part of the financial services group's actual buffer against losses. Capital adequacy under the Act on the Supervision of Financial and Insurance Conglomerates -------------------------------------------------------------------------------- | EUR million | 30 Sep | 30 Sep | Change, | Change, | 31 Dec | | | 2008 | 2007 | EUR | % | 2007 | | | | | mill. | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | OP-Pohjola Group's | 5,470 | 5,557 | -87 | -1.6 | 5,638 | | equity capital | | | | | |-------------------------------------------------------------------------------- | Business | 1,792 | 1,597 | 195 | 12.2 | 1,607 | | segment-specific | | | | | | | items | | | | | | -------------------------------------------------------------------------------- | Goodwill and | -1,108 | -1,127 | 19 | -1.7 | -1,116 | | intangible assets | | | | | | -------------------------------------------------------------------------------- | Equalisation | -484 | -246 | -238 | 96.9 | -256 | | provision | | | | | | -------------------------------------------------------------------------------- | Other items | -566 | -689 | 123 | -17.8 | -728 | | included in equity | | | | | | | capital and | | | | | | | business-segment-sp | | | | | | | ecific items, but | | | | | | | not included in the | | | | | | | conglomerate's own | | | | | | | funds | | | | | | -------------------------------------------------------------------------------- | Conglomerate's own | 5,104 | 5,093 | 11 | 0.2 | 5,145 | | funds, total | | | | | | -------------------------------------------------------------------------------- | Own funds | 3,089 | 2,957 | 132 | 4.5 | 3,037 | | requirement for | | | | | | | credit institutions | | | | | | -------------------------------------------------------------------------------- | Own funds | 359 | 351 | 8 | 2.4 | 355 | | requirement for | | | | | | | insurance | | | | | | | operations | | | | | | -------------------------------------------------------------------------------- | Total minimum | 3,448 | 3,307 | 141 | 4.2 | 3,392 | | amount of | | | | | | | conglomerate's own | | | | | | | funds | | | | | | -------------------------------------------------------------------------------- | Conglomerate's | 1,656 | 1,785 | -130 | -7.3 | 1,753 | | capital adequacy | | | | | | -------------------------------------------------------------------------------- | Conglomerate's | 1.48 | 1.54 | | -0.06* | 1.52 | | capital adequacy | | | | | | | ratio (own | | | | | | | funds/minimum of | | | | | | | own funds) | | | | | | -------------------------------------------------------------------------------- * Change in ratio. Risk exposure OP-Pohjola Group's credit risk status has remained stable and credit risks low despite the strong growth of the loan and guarantee portfolio. Non-performing and zero-interest receivables came to EUR 234 million (147) on 30 September, which was 0.4% (0.3) of the loan and guarantee portfolio. The ratio of non-performing and zero-interest loans to the loan and guarantee portfolio remained low, although increasing by 22% from September 2007. The loan and guarantee portfolio rose year on year by 15%. Impairments losses on receivables continued to be low. Gross impairment losses of EUR 49 million (27) were recorded in January-September, which was 0.12% (0.08) of the loan and guarantee portfolio. Of the increase in impairment losses, EUR 9 million can be attributed to the failure of Lehman Brothers Holdings Inc. The overall effect of the Lehman Brothers bankruptcy on Group earnings was minus EUR 16 million. The Group has no exposure to the Icelandic government, Icelandic financial institutions or Icelandic companies except for the arrangement described on page 14, whereby OP-Pohjola Group together with two other bank groups from Finland secured the repayment of deposits in Kaupthing's Finnish branch office. OP-Pohjola Group's liquidity has remained good during the report period despite the financial crisis. The continuing uncertainty of the financial markets has not affected the availability of the Group's funding. Deposits make up two-thirds of OP-Pohjola Group's funding, and deposit have continued to grow steadily. The Group's financial position was further aided in the report period by a EUR 1 billion bond issued by Pohjola Bank. The liquidity reserve maintained by OP-Pohjola Group and Pohjola Bank plc amounted to EUR 7.2 billion (6.1) on 30 September 2008. The liquidity reserves plus items included in OP-Pohjola Group's balance sheet comprise the liquidity reserve eligible for central bank refinancing, which can be used to cover OP-Pohjola Group's wholesale funding maturities for approximately 24 months. Strongly widening credit spreads resulted in the negative EUR 104 million mark-to-market valuation through a fall in the market value of notes and bonds included in liquidity reserves. Of this amount, EUR 70 million was recognised in the income statement and EUR 34 million in the fair value reserve. Negative value changes will be reversed during the remaining term to maturity if the notes and bonds are not sold before their maturity and their issuer is not declared insolvent. In Non-life Insurance, January-September saw 142 (167) major or medium-sized losses, with their claims incurred retained for own account totalling EUR 57 million (62). On 30 September, the investment portfolio of Non-life Insurance totalled EUR 2.5 billion (2.5), with bonds and bond funds accounting for 76% (71) and equities for 14% (16). The fixed-income portfolio's credit rating distribution was still good, as 85% of the fixed-income investments were in the top three rating categories (AAA-A). Owing to the particularly difficult investment environment, January‑September investments resulted in a loss of 2.8% (profit of 4.6%). On 30 September, life insurance investment assets amounted to EUR 3.9 billion (4.2). Fixed-income instruments accounted for 63% (64%) of the investment assets. Some 73% (75%) of fixed-income investments belonged to the top three rating categories. Investments made a loss of 6.1% in January-September (as opposed to a profit of 1.8% year on year). The rising interest rates lowered fixed-income investment profits, and at the same time return on equity investments were hit by falling share performance. Credit ratings Of the international credit rating agencies, Fitch Ratings provides a rating for both OP-Pohjola Group and its central bank, Pohjola Bank plc. OP-Pohjola Group's financial position also has a considerable impact on credit ratings issued for Pohjola Bank plc alone. The credit ratings are as follows: -------------------------------------------------------------------------------- | Rating agency | Short-term debt | Long-term debt | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Fitch Rating | F1+ | AA- | | (OP-Pohjola Group and | | | | Pohjola Bank plc) | | | -------------------------------------------------------------------------------- | Standard & Poor's | A-1+ | AA- | | (Pohjola) | | | -------------------------------------------------------------------------------- | Moody's (Pohjola) | P-1 | Aa1 | -------------------------------------------------------------------------------- All of the credit rating agencies have confirmed a stable rating outlook for Pohjola Bank. OP-Pohjola Group's long-term financial targets OP-Pohjola Group's business strategy adopted in June 2006 describes the Group's long-term financial targets for risk-bearing capacity, profitability, risk appetite and efficiency. Due to the fall in financial instruments' market values, OP-Pohjola Group's did not reach its long-term profitability target. The cost/income efficiency fell from last year's 48% to 50%. The values for risk-bearing capacity and risk appetite were higher than the target levels. Long-term performance indicators -------------------------------------------------------------------------------- | | Indicator | Target | 30 Sep | 30 Sep | 31 Dec | | | | | 2008 | 2007 | 2007 | -------------------------------------------------------------------------------- | Risk-bearing | Non-curren | Min. | 1.06 | 1.14 | 1.14 | | capacity | t own | 1.0 | | | | | | funds/ | | | | | | | economic | | | | | | | capital | | | | | -------------------------------------------------------------------------------- | | Indicator | Target | Q1-3/2008 | Q1-3/2007 | 2007 | -------------------------------------------------------------------------------- | Profitability | Return on | Min. | 13.6% | 23.1% | 22.5% | | | economic | 17% | | | | | | capital | | | | | -------------------------------------------------------------------------------- | Risk appetite | Impairment | Max. | 0.07% | 0.03% | 0.03% | | | s on | 0.25% | | | | | | receivable | | | | | | | s/ | | | | | | | loan and | | | | | | | guarantee | | | | | | | portfolio | | | | | -------------------------------------------------------------------------------- | Efficiency | Cost/incom | Max. | 50% | 48% | 49% | | (Banking and | e | 50% | | | | | Investment | | | | | | | Services) | | | | | | -------------------------------------------------------------------------------- Changes in OP-Pohjola Group's structure OP-Pohjola Group's consolidated financial statements include 229 member cooperative banks, OP-Pohjola Group Central Cooperative Consolidated and OP Bank Group Mutual Insurance Company as well as five subsidiaries of the member banks. Karunan Osuuspankki has decided to merge with Sauvon Osuuspankki. In addition, the member banks Joensuun Osuuspankki and Kontiolahden Osuuspankki have decided to merge and establish a new member bank, Joensuun Seudun Osuuspankki. Kuusjoen Osuuspankki, Kiikalan Rekijoen Osuuspankki, Kiskon Osuuspankki, Perniön Osuuspankki and Salon Seudun Osuuspankki have decided to create Salon Osuuspankki through a combination merger. In another combination merger, Lieksan Osuuspankki, Nurmeksen Osuuspankki and Valtimon Osuuspankki will become Pielisen Osuuspankki. The planned date for the last two mergers to be entered in the trade register is 30 April 2009. In accordance with the agreement made between Pohjola Bank plc and Kesko Corporation on 21 December 2007, the share capital of K-Finance Ltd was transferred to Pohjola Bank plc 31 January 2008 and the company was renamed Pohjola Finance Ltd. The Boards of Directors of Pohjola Bank plc and Pohjola Finance Ltd have approved a plan whereby Pohjola Finance Ltd is expected to merge with its parent company by 31 December 2008. As part of the agreement between OP-Pohjola Group Central Cooperative and TietoEnator on datacentre services, the former sold TietoEnator and Ilmarinen Mutual Pension Insurance Company 34% of its FD Finanssidata Oy shares in May. As a result, FD Finanssidata Oy is no longer consolidated in OP-Pohjola Group's financial statements as a subsidiary. This structural change has no material effect on the Group's result. During the reporting period, Pohjola Insurance Ltd and a number of OP-Pohjola Group member cooperative banks have been building up and implementing a new operating model for banking and non-life insurance product sales to private customers. According to this plan, Pohjola Insurance's field staff for private customers (around 250 employees) joined the payroll of local cooperative banks on 1 October 2008. On 22 August 2008, the Helsinki District Court issued its verdict in the redemption dispute between Pohjola Bank plc's and Pohjola Group plc's minority shareholders, The redemption price bid by Pohjola Bank plc for Pohjola Group plc's shares held by minority shareholders was EUR 13.35, which is the same as the redemption price offered by Pohjola Bank for them. This concerned some 2.1 per cent of the company's shares (about 3.4 million shares). Owner-members and customers The cooperative member banks had 1,243,000 owner-members at the end of September, or 51,000 more than a year earlier. Helsinki OP Bank Plc, which operates in the Helsinki Metropolitan Area, had a total of 1,040,000 OP bonus customers at the end of September. Loyal customer bonuses earned by OP bonus customers totalled EUR 98 million, up by 58% on the previous year, this growth stemming particularly from the nearly 40% increase in the value of accumulated bonuses since the beginning of 2008. As of May, bonus customers also began to receive bonuses for OP-Visa purchases. Bonuses earned by owner-members are stated in OP-Pohjola Group's income statement under 'Returns to owner-members'. OP bonus customers used a total of EUR 56 million (43) in bonuses for banking services during January-September, and since the autumn of 2007 bonuses can also have been used to pay for Pohjola's non-life insurance products. In January-September, bonuses worth EUR 16 million were used to pay insurance premiums. The entire OP-Pohjola Group had 4,129,000 customers in Finland at the end of September, 46 000 more than a year earlier. There were 3,726,000 private customers, up by 33,000 year on year, and 403,000 corporate customers, up by 13,200. In addition, OP-Pohjola Group has approximately 200,000 non-life insurance customers in the Baltic countries. In the year to September, the number of joint banking and non-life insurance customers in Finland increased by 84,000 to 964,000 as a result of cross-selling. OP-Pohjola Group aims at increasing the number of joint customers to one million by the end of 2008. On 30 September, the number of Pohjola's loyal customer households totalled 382,000, up by 27,100 from 31 December 2007. Personnel and incentive system On 30 September, OP-Pohjola Group had a staff of 12,653, or 182 more than on 31 December 2007 and 220 more than 31 December 2006. About 95% of OP-Pohjola Group's personnel are members in the Group's Personnel Fund. A management incentive scheme is also in place within the Group. Central Cooperative's corporate governance OP-Pohjola Group Central Cooperative is the central institution of the amalgamation of the cooperative banks, the parent company of OP-Pohjola Group Central Cooperative Consolidated and the company heading the financial and insurance conglomerate formed by OP-Pohjola Group. Acting as a development and service centre for OP-Pohjola Group and as a strategic owner institution, Central Cooperative plays a pivotal role in developing and steering OP-Pohjola Group's business. OP-Pohjola Group Central Cooperative's Annual Cooperative Meeting of 27 March 2008 re-elected the following members due to resign to the Cooperative's Supervisory Board for a term ending in 2011: Mr Jari Laaksonen, Managing Director; Mr Olli Lehtilä, Managing Director; Mr Juhani Leminen, Managing Director; and Ms Marita Marttila, Senior Nursing Officer. Jaakko Pehkonen, Professor, and Timo Parmasuo, Chairman of the Board of Directors, were appointed as new Supervisory Board members. In addition, the Meeting elected Mr Jussi Ruuhela, Managing Director, for the term ending in 2009. The Supervisory Board comprises 34 members. At its first meeting following election, the Supervisory Board re-elected Mr Seppo Penttinen Chairman and Mr Paavo Haapakoski and Mr Jukka Hulkkonen Vice Chairmen. The Annual Cooperative Meeting re-elected KPMG Oy Ab, a firm of authorised public accountants, the auditor of OP-Pohjola Group Central Cooperative and OP-Pohjola Group for the financial year 2008. As proposed by Central Cooperative's Executive Board, the Meeting decided to change the corporate name of OP Bank Group Central Cooperative to OP-Pohjola Group Central Cooperative. The new name was registered in the Trade Register on 21 April 2008. Capital expenditure The Central Cooperative, together with its subsidiaries, is responsible for developing OP-Pohjola Group's services. ICT investments and related specifications make up a significant portion of costs of developing these services. ICT procurement capitalised in the balance sheet totalled EUR 28 million. Of these investments, EUR 15 million was allocated to banking and investment operations, EUR 8 million to non-life insurance operations and EUR 5 million to life insurance operations. Expenses of some EUR 11 million were during the report period caused by the integration of banking and insurance operations information systems. Joint responsibility and joint security Under the Act on Cooperative Banks and Other Cooperative Credit Institutions, the amalgamation of the cooperative banks comprises the organisation's central institution (OP-Pohjola Group Central Cooperative), the Central Cooperative's member credit institutions and the companies belonging to their consolidation groups. This amalgamation is monitored on a consolidated basis. Central Cooperative and its 233 member banks are ultimately responsible for each other's liabilities and commitments. Central Cooperative's members at the end of the reporting period comprised OP-Pohjola Group's 229 member banks as well as Pohjola Bank plc, Helsinki OP Bank Plc, OP Mortgage Bank and OP-Kotipankki Oyj. OP-Pohjola Group's insurance companies do not fall within the scope of joint responsibility. Deposit banks belonging to OP-Pohjola Group, i.e. its member cooperative banks, Pohjola Bank plc, Helsinki OP Bank Plc and OP-Kotipankki Oyj, are regarded as a single bank with respect to deposit protection. Under legislation governing the Investor Compensation Fund, OP-Pohjola Group is also considered a single entity for purposes of compensation protection. Events after the reporting period Pohjola Bank plc and six other European cooperative banks belonging to the Unico Banking Group announced in October that they were aiming through joint action to stabilise and restore confidence in the European interbank funding market. The banks have agreed on reciprocal unsecured interbank credit lines of up to three months, with the total funding volume expected to be between 10 and 15 billion euros. The Unico Banking Group holds a 21 per cent share of the European retail banking market. The Finnish Financial Supervision Authority (FSA), the Icelandic Financial Supervisory Authority (FME) and the Resolution Committee running the operations of Kaupthing Bank h.f reached an understanding in October on paying back the depositors (around 10,000 customers) of the Finnish branch of Kaupthing Bank h.f their deposits in full, including interest. OP-Pohjola Group, Nordea Bank Finland Plc and Sampo Bank plc have decided to provide funding so that the depositors will get their money back. The required financing for this scheme totals roughly EUR 100 million, with OP-Pohjola Group accounting for around 40%. Kaupthing's branch office's receivables and other property have been pledged as collateral for the funding. Outlook for the end of the year The favourable operating environment which the financial sector has enjoyed for many years has now reached a turning point. The operating environment has become clearly more difficult. OP-Pohjola Group still aims to grow at a rate that is higher than the market average. As uncertainty in the investment market continues and the financial crisis is beginning to affect the real economy, the Group's earnings before tax for 2008 will fall below the record earnings of 2007. All forward-looking statements in this bulletin expressing the management's expectations, beliefs, estimates, forecasts, projections and assumptions are based on the current view of the future financial performance of OP-Pohjola Group and its various functions, and actual results may differ materially from those expressed in the forward-looking statements. Operations and earnings by business segment OP-Pohjola Group's business segments are Banking and Investment Services, Non-life Insurance and Life Insurance. Non-segment operations are presented in 'Other Operations'. OP-Pohjola Group's segment reporting is based on accounting policies applied in its financial statements. Amortisation on intangible assets arising from the Pohjola acquisition is allocated to the business segments. OP-Pohjola Group's business segment reporting was changed as of the second quarter of 2008: Pohjola Bank Group's asset management and central bank operations which used to be included in Banking and Investment Services will from now on be reported as part of the non-business-segment Other Operations. The comparison period figures for 2007 have been changed to correspond to the new segment division. The changes concern the Banking and Investment Services and Other Operations. Companies within the Banking and Investment Services segment are the member banks, Helsinki OP Bank Plc, OP Kotipankki Oyj, OP Mortgage Bank, OP Fund Management Company Ltd, Pohjola Asset Management Limited, Pohjola Corporate Finance Ltd*, Pohjola Capital Partners Ltd**, as well as certain smaller companies supporting banking and investment services in their entirety. Pohjola Bank plc's*** banking and asset management segments are also included in the Banking and Investment Services segment as are the operations of OP-Pohjola Group Mutual Insurance Company, because most of the company's business consists of credit insurance granted to the Group's retail banks. The Non-life Insurance segment encompasses the operations of OP-Pohjola Group's non-life insurance companies, i.e. Pohjola Insurance Ltd****, Eurooppalainen Insurance Company Ltd, A-Insurance Ltd, the Seesam companies operating in the Baltic countries, as well as the operations of service companies supporting non-life insurance. The Life Insurance segment comprises OP Life Assurance Company Ltd engaged in the Group's life and pension insurance business. As a result of the new division into segments, Other Operations, which does not fall under any segment, grew in size. Pohjola Bank Group's central bank and asset management, which are now included under Other Operations, include the financial services group's EUR 7 billion liquidity reserve, Pohjola Bank Group's capital market asset management and the central bank operations offered to Group member banks by Pohjola Bank. Other Operations already included operations that supported all business segments, particularly the operations of OP-Pohjola Group Central Cooperative and FD Finanssidata Oy (up to May 2008) and Pohjola's Group management. Costs of the services which Central Cooperative and FD provide for the business segments are allocated to the segments in the form of internal service charges. The allocation of own capital to the business segments is carried out through an internal bank under Other Operations, which means that any positive results in excess of the target level will be shown under Other Operations. * OKO Corporate Finance Ltd until 29 February 2008 ** OKO Venture Capital Ltd until 29 February 2008 *** OKO Bank Group until 29 February 2008 **** Pohjola Non-Life Insurance Company Ltd, until 29 February 2008 Summary of performance by business segment -------------------------------------------------------------------------------- | EUR million | Total | Expense | Other | Earnings | Earnings | | | income | s | items | before tax | before tax | | | | | | Q1-3/2008 | Q1-3/2007 | -------------------------------------------------------------------------------- | Banking and | 1,244 | 625 | -146 | 473 | 536 | | Investment | | | | | | | Services | | | | | | -------------------------------------------------------------------------------- | Non-life | 297 | 224 | 0 | 73 | 125 | | Insurance | | | | | | -------------------------------------------------------------------------------- | Life Insurance | 28 | 41 | 0 | -13 | 89 | -------------------------------------------------------------------------------- | Other Operations | 216 | 254 | -1 | -38 | 7 | -------------------------------------------------------------------------------- | Eliminations | -265 | -238 | 0 | -27 | 0 | -------------------------------------------------------------------------------- | Total | 1,519 | 907 | -146 | 466 | 757 | -------------------------------------------------------------------------------- Banking and Investment Services The banking and investment operating environment became more and more challenging towards the end of the report period as a result of the heightening financial crisis. Mutual fund capital declined sharply along, although credits and deposits continued to grow well. In the uncertain market situation, customers' confidence for Finnish OP-Pohjola Group with high capital adequacy improved the Group's market position. OP-Pohjola Group's loan portfolio at the end of September stood at EUR 50.1 billion (44.8), with the guarantee portfolio totalling EUR 2.7 billion (2.4). The loan portfolio grew by 12% from the year-start level and by 14.9% (13,0) in the year to September. The market share of the loan portfolio grew by 0.2 percentage points to 31.6% over the previous year. The home mortgage portfolio totalled EUR 23.8 billion (21.5) at the end of September. During the report period, home mortgages increased by 10% (11) and in the year to September by 13% (14). At the end of September, the market share of home mortgages was 35.7%, or 1 percentage point higher year on year. The steady decrease of the average margin of home mortgages over the years came to an end during the third quarter, with June appearing to be the turning point. However, margins increased very moderately in the third quarter. Fixed-rate home mortgages accounted for a low share of all home mortgages at 2.4% (0.5). The financial services group's mortgage Bank, OP Mortgage Bank issued in May a EUR 1 billion covered bond, which will further improve OP-Pohjola Group's already strong competitiveness and position in the home mortgage market. In July-September, Pohjola Bank issued bonds worth EUR 1.2 billion. Despite a tighter financial market situation, poor availability of funding did not stop OP-Pohjola Group from increasing its loan portfolio in the report period. Nevertheless, more expensive funding on the wholesale market will inevitably lead to more expensive credit. On 30 September, the consumer credit portfolio amounted to EUR 3.6 billion (3.3), showing an increase of 9.7% from 31 December 2007 and 11% year on year. At the end of September, the Group's corporate loan portfolio stood at EUR 13.3 billion (11.3), growing by 18% during the reporting period and 22% in the year to September, and the guarantee portfolio totalled EUR 2.3 billion (2.1). The increase in corporate loans is partly explained by capital market instability, which has increased the popularity of bank financing in proportion to companies' direct funding from the capital markets. The market share of corporate loans was 26.0% on 30 September, or 0.2 percentage points lower than a year earlier. On 30 September, deposits totalled EUR 33.0 billion (29,0), or 17% higher than a year ago and 14% more than on 31 December 2007. The growth took place mainly in investment deposits, which grew by 39% to EUR 17.9 billion (14.0). The Group's market share of deposits was 33.5% on 30 September, or 0.3 percentage points higher year on year. On 30 September, OP-Pohjola Group customers had 1.7 million (1.6) international OP-Visa, OP-Visa Electron, OP-Visa Debit or OP-MasterCard cards. By the end of September, over 530,000 cards had the K-Group's Plussa bonus point feature following the card cooperation started with the K-Group in 2007. Capital invested in OP-Pohjola Group's mutual funds stood at EUR 11.1 billion (14.1) billion. The amount of capital fell with the market trends by 21% during the report period and by 25% since September 2007. On 30 September, OP-Pohjola Group held a 22.0% market share of the capital of mutual funds registered in Finland, or 0.3 percentage points higher than a year earlier. Net subscriptions to OP-Pohjola Group's mutual funds were EUR 1,431 million in the negative (+1,103). On 30 September, assets managed by Pohjola Bank's asset management were worth EUR 27.3 billion (31.3), EUR 10.1 billion (13.1) of which was invested in OP-Pohjola Group's mutual funds. OP-Pohjola Group companies accounted for EUR 6.3 billion of assets managed by Pohjola Bank. Assets managed in accordance with the OP-Private operating model totalled EUR 2.9 billion (2.9). Stockbroking for households totalled 365,000 trades during the reporting period, or down bf 15% on the previous year. Earnings and risk exposure Banking and Investment Services reported earnings of EUR 473 million (536) before tax for January-September 2008, down by 12% year on year. Half of this change can be attributed to higher bonuses paid to customers, totalling EUR 98 million (62) in the report period. Without these higher payouts to owner-members and loyal customers, the Banking and Investment Services result would have been 5 per cent smaller than a year ago. Net interest income increased by 11% to EUR 837 million and net commissions and fees by 0.1% to EUR 341 million, the increase mainly stemming from business growth. Personnel costs rose by 6.6% and other expenses by 9.2%. The cost/income ratio stood at 50% (48). Impairment losses on receivables came to EUR 27 million (10), increased by the EUR 6 million impairment loss caused by Lehman Brothers Holdings Inc. Otherwise the growth increase in impairment losses can be seen to reflect on the end of a long stretch of favourable trends and a normalisation of credit losses that come with banking operations. The amount of impairment losses was still low in relation to the business volumes, and clearly below the maximum figure set by the Group itself. The Group's non-performing and zero-interest receivables increased but remained at low levels, totalling EUR 234 million on 30 September 2008, or 22% more than a year ago. Non-performing and zero-interest loans are stated net of impairments of specific receivables and groups of receivables, which amounted to EUR 91 million (87). The ratio of non-performing and zero-interest receivables to the loan and guarantee portfolio was 0.4, the same as a year ago. Banking and Investment Services: key figures -------------------------------------------------------------------------------- | EUR million | Q1-3/2008 | Q1-3/2007 | Change, | 2007 | | | | | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net interest income | 837 | 755 | 10.9 | 1,030 | -------------------------------------------------------------------------------- | Impairment losses on | 27 | 10 | 176.8 | 13 | | receivables | | | | | -------------------------------------------------------------------------------- | Other income | 407 | 449 | -9.5 | 609 | -------------------------------------------------------------------------------- | Personnel costs | 270 | 253 | 6.6 | 346 | -------------------------------------------------------------------------------- | Other expenses | 355 | 325 | 9.2 | 450 | -------------------------------------------------------------------------------- | Returns to owner-members | 119 | 80 | 49.9 | 107 | | and | | | | | | OP bonus customers | | | | | -------------------------------------------------------------------------------- | Earnings before tax | 473 | 536 | -11.9 | 722 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | Q1-3/2008 | Q1-3/2007 | Change, | 2007 | | | | | % | | -------------------------------------------------------------------------------- | Home mortgages drawn down | 5,780 | 5,513 | 4.9 | 7,226 | -------------------------------------------------------------------------------- | Corporate loans drawn | 6,037 | 5,069 | 19.1 | 6,797 | | down | | | | | -------------------------------------------------------------------------------- | Net subscriptions to | -1,431 | 1,103 | | 595 | | mutual funds | | | | | -------------------------------------------------------------------------------- | No. of brokered property | 12,095 | 12,547 | -3.6 | 16,263 | | transactions | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR billion | 30 Sep | 30 Sep | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- | Loan portfolio | | | | | -------------------------------------------------------------------------------- | Home mortgages | 24 | 21 | 13.5 | 22 | -------------------------------------------------------------------------------- | Other loans to households | 10 | 9 | 7.3 | 9 | -------------------------------------------------------------------------------- | Corporate loans | 13 | 11 | 22.1 | 11 | -------------------------------------------------------------------------------- | Other loans | 3 | 3 | 22.2 | 3 | -------------------------------------------------------------------------------- | Total | 50 | 44 | 14.9 | 45 | -------------------------------------------------------------------------------- | Guarantee portfolio | 2.7 | 2.4 | 12.1 | 2.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Deposits | | | | | -------------------------------------------------------------------------------- | Total current and payment | | | | | | transfer | | | | | -------------------------------------------------------------------------------- | Households | 10 | 11 | -5.5 | 10 | -------------------------------------------------------------------------------- | Companies | 3 | 3 | 10.2 | 3 | -------------------------------------------------------------------------------- | Others | 2 | 2 | 7.4 | 2 | -------------------------------------------------------------------------------- | Total current and payment | 15 | 15 | -1.1 | 15 | | transfer | | | | | | | | | | | -------------------------------------------------------------------------------- | Investment deposits | 18 | 13 | 38.7 | 14 | -------------------------------------------------------------------------------- | Total deposits | 33 | 28 | 17.1 | 29 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Mutual funds | | | | | -------------------------------------------------------------------------------- | Equity and hedge funds | 2.9 | 4.6 | -36.5 | 4.2 | -------------------------------------------------------------------------------- | Balanced funds | 1.5 | 2.2 | -28.2 | 2.1 | -------------------------------------------------------------------------------- | Long-term bond funds | 4.1 | 3.8 | 8.9 | 3.9 | -------------------------------------------------------------------------------- | Money market funds | 2.5 | 4.3 | -41.3 | 4.0 | -------------------------------------------------------------------------------- | Total value of mutual | 11.1 | 14.9 | -25.1 | 14.1 | | funds | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Market share,% | 30 Sep | 30 Sep | Change, | 31 Dec | | | 2008 | 2007 | %-yks. | 2007 | -------------------------------------------------------------------------------- | Total loans | 31.6 | 31.4 | 0.2 | 31.1 | -------------------------------------------------------------------------------- | Home mortgages | 35.7 | 34.7 | 1.0 | 34.8 | -------------------------------------------------------------------------------- | Corporate loans | 26.0 | 26.2 | -0.2 | 25.7 | -------------------------------------------------------------------------------- | Total deposits | 33.5 | 33.3 | 0.3 | 32.3 | -------------------------------------------------------------------------------- | Capital invested in | 22.0 | 21.7 | 0.3 | 21.4 | | mutual funds | | | | | -------------------------------------------------------------------------------- | EUR million | | | | | -------------------------------------------------------------------------------- | Non-performing and | | | Change,% | | | zero-interest | | | | | | receivables | | | | | -------------------------------------------------------------------------------- | Households | 147 | 117 | 25.0 | 92 | -------------------------------------------------------------------------------- | Non-banking corporate | 64 | 67 | -3.6 | 52 | | sector | | | | | -------------------------------------------------------------------------------- | Condominiums and others | 23 | 9 | | 3 | -------------------------------------------------------------------------------- | Total non-performing and | 234 | 192 | 21.7 | 147 | | zero-interest receivables | | | | | -------------------------------------------------------------------------------- | Non-performing and | 0.4 | 0.4 | 0.03* | 0.3 | | zero-interest receivables | | | | | | within loan and guarantee | | | | | | portfolio,% | | | | | -------------------------------------------------------------------------------- * Percentage point(s) Non-life Insurance On 30 September, the number of loyal customer households within the Non-life Insurance segment totalled 382,000, showing an increase of 27,000 from 31 December 2007. Since the autumn of 2007, it has been possible to use OP bonuses earned through banking transactions to pay insurance premiums. In January-September, bonuses worth EUR 16 million were used to pay insurance premiums. Bonuses were used to pay almost 270,000 bills and some 60,000 bills were paid using bonuses alone. Insurance premium revenue rose by 8.9% to EUR 696 million (639). Growth remained strong within the Private Customers division because of closer cooperation between Group member banks and the non-life insurance operations, and because of the increase in the number of loyal customer households. Insurance premium revenue from Private Customers improved by 12% to EUR 287 million. Within the Corporate Customers division, insurance premium revenue amounted to EUR 366 million, up by 10%. The increase of earnings in statutory accident insurance in the latter part of the period under review boosted growth. Premium revenue generated by the Baltic business increased by 5.8% to EUR 44 million (41). Pohjola Insurance Ltd's market share of premiums written in non-life insurance in 2007 was 26.9%, against 26.3% a year earlier. In 2007, Pohjola Insurance became the market leader in non-life insurance. Market share data on premiums written in non-life insurance come in only once a year. Earnings and risk exposure Non-life Insurance earnings before tax for the report period were EUR 73 million, or 42% lower than a year ago (125). In terms of balance on technical account, 2008 has been a better year than 2007. Net investment income recognised under earnings came to EUR 61 million, or EUR 64 million higher year on year (126). Net investment losses at fair value came to EUR 79 million (income of EUR 118 million). Results for the same period a year ago included EUR 6 million in capital gains on the sale of the marine hull insurance business. Insurance premium revenue totalled EUR 696 million (639) and indemnities EUR 447 million (424). The risk ratio stood at 63.4 (65.5). In particular, developments in the claims incurred due to severe traffic and industrial accidents were favourable. The number of major or medium-sized losses in excess of EUR 0.1 million (EUR 0.5 million in pension liabilities) totalled 142 (167), accounting for EUR 57 million (62) of total claims incurred. Another factor that contributed to higher indemnifications paid out was caused by the growing insurance portfolio. Operating expenses and loss adjustment expenses showed controlled growth, totalling EUR 186 million (176). The cost ratio developed favourably, standing at 26.7% (27.6). The operating combined ratio was 90.0 (93.0). On 30 September, the investment portfolio of Non-life Insurance totalled EUR 2.5 billion (2.5), with bonds and bond funds accounting for 76% (71) and equities for 14% (16). The average remaining maturity of the fixed-income portfolio was 5.3 years and the duration 3.6 years (3.8). Due to unfavourable developments in the equity market, return on investment at fair value stood at -2.8% (4.6). Non-life Insurance: key figures -------------------------------------------------------------------------------- | EUR million | Q1-3/2008 | Q1-3/2007 | Change, | 2007 | | | | | % | | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Insurance premium revenue | 696 | 639 | 8.9 | 850 | -------------------------------------------------------------------------------- | Insurance claims and | 447 | 424 | 5.5 | 536 | | benefits | | | | | -------------------------------------------------------------------------------- | Net investment income | 61 | 126 | -51.1 | 160 | -------------------------------------------------------------------------------- | Unwinding of discount and | -31 | -29 | 5.2 | -39 | | other items included in | | | | | | net income | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 280 | 312 | -10.2 | 435 | | Insurance | | | | | -------------------------------------------------------------------------------- | Other income | 16 | 29 | -44.9 | 37 | -------------------------------------------------------------------------------- | Personnel costs | 81 | 76 | 6.1 | 103 | -------------------------------------------------------------------------------- | Other expenses | 143 | 141 | 1.8 | 188 | -------------------------------------------------------------------------------- | Earnings/loss before tax | 73 | 125 | -41.9 | 181 | -------------------------------------------------------------------------------- | Gross change in fair value | -140 | -8 | , | -39 | | reserve | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax | -67 | 117 | -157.3 | 142 | | at fair value | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | Q1-3/2008 | Q1-3/2007 | Change, | 2007 | | | | | % | | -------------------------------------------------------------------------------- | Insurance premium revenue | | | | | -------------------------------------------------------------------------------- | Private Customers | 287 | 266 | 7.9 | 345 | -------------------------------------------------------------------------------- | Corporate Customers | 366 | 332 | 10.1 | 449 | -------------------------------------------------------------------------------- | Baltic States | 43 | 41 | 5.8 | 56 | -------------------------------------------------------------------------------- | Total insurance premium | 696 | 639 | 8.9 | 850 | | revenue | | | | | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Mrd. e | 30 Sep | 30 Sep | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Insurance contract | | | | | | liabilities | | | | | -------------------------------------------------------------------------------- | Discounted insurance | 1.3 | 1.3 | -1.3 | 1.3 | | contract liabilities | | | | | -------------------------------------------------------------------------------- | Other insurance contract | 0.9 | 0.8 | 11.9 | 0.8 | | liabilities | | | | | -------------------------------------------------------------------------------- | Total | 2.2 | 2.1 | 3.9 | 2.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investment portfolio | | | | | -------------------------------------------------------------------------------- | Bonds and bond funds | 1.7 | 1.6 | 7.0 | 1.7 | -------------------------------------------------------------------------------- | Money market instruments | 0.2 | 0.1 | 64.4 | 0.1 | -------------------------------------------------------------------------------- | Equities and equity funds | 0.3 | 0.5 | -27.5 | 0.4 | -------------------------------------------------------------------------------- | Real property investment | 0.1 | 0.1 | 89.8 | 0.1 | | *) | | | | | -------------------------------------------------------------------------------- | Alternative investments | 0.1 | 0.2 | -22.0 | 0.2 | -------------------------------------------------------------------------------- | Total | 2.5 | 2.5 | 3.2 | 2.5 | -------------------------------------------------------------------------------- *) Includes real estate funds Life Insurance The operating environment was unfavourable for the life insurance business in the first half of 2008, and particularly so in the third quarter. Negative developments in the investment market limited life insurance companies' investment activities considerably and weakened demand for unit-linked products. Premiums written in the domestic life insurance market were 9.2% lower than a year ago, mainly due to a fall in premiums written in endowment insurance policies. Year on year, OP-Pohjola Group's premiums written in life and pension insurance decreased by 9.2% to EUR 515 million (567). Despite this reduction, OP-Pohjola Group increased its market share in premiums written in life insurance, as evidenced by At the end of September, the market share was 30.5%, or 1.3 percentage points higher year on year. Premiums written in endowment insurance declined by 23.5%. Premiums written in pension insurance grew by 23%, with those written in personal pension insurance increasing by 5.6%. Premiums written in unit-linked policies accounted for 56% of those written in endowment insurance and personal pension insurance. Life insurance claims paid totalled EUR 461 million (384), of which surrenders accounted for EUR 233 million (157). EUR 36 million in pensions (27) was paid out in the review period. OP-Pohjola Group's market share of insurance savings through life and pension insurance policies increased by 0.3 percentage points to 19.5% since year-end 2007. Unit-linked policies accounted for 33.5% (41) of insurance savings in life and pension insurance. Earnings and risk exposure Life Insurance recorded pre-tax losses of EUR 13 million (earnings of EUR 89 million). The negative effects of the financial crisis on the valuation of securities caused pre-tax losses at fair value to EUR 322 million (earnings of EUR 42 million). The fair value reserve change before tax stood at EUR -309 million (-48). Net income from Life Insurance was EUR 14 million (121). Net income from investment assets other than those covering unit-linked insurance stood at EUR 57 million (139). The provision worth EUR 10 million for future supplementary benefits made at the end of 2007 was reversed during the reporting period. Personnel costs increased by 6% to EUR 4 million, while other expenses decreased by 8.8% to EUR 35 million (38). Other expenses include EUR 18 million (22) in commissions paid to the sales network. On 30 September, total insurance contract liabilities within OP-Pohjola Group's life insurance operations stood at EUR 5.6 billion (6.0), down by 6.0% (6.0) from 31 December 2007. Interest-bearing contract liabilities accounted for 67% and unit-linked for 33%. Life insurance investment assets, excluding assets covering unit-linked insurance, amounted to EUR 3.9 billion (4.2). The investment environment was particularly difficult in the review period and therefore investments at fair value recorded a loss of 6.1% (income of 1.8%). Owing to the unstability of investment markets, it was decided that the solvency margin will be increased. OP Life Assurance Company Ltd made a share issue worth EUR 100 million, followed by another issue in October to boost capital adequacy. A total of some EUR 160 million was raised through the issues. Life Insurance: key figures -------------------------------------------------------------------------------- | EUR million | Q1-3/2008 | Q1-3/2007 | Change, | 2007 | | | | | % | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Premiums written, IFRS | 515 | 567 | -9.2 | 794 | -------------------------------------------------------------------------------- | Unit-linked | 231 | 328 | -29.7 | 451 | -------------------------------------------------------------------------------- | Other | 284 | 239 | 19.0 | 343 | -------------------------------------------------------------------------------- | Net investment income | -399 | 310 | -228.4 | 303 | -------------------------------------------------------------------------------- | Unit-linked | -456 | 171 | -366.0 | 97 | -------------------------------------------------------------------------------- | Other | 57 | 139 | -58.7 | 206 | -------------------------------------------------------------------------------- | Change in insurance | -351 | 368 | -195.3 | 409 | | contract liabilities | | | | | -------------------------------------------------------------------------------- | Unit-linked | -501 | 321 | -256.4 | 282 | -------------------------------------------------------------------------------- | Other | 151 | 48 | 215.5 | 127 | -------------------------------------------------------------------------------- | Claims incurred | 461 | 384 | 20.1 | 507 | -------------------------------------------------------------------------------- | Other items | 9 | -4 | -315.4 | -4 | -------------------------------------------------------------------------------- | Net income from Life | 14 | 121 | -88.1 | 177 | | Insurance | | | | | -------------------------------------------------------------------------------- | Other income | 13 | 11 | 23.4 | 12 | -------------------------------------------------------------------------------- | Personnel costs | 6 | 4 | 33.9 | 7 | -------------------------------------------------------------------------------- | Other expenses | 35 | 38 | -8.8 | 53 | -------------------------------------------------------------------------------- | Earnings/loss before tax | -13 | 89 | -114.8 | 129 | -------------------------------------------------------------------------------- | Gross change in fair value | -309 | -48 | | -132 | | reserve | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax at | -322 | 42 | | -3 | | fair value | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | Q1-3/2008 | Q1-3/2007 | Change, | 2007 | | | | | % | | -------------------------------------------------------------------------------- | Premiums written | | | | | -------------------------------------------------------------------------------- | Endowment insurance | 307 | 401 | -23.5 | 530 | -------------------------------------------------------------------------------- | Pension insurance | 160 | 130 | 23.0 | 218 | -------------------------------------------------------------------------------- | Term life insurance | 59 | 31 | 85.8 | 50 | -------------------------------------------------------------------------------- | Other | 11 | 4 | 212.7 | 61 | -------------------------------------------------------------------------------- | Total premiums written | 537 | 566 | -5.3 | 859 | -------------------------------------------------------------------------------- | of which unit-linked | 241 | 330 | -27.2 | 462 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Market share of premiums | 30.5 | 29.2 | 1.3* | 30.8 | | written in life and pension | | | | | | insurance,% | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR billion | 30 Sep | 30 Sep | Change, | 31 Dec | | | 2008 | 2007 | % | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Insurance savings | | | | | -------------------------------------------------------------------------------- | Endowment insurance | 4.0 | 4.3 | -7.7 | 4.3 | -------------------------------------------------------------------------------- | Pension insurance | 1.5 | 1.5 | 1.1 | 1.6 | -------------------------------------------------------------------------------- | Capital redemption | 0.1 | 0.1 | -22.3 | 0.2 | | contracts | | | | | -------------------------------------------------------------------------------- | Total insurance savings | 5.6 | 5.9 | -5.8 | 6.0 | -------------------------------------------------------------------------------- | of which unit-linked | 1.9 | 2.4 | -22.2 | 2.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investment portfolio | | | | | -------------------------------------------------------------------------------- | Bonds and bond funds | 2.4 | 2.7 | -11.3 | 2.6 | -------------------------------------------------------------------------------- | Money market instruments | 0.1 | 0.0 | 168.7 | 0.1 | -------------------------------------------------------------------------------- | Equities and equity funds | 0.5 | 0.6 | -15.0 | 0.7 | -------------------------------------------------------------------------------- | Real property investment | 0.3 | 0.2 | 41.3 | 0.3 | | **) | | | | | -------------------------------------------------------------------------------- | Alternative investments | 0.6 | 0.5 | 16.2 | 0.5 | -------------------------------------------------------------------------------- | Total investment portfolio | 3.9 | 4.1 | -4.2 | 4.2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Market share of insurance | 19.5 | 19.8 | -0.3 | 19.9 | | savings in life and pension | | | | | | insurance,% | | | | | -------------------------------------------------------------------------------- * Percentage point(s) ** Includes real estate funds Other Operations Other Operations' pre-tax result were EUR 45 million poorer than last year (38), ending in a loss of EUR 7 million. The biggest reason for the change was the impairment losses on the liquidity reserve, affecting Other Operations by EUR 53 million (minus 25). Therefore the net trading losses came to EUR 61 million. The earnings performance was eroded by an impairment of EUR 7 million recognised on bond receivables from Lehman Brothers Holdings Inc. and by a credit loss of EUR 3 million recognised on guarantee receivables. The European Commission issued regulation no. 1004/2008 on 15 October 2008, amending the classification of IAS 39, reducing the amount of negative value changes recognised in the income statement. The net interest income was EUR 25 million (15) and net investment income EUR 10 million (25). Most of the other income in Other Operations came from within the Group as internal service charges, which are recorded as business segment expenses. Of the Other Operations expenses, EUR 83 million (73) were personnel costs and EUR 171 million (172) other costs. Earnings were burdened by the liquidated damages ruled by the Arbitral Tribunal concerning the shareholder agreement dispute over Nooa Savings Bank Ltd. This affected other costs by EUR 10 million. Other Operations: key figures -------------------------------------------------------------------------------- | EUR million | Q1-3/2008 | Q1-3/2007 | Change,% | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net trading income | -61 | -22 | | -52 | -------------------------------------------------------------------------------- | Other income | 277 | 273 | 1.5 | 339 | -------------------------------------------------------------------------------- | Expenses | 254 | 245 | 3.6 | 313 | -------------------------------------------------------------------------------- | Other items | 1 | 0 | 0.0 | 0 | -------------------------------------------------------------------------------- | Earnings/loss before tax | -38 | 7 | | -27 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR billion | 30 Sep | 30 Sep | Change,% | 31 Dec | | | 2008 | 2007 | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Receivables from | 4.0 | 5.0 | -19.5 | 5.0 | | financial institutions | | | | | -------------------------------------------------------------------------------- | Financial assets held | 2.3 | 2.9 | -20.2 | 3.4 | | for trading | | | | | -------------------------------------------------------------------------------- | Investment assets | 4.8 | 1.5 | | 1.8 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Liabilities to financial | 6.2 | 2.0 | | 2.5 | | institutions | | | | | -------------------------------------------------------------------------------- | Debt securities issued | 14.5 | 14.1 | 3.1 | 13.2 | | to the public | | | | | -------------------------------------------------------------------------------- OP-Pohjola Group income statement 1 January-30 September 2008 -------------------------------------------------------------------------------- | EUR million | Q1-3/200 | Q1-3/200 | Change, | 2007 | | | 8 | 7 | % | | -------------------------------------------------------------------------------- | Interest income | 3,510 | 2,581 | 36 | 3,630 | -------------------------------------------------------------------------------- | Interest expenses | 2,638 | 1,809 | 46 | 2,583 | -------------------------------------------------------------------------------- | Net interest income (Note 1) | 873 | 771 | 13 | 1,048 | -------------------------------------------------------------------------------- | Impairments of receivables | 27 | 10 | | 13 | | (Note 2) | | | | | -------------------------------------------------------------------------------- | Net interest income after | 846 | 762 | 11 | 1,035 | | impairments | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 274 | 306 | -10 | 427 | | Insurance operations | | | | | | (Note 3) | | | | | -------------------------------------------------------------------------------- | Net income from Life Insurance | 4 | 117 | -96 | 172 | | operations (Note 4) | | | | | -------------------------------------------------------------------------------- | Net commissions and fees (Note | 320 | 324 | -1 | 430 | | 5) | | | | | -------------------------------------------------------------------------------- | Net trading income (Note 6) | -81 | 0 | | -30 | -------------------------------------------------------------------------------- | Net investment income (Note 7) | 41 | 73 | -44 | 95 | -------------------------------------------------------------------------------- | Other operating income (Note 8) | 80 | 78 | 2 | 109 | -------------------------------------------------------------------------------- | Personnel costs (Note 9) | 440 | 407 | 8 | 553 | -------------------------------------------------------------------------------- | Other administrative expenses | 230 | 211 | 9 | 303 | | (Note 10) | | | | | -------------------------------------------------------------------------------- | Other operating expenses (Note | 228 | 208 | 10 | 273 | | 11) | | | | | -------------------------------------------------------------------------------- | Returns to owner-members (Note | 119 | 80 | 50 | 107 | | 12) | | | | | -------------------------------------------------------------------------------- | Share of associates' | 0 | 2 | -88 | 3 | | profits/losses | | | | | -------------------------------------------------------------------------------- | Earnings before tax for the | 466 | 757 | -38 | 1,005 | | period | | | | | -------------------------------------------------------------------------------- | Income tax expense | 134 | 197 | -32 | 266 | -------------------------------------------------------------------------------- | Profit for the period | 332 | 560 | -41 | 738 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Attributable to: | | | | | -------------------------------------------------------------------------------- | OP-Pohjola Group's owners | 332 | 560 | -41 | 738 | -------------------------------------------------------------------------------- | Minority interest | 0 | 0 | -84 | 0 | -------------------------------------------------------------------------------- | Total | 332 | 560 | -41 | 738 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Key figures and ratios | Q1-3/200 | Q1-3/200 | | 2007 | | | 8 | 7 | | | -------------------------------------------------------------------------------- | Return on equity, % | 8.0 | 14.0 | | 13.7 | -------------------------------------------------------------------------------- | Return on equity at fair value, | -1.7 | 12.2 | | 10.9 | | % | | | | | -------------------------------------------------------------------------------- | Return on assets, % | 0.63 | 1.20 | | 1.18 | -------------------------------------------------------------------------------- | Cost/income ratio, % | 59 | 49 | | 50 | -------------------------------------------------------------------------------- | Average personnel | 12,575 | 12,339 | | 12,378 | -------------------------------------------------------------------------------- | Full-time | 11,452 | 11,221 | | 11,226 | -------------------------------------------------------------------------------- | Part-time | 1,123 | 1,118 | | 1,152 | -------------------------------------------------------------------------------- Definition of key figures and ratios Return on equity (ROE) = Profit for the period / Equity capital (average of the beginning and end of the period) x 100 Return on equity at fair value, % = Profit for the period + change in fair value reserve less deferred tax liability / equity capital (average of the beginning and end of the period) x 100 Return on assets (ROA) = Profit for the period / Balance sheet total (average of the beginning and end of the period) x 100 Cost/income ratio, % = (Personnel costs + other administrative expenses + other operating expenses) / (Net interest income + net income from Non-life Insurance operations + net income from Life Insurance operations + net commissions and fees + net trading income + net investment income + other operating income + share of associates' profits/losses) x 100 Combined ratio (excl. unwinding of discount) Loss ratio+expense ratio Risk ratio+cost ratio Loss ratio (exc. unwinding of discount) Claims and loss adjustment expenses / Net insurance premium revenue x 100 Expense ratio Operating expenses + Amortisation/adjustment of intangible assets related to company acquisition / Net insurance premium revenue x 100 Risk ratio (excl. unwinding fo discount) Claims excl. loss adjustment expenses / Net insurance premium revenue x 100 Cost ratio Operating expenses and loss adjustments expenses / Net insurance premium revenue x 100 OP-Pohjola Group quarterly performance -------------------------------------------------------------------------------- | | 2007 | 2008 | -------------------------------------------------------------------------------- | EUR million | Q3 | Q4 | Q1 | Q2 | Q3 | -------------------------------------------------------------------------------- | Interest income | 943 | 1,050 | 1,113 | 1,140 | 1,257 | -------------------------------------------------------------------------------- | Interest expenses | 680 | 773 | 841 | 844 | 952 | -------------------------------------------------------------------------------- | Net interest income | 263 | 277 | 272 | 296 | 305 | -------------------------------------------------------------------------------- | Impairments of | 4 | 4 | 2 | 7 | 18 | | receivables | | | | | | -------------------------------------------------------------------------------- | Net interest income | 259 | 273 | 270 | 289 | 287 | | after impairments | | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 100 | 121 | 89 | 89 | 97 | | Insurance | | | | | | | operations | | | | | | -------------------------------------------------------------------------------- | Net income from Life | 20 | 54 | 53 | -6 | -43 | | Insurance | | | | | | | operations | | | | | | -------------------------------------------------------------------------------- | Net commissions and fees | 98 | 106 | 120 | 103 | 97 | -------------------------------------------------------------------------------- | Net trading income | -16 | -30 | -48 | -1 | -32 | -------------------------------------------------------------------------------- | Net investment income | 22 | 22 | 18 | 13 | 10 | -------------------------------------------------------------------------------- | Other operating income | 24 | 31 | 27 | 27 | 26 | -------------------------------------------------------------------------------- | Personnel costs | 122 | 146 | 152 | 158 | 130 | -------------------------------------------------------------------------------- | Other administrative | 64 | 93 | 82 | 86 | 61 | | expenses | | | | | | -------------------------------------------------------------------------------- | Other operating expenses | 61 | 65 | 77 | 72 | 80 | -------------------------------------------------------------------------------- | Returns to owner-members | 27 | 28 | 37 | 40 | 42 | -------------------------------------------------------------------------------- | Share of associates' | 1 | 0 | 0 | 0 | 0 | | profits/losses | | | | | | -------------------------------------------------------------------------------- | Earnings before tax for | 234 | 247 | 181 | 157 | 128 | | the period | | | | | | -------------------------------------------------------------------------------- | Income tax expense | 59 | 69 | 49 | 44 | 42 | -------------------------------------------------------------------------------- | Profit for the period | 175 | 179 | 132 | 114 | 86 | -------------------------------------------------------------------------------- OP-Pohjola Group balance sheet -------------------------------------------------------------------------------- | EUR million | 30 Sep. | 30 Sep. | Change, | 31 | | | 2008 | 2007 | % | Dec. | | | | | | 2007 | -------------------------------------------------------------------------------- | Liquid assets | 2,610 | 1,173 | | 589 | -------------------------------------------------------------------------------- | Receivables from financial | 534 | 281 | 90 | 285 | | institutions | | | | | -------------------------------------------------------------------------------- | Financial assets at fair value | 3,714 | 4,317 | -14 | 4,791 | | through profit or loss (Note | | | | | | 13) | | | | | -------------------------------------------------------------------------------- | Derivative contracts | 797 | 559 | 43 | 526 | -------------------------------------------------------------------------------- | Receivables from customers | 50,170 | 43,587 | 15 | 44,776 | -------------------------------------------------------------------------------- | Non-life Insurance assets (Note | 2,849 | 2,853 | 0 | 2,750 | | 14) | | | | | -------------------------------------------------------------------------------- | Life Insurance assets (Note 15) | 5,675 | 6,469 | -12 | 6,361 | -------------------------------------------------------------------------------- | Investment assets (Note 16) | 5,015 | 1,706 | | 1,970 | -------------------------------------------------------------------------------- | Investments in associates | 28 | 30 | -7 | 26 | -------------------------------------------------------------------------------- | Intangible assets | 1,215 | 1,244 | -2 | 1,230 | -------------------------------------------------------------------------------- | Property, plant and equipment | 761 | 711 | 7 | 715 | | (PPE) | | | | | -------------------------------------------------------------------------------- | Other assets | 1,866 | 1,905 | -2 | 1,579 | -------------------------------------------------------------------------------- | Tax assets | 273 | 66 | | 117 | -------------------------------------------------------------------------------- | Total assets | 75,507 | 64,900 | 16 | 65,716 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Liabilities to financial | 4,008 | 665 | | 949 | | institutions | | | | | -------------------------------------------------------------------------------- | Financial liabilities at fair | 506 | 6 | | 52 | | value through profit or loss | | | | | -------------------------------------------------------------------------------- | Derivative contracts | 770 | 579 | 33 | 554 | -------------------------------------------------------------------------------- | Liabilities to customers | 35,424 | 30,166 | 17 | 31,224 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 2,469 | 2,403 | 3 | 2,140 | | (Note 17) | | | | | -------------------------------------------------------------------------------- | Life Insurance liabilities | 5,663 | 6,020 | -6 | 6,099 | | (Note 18) | | | | | -------------------------------------------------------------------------------- | Debt securities issued to the | 15,836 | 14,832 | 7 | 14,074 | | public (Note 19) | | | | | -------------------------------------------------------------------------------- | Provisions and other | 2,675 | 2,214 | 21 | 2,480 | | liabilities | | | | | -------------------------------------------------------------------------------- | Tax liabilities | 917 | 848 | 8 | 893 | -------------------------------------------------------------------------------- | Cooperative capital | 563 | 553 | 2 | 571 | -------------------------------------------------------------------------------- | Subordinated liabilities (Note | 1,207 | 1,058 | 14 | 1,042 | | 20) | | | | | -------------------------------------------------------------------------------- | Total liabilities | 70,038 | 59,343 | 18 | 60,078 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Equity capital | | | | | -------------------------------------------------------------------------------- | Share of OP-Pohjola Group's | | | | | | owners | | | | | -------------------------------------------------------------------------------- | Share and cooperative capital | 360 | 360 | 0 | 359 | -------------------------------------------------------------------------------- | Share issue account | - | - | | - | -------------------------------------------------------------------------------- | Translation differences | 0 | 0 | 63 | 0 | -------------------------------------------------------------------------------- | Reserves | 1,960 | 2,306 | -15 | 2,224 | -------------------------------------------------------------------------------- | Retained earnings | 3,150 | 2,888 | 9 | 3,052 | -------------------------------------------------------------------------------- | Minority interest | 0 | 3 | -96 | 3 | -------------------------------------------------------------------------------- | Total equity capital | 5,470 | 5,557 | -2 | 5,638 | -------------------------------------------------------------------------------- | Total liabilities and equity | 75,507 | 64,900 | 16 | 65,716 | | capital | | | | | -------------------------------------------------------------------------------- Statement of changes in equity capital -------------------------------------------------------------------------------- | EUR million | Share | Reserve | Retained | Minority | Total | | | and | s | earnings | interest | equity | | | coopera | | | | capital | | | tive | | | | | | | capital | | | | | -------------------------------------------------------------------------------- | Balance at 1 January | 344 | 2,295 | 2,483 | 2 | 5,124 | | 2007 | | | | | | -------------------------------------------------------------------------------- | Increase of share | - | - | - | - | - | | capital | | | | | | -------------------------------------------------------------------------------- | Transfer of cooperative | 17 | - | - | - | 17 | | capital to | | | | | | | equity | | | | | | | capital | | | | | | -------------------------------------------------------------------------------- | Fair value reserve | - | -71 | - | - | -71 | -------------------------------------------------------------------------------- | Transfer of reserves | - | 81 | -81 | - | - | -------------------------------------------------------------------------------- | Profit distribution | - | - | -76 | - | -76 | -------------------------------------------------------------------------------- | Profit for the period | - | - | 560 | 0 | 560 | -------------------------------------------------------------------------------- | Other | -1 | 1 | 3 | 0 | 3 | -------------------------------------------------------------------------------- | Balance at 30 September | 360 | 2,306 | 2,888 | 3 | 5,557 | | 2007 | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance at 1 January | 359 | 2,224 | 3,052 | 3 | 5,638 | | 2008 | | | | | | -------------------------------------------------------------------------------- | Increase of share | - | - | - | - | - | | capital | | | | | | -------------------------------------------------------------------------------- | Transfer of cooperative | 4 | - | - | - | 4 | | capital to | | | | | | | equity | | | | | | | capital | | | | | | -------------------------------------------------------------------------------- | Fair value reserve | - | -405 | - | - | -405 | -------------------------------------------------------------------------------- | Transfer of reserves | - | 138 | -138 | - | - | -------------------------------------------------------------------------------- | Profit distribution | - | - | -77 | - | -77 | -------------------------------------------------------------------------------- | Profit for the period | - | - | 332 | 0 | 332 | -------------------------------------------------------------------------------- | Other | -4 | 2 | -18 | -2 | -23 | -------------------------------------------------------------------------------- | Balance at 30 September | 360 | 1,960 | 3,150 | 0 | 5,470 | | 2008 | | | | | | -------------------------------------------------------------------------------- Cash flow statement -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | | | 2008 | 2007 | -------------------------------------------------------------------------------- | Cash flow from operating activities | | | -------------------------------------------------------------------------------- | Profit for the period | 332 | 560 | -------------------------------------------------------------------------------- | Adjustments to profit for the period | 750 | 616 | -------------------------------------------------------------------------------- | Increase (-) or decrease (+) in operating | -8,613 | -5,057 | | assets | | | -------------------------------------------------------------------------------- | Receivables from financial institutions | -282 | 93 | -------------------------------------------------------------------------------- | Financial assets at fair value through profit | -1,368 | 507 | | or loss | | | -------------------------------------------------------------------------------- | Derivative contracts | -67 | -49 | -------------------------------------------------------------------------------- | Receivables from customers | -5,444 | -4,012 | -------------------------------------------------------------------------------- | Non-life Insurance assets | -279 | -94 | -------------------------------------------------------------------------------- | Life Insurance assets | 70 | -338 | -------------------------------------------------------------------------------- | Investment assets | -917 | -339 | -------------------------------------------------------------------------------- | Other assets | -327 | -825 | -------------------------------------------------------------------------------- | Increase (+) or decrease (-) in operating | 7,792 | 2,883 | | liabilities | | | -------------------------------------------------------------------------------- | Liabilities to financial institutions | 2,882 | -423 | -------------------------------------------------------------------------------- | Financial liabilities at fair value through | 455 | 6 | | profit or loss | | | -------------------------------------------------------------------------------- | Derivative contracts | 84 | 50 | -------------------------------------------------------------------------------- | Liabilities to customers | 4,203 | 2,451 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 207 | 166 | -------------------------------------------------------------------------------- | Life Insurance liabilities | -95 | -16 | -------------------------------------------------------------------------------- | Provisions and other liabilities | 56 | 649 | -------------------------------------------------------------------------------- | Income tax paid | -123 | -122 | -------------------------------------------------------------------------------- | Dividends received | 66 | 111 | -------------------------------------------------------------------------------- | A. Net cash from operating activities | 203 | -1,009 | -------------------------------------------------------------------------------- | Cash flow from investing activities | | | -------------------------------------------------------------------------------- | Increases in held-to-maturity financial assets | -32 | -196 | -------------------------------------------------------------------------------- | Decreases in held-to-maturity financial assets | 44 | 208 | -------------------------------------------------------------------------------- | Acquisition of subsidiaries, net of cash | -34 | - | | acquired | | | -------------------------------------------------------------------------------- | Disposal of subsidiaries, net of cash disposed | 4 | 13 | -------------------------------------------------------------------------------- | Purchase of PPE and intangible assets | -79 | -86 | -------------------------------------------------------------------------------- | Proceeds from sale of PPE and intangible assets | 1 | 15 | -------------------------------------------------------------------------------- | B. Net cash used in investing activities | -96 | -46 | -------------------------------------------------------------------------------- | Cash flow from financing activities | | | -------------------------------------------------------------------------------- | Increases in subordinated liabilities | 283 | 223 | -------------------------------------------------------------------------------- | Decreases in subordinated liabilities | -116 | -226 | -------------------------------------------------------------------------------- | Increases in debt securities issued to the | 28,830 | 27,011 | | public | | | -------------------------------------------------------------------------------- | Decreases in debt securities issued to the | -27,021 | -25,670 | | public | | | -------------------------------------------------------------------------------- | Increases in cooperative and share capital | 117 | 136 | -------------------------------------------------------------------------------- | Decreases in cooperative and share capital | -121 | -162 | -------------------------------------------------------------------------------- | Dividends paid and interest on cooperative | -101 | -97 | | capital | | | -------------------------------------------------------------------------------- | Returns to owner-members | 0 | -7 | -------------------------------------------------------------------------------- | Monetary increases in other equity items | - | - | -------------------------------------------------------------------------------- | Other | - | - | -------------------------------------------------------------------------------- | C. Net cash from financing activities | 1,870 | 1,208 | -------------------------------------------------------------------------------- | Net change in cash and cash equivalents (A+B+C) | 1,977 | 153 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents at period-start | 700 | 1,098 | -------------------------------------------------------------------------------- | Cash and cash equivalents at period-end | 2,677 | 1,251 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest received | 1,917 | 2,283 | -------------------------------------------------------------------------------- | Interest paid | -1,333 | -1,458 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Adjustments to profit for the period | | | -------------------------------------------------------------------------------- | Non-cash transactions and other adjustments | | | -------------------------------------------------------------------------------- | Impairments of receivables | 31 | 14 | -------------------------------------------------------------------------------- | Unrealised net earnings in Non-life Insurance | 150 | 135 | -------------------------------------------------------------------------------- | Unrealised net earnings in Life Insurance | 197 | 257 | -------------------------------------------------------------------------------- | Change in fair value for trading | 97 | 28 | -------------------------------------------------------------------------------- | Unrealised net gains on foreign exchange | -3 | -43 | | operations | | | -------------------------------------------------------------------------------- | Change in fair value of investment property | -10 | -11 | -------------------------------------------------------------------------------- | Depreciation and amortisation | 97 | 97 | -------------------------------------------------------------------------------- | Share of associates' profits/losses | 1 | -2 | -------------------------------------------------------------------------------- | Other | 169 | 120 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Items presented outside cash flow from | | | | operating activities | | | -------------------------------------------------------------------------------- | Capital gains, share of cash flow from | -1 | -3 | | investing activities | | | -------------------------------------------------------------------------------- | Interest on cooperative capital | 22 | 18 | -------------------------------------------------------------------------------- | Other returns to owner-members | 0 | 7 | -------------------------------------------------------------------------------- | Total adjustments | 750 | 616 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents | | | -------------------------------------------------------------------------------- | Liquid assets | 127 | 129 | -------------------------------------------------------------------------------- | Receivables from financial institutions payable | 2,550 | 1,123 | | on demand | | | -------------------------------------------------------------------------------- | Total | 2,677 | 1,251 | -------------------------------------------------------------------------------- Notes -------------------------------------------------------------------------------- | Note 1 Net interest income | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, | 2007 | | | 20 | 20 | % | | | | 08 | 07 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest income | | | | | -------------------------------------------------------------------------------- | Receivables from financial | 42 | 41 | 2 | 53 | | institutions | | | | | -------------------------------------------------------------------------------- | Receivables from customers | 1,935 | 1,505 | 29 | 2,087 | -------------------------------------------------------------------------------- | Other | 1,534 | 1,035 | 48 | 1,490 | -------------------------------------------------------------------------------- | Total | 3,510 | 2,581 | 36 | 3,630 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest expenses | | | | | -------------------------------------------------------------------------------- | Liabilities to financial | 71 | 24 | | 37 | | institutions | | | | | -------------------------------------------------------------------------------- | Liabilities to customers | 727 | 462 | 57 | 657 | -------------------------------------------------------------------------------- | Other | 1,840 | 1,323 | 39 | 1,888 | -------------------------------------------------------------------------------- | Total | 2,638 | 1,809 | 46 | 2,583 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net interest income | 873 | 771 | 13 | 1,048 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 2 Impairments of | | | | | | receivables | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, | 2007 | | | 20 | 20 | % | | | | 08 | 07 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Impairments of receivables | 37 | 22 | 67 | 39 | -------------------------------------------------------------------------------- | Reversals of impairments | -18 | -13 | -38 | -20 | -------------------------------------------------------------------------------- | Payments on impaired | -4 | -4 | 6 | -9 | | receivables | | | | | | amortised from | | | | | | balance sheet | | | | | -------------------------------------------------------------------------------- | Net change in group-specific | 13 | 5 | | 4 | | impairments | | | | | -------------------------------------------------------------------------------- | Total | 27 | 10 | | 13 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 3 Net income from Non-life | | | | | | Insurance | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, | 2007 | | | 20 | 20 | % | | | | 08 | 07 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net insurance premium revenue | | | | | -------------------------------------------------------------------------------- | Premiums written | 847 | 798 | 6 | 944 | -------------------------------------------------------------------------------- | Insurance premiums ceded to | -41 | -45 | 9 | -49 | | reinsurers | | | | | -------------------------------------------------------------------------------- | Change in provision for | -119 | -118 | -1 | -43 | | unearned premiums | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | 9 | 4 | | -2 | -------------------------------------------------------------------------------- | Total | 696 | 639 | 9 | 850 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net Non-life Insurance claims | | | | | -------------------------------------------------------------------------------- | Claims paid | -446 | -407 | -10 | -556 | -------------------------------------------------------------------------------- | Insurance claims recovered from | 9 | 7 | 38 | 14 | | reinsurers | | | | | -------------------------------------------------------------------------------- | Change in provision for unpaid | -28 | -24 | -15 | 10 | | claims | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | 18 | 1 | | -5 | -------------------------------------------------------------------------------- | Total | -447 | -424 | -5 | -536 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net investment income, Non-life | | | | | | Insurance | | | | | -------------------------------------------------------------------------------- | Interest income | 53 | 51 | 3 | 68 | -------------------------------------------------------------------------------- | Capital gains and losses and | | | | | | realised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | -17 | -33 | 50 | -39 | -------------------------------------------------------------------------------- | Shares and participations | -1 | 45 | | 47 | -------------------------------------------------------------------------------- | Property | 3 | 3 | -25 | 3 | -------------------------------------------------------------------------------- | Other | -4 | 3 | | 13 | -------------------------------------------------------------------------------- | Unrealised changes in fair | | | | | | value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | -2 | 0 | | 0 | -------------------------------------------------------------------------------- | Shares and participations | -1 | 0 | | -1 | -------------------------------------------------------------------------------- | Property | 1 | 0 | | 2 | -------------------------------------------------------------------------------- | Other | 1 | 3 | -62 | 0 | -------------------------------------------------------------------------------- | Dividend income | 21 | 47 | -56 | 61 | -------------------------------------------------------------------------------- | Other | 1 | 0 | | 0 | -------------------------------------------------------------------------------- | Total | 55 | 120 | -54 | 153 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Unwinding of discount | -31 | -29 | -7 | -39 | -------------------------------------------------------------------------------- | Other | 1 | 0 | | 0 | -------------------------------------------------------------------------------- | Net income from Non-life | 274 | 306 | -10 | 427 | | Insurance | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 4 Net income from Life | | | | | | Insurance | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, | 2007 | | | 20 | 20 | % | | | | 08 | 07 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Premiums written | 538 | 574 | -6 | 809 | -------------------------------------------------------------------------------- | Reinsurers' share | -23 | -8 | | -15 | -------------------------------------------------------------------------------- | Net investment income | -409 | 307 | | 297 | -------------------------------------------------------------------------------- | Claims incurred | | | | | -------------------------------------------------------------------------------- | Benefits paid | -463 | -384 | -21 | -507 | -------------------------------------------------------------------------------- | Change in provision for unpaid | -12 | -13 | 2 | -40 | | claims | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | 2 | 0 | | 0 | -------------------------------------------------------------------------------- | Change in insurance contract | | | | | | liabilities | | | | | -------------------------------------------------------------------------------- | Change in life insurance | 333 | -361 | | -373 | | provision | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | 21 | 6 | | 12 | -------------------------------------------------------------------------------- | Other | 19 | -4 | | -11 | -------------------------------------------------------------------------------- | Net income from Life Insurance | 4 | 117 | -96 | 172 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 5 Commissions and fees | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, | 2007 | | | 20 | 20 | % | | | | 08 | 07 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission income | | | | | -------------------------------------------------------------------------------- | Lending | 77 | 76 | 2 | 103 | -------------------------------------------------------------------------------- | Deposits | 4 | 4 | -9 | 6 | -------------------------------------------------------------------------------- | Payment transfers | 91 | 84 | 8 | 112 | -------------------------------------------------------------------------------- | Securities brokerage | 15 | 21 | -27 | 27 | -------------------------------------------------------------------------------- | Securities issuance | 3 | 5 | -51 | 7 | -------------------------------------------------------------------------------- | Mutual funds brokerage | 56 | 70 | -21 | 95 | -------------------------------------------------------------------------------- | Asset management and legal | 38 | 37 | 1 | 53 | | services | | | | | -------------------------------------------------------------------------------- | Insurance brokerage | 39 | 42 | -7 | 49 | -------------------------------------------------------------------------------- | Guarantees | 10 | 8 | 16 | 11 | -------------------------------------------------------------------------------- | Other | 34 | 29 | 17 | 39 | -------------------------------------------------------------------------------- | Total | 366 | 377 | -3 | 502 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission expenses | | | | | -------------------------------------------------------------------------------- | Total | 46 | 53 | -13 | 72 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net commissions and fees | 320 | 324 | -1 | 430 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 6 Net trading income | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, | 2007 | | | 20 | 20 | % | | | | 08 | 07 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital gains and losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | -16 | -9 | 91 | -8 | -------------------------------------------------------------------------------- | Shares and participations | -1 | 4 | | 6 | -------------------------------------------------------------------------------- | Derivatives | 18 | 0 | | 3 | -------------------------------------------------------------------------------- | Changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | -67 | -34 | 98 | -65 | -------------------------------------------------------------------------------- | Shares and participations | -12 | -1 | | -5 | -------------------------------------------------------------------------------- | Derivatives | 0 | 25 | | 24 | -------------------------------------------------------------------------------- | Dividend income | 1 | 1 | 4 | 1 | -------------------------------------------------------------------------------- | Net income from foreign | -3 | 12 | | 16 | | exchange operations | | | | | -------------------------------------------------------------------------------- | Total | -81 | 0 | | -30 | -------------------------------------------------------------------------------- | Note 7 Net investment income | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, | 2007 | | | 20 | 20 | % | | | | 08 | 07 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Available-for-sale financial | | | | | | assets | | | | | -------------------------------------------------------------------------------- | Capital gains and losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | -1 | -3 | -61 | -5 | -------------------------------------------------------------------------------- | Shares and participations | 2 | 25 | -92 | 32 | -------------------------------------------------------------------------------- | Other | - | - | | - | -------------------------------------------------------------------------------- | Dividend income | 11 | 23 | -52 | 24 | -------------------------------------------------------------------------------- | Impairment losses | 0 | -1 | -97 | -1 | -------------------------------------------------------------------------------- | Total | 11 | 43 | -74 | 50 | -------------------------------------------------------------------------------- | Investment property | | | | | -------------------------------------------------------------------------------- | Rental income | 38 | 40 | -6 | 53 | -------------------------------------------------------------------------------- | Maintenance charges and | -21 | -22 | 4 | -31 | | expenses | | | | | -------------------------------------------------------------------------------- | Changes in fair value, capital | 13 | 11 | 14 | 20 | | gains and losses | | | | | -------------------------------------------------------------------------------- | Other | 0 | 1 | -33 | 4 | -------------------------------------------------------------------------------- | Total | 29 | 29 | 0 | 45 | -------------------------------------------------------------------------------- | Other | - | - | | - | -------------------------------------------------------------------------------- | Net investment income | 41 | 73 | -44 | 95 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 8 Other operating income | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, | 2007 | | | 20 | 20 | % | | | | 08 | 07 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income from property and | 9 | 10 | -14 | 13 | | business | | | | | | premises in own use | | | | | -------------------------------------------------------------------------------- | Other | 71 | 68 | 5 | 97 | -------------------------------------------------------------------------------- | Total | 80 | 78 | 2 | 109 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 9 Personnel costs | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, | 2007 | | | 20 | 20 | % | | | | 08 | 07 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Wages and salaries | 377 | 357 | 5 | 482 | -------------------------------------------------------------------------------- | Pension costs | 43 | 28 | 57 | 39 | -------------------------------------------------------------------------------- | Other social expenses | 20 | 22 | -9 | 31 | -------------------------------------------------------------------------------- | Total | 440 | 407 | 8 | 553 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 10 Other administrative | | | | | | expenses | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, | 2007 | | | 20 | 20 | % | | | | 08 | 07 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Office expenses | 34 | 35 | -3 | 48 | -------------------------------------------------------------------------------- | IT expenses | 77 | 60 | 27 | 86 | -------------------------------------------------------------------------------- | Telecommunications expenses | 28 | 28 | -2 | 38 | -------------------------------------------------------------------------------- | Marketing expenses | 43 | 42 | 2 | 63 | -------------------------------------------------------------------------------- | Other administrative expenses | 49 | 45 | 9 | 68 | -------------------------------------------------------------------------------- | Total | 230 | 211 | 9 | 303 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 11 Other operating | | | | | | expenses | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, | 2007 | | | 20 | 20 | % | | | | 08 | 07 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Expenses for property and | 54 | 53 | 1 | 77 | | business | | | | | | premises in own use | | | | | -------------------------------------------------------------------------------- | Depreciation | 97 | 97 | 1 | 129 | -------------------------------------------------------------------------------- | Other | 77 | 58 | 33 | 67 | -------------------------------------------------------------------------------- | Total | 228 | 208 | 10 | 273 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 12 Returns to | | | | | | owner-members | | | | | -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, | 2007 | | | 20 | 20 | % | | | | 08 | 07 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonuses | 98 | 62 | 58 | 83 | -------------------------------------------------------------------------------- | Interest on cooperative capital | 22 | 18 | 22 | 24 | -------------------------------------------------------------------------------- | Total | 119 | 80 | 50 | 107 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 13 Financial assets at fair value | | | | | through profit or loss | | | | -------------------------------------------------------------------------------- | EUR million | 30 Sep. | 30 Sep. | Change, | 31 | | | 2008 | 2007 | % | Dec. | | | | | | 200 | | | | | | 7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Notes and bonds | 3,659 | 4,238 | -14 | 4,721 | -------------------------------------------------------------------------------- | Shares and participations | 55 | 79 | -31 | 69 | -------------------------------------------------------------------------------- | Purchased loans and other | - | - | | - | | receivables | | | | | -------------------------------------------------------------------------------- | Total | 3,714 | 4,317 | -14 | 4,791 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 14 Non-life Insurance | | | | | | assets | | | | | -------------------------------------------------------------------------------- | EUR million | 30 Sep. | 30 Sep. | Change, | 31 | | | 2008 | 2007 | % | Dec. | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investments | | | | | -------------------------------------------------------------------------------- | Loan and other receivables | 66 | 80 | -18 | 57 | -------------------------------------------------------------------------------- | Shares and participations | 856 | 794 | 8 | 894 | -------------------------------------------------------------------------------- | Property | 81 | 71 | 14 | 85 | -------------------------------------------------------------------------------- | Notes and bonds | 1,446 | 1,531 | -6 | 1,387 | -------------------------------------------------------------------------------- | Other | 4 | 5 | -23 | 1 | -------------------------------------------------------------------------------- | Total | 2,452 | 2,481 | -1 | 2,425 | -------------------------------------------------------------------------------- | Other assets | | | | | -------------------------------------------------------------------------------- | Prepayments and accrued income | 25 | -17 | | 28 | -------------------------------------------------------------------------------- | Other | | | | | -------------------------------------------------------------------------------- | Arising from direct insurance | 260 | 292 | -11 | 210 | | operations | | | | | -------------------------------------------------------------------------------- | Arising from reinsurance | 109 | 91 | 19 | 74 | | operations | | | | | -------------------------------------------------------------------------------- | Cash in hand and at bank | 2 | 6 | -66 | 12 | -------------------------------------------------------------------------------- | Total | 396 | 372 | 6 | 325 | -------------------------------------------------------------------------------- | Non-life Insurance assets | 2,849 | 2,853 | 0 | 2,750 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 15 Life Insurance assets | | | | | -------------------------------------------------------------------------------- | EUR million | 30 Sep. | 30 Sep. | Change, | 31 | | | 2008 | 2007 | % | Dec. | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investments | | | | | -------------------------------------------------------------------------------- | Loan and other receivables | 20 | 16 | 24 | 16 | -------------------------------------------------------------------------------- | Shares and participations | 2,549 | 2,558 | 0 | 2,525 | -------------------------------------------------------------------------------- | Property | 122 | 118 | 3 | 121 | -------------------------------------------------------------------------------- | Notes and bonds | 1,042 | 1,315 | -21 | 1,263 | -------------------------------------------------------------------------------- | Other | -1 | 5 | | 1 | -------------------------------------------------------------------------------- | Total | 3,733 | 4,012 | -7 | 3,926 | -------------------------------------------------------------------------------- | Assets covering unit-linked | | | | | | insurance contracts | | | | | -------------------------------------------------------------------------------- | Shares and participations | 1,874 | 2,416 | -22 | 2,374 | -------------------------------------------------------------------------------- | Other assets | | | | | -------------------------------------------------------------------------------- | Prepayments and accrued income | 25 | 26 | -3 | 36 | -------------------------------------------------------------------------------- | Other | | | | | -------------------------------------------------------------------------------- | Arising from direct insurance | 9 | 8 | 16 | 9 | | operations | | | | | -------------------------------------------------------------------------------- | Arising from reinsurance | 33 | 7 | | 14 | | operations | | | | | -------------------------------------------------------------------------------- | Cash in hand and at bank | 1 | 0 | | 2 | -------------------------------------------------------------------------------- | Total | 69 | 41 | 69 | 61 | -------------------------------------------------------------------------------- | Life Insurance assets | 5,675 | 6,469 | -12 | 6,361 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 16 Investment assets | | | | | -------------------------------------------------------------------------------- | EUR million | 30 Sep. | 30 Sep. | Change, | 31 | | | 2008 | 2007 | % | Dec. | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Available-for-sale financial | | | | | | assets | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 3,094 | 676 | | 979 | -------------------------------------------------------------------------------- | Shares and participations | 345 | 405 | -15 | 368 | -------------------------------------------------------------------------------- | Other | - | - | | - | -------------------------------------------------------------------------------- | Held-to-maturity financial | 1,083 | 118 | | 116 | | assets | | | | | -------------------------------------------------------------------------------- | Investment property | 478 | 499 | -4 | 496 | -------------------------------------------------------------------------------- | Subsidiaries and associates not | 15 | 9 | 67 | 11 | | consolidated | | | | | -------------------------------------------------------------------------------- | Total | 5,015 | 1,706 | | 1,970 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 17 Non-life Insurance | | | | | | liabilities | | | | | -------------------------------------------------------------------------------- | EUR million | 30 Sep. | 30 Sep. | Change, | 31 | | | 2008 | 2007 | % | Dec. | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Insurance contract liabilities | | | | | -------------------------------------------------------------------------------- | Provision for unearned premiums | 440 | 392 | 12 | 318 | -------------------------------------------------------------------------------- | Provision for unpaid claims | 1,759 | 1,724 | 2 | 1,699 | -------------------------------------------------------------------------------- | Total | 2,199 | 2,116 | 4 | 2,017 | -------------------------------------------------------------------------------- | Other liabilities | | | | | -------------------------------------------------------------------------------- | Accrued expenses and deferred | - | - | | - | | income | | | | | -------------------------------------------------------------------------------- | Other | | | | | -------------------------------------------------------------------------------- | Arising from direct insurance | 209 | 215 | -2 | 71 | | operations | | | | | -------------------------------------------------------------------------------- | Arising from reinsurance | 21 | 34 | -39 | 15 | | operations | | | | | -------------------------------------------------------------------------------- | Other | 40 | 38 | 5 | 38 | -------------------------------------------------------------------------------- | Total | 271 | 287 | -6 | 123 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 2,469 | 2,403 | 3 | 2,140 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 18 Life Insurance | | | | | | liabilities | | | | | -------------------------------------------------------------------------------- | EUR million | 30 Sep. | 30 Sep. | Change, | 31 | | | 2008 | 2007 | % | Dec. | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Insurance contract liabilities | 3,723 | 3,521 | 6 | 3,605 | -------------------------------------------------------------------------------- | Provisions for unit-linked | 1,831 | 2,370 | -23 | 2,333 | | policies | | | | | -------------------------------------------------------------------------------- | Other liabilities | | | | | -------------------------------------------------------------------------------- | Accrued expenses and deferred | 7 | 3 | | 1 | | income | | | | | -------------------------------------------------------------------------------- | Other | | | | | -------------------------------------------------------------------------------- | Arising from direct insurance | 2 | 0 | | 1 | | operations | | | | | -------------------------------------------------------------------------------- | Arising from reinsurance | 8 | 3 | | 2 | | operations | | | | | -------------------------------------------------------------------------------- | Other | 92 | 123 | -25 | 156 | -------------------------------------------------------------------------------- | Total | 109 | 129 | -15 | 161 | -------------------------------------------------------------------------------- | Life Insurance liabilities | 5,663 | 6,020 | -6 | 6,099 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 19 Debt securities issued | | | | | | to the public | | | | | -------------------------------------------------------------------------------- | EUR million | 30 Sep. | 30 Sep. | Change, | 31 | | | 2008 | 2007 | % | Dec. | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonds | 8,329 | 8,921 | -7 | 8,107 | -------------------------------------------------------------------------------- | Certificates of deposit | 7,360 | 5,801 | 27 | 5,859 | -------------------------------------------------------------------------------- | Other | 147 | 109 | 34 | 109 | -------------------------------------------------------------------------------- | Total | 15,836 | 14,832 | 7 | 14,074 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Note 20 Subordinated | | | | | | liabilities | | | | | -------------------------------------------------------------------------------- | EUR million | 30 Sep. | 30 Sep. | Change, | 31 | | | 2008 | 2007 | % | Dec. | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Subordinated loans | 208 | 203 | 2 | 204 | -------------------------------------------------------------------------------- | Other | 999 | 855 | 17 | 839 | -------------------------------------------------------------------------------- | Total | 1,207 | 1,058 | 14 | 1,042 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Collateral given | | | | | -------------------------------------------------------------------------------- | EUR million | 30 Sep. | 30 Sep. | Change, | 31 | | | 2008 | 2007 | % | Dec. | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Given on behalf of own | | | | | | liabilities and commitments | | | | | -------------------------------------------------------------------------------- | Mortgages | 1 | 1 | 0 | 1 | -------------------------------------------------------------------------------- | Pledges | 4,205 | 2,388 | 76 | 2,633 | -------------------------------------------------------------------------------- | Other | 350 | 70 | | 123 | -------------------------------------------------------------------------------- | Total | 4,556 | 2,458 | 85 | 2,756 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Off-balance-sheet items | | | | | -------------------------------------------------------------------------------- | EUR million | 30 Sep. | 30 Sep. | Change, | 31 | | | 2008 | 2007 | % | Dec. | | | | | | 2007 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Guarantees | 786 | 577 | 36 | 613 | -------------------------------------------------------------------------------- | Other guarantee liabilities | 1,873 | 1,795 | 4 | 1,785 | -------------------------------------------------------------------------------- | Pledges | 1 | 1 | 0 | 1 | -------------------------------------------------------------------------------- | Loan commitments | 7,947 | 7,850 | 1 | 7,708 | -------------------------------------------------------------------------------- | Commitments related to | 186 | 154 | 21 | 171 | | short-term | | | | | | trade transactions | | | | | -------------------------------------------------------------------------------- | Other | 514 | 490 | 5 | 568 | -------------------------------------------------------------------------------- | Total off-balance-sheet items | 11,307 | 10,867 | 4 | 10,847 | -------------------------------------------------------------------------------- Derivative contracts Total trading and hedging derivatives, 30 September 2008 -------------------------------------------------------------------------------- | EUR million | Nominal values / remaining | | Fair values | | | term to maturity | | | -------------------------------------------------------------------------------- | | <1 year | 1-5 | >5 | Total | Assets | Liabilit | | | | years | years | | | ies | -------------------------------------------------------------------------------- | Interest rate | 59,014 | 38,999 | 11,329 | 109,342 | 580 | -509 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Currency | 13,528 | 1,706 | 1,037 | 16,272 | 255 | -369 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Equity and | 28 | 358 | 73 | 459 | 22 | - | | index-linked | | | | | | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Credit | 147 | 238 | - | 385 | 4 | -4 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Other | - | 16 | - | 16 | 1 | - | | derivatives | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total | 72,718 | 41,317 | 12,439 | 126,474 | 862 | -882 | | derivatives | | | | | | | -------------------------------------------------------------------------------- Total trading and hedging derivatives, 30 September 2007 -------------------------------------------------------------------------------- | EUR million | Nominal values / remaining | | Fair values | | | term to maturity | | | -------------------------------------------------------------------------------- | | <1 year | 1-5 | >5 | Total | Assets | Liabilit | | | | years | years | | | ies | -------------------------------------------------------------------------------- | Interest rate | 72,707 | 27,619 | 9,322 | 109,649 | 417 | -353 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Currency | 8,330 | 1,780 | 1,158 | 11,268 | 94 | -287 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Equity and | 11 | 238 | 28 | 277 | 48 | - | | index-linked | | | | | | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Credit | 40 | 131 | - | 171 | 0 | 0 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Other | 8 | 7 | - | 15 | 1 | - | | derivatives | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total | 81,096 | 29,775 | 10,508 | 121,379 | 561 | -640 | | derivatives | | | | | | | -------------------------------------------------------------------------------- Related-party transactions 30 September 2008 OP-Pohjola Group's related parties comprise associates, administrative personnel and other related-party companies. The administrative personnel comprises OP-Pohjola Group's Executive Chairman (Chairman of the Executive Board of OP-Pohjola Group Central Cooperative), President of OP-Pohjola Group Central Cooperative, members and deputy members of the Executive and Supervisory Boards and their family members. Other organisations considered as related parties include OP Bank Group Pension Fund and OP Bank Group Pension Foundation. With respect to loans granted to the management, OP-Pohjola Group applies standard terms and conditions for credit. Loans are tied to generally used reference rates. -------------------------------------------------------------------------------- | EUR million | Associate | Management | Others | | | s | | | -------------------------------------------------------------------------------- | Loans | 92 | 4 | - | -------------------------------------------------------------------------------- | Other receivables | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Deposits | 2 | 10 | 28 | -------------------------------------------------------------------------------- | Other liabilities | - | - | - | -------------------------------------------------------------------------------- | Interest income | 0 | 0 | - | -------------------------------------------------------------------------------- | Interest expenses | 1 | 0 | 1 | -------------------------------------------------------------------------------- | Dividend income | 1 | - | - | -------------------------------------------------------------------------------- | Commission income | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Commission expenses | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Other operating income | - | - | - | -------------------------------------------------------------------------------- | Impairments of loans | - | - | - | -------------------------------------------------------------------------------- | Impairments of loans at the end of the | - | - | - | | period | | | | -------------------------------------------------------------------------------- | Off-balance-sheet items | | | | -------------------------------------------------------------------------------- | Guarantees | - | - | - | -------------------------------------------------------------------------------- | Irrevocable commitments | - | - | - | -------------------------------------------------------------------------------- | Other off-balance-sheet commitments | - | 0 | - | -------------------------------------------------------------------------------- | Wages and salaries | | | | | and | | | | | performance-based pay | | | | -------------------------------------------------------------------------------- | Wages and salaries | - | 3 | - | -------------------------------------------------------------------------------- | Performance-based pay | - | - | - | -------------------------------------------------------------------------------- | Holdings of related parties | | | | -------------------------------------------------------------------------------- | Number of share options | - | - | - | -------------------------------------------------------------------------------- | Number of shares | - | 99,492 | 3,680,793 | -------------------------------------------------------------------------------- | Number of participations | - | 5,511 | - | -------------------------------------------------------------------------------- Related-party transactions 30 September 2007 -------------------------------------------------------------------------------- | EUR million | Associate | Management | Others | | | s | | | -------------------------------------------------------------------------------- | Loans | 90 | 3 | - | -------------------------------------------------------------------------------- | Other receivables | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Deposits | 14 | 4 | 35 | -------------------------------------------------------------------------------- | Other liabilities | - | - | - | -------------------------------------------------------------------------------- | Interest income | 0 | 0 | - | -------------------------------------------------------------------------------- | Interest expenses | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Dividend income | 1 | - | - | -------------------------------------------------------------------------------- | Commission income | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Commission expenses | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Other operating income | - | - | - | -------------------------------------------------------------------------------- | Impairments of loans | - | - | - | -------------------------------------------------------------------------------- | Impairments of loans at the end of the | - | - | - | | period | | | | -------------------------------------------------------------------------------- | Off-balance-sheet items | | | | -------------------------------------------------------------------------------- | Guarantees | - | - | - | -------------------------------------------------------------------------------- | Irrevocable commitments | - | - | - | -------------------------------------------------------------------------------- | Other off-balance-sheet commitments | - | - | - | -------------------------------------------------------------------------------- | Wages and salaries and | | | | | performance-based pay | | | | -------------------------------------------------------------------------------- | Wages and salaries | - | 3 | - | -------------------------------------------------------------------------------- | Performance-based pay | - | - | - | -------------------------------------------------------------------------------- | Holdings of related parties | | | | -------------------------------------------------------------------------------- | Number of share options | - | - | - | -------------------------------------------------------------------------------- | Number of shares | - | 81,114 | 3,680,793 | -------------------------------------------------------------------------------- | Number of participations | - | 3,541 | - | -------------------------------------------------------------------------------- The Interim Report for 1 January-30 September 2008 was prepared in accordance with IAS 34 (Interim Financial Reporting). The accounting policies applied are described in the 2007 financial statements. OP-Pohjola Group has applied the IAS 39 amendment of 13 October 2008. Applying the IFRSs and interpretations adopted in 2008 did not have any material effect on the content of the financial statements. This Interim Report is based on unaudited figures. Pohjola Bank plc (OKO Bank plc until 29 February 2008) will publish its own Interim Report. OP-Pohjola Group will publish its financial statements for 2008 on 14 February 2009. The Group will publish its interim reports for three, six and nine months on 7 May 2009, 6 August and 5 November 2009, respectively. Helsinki, 6 November 2008 OP-Pohjola Group Central Cooperative Executive Board OP-Pohjola Group Central Cooperative Markku Koponen Senior Vice President FURTHER INFORMATION Reijo Karhinen, Executive Chairman, tel. +358 (0)10 252 4500 Tony Vepsäläinen, President, tel. +358 (0)10 252 4020 Harri Luhtala, CFO, tel. +358 (0)10 252 2433 DISTRIBUTION NASDAQ OMX Helsinki Ltd London Stock Exchange SWX Swiss Exchange Major media
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