2009-11-06 07:00:00 CET
2009-11-06 07:00:02 CET
REGULATED INFORMATION
Pohjola Pankki Oyj - Interim report (Q1 and Q3)
CORRECTION: OP-Pohjola Group January-September 2009
CORRECTION: OP-Pohjola Group January-September 2009 This is a correction of the Interim Report published on 5 November 2009 at 8.00 am. The translation has been corrected on pages 2, 4, 5, 19, 20 and 22. Page 2 OP-Pohjola Group's key indicators "Non-performing loan losses within loan and guarantee portfolio, %" was changed to "Non-performing receivables within loan and guarantee portfolio, %" Page 4 January-September Second paragraph, third sentence: Footnote mark ** added after 86.7%** Page 5 Earning analysis First paragraph, first sentence: "OP-Pohjola Group's total assets amounted to EUR 78.7 billion (75.7) on 30 September 2007." was changed to "OP-Pohjola Group's total assets amounted to EUR 78.7 billion (75.7) on 30 September." Third paragraph, last sentence: "Impairments of EUR 208 million (23) were recognised in the third quarter." was changed to "Impairments of EUR 208 million (23) were recognised in the review period". Page 19 Non-life Insurance: key figures Figures changed in the following part of the table from -------------------------------------------------------------------------------- | Insurance premium revenue | 320 | 287 | 11.4 | | -------------------------------------------------------------------------------- | Private customers | 347 | 366 | -5.0 | 380 | -------------------------------------------------------------------------------- | Corporate Customers | 44 | 43 | 2.0 | 485 | -------------------------------------------------------------------------------- | Baltic States | 712 | 696 | 2.2 | 58 | -------------------------------------------------------------------------------- | Total insurance premium | 320 | 287 | 11.4 | 923 | | revenue | | | | | -------------------------------------------------------------------------------- to -------------------------------------------------------------------------------- | Insurance premium revenue | | | | | -------------------------------------------------------------------------------- | Private customers | 320 | 287 | 11.4 | 380 | -------------------------------------------------------------------------------- | Corporate Customers | 347 | 366 | -5.0 | 485 | -------------------------------------------------------------------------------- | Baltic States | 44 | 43 | 2.0 | 58 | -------------------------------------------------------------------------------- | Total insurance premium | 712 | 696 | 2.2 | 923 | | revenue | | | | | -------------------------------------------------------------------------------- Page 20 Life Insurance First sentence: "The life insurance market increase was largely contributed by certain actors making capital redemption contracts containing asset management services" was changed to "The life insurance market increased by 13.3% and was largely contributed by certain actors making capital redemption contracts containing asset management services." Page 20 Earnings and risk exposure Second chapter: "Investment income includes a EUR 167 million impairment loss of available-for-sale securities (20). Investment income was eroded during the comparison period by a negative valuation of EUR 95 million concerning notes and bonds recognised in the balance sheet, EUR 33 million of which were reflected in the report period's balance sheet." was changed to "Investment income includes EUR 167 million impairments of available-for-sale securities (20). Investment income was eroded during the comparison period by a negative valuation of EUR 95 million of notes and bonds recognised at fair value in the profit and loss. EUR 33 million of this was reflected in the report period's result." Page 22 Other Operations First paragraph, first sentence: "Other Operations' pre-tax result for January-September was EUR 32 million better than last year, ending in a profit of EUR 70 million (loss of EUR 38 million)." was changed to "Other Operations' pre-tax result for January-September was EUR 70 million better than last year, ending in a profit of EUR 32 million (loss of EUR 38 million)." Second paragraph, first sentence: "Net investment income was EUR 47 million (25), net trading loss EUR 4 million (loss of EUR 61 million) and the net investment losses EUR 2 million (income of EUR 10 million)." was changed to "Net interest income was EUR 47 million (25), net trading loss EUR 4 million (loss of EUR 61 million) and the net investment losses EUR 2 million (income of EUR 10 million)." Please find the corrected Interim Report below. OP-Pohjola Group Central Cooperative Company Release 5 November 2009 at 8.00am 1(40) Release category: Interim Report OP-Pohjola Group January-September 2009 - The Group's result for January-September was good - pre-tax earnings were EUR 393 million, a 10% increase year on year. - Total income increased by 11% and expenses by 2%. Net interest income turned to a clear downward trend, and other income increased at a steady rate. - Non-life insurance's balance on technical account was very good. - Credit losses and non-performing loan losses increased as expected, but they were still low compared to the loan and guarantee portfolio. - The Group's market position improved clearly despite the sluggish growth climate - especially within corporate loans (2.4 percentage points) and mutual funds (1.5 percentage points). - The integration of banking and non-life insurance operations is proceeding apace. The transfer of non-life insurance sales to private customer increased sales in branch offices by 22%. - The Group's risk-bearing capacity is high. The financial and insurance conglomerate's capital buffers rose to EUR 2.0 billion, and the Tier 1 ratio was 12.3%. - The Group's full-year earnings are expected to exceed those of 2008 - the greatest uncertainty is related to how impairment charges will develop. Comments by Reijo Karhinen, Executive Chairman The entire Group's result for January-September was good despite the challenging financial situation. Improvement on last year can be attributed to a steep increase in 'Other income' and the good results made by Non-life Insurance and Markets. On the other hand, the profitability of basic banking operations fell markedly as a result of lower net interest income and higher credit losses. However, our risk-bearing capacity is excellent. Our customers benefit from OP-Pohjola Group's solid capital adequacy. Our ability to respond to our customers' financing and other service needs has remained intact throughout the financial and economic crisis. We have remained true to our values and carried our responsibility for our customers. Our improved market position in general and especially within corporate financing is proof that our efforts have been successful. A turn for the better in the financial market is evident. In Finland, too, the worst fall is over, but our economy and society will be overshadowed by the crisis for a long time still. The deteriorating unemployment situation dampens the outlook for the financial sector. Considering the economic situation, the ability of our customers to fulfil their obligations has been better than we expected, and consequently credit losses have also been moderate. From the vantage point of OP-Pohjola Group, I approach 2010 with a calm and confident mind. We have both the will and the ability to serve our customers' financing needs and thereby support Finland's slowly recovering economic growth. OP-Pohjola Group's interim report for 1 January-30 September 2009 OP-Pohjola Group's key indicators -------------------------------------------------------------------------------- | | Q3/ | Q3/ | Change* | 2008 | | | 2009 | 2008 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings before tax, EUR | 393 | 357 | 10 | 372 | | million | | | | | -------------------------------------------------------------------------------- | Banking and Investment | 379 | 459 | -17.5 | 532 | | Services | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | 89 | 73 | 23.2 | 55 | -------------------------------------------------------------------------------- | Life insurance | -108 | -108 | 0.6 | -162 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonuses paid to customers | 106 | 98 | 9 | 132 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on equity (ROE), % | 6.8 | 6.0 | 0.7 | 4.1 | -------------------------------------------------------------------------------- | Return on equity at fair | 16.4 | -1.7 | 18.1 | -6.0 | | value, % | | | | | -------------------------------------------------------------------------------- | Cost/income, % | 52 | 51 | 1.3 | 54 | | (Banking and Investment | | | | | | Services) | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Average personnel | 12,670 | 12,575 | 0.8 | 12,615 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | 30 Sep | 30 Sep | Change* | 31 Dec | | | 2009 | 2008 | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total assets, EUR billion | 78.7 | 75.5 | 4.2 | 75.7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital adequacy ** | 12.3 | 12.4 | 0.0 | 12.6 | -------------------------------------------------------------------------------- | Tier 1 ratio, %** | 12.3 | 12.4 | 0.0 | 12.6 | -------------------------------------------------------------------------------- | Ratio of capital base to | 1.54 | 1.48 | 0.06 | 1.40 | | minimum amount of capital | | | | | | base*** | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-performing receivables | 0.5 | 0.4 | 0.1 | 0.4 | | within loan and guarantee | | | | | | portfolio, % | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Market share, % | | | | | -------------------------------------------------------------------------------- | Total loans | 32.6 | 31.6 | 1.0 | 32.1 | -------------------------------------------------------------------------------- | Total deposits | 33.7 | 33.5 | 0.2 | 33.8 | -------------------------------------------------------------------------------- | Capital invested in mutual | 23.5 | 22.0 | 1.5 | 22.5 | | funds | | | | | -------------------------------------------------------------------------------- | Of insurance savings through | 19.9 | 19.5 | 0.4 | 19.4 | | life and pension | | | | | | insurance | | | | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | Q3/ | Q3/ | Change* | 2008 | | | 2009 | 2008 | | | -------------------------------------------------------------------------------- | Of premiums written in life | 23.1 | 30.2 | -7.1 | 29.3 | | 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 capital resources to the minimum amount of capital resources, 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 global economy continued its gradual recovery in the third quarter. The recession has probably bottomed out in the US, and the euro area is showing signs economic stability, with hopes of growth in the horizon. The acceleration of China's economic growth will increase demand for exports and gradually lift other Asian countries, too. But there is still very much uncertainty concerning when and at what rate the global economy will recover, because the stabilisation of economies following the steep fall in the early part of 2009 was largely due to governmental stimulus packages. Short-term growth prospects in the euro area are dampened by the fact that the euro has been getting stronger than the US dollar. The Finnish economy showed some signs of stabilising in the third quarter. Both businesses and households are expecting a turn for the better, but no clear change has taken place yet. Although the world economy and export markets are now more stable, this has not yet reflected in exports, and the poor labour market situation will keep consumer demand low. Production investments will continue to fall, because poor demand and the great amount of available capacity will reduce businesses' need for machine and equipment acquisitions and the building of business and office premises. Housing construction is gradually picking up thanks to livelier housing markets. The financial markets have improved in the last few months. As an atmosphere of trust has returned to interbank markets, risk premiums have fallen to their lowest in two years, and corporate-loan risk premiums have also narrowed to pre-financial crisis levels. Central banks have retained their benchmark interest rates near zero. ECB will not be raising the interest rates until towards the end of next year. The ECB continues to support the banking system's liquidity through special measures. Short-term market rates in the euro area hit an all-time low in the third quarter. The loan portfolio slowed down clearly in the beginning of the year as the recession reduced the need for businesses' investment financing in particular. The volume of home loans is still growing but at a lower rate than last year. The fact that the housing trade has gradually recovering has raised home prices somewhat. The equity market continued to grow at a good rate in the third quarter. The investment atmosphere has livened up, increasing net subscriptions to mutual funds at a good rate. Life insurance premiums written have also begun to grow. The growth in deposit has slowed down significantly since last year, as owing to the low interest rates and a recovery of the investment markets, deposits have been moved to other savings and investment instruments. Within non-life insurance, the fast weakening of the economic environment has primarily hit the premiums written of corporate customers, where those of private customers have not been too adversely affected. The sector's claims expenditure has reduced in the course of the recession. OP-Pohjola Group's earnings and total assets January-September Pre-tax earnings exceeded last year's level despite the more challenging operating environment, reaching EUR 393 million (357)*. Impairments reducing the results and fair value changes were recognised to an amount of EUR 323 million in the report period (208). Thanks to recovering capital markets, earnings before tax at fair value were EUR 939 million (-80). The Banking pre-tax earnings fell short of the comparison period as a result of lower net interest income and higher credit losses, but were nevertheless good considering the current trends. Non-Life Insurance's balance on technical account was excellent, as a result of which the segment's overall result improved on the previous year despite a somewhat smaller return on investment. Non-life Insurance's operating combined ratio improved to 86.7%** (90.0). Life Insurance's accounting results were burdened by impairments concerning available-for-sale financial instruments recognised in the profit and loss. The Group's revenues increased by 11% to EUR 1,561 million (1,403). Net interest income was EUR 825 million (873), or down by 5.5% year on year. Other income increased substantially, reaching EUR 737 million (530), up by 39% year on year. Banking's investment and net trading income increased by EUR 130 million. The comparison period's net trading income included a decrease of EUR 70 million in fair value from securities in the liquidity reserve, recognised in the profit and loss. Net commissions - totalling EUR 371 million particularly thanks to higher lending fees and insurance brokerage fees - were higher than last year. Asset management commissions and fees contracted from last year. Expenses stood at EUR 920 million (899), up by 2.3% year on year, as a result of higher personnel costs. The 6.4% rise in personnel costs resulted mainly from previously agreed pay increases. Bonuses paid to owner-members and OP bonus customers rose by 8.7% and totalled EUR 106 million (98). Net impairment losses on loans and receivables increased to EUR 127 million (27). New impairment losses in gross terms totalled EUR 173 million, or up by EUR 123 million from last year. Value readjustments and cancellations of impairment losses totalled EUR 45 million (19). Impairment losses on receivables remained pretty low, at 0.31% of the loan and guarantee portfolio in annual terms. * Comparatives for 2008 are given in brackets. For income-statement and other aggregated figures, January-September 2008 figures serve as comparatives. For balance-sheet and other cross-sectional figures, figures at the end of the previous reporting period (31 December 2008) 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. Earnings analysis -------------------------------------------------------------------------------- | EUR million | Q3/ | Q3/ | Change, | Change, | 2008 | | | 2009 | 2008 | EUR | % | | | | | | million | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings before tax | 393 | 357 | 36 | 10.1 | 372 | -------------------------------------------------------------------------------- | Gross change in fair value | 546 | -437 | 983 | | -737 | | reserve | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax | 939 | -80 | 1,019 | | -365 | | at fair value | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on equity (ROE), % | 6.8 | 6.0 | | 0.7* | 4.1 | -------------------------------------------------------------------------------- | Return on equity at fair | 16.4 | -1.7 | | 18.1* | -6.0 | | value, % | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income | | | | | | -------------------------------------------------------------------------------- | Net interest income | 825 | 873 | -48 | -5.5 | 1,189 | -------------------------------------------------------------------------------- | Net income from Non-life | 302 | 274 | 28 | 10.3 | 345 | | Insurance | | | | | | -------------------------------------------------------------------------------- | Net income from Life | -89 | -90 | 2 | -1.9 | -139 | | Insurance | | | | | | -------------------------------------------------------------------------------- | Net commissions and fees | 371 | 331 | 39 | 11.8 | 433 | -------------------------------------------------------------------------------- | Net trading and investment | 76 | -53 | 130 | | -99 | | income | | | | | | -------------------------------------------------------------------------------- | Other operating income | 76 | 68 | 7 | 10.7 | 93 | -------------------------------------------------------------------------------- | Share of associates' | 1 | 0 | 1 | | 1 | | profits/losses | | | | | | -------------------------------------------------------------------------------- | Other income, total | 737 | 530 | 207 | 39.0 | 634 | -------------------------------------------------------------------------------- | Total income | 1,561 | 1,403 | 159, | 11.3 | 1,823 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Expenses | | | | | | -------------------------------------------------------------------------------- | Personnel costs | 468 | 440 | 28 | 6.4 | 598 | -------------------------------------------------------------------------------- | Other administrative | 223 | 230 | -7 | -3.0 | 328 | | expenses | | | | | | -------------------------------------------------------------------------------- | Other operating expenses | 228 | 228 | -1 | -0.2 | 312 | -------------------------------------------------------------------------------- | Total expenses | 920 | 899 | 21 | 2.3 | 1,238 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Impairment losses on | 127 | 27 | 100 | | 58 | | receivables | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Returns to owner-members | | | | | | | and OP bonus customers | | | | | | -------------------------------------------------------------------------------- | Bonuses | 106 | 98 | 8 | 8.7 | 132 | -------------------------------------------------------------------------------- | Interest on ordinary and | 15 | 22 | -7 | -30.6 | 22 | | supplementary cooperative | | | | | | | capital | | | | | | -------------------------------------------------------------------------------- | Total returns | 121 | 119 | 2 | 1.5 | 154 | -------------------------------------------------------------------------------- * Percentage points OP-Pohjola Group's total assets amounted to EUR 78.7 billion (75.7) on 30 September. At the end of the review period, receivables from customers stood at EUR 52.8 billion (51.7) and deposits at EUR 34.3 billion (34.5). Debt securities issued to the public fell by 2.2% to EUR 17.8 billion. Equity capital increased by 16% to EUR 6.0 billion (5.2), not only by the result in the first half of the year and the increased value of investment assets but also a subscription issue in April by Pohjola Bank plc, OP-Pohjola Group Central Cooperative's subsidiary. The share issue increased the Group's equity capital by EUR 171 million. The fair value reserve, adjusted for deferred tax assets, was EUR 151 million in the negative (minus EUR 556 million). This is mainly due to equity and mutual fund investments by life and non-life Insurance. The reserve may recover by means of asset appreciation and recognised impairments. Only the value changes in the fair value reserve are recognised which the management deem to fulfil the relevant requirements. Impairments of EUR 208 million (23) were recognised in the review period. On 30 September, the cooperative capital investments and supplementary cooperative capital investments of the member cooperative banks' owner-members totalled EUR 732 million (695). Member banks paid a total of EUR 26 million in interest on the ordinary and supplementary cooperative capital for 2008. The Annual General Meeting of Pohjola Bank plc decided that the company will pay a dividend of EUR 0.23 for each Series A and EUR 0.20 for each Series K share for 2008, totalling EUR 45 million (131). July-September Earnings before tax in the third quarter amounted to EUR 112 million (74). Income increased by 19% mainly thanks to higher net trading income and lower life insurance net losses. Reported expenses grew by EUR 8.2 million. Year on year, third-quarter personnel costs increased by 9.0%, or EUR 12 million. Impairment losses on receivables came to EUR 52 million, or EUR 34 million higher year on year. The fair value reserve (gross) increased by EUR 368 million, while a year ago it shrank by EUR 133 million. Impairments of EUR 92 million were recognised in the third quarter. The Q3/2009 net interest income contracted by EUR 25 million from Q2/2009. Impairments of receivables were EUR 6.0 million higher than in April-June. Net income from Life Insurance fell from the previous quarter mainly as a result of investment impairments recognised in the profit and loss. Pre-tax earnings were EUR 45 million lower than in the previous quarter. Pre-tax earnings at fair value were EUR 480 million as opposed to EUR 374 million in the preceding quarter. Third-quarter earnings analysis -------------------------------------------------------------------------------- | EUR million | Q3/ | Q3/ | Change, | Q2/ | Change, | | | 2009 | 2008 | % | 2009 | % | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings before tax | 112 | 74 | 50.6 | 157 | -28.6 | -------------------------------------------------------------------------------- | Gross change in fair | 368 | -133 | | 217 | 69.6 | | value reserve | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax | 480 | -59 | | 374 | 28.4 | | at fair value | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on equity (ROE), % | 5.8 | 3.4 | 2.4* | 10.1 | -4.3* | -------------------------------------------------------------------------------- | Return on equity at fair | 24.2 | -3.8 | 28.0* | 22.0 | 2.3* | | value, % | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income | | | | | | -------------------------------------------------------------------------------- | Net interest income | 256 | 305 | -15.9 | 282 | -8.9 | -------------------------------------------------------------------------------- | Net income from Non-life | 113 | 96 | 17.6 | 120 | -6.2 | | Insurance | | | | | | -------------------------------------------------------------------------------- | Net income from Life | -60 | -91 | -34.0 | -8 | | | Insurance | | | | | | -------------------------------------------------------------------------------- | Net commissions and fees | 120 | 100 | 19.0 | 121 | -1.4 | -------------------------------------------------------------------------------- | Net trading and | 30 | -27 | | 26 | 15.8 | | investment income | | | | | | -------------------------------------------------------------------------------- | Other operating income | 23 | 22 | 5.5 | 27 | -15.7 | -------------------------------------------------------------------------------- | Share of associates' | 1 | 0 | 47.0 | 0 | | | profits/losses | | | | | | -------------------------------------------------------------------------------- | Other income, total | 226 | 101 | | 287 | -21.2 | -------------------------------------------------------------------------------- | Total income | 483 | 406 | 18.9 | 569 | -15.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Expenses | | | | | | -------------------------------------------------------------------------------- | Personnel costs | 142 | 130 | 9.0 | 163 | -13.2 | -------------------------------------------------------------------------------- | Other administrative | 67 | 72 | -7.4 | 76 | -12.4 | | expenses | | | | | | -------------------------------------------------------------------------------- | Other operating expenses | 71 | 69 | 2.6 | 81 | -12.7 | -------------------------------------------------------------------------------- | Total expenses | 280 | 272 | 3.0 | 321 | -12.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Impairment losses on | 52 | 18 | | 46 | 13.1 | | receivables | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Returns to owner-members | | | | | | | and OP bonus customers | | | | | | -------------------------------------------------------------------------------- | Bonuses | 36 | 34 | 6.4 | 35 | 1.6 | -------------------------------------------------------------------------------- | Interest on ordinary and | 3 | 8 | -66.4 | 9 | -70.5 | | supplementary cooperative | | | | | | | capital | | | | | | -------------------------------------------------------------------------------- | Total returns | 39 | 42 | -7.6 | 44 | -13.2 | -------------------------------------------------------------------------------- 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 capital resources 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 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. In its calculation of capital requirement for credit risk, OP-Pohjola Group will phase in the Internal Rating-based Approach (IRBA). The Financial Supervisory Authority granted OP-Pohjola Group permission to use IRBA in its calculation of capital adequacy requirements 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, but will make the requirement more susceptible to market fluctuations. As to market risks, OP-Pohjola Group will continue to use the Standardised Approach, whereas the introduction of the Standardised Approach is scheduled for in 2010 for operational risks. Capital adequacy of the amalgamation of cooperative banks On 30 September, OP-Pohjola Group's capital adequacy ratio under the Credit Institutions Act and the Tier 1 ratio stood at 12.3%. Tier 1 ratio in the 31 December 2008 financial statements stood at 12.6%. -------------------------------------------------------------------------------- | Capital base | | | | | | -------------------------------------------------------------------------------- | EUR million | 30 Sep | 31 Dec | Change, | Change, | 30 Sep | | | 2009 | 2008 | EUR | % | 2008 | | | | | million | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital base | | | | | | -------------------------------------------------------------------------------- | Tier 1 capital | 5,124 | 4,884 | 241 | 4.9 | 4,743 | -------------------------------------------------------------------------------- | Tier 2 capital | - | - | | | - | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total capital base | 5,124 | 4,884 | 241 | 4.9 | 4,743 | -------------------------------------------------------------------------------- September-end Tier 1 capital totalled EUR 5,124 million (4,884). Net profit for the period, less estimated profit distribution, is included in Tier 1 capital. OP-Pohjola Group's Tier 1 capital increased by 4.9% during the report period. The capital base was reduced by insurance company investments in the first quarter, but on the other hand, Pohjola Bank's share issue in the second quarter increased it by EUR 171 million. On 30 September, the ratio of hybrid capital to Tier 1 capital before adjustments was 3.2% (3.6). Tier 1 capital does not include equity capital growth resulting from the IFRS-compliant measurement of pension liabilities and the assets covering them, and from the measurement at fair value of investment property. Tier 2 capital came to zero following deductions from the item during the report period. Any deductions in excess of Tier 2 capital were made from Tier 1 capital. Pohjola was authorised during the second quarter by the Financial Supervisory Authority to redeem prematurely EUR 150 million in debt instruments included in Tier 2 capital. During the third quarter, Pohjola informed the Financial Supervisory Authority that it planned to redeem prematurely up to EUR 20 million in debt instruments included in Tier 2 capital; this sum has been deducted from the capital base in full. By 30 September, a total of EUR 7 million of debt had been redeemed. At the end of the report period, capital resources were increased by the consolidation group's fair value reserve that was EUR 6 million in the black (84 in the red). On 30 September, insurance company investments, deducted in equal proportions from Tier 1 and 2 capital, came to EUR 2,329 million (2,159). EUR 171 million have been deducted from equity capital as a shortfall of expected losses and impairments. On the basis of the exemptions granted by the Financial Supervisory Authority, investments by OP-Pohjola Group entities in venture capital funds, managed by Pohjola Capital Partners, are treated in the capital adequacy calculation in the same way as investments in shares in business or industrial corporations. -------------------------------------------------------------------------------- | Capital adequacy | | | | | | -------------------------------------------------------------------------------- | EUR million | 30 Sep | 31 Dec | Change, | Change, | 30 Sep | | | 2009 | 2008 | EUR | % | 2008 | | | | | million | | | -------------------------------------------------------------------------------- | Risk-weighted assets, | 41,521 | 38,746 | 2,776 | 7.2 | 38,345 | | total | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Minimum capital | | | | | | | requirement | | | | | | -------------------------------------------------------------------------------- | Credit and | 3,003 | 2,832 | 171 | 6.0 | 2,805 | | counterparty risk | | | | | | -------------------------------------------------------------------------------- | Market risk | 42 | 47 | -5 | -9.7 | 42 | -------------------------------------------------------------------------------- | Operational risks | 277 | 221 | 56 | 25.3 | 221 | -------------------------------------------------------------------------------- | Total | 3,322 | 3,100 | 222 | 7.2 | 3,068 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital adequacy | 12.3 | 12.6 | | -0.3* | 12.4 | | ratio, % | | | | | | -------------------------------------------------------------------------------- | Tier 1 ratio, % | 12.3 | 12.6 | | -0.3* | 12.4 | -------------------------------------------------------------------------------- * Percentage points 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 capital resources 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. Capital resources may not include items not available for covering the losses of other companies belonging to the conglomerate. 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 1,988 million (1,406). The insurance companies' equalisation provision is not included in the financial and insurance conglomerate's capital resources. On 30 September 2009, the combined equalisation provision less the non-life and life insurance tax liabilities stood at EUR 521 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 | 31 Dec | Change, | Change, | 30 Sep | | | 2009 | 2008 | EUR | % | 2008 | | | | | million | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | OP-Pohjola Group's | 6,042 | 5,215 | 827 | 15.9 | 5,470 | | equity capital | | | | | | -------------------------------------------------------------------------------- | Business-segment-spec | 1,852 | 1,873 | -21 | -1.1 | 1,792 | | ific items | | | | | | -------------------------------------------------------------------------------- | Goodwill and | -1,096 | -1,106 | 10 | 0.9 | -1,108 | | intangible assets | | | | | | -------------------------------------------------------------------------------- | Equalisation | -521 | -481 | -40 | 8.3 | -484 | | provision | | | | | | -------------------------------------------------------------------------------- | Other items included | -618 | -619 | 1 | 0.1 | -566 | | in equity capital and | | | | | | | business-segment-spec | | | | | | | ific items, but not | | | | | | | included in the | | | | | | | conglomerate's | | | | | | | capital resources | | | | | | -------------------------------------------------------------------------------- | Conglomerate's | 5,659 | 4,882 | 777 | 15.9 | 5,104 | | capital base, total | | | | | | -------------------------------------------------------------------------------- | Regulatory capital | 3,303 | 3,115 | 188 | 6.0 | 3,089 | | requirement for | | | | | | | credit institutions | | | | | | -------------------------------------------------------------------------------- | Regulatory capital | 368 | 361 | 7 | 1.8 | 359 | | requirement for | | | | | | | insurance operations | | | | | | -------------------------------------------------------------------------------- | Total minimum amount | 3,671 | 3,476 | 195 | 5,6 | 3,448 | | of conglomerate's | | | | | | | capital base | | | | | | -------------------------------------------------------------------------------- | Conglomerate's | 1,988 | 1,406 | 582 | 41.4 | 1,656 | | capital adequacy | | | | | | -------------------------------------------------------------------------------- | Conglomerate's | 1.54 | 1.40 | | 0.14* | 1.48 | | capital adequacy | | | | | | | ratio (capital | | | | | | | resources/minimum of | | | | | | | capital resources) | | | | | | -------------------------------------------------------------------------------- * Change in ratio Risk exposure OP-Pohjola Group's credit risk status has remained stable. Credit risks are relatively low, although doubtful receivables and impairment losses on receivables have increased in the current economic situation. The recession is expected to deteriorate customers' liquidity in the coming months. OP-Pohjola Group's non-performing and zero-interest receivables came to EUR 280 million (203) on 30 September, which was 0.5% (0.4) of the loan and guarantee portfolio. Gross impairment losses of EUR 173 million (49) were recorded in the report period, which was 0.42% (0.12) of the loan and guarantee portfolio. Of OP-Pohjola Group's corporate exposure, investment-grade exposure stood at 47% (51). OP-Pohjola Group financial position and liquidity remained strong. Short-term funding performed well and the availability of long-term funding also improved. Pohjola Bank plc issued two bonds in international capital markets in the report period, worth a total of EUR 1.5 billion. The liquidity reserve portfolio maintained by Pohjola Bank plc amounted to EUR 9.5 billion (9.8) on 30 September. This liquidity reserve portfolio together with items in OP-Pohjola Group's balance sheet that are eligible for central bank refinancing cover the entire Group's wholesale funding maturities for 24 months. On 30 September, non-life insurance investment assets amounted to EUR 2.8 billion (2.4) and those of life insurance EUR 4.1 billion (3.9). The distribution of and profits from investment assets is covered in more detail in the sections dealing with individual business segments. As part of normal business planning and management, OP-Pohjola Group creates a number of stress tests and scenario analyses. Stress tests assess the Group's development in terms of result and capital adequacy a few years ahead in a potential but particularly deep recession. The latest stress test was performed on all banks and insurance companies supervised by the Financial Supervisory Authority on the basis of assumptions concerning financial devopment. According to the tests, OP-Pohjola Group's ability to absorb losses is sufficient and its capital adequacy would remain high even if the recession dragged on for another two years. 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 (Pohjola | A-1+ | AA- | | Bank) | | | -------------------------------------------------------------------------------- | Moody's (Pohjola Bank) | P-1 | Aa2 | -------------------------------------------------------------------------------- Standard & Poor's forecasts a stable credit rating outlook for Pohjola Bank plc, whereas Fitch confirmed the credit ratings in July, changing the outlook for long-term debt from stable to negative. Moody's reduced Pohjola's long-term debt rating to Aa2 but kept the short-term debt rating at Prime-1. The rating outlook is negative. New business strategy OP-Pohjola Group Central Cooperative's Supervisory Board confirmed in June OP-Pohjola Group's business strategy that sets the guidelines for long-term development, integrating non-life insurance operations for the first time on a strategic level as part of the entire financial services group. OP-Pohjola Group's existence is based on benefits provided to its owner-members and customers. The Group's mission, values, customer promise, objective and customer promise remained the same. The Group's success factors are based on five competitive edges: comprehensive financial services, best loyalty benefits, working close to the customer, the cooperative principle and Finnish roots. Deepening the integration of the banking and non-life insurance operations forms the strategy's cornerstone and source of growth. It also states more clearly the Group's strategic intent in terms of corporate business operations. The Group's objective is that each region in Finland has at least one Group member bank that provides comprehensive services locally for individuals and businesses alike. The Group's high capital adequacy provides a strong foundation for business development and growth. The Group still adopts a policy of moderate risk-taking. The Group aims to operate at least as effectively as its main competitors. The strategy also specified in more detail OP-Pohjola Group's long-term financial targets in order to ensure its operation in the long run. These have not been adapted to the existing financial operating environment. At Group level, objectives were set for risk-bearing capacity, profitability and efficiency. The long-term risk-bearing capacity target is that the capital adequacy ratio calculated according to the Act on the Supervision of Financial and Insurance Conglomerates is 1.5. The profitability target for risk-based economic capital is a 17 per cent return on economic capital. The efficiency of the entire financial services group is measured by the growth differential between income and expenses. The objective is that income grows at a higher rate than expenses. OP-Pohjola Group's success indicators for 2009: -------------------------------------------------------------------------------- | | 2008 | Sep,2009 | Target | -------------------------------------------------------------------------------- | Capital adequacy (under | 1.40 | 1.54 | 1.5 | | the Act on the | | | | | Supervision of Financial | | | | | and Insurance | | | | | Conglomerates) | | | | -------------------------------------------------------------------------------- | Return on economic | 10.0% | 10.6% | 17% | | capital (12-month | | | | | rolling) | | | | -------------------------------------------------------------------------------- | Growth differential | -28.8% points | -4.9% points | > 0% points | | between income and | | | | | expenses, percentage | | | | | point (12-month rolling) | | | | -------------------------------------------------------------------------------- Changes in OP-Pohjola Group's structure OP-Pohjola Group's consolidated financial statements include 221 member cooperative banks, OP-Pohjola Group Central Cooperative Consolidated and OP Bank Group Mutual Insurance Company. Kuusjoen Osuuspankki, Kiikalan Rekijoen Osuuspankki, Kiskon Osuuspankki, Perniön Osuuspankki and Salon Seudun Osuuspankki merged to create Salon Osuuspankki. In another combination merger, Lieksan Osuuspankki, Nurmeksen Osuuspankki and Valtimon Osuuspankki became Pielisen Osuuspankki. The mergers were entered in the Trade Register on 30 April 2009. Kärsämäen Osuuspankki has decided to merge with Haapaveden Osuuspankki. The planned date for the merger is 31 December 2009. In December 2008, OP-Pohjola Group Central Cooperative offered its member cooperative banks to subscribe to its supplementary cooperative capital. The subscription period ended on 2 February 2009, resulting in supplementary cooperative capital totalling EUR 444 million. Pohjola Finance Ltd merged with its parent company Pohjola Bank plc on 30 September 2009. Owner-members and customers The cooperative member banks had 1,280,000 owner-members at the end of September, or 38,000 more than a year earlier. Helsinki OP Bank Plc, which operates in the Helsinki Metropolitan Area, had a total of 1,084,000 OP bonus customers at the end of September. Loyal customer bonuses earned by OP bonus customers totalled EUR 106 million, up by 8.7% on the previous year. Bonuses earned by owner-members are stated in OP-Pohjola Group's income statement under 'Returns to owner-members'. In January-September, OP bonus customers used a total of EUR 51 million (56) of bonuses on banking services and EUR 44 million (16) on Pohjola non-life insurance premiums. In the period under review, OP bonuses have been used to pay over 664,000 insurance premiums, with 27% paid in full using bonuses. OP-Pohjola Group had 4,135,000 customers in Finland at the end of September. The number of private customers totalled 3,725,000 and that of corporate customers 410,000. 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 79,000 to 1,043,000 as a result of cross-selling. At the end of September, Pohjola's loyal customer households numbered 412,000, increasing by 30,100 in the year to September. More than half of Pohjola's loyal customer households have concentrated their banking transactions in OP-Pohjola Group member cooperative banks. According to a regular survey, autumn 2009 marked the point when for the first time more than 40% of private customers stated an OP-Pohjola Group member bank as their primary bank. The difference to the next-biggest bank group stretched to 9 percentage points. Personnel and incentive system On 30 September, OP-Pohjola Group had a staff of 12,528, or 224 fewer than on 31 December 2008 and 125 fewer than 30 September 2008. About 94% 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, the Central Cooperative plays a pivotal role in developing and steering OP-Pohjola Group's business. The Annual Cooperative Meeting of OP-Pohjola Group Central Cooperative was held on 27 March 2009. The new members elected to the Supervisory Board for 2009-2012 were as follows: Kari Manninen, Managing Director; Jarmo Partanen, Professor; Jorma Vierula, Forest Officer; Tomi Korpisaari, Managing Director; Paavo Pelkonen, Professor; Jorma Pitkälä, maakuntaneuvos (Finnish honorary title); and Jarmo Tuovinen, Managing Director. The Meeting elected Leif Laine, Managing Director, to replace Jari Laaksonen, Managing Director, until 2011. The Supervisory Board comprises 34 members. At is first meeting after the Annual Cooperative Meeting, Supervisory Board elected Paavo Haapakoski Chairman. Professor Jaakko Pehkonen and President Jukka Hulkkonen were elected as 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 2009. 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 32 million (28) in the report period. Of these investments, EUR 21 million (15) was allocated to banking and investment operations, EUR 7 million (8) to non-life insurance operations and EUR 5 million (5) to life insurance operations. 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. The Central Cooperative and its member banks are ultimately responsible for each other's liabilities and commitments. The Central Cooperative's members at the end of the report period comprised OP-Pohjola Group's 221 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. Outlook towards the year end The financial markets continued to return back to normal in the third quarter. The global economy is considered to be on the rise again. Finland, too, is now past the most severe economic cuts, but growth is not expected to get properly under way in Finland until next year. Although there are already many weak signals indicating that the economy is stabilising, the financial markets and the operating environment still involve an unusual amount of uncertainty. Profit performance in the financial sector is weakened by sluggish growth, exceptionally low interest rates and increasing credit losses. Considering the financial performance in January-September, OP-Pohjola Group's full-year pre-tax earnings are expected to be better than last year, with the greatest difficulty in the forecast related to credit loss and other impairment loss developments. All forward-looking statements in this Interim Report 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. 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 Group'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. Other Operations includes operations that support all business segments, particularly the operations of OP-Pohjola Group Central Cooperative and Pohjola's Group management. Up until May 2008, FD Finanssidata was also included under Other Operations. Costs of the services 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. Summary of performance by business segment -------------------------------------------------------------------------------- | EUR million | Incom | Expens | Other | Earnings/ | Earnings/ | Earnings/ | | | e | es | items | loss | loss | loss | | | | | | before | before | before | | | | | | tax, | tax | tax | | | | | | Q1-3/2009 | Q1-3/2008 | 2008 | -------------------------------------------------------------------------------- | Banking and | 1,287 | 671 | -237 | 379 | 459 | 532 | | Investment | | | | | | | | Services | | | | | | | -------------------------------------------------------------------------------- | Non-life | 320 | 230 | 0 | 89 | 73 | 55 | | Insurance | | | | | | | -------------------------------------------------------------------------------- | Life insurance | -63 | 45 | 0 | -108 | -108 | -162 | -------------------------------------------------------------------------------- | Other | 292 | 249 | -11 | 32 | -38 | -24 | | Operations | | | | | | | -------------------------------------------------------------------------------- | Eliminations | -274 | -276 | 0 | 2 | -28 | -29 | -------------------------------------------------------------------------------- | Total | 1,561 | 920 | -248 | 393 | 357 | 372 | -------------------------------------------------------------------------------- Banking and Investment Services Within Banking and Investment Services, the third quarter was a period of dichotomy: on the one hand, the economic recession increased customers' liquidity problems and the volume of credit impairments; and business growth also slowed down markedly. On the other hand, the quick and strong recovery of the investment market increased investment volumes and demand for asset management services; and the record-low interest rates shrank net interest income. OP-Pohjola Group has the biggest market shares in Finland in terms of deposits and credit volume. The Group's market position has strengthened despite the recession. OP-Pohjola Group's loan portfolio at the end of September stood at EUR 52.4 billion (51.0), with the guarantee portfolio totalling EUR 3.0 billion (3.0). The loan portfolio expanded by 4.6% (15) in the year to September and by 2.8% in the report period. The market share of the loan portfolio increased year on year by 1.0 percentage point to 32.6%. On 30 September, the consumer credit portfolio amounted to EUR 25.3 billion (24.2), showing an increase of 6.5% in the year to September (13) and 4.8% in the report period. OP-Pohjola Group held 36.0% of the home mortgage portfolio at the end of the report period, up by 0.3 percentage points year on year. The average margin of new home mortgages almost doubled in the report period. The margin increase nevertheless levelled out towards the end of the report period, as the price of long-term debt began to fall. The percentage of fixed-rate home mortgages of all home mortgages remained low at 2.1% (2.4). The housing market improved clearly in the report period. The volume of house sales brokered by OP-Kiinteistökeskus estate agents increased in July-September to the record figures of 2007. At the end of the report period, the consumer credit portfolio amounted to EUR 3.8 billion (3.7), showing an increase of 3.8% (11) year on year and 2.0% in the report period. The corporate loan portfolio stood at EUR 13.6 billion (14) at the end of September, with the guarantee portfolio totalling EUR 2.7 billion (2.6). The corporate loan portfolio rose by 2.2% in the year to September, but shrank by 1.3% (18) in the report period. Demand for corporate loans slowed down clearly in the first three quarters 2009 as a result of lower customer company investments. On the other hand, guarantees and other off-balance-sheet commitments increased in the report period by 3.6%. At the end of September, the market share of corporate loans was 28.4%, or 2.4 percentage points higher year on year. On 30 September, deposits totalled EUR 34.3 billion (34.5), or 3.9% higher year on year, although deposits in the report period shrank by 0.7%. A significant change took place in the structure of deposits during the report period, from investment deposits to current accounts. Investment deposits shrank by 3% in the year to September (39), while current accounts increased by 12% (-1). The Group's market share of deposits was 33.7% on 30 September, or 0.2 percentage points higher year on year. Capital invested in OP-Pohjola Group's mutual funds totalled EUR 12.2 billion (9.3), showing an increase of 30.9% during the report period and 9.2% in the year to September. On 30 September, OP-Pohjola Group held a 23.5% market share of the capital of mutual funds registered in Finland, or 1.5 percentage points higher than a year earlier. Net subscriptions to OP-Pohjola Group's mutual funds totalled EUR 1.4 billion (-2.3). On 30 September, assets managed by Pohjola Bank's Asset Management were worth EUR 31.4 billion (25.3), of which EUR 10.9 billion (9.5) was invested in OP-Pohjola Group's mutual funds. OP-Pohjola Group companies accounted for EUR 7.6 billion of assets managed by Pohjola Bank. Assets managed in accordance with the OP-Private operating model totalled EUR 3.4 billion (2.7). Stockbroking for households totalled some 692,000, or up by 90% year on year. Earnings and risk exposure Banking and Investment Services reported pre-tax earnings of EUR 379 million (459) for January-September, down by 17% year on year. Bonuses given out in the report period rose by 9% to EUR 106 million (98). Net interest income fell by 8.9 to EUR 762 million (836), while net commissions and fees rose by 16% to EUR 394 million (341). The fall in net interest income was caused by lower interest rates. Net trading and investment income totalled EUR 81 million (3). Trading income in the report period developed extremely favourably, but on the other hand, revaluation losses were recorded of securities from the comparison period. The report period's return of investments was burdened by EUR 18 million impairment losses related to available-for-sale investments. Personnel costs rose by 9.7% and other expenses by 5.6%. Personnel costs rose by so much because the insurance sales staff joined the payroll of OP-Pohjola Group member cooperative banks in October 2008. Insurance sales bonuses are included under net commissions and fees. The cost/income ratio stood at 52% (51). Impairments on receivables came to EUR 116 million (27), the increase being the result of a clearly weaker financial situation compared with last year. The amount of impairment losses was still moderate in relation to the business volumes, and moderate considering the current trends. The Group's non-performing and zero-interest receivables increased but remained low, totalling EUR 280 million on 30 September, up by 19% year on year. Households' non-performing loan losses increased in particular. Non-performing and zero-interest loans are stated net of impairments of specific receivables and groups of receivables, which amounted to EUR 110 million (85). The ratio of non-performing and zero-interest receivables to the loan and guarantee portfolio was 0.5%, or slightly higher than a year ago (0.4). Banking and Investment Services: key figures -------------------------------------------------------------------------------- | EUR million | Q3/2009 | Q3/2008 | Change, % | 2008 | -------------------------------------------------------------------------------- | | , | | | | -------------------------------------------------------------------------------- | Net interest income | 762 | 836 | -8.9 | 1,121 | -------------------------------------------------------------------------------- | Impairment losses on | 116 | 27 | 338.4 | 48 | | receivables | | | | | -------------------------------------------------------------------------------- | Other income | 526 | 394 | 33.6 | 489 | -------------------------------------------------------------------------------- | Personnel costs | 296 | 270 | 9.7 | 381 | -------------------------------------------------------------------------------- | Other expenses | 375 | 355 | 5.6 | 494 | -------------------------------------------------------------------------------- | Returns to owner-members | 121 | 119 | 1.5 | 154 | | and OP bonus customers | | | | | -------------------------------------------------------------------------------- | Earnings before tax | 379 | 459 | -17.5 | 532 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | Q3/2009 | Q3/2008 | Change, % | 2008 | -------------------------------------------------------------------------------- | Home mortgages drawn down | 4,292 | 5,780 | -25.8 | 7,041 | -------------------------------------------------------------------------------- | Corporate loans drawn | 4,777 | 6,037 | -20.9 | 8,271 | | down | | | | | -------------------------------------------------------------------------------- | Net subscriptions to | 1,357 | -1,431 | | -2,308 | | mutual funds | | | | | -------------------------------------------------------------------------------- | No. of brokered property | 11,249 | 12,095 | -7.0 | 14,569 | | transactions | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR billion | 30 Sep | 30 Sep | Change, % | 31 Dec | | | 2009 | 2008 | | 2008 | -------------------------------------------------------------------------------- | Outstanding credit | , | , | | | -------------------------------------------------------------------------------- | Home loans | 25 | 24 | 6.5 | 24 | -------------------------------------------------------------------------------- | Other loans to households | 10 | 10 | 3.4 | 10 | -------------------------------------------------------------------------------- | Corporate loans | 14 | 13 | 2.2 | 14 | -------------------------------------------------------------------------------- | Other loans | 3 | 3 | 4.2 | 3 | -------------------------------------------------------------------------------- | Total | 52 | 50 | 4.6 | 51 | -------------------------------------------------------------------------------- | Guarantee portfolio | 3.0 | 2.7 | 13.7 | 3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Deposits | | | | | -------------------------------------------------------------------------------- | Total current and payment | | | | | | transfer | | | | | -------------------------------------------------------------------------------- | Households | 11 | 10 | 8.7 | 10 | -------------------------------------------------------------------------------- | Companies | 4 | 3 | 17.3 | 4 | -------------------------------------------------------------------------------- | Others | 2 | 2 | 19.7 | 2 | -------------------------------------------------------------------------------- | Total current and payment | 17 | 15 | 11.9 | 16 | | transfer | | | | | | | | | | | -------------------------------------------------------------------------------- | Investment deposits | 17 | 18 | -3.0 | 19 | -------------------------------------------------------------------------------- | Total deposits | 34 | 33 | 3.9 | 35 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Mutual funds | | | | | -------------------------------------------------------------------------------- | Equity and hedge funds | 3.5 | 2.9 | 20.5 | 2.1 | -------------------------------------------------------------------------------- | Balanced funds | 1.5 | 1.5 | -3.4 | 1.3 | -------------------------------------------------------------------------------- | Long-term bond funds | 5.1 | 4.1 | 23.4 | 4.0 | -------------------------------------------------------------------------------- | Money market funds | 2.1 | 2.5 | -19.3 | 1.9 | -------------------------------------------------------------------------------- | Total value of mutual | 12.2 | 11.1 | 9.2 | 9.3 | | funds | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Market share, % | 30 Sep | 30 Sep | Change, | 31 Dec | | | 2009 | 2008 | percentage | 2008 | | | | | points | | -------------------------------------------------------------------------------- | Total loans | 32.6 | 31.6 | 1.0 | 32.1 | -------------------------------------------------------------------------------- | Home mortgages | 36.0 | 35.7 | 0.3 | 35.9 | -------------------------------------------------------------------------------- | Corporate loans | 28.4 | 26.0 | 2.4 | 26.8 | -------------------------------------------------------------------------------- | Total deposits | 33,7 | 33.5 | 0.2 | 33.8 | -------------------------------------------------------------------------------- | Capital invested in | 23,5 | 22,0 | 1,5 | 22,5 | | mutual funds | | | | | -------------------------------------------------------------------------------- | EUR million | | | | | -------------------------------------------------------------------------------- | Non-performing and | | | Change, % | | | zero-interest receivables | | | | | -------------------------------------------------------------------------------- | Households | 177 | 147 | 20.5 | 122 | -------------------------------------------------------------------------------- | Companies and housing | 75 | 71 | 6.6 | 63 | | associations | | | | | -------------------------------------------------------------------------------- | Other | 28 | 17 | 64.0 | 18 | -------------------------------------------------------------------------------- | Total non-performing and | 280 | 234 | 19.4 | 203 | | zero-interest receivables | | | | | -------------------------------------------------------------------------------- | Non-performing and | 0.5 | 0.4 | 0.1 | 0.4 | | zero-interest receivables | | | | | | within loan and guarantee | | | | | | portfolio, % | | | | | -------------------------------------------------------------------------------- * Percentage points Non-life Insurance The non-life insurance business improved well in the report period. On 30 September, the number of loyal customer households within the Non-life Insurance segment totalled 412,000, showing a year-on-year increase of 8%. Insurance premium revenue rose by 2.2% to EUR 712 million (696). Insurance premium revenue from Private Customers improved by 11% to EUR 320 million. Insurance sales to private customers were transferred to Group member banks in October 2008 with good results: year on year, non-life insurance policy sales grew by 22% in January-September, in comparison with sales performed by Pohjola's own offices. The first half saw the sales network strengthen when OP-Pohjola Group member banks increased their number of insurance salespersons, with 12 new banks beginning to sell insurance policies independently. Within Corporate Customers, the economic recession slowed down growth. Insurance premium revenue fell by 5% to EUR 347 million (366). In the Baltic States, insurance premium revenue rose by 2% to EUR 44.3 million (44). Pohjola Insurance is the non-life insurance market leader in Finland. At the end of 2008, it held a 27.5% market share of premiums written, having increased its 2008 market share by 0.5 percentage points. More than 52% of Pohjola's loyal customer households have also concentrated their banking transactions in OP-Pohjola Group member cooperative banks. OP bonuses obtained through bank transactions were used for the payment of insurance premiums to a total of EUR 44 million in January-September 2009 (16). Bonuses were used for the payment of 664,000 bills, with over 177,000 bills paid with bonuses alone. Earnings and risk exposure Pre-tax earnings from Non-life Insurance amounted to EUR 89 million (73) in the report period. The balance on technical account during the report period was clearly better than last year. The operating combined ratio stood at 86.7% (90.0). Insurance premium revenue totalled EUR 712 million (696) and indemnities EUR 421 million (447). Net investment income recognised under earnings came to EUR 48 million, or EUR 13 million lower year on year (61). Investment income included EUR 23 million writedowns of available-for-sale securities. As a result of favourable claims developments, claims incurred were lower than a year ago although strong growth in the private customer insurance portfolio added to the number of losses reported. The efficiency of claims settlement and the successful utilisation of partnerships, for instance in the form of early referral to treatment and cost control, contributed to this favourable development. The limit for major or medium-sized loss is EUR 0.1 million for non-life insurance and EUR 0.5 million for pension liabilities. There were 141 (144) such losses in January-September, with their claims incurred retained for own account totalling EUR 66 million (57). The risk ratio was 58.1 (63.4). The non-life insurance segment's expenses grew by 6.3% to EUR 230 million (216). Personnel costs were unchanged, largely because the staff selling insurance to private customers joined the payroll of OP-Pohjola Group member cooperative banks. Operating expenses and loss adjustment expenses grew to EUR 204 million (186). The expenses increased particularly because of commissions and fees and product and system development expenses. The cost ratio was 28.6 (26.7). The proportion of private customers is increasing steeply. This changes the business cost structure and increases the cost ratio. On 30 September, Non-life Insurance's solvency capital had increased to EUR 831 million (608). The ratio between solvency capital and insurance premium revenue (solvency ratio) was 89% (66). Solvency capital increased by EUR 109 million in the third quarter, due to the good financial performance reported by investment and insurance business. As a result of the excellent balance on technical account, equalisation provision increased by EUR 23 million to EUR 407 million in the third quarter. On 30 September, the Non-life Insurance investment portfolio totalled EUR 2.8 billion (2.4), Return on investments at fair value was 9.0% (-2.8). Of the investment portfolio, bonds and bond funds accounted for 78% (81), listed equities for 8% (4) and equities, including unlisted investments, represented 10% (8). The fixed-income portfolio by credit rating remained healthy, with 82% of the fixed-income instruments rated at least A-. The average residual maturity of the fixed-income portfolio was 4.9 years and the duration 3.1 years (4.3). Non-life Insurance: key figures -------------------------------------------------------------------------------- | EUR million | Q3/2009 | Q3/2008 | Change, | 2008 | | | | | % | | -------------------------------------------------------------------------------- | Insurance premium revenue | 712 | 696 | 2.2 | 923 | -------------------------------------------------------------------------------- | Insurance claim and | 421 | 447 | -5.8 | 591 | | benefits | | | | | -------------------------------------------------------------------------------- | Net investment income | 48 | 61 | -21.4 | 59 | -------------------------------------------------------------------------------- | Unwinding of discount and | -32 | -31 | 5.9 | -40 | | other items included in | | | | | | net income | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 306 | 280 | 9.3 | 352 | | Insurance | | | | | -------------------------------------------------------------------------------- | Other net income | 13 | 9 | 53.0 | 9 | -------------------------------------------------------------------------------- | Personnel costs | 81 | 81 | 0.4 | 111 | -------------------------------------------------------------------------------- | Other expenses | 149 | 135 | 9.9 | 195 | -------------------------------------------------------------------------------- | Earnings/loss before tax | 89 | 73 | 23.2 | 55 | -------------------------------------------------------------------------------- | Gross change in fair value | 157 | -139 | | -226 | | reserve | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax | 247 | -69 | | -171 | | at fair value | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | Q3/2009 | Q3/2008 | Change, | 2008 | | | | | % | | -------------------------------------------------------------------------------- | Insurance premium revenue | | | | | -------------------------------------------------------------------------------- | Private customers | 320 | 287 | 11.4 | 380 | -------------------------------------------------------------------------------- | Corporate Customers | 347 | 366 | -5.0 | 485 | -------------------------------------------------------------------------------- | Baltic States | 44 | 43 | 2.0 | 58 | -------------------------------------------------------------------------------- | Total insurance premium | 712 | 696 | 2.2 | 923 | | revenue | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR billion | 30 Sep | 30 Sep | Change, | 31 Dec | | | 2009 | 2009 | % | 2008 | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Insurance contract | | | | | | liabilities | | | | | -------------------------------------------------------------------------------- | Discounted insurance | 1.3 | 1.3 | 1.3 | 1.3 | | contract liabilities | | | | | -------------------------------------------------------------------------------- | Other insurance contract | 0.9 | 0.9 | 0.9 | 0.8 | | liabilities | | | | | -------------------------------------------------------------------------------- | Total | 2.2 | 2.2 | 2.2 | 2.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investment portfolio | | | | | -------------------------------------------------------------------------------- | Bonds and bond funds | 2.1 | 1.7 | 17.6 | 1.7 | -------------------------------------------------------------------------------- | Money market instruments | 0.2 | 0.2 | -4.9 | 0.3 | -------------------------------------------------------------------------------- | Equities and equity funds | 0.3 | 0.3 | -15.5 | 0.2 | -------------------------------------------------------------------------------- | Real property investment | 0.1 | 0.1 | 4.1 | 0.1 | | *) | | | | | -------------------------------------------------------------------------------- | Alternative investments | 0.2 | 0.1 | 31.8 | 0.1 | -------------------------------------------------------------------------------- | Total | 2.8 | 2.5 | 11.6 | 2.4 | -------------------------------------------------------------------------------- *) Includes real estate funds Life insurance The life insurance market increased by 13.3% and was largely contributed by certain actors making capital redemption contracts containing asset management services. Year on year, OP-Pohjola Group's premiums written in life and pension insurance decreased by 11.8% to EUR 454 million (515). OP-Pohjola Group's life and pension insurance strategy was reformed during the report period. The focus of sales was moved, according to the strategy, to unit-linked endowment insurance, which increased its premiums written by 9.1%. Premiums written in interest-bearing endowment insurance declined by 34.2%, and those of personal pension plans by 1.1%. Comparability is also affected by an insurance portfolio transfer of EUR 36 million included in the 2008 figures. Unit-linked premiums written accounted for 53.5%. OP-Pohjola Group increased its market share in life insurance savings to 19.9% (19.4) during the report period. The market share in unit-linked insurance savings was 24.5% (24.2). The market share in premiums written fell in the report period by 6.2 percentage points to 23.1%. Life insurance claims paid by OP-Pohjola Group totalled EUR 354 million (461), of which surrenders accounted for EUR 106.4 million (232.5). Reported pension payout came to EUR 44.4 million (35.8). Earnings and risk exposure Earnings before tax were good: EUR 158 million (-322). The fair value reserve change before tax stood at EUR 266 million (-214) during the report period. The loss before tax from Life Insurance was the same as the year before: EUR 108 million. The result for the report period was eroded by a fall in the fair value of investment assets mainly towards the end of 2008 recognised in the income statement. Net losses from Life Insurance were EUR 75 million (losses of EUR 80 million). The provision worth EUR 10 million for future supplementary benefits was reversed during the comparison period. Net losses from investment assets other than those covering unit-linked insurance stood at EUR 44 million (losses of EUR 37 million). Investment income includes EUR 167 million impairments of available-for-sale securities (20). Investment income was eroded during the comparison period by a negative valuation of EUR 95 million of notes and bonds recognised at fair value in the profit and loss. EUR 33 million of this was reflected in the report period's result. Personnel costs increased by 9.2% to EUR 7 million (6) and other administrative expenses by 11 to EUR 39 million (35). Other expenses include EUR 20 million (19) in commissions paid to the sales network. The life insurance technical provisions totalled EUR 5.8 billion (5.6) at the end of September. Interest-bearing contract liabilities accounted for 63% and unit-linked 37% of the total liabilities. Life insurance investment assets, excluding assets covering unit-linked insurance, amounted to EUR 4.1 billion (3.9). Return on investments at fair value was 6.8% in the report period (-6.1). The proportion of equities of the total investment assets increased to 14% (5) during the report period. Fixed-income instruments accounted for 66% (73%) of the investment assets. Investments under the 'investment grade' accounted for approximately 75% (83) of the fixed-income portfolio. The average duration of the fixed-income portfolio was 3.5 years (3.6). OP-Pohjola Group Central Cooperative invested a total of EUR 150 million in non-restricted equity in the beginning of the report period. In addition to this investment, the recovery of investment markets increased OP Life Assurance Company's operating capital by EUR 176 million in the report period. At the end of the report period, the solvency margin was 2.6-fold the required minimum. Life Insurance: key figures -------------------------------------------------------------------------------- | EUR million | Q3/2009 | Q3/2008 | Change, % | 2008 | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Premiums written | 454 | 515 | -11.8 | 717 | -------------------------------------------------------------------------------- | Unit-linked | 243 | 231 | 5.3 | 299 | -------------------------------------------------------------------------------- | Other | 211 | 284 | -25.7 | 418 | -------------------------------------------------------------------------------- | Net investment income | 312 | -493 | -163.2 | -802 | -------------------------------------------------------------------------------- | Unit-linked | 355 | -456 | -177.9 | -708 | -------------------------------------------------------------------------------- | Other | -43.7 | -37.2 | 17.6 | -94 | -------------------------------------------------------------------------------- | Change in insurance | 481 | -351 | -237.2 | -590 | | contract liabilities | | | | | -------------------------------------------------------------------------------- | Unit-linked | 549 | -501 | -209.4 | -758 | -------------------------------------------------------------------------------- | Other | -67 | 151 | -144.8 | 168 | -------------------------------------------------------------------------------- | Claims incurred | 354 | 461 | -23.1 | 643 | -------------------------------------------------------------------------------- | Other items | -5 | 9 | -162.1 | 12 | -------------------------------------------------------------------------------- | Net income from Life | -75 | -80 | -5.8 | -126 | | Insurance | | | | | -------------------------------------------------------------------------------- | Other income | 12 | 13 | -7.5 | 16 | -------------------------------------------------------------------------------- | Personnel costs | 7 | 6 | 9.2 | 5 | -------------------------------------------------------------------------------- | Other expenses | 39 | 35 | 10.6 | 48 | -------------------------------------------------------------------------------- | Earnings/loss before tax | -108 | -108 | 0.6 | -162 | -------------------------------------------------------------------------------- | Gross change in fair value | 266 | -214 | | -403 | | reserve | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax at | 158 | -322 | | -565 | | fair value | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | Q3/2009 | Q3/2008 | Change, % | 2008 | -------------------------------------------------------------------------------- | Premiums written, FAS | | | | | -------------------------------------------------------------------------------- | Endowment insurance | 272 | 307 | -11.1 | 382 | -------------------------------------------------------------------------------- | Pension insurance | 137 | 160 | -14.5 | 279 | -------------------------------------------------------------------------------- | Term life insurance | 49 | 59 | -15.5 | 73 | -------------------------------------------------------------------------------- | Other | 6 | 11 | -42.4 | 33 | -------------------------------------------------------------------------------- | Total premiums written | 466 | 537 | -13.2 | 766 | -------------------------------------------------------------------------------- | of which unit-linked | 248 | 241 | 3.3 | 317 | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Market share of premiums | 23.1 | 30.2 | -7.1* | 29.3 | | written in life and pension | | | | | | insurance, % | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR billion | 30 Sep | 30 Sep | Change, | 31 Dec | | | 2009 | 2008 | % | 2008 | -------------------------------------------------------------------------------- | Insurance savings | | | | | -------------------------------------------------------------------------------- | Endowment insurance | 3.8 | 4.0 | -3.6 | 3.7 | -------------------------------------------------------------------------------- | Pension insurance | 1.7 | 1.5 | 9.5 | 1.5 | -------------------------------------------------------------------------------- | Capital redemption | 0.1 | 0.1 | -15.1 | 0.1 | | contracts | | | | | -------------------------------------------------------------------------------- | Total insurance savings | 5.6 | 5.6 | -0.2 | 5.4 | -------------------------------------------------------------------------------- | of which unit-linked | 1.8 | 1.9 | -1.4 | 1.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investment portfolio | | | | | -------------------------------------------------------------------------------- | Bonds and bond funds | 2.5 | 2.4 | 3.9 | 2.3 | -------------------------------------------------------------------------------- | Money market instruments | 0.2 | 0.1 | 158.6 | 0.6 | -------------------------------------------------------------------------------- | Equities and equity funds | 0.6 | 0.5 | 4.7 | 0.2 | -------------------------------------------------------------------------------- | Real property investment | 0.3 | 0.3 | -6.4 | 0.3 | | **) | | | | | -------------------------------------------------------------------------------- | Alternative investments | 0.5 | 0.6 | -11.5 | 0.5 | -------------------------------------------------------------------------------- | Total investment portfolio | 4.1 | 3.9 | 4.5 | 3.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Market share of insurance | 19.9 | 19.5 | 0.4 * | 19.4 | | savings in life and pension | | | | | | insurance, % | | | | | -------------------------------------------------------------------------------- * Percentage points ** Includes real estate funds Other Operations Other Operations' pre-tax result for January-September was EUR 70 million better than last year, ending in a profit of EUR 32 million (loss of EUR 38 million). In the comparison year, financial performance was eroded by liquidity reserve impairments. In the latter half of 2008, OP-Pohjola Group reclassified the securities included in the liquidity reserve in terms of accounting. This means that changes in fair value are no longer recognised through profit or loss under 'Net trading income'. EUR 11 million impairment losses from these securities have been recorded under 'Impairments of receivables'. Net interest income was EUR 47 million (25), net trading loss EUR 4 million (loss of EUR 61 million) and the net investment losses EUR 2 million (income of EUR 10 million). 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 84 million (83) were personnel costs and EUR 165 million (171) other costs. Other Operations: key figures -------------------------------------------------------------------------------- | EUR million | Q3/2009 | Q3/2008 | Change, % | 2008 | -------------------------------------------------------------------------------- | | , | | | | -------------------------------------------------------------------------------- | Net interest income | 47 | 25 | 92.2 | 39 | -------------------------------------------------------------------------------- | Net trading income | -4 | -61 | -93.6 | -61 | -------------------------------------------------------------------------------- | Net investment income | -2 | 10 | -120.4 | 10 | -------------------------------------------------------------------------------- | Other income | 251 | 243 | 3.1 | 334 | -------------------------------------------------------------------------------- | Expenses | 249 | 254 | -2.1 | 337 | -------------------------------------------------------------------------------- | Impairment losses on | 11 | 1 | 1861.7 | 10 | | receivables | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax | 32 | -38 | -184.1 | -24 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR billion | 30 Sep | 30 Sep | Change, % | 31 Dec | | | 2009 | 2008 | | 2008 | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Receivables from | 7.4 | 4.0 | 86.2 | 6.3 | | financial institutions | | | | | -------------------------------------------------------------------------------- | Financial assets held | 0.7 | 2.3 | -67.9 | 1.9 | | for trading | | | | | -------------------------------------------------------------------------------- | Investment assets | 6.0 | 4.8 | 24.4 | 2.5 | -------------------------------------------------------------------------------- | | | | | | -------------------------------------------------------------------------------- | Liabilities to credit | 3.5 | 6.2 | -43.5 | 3.4 | | institutions | | | | | -------------------------------------------------------------------------------- | Debt securities issued | 16.4 | 14.5 | 13.3 | 17.1 | | to the public | | | | | -------------------------------------------------------------------------------- FINANCIAL STATEMENTS AND NOTES Income statement Statement of comprehensive income Key figures, ratios and definitions Financial performance by quarter Balance sheet Statement of changes in equity Cash flow statement Notes: Note 1. Accounting policies Notes to the income statement and balance sheet: Note 2. Net interest income Note 3. Impairments of receivables Note 4. Net income from Non-life Insurance Note 5. Net income from Life Insurance Note 6. Net commissions and fees Note 7. Net trading income Note 8. Net investment income Note 9. Other operating income Note 10. Personnel costs Note 11. Other administrative expenses Note 12. Other operating expenses Note 13. Returns to owner-members Note 14. Classification of financial instruments Note 15. Reclassified notes and bonds Note 16. Non-life Insurance assets Note 17. Life Insurance assets Note 18. Debt securities issued to the public Note 19. Fair value reserve after income tax Other notes: Note 20. Collateral given Note 21. Off-balance-sheet commitments Note 22. Derivative contracts Note 23. Related-party transactions OP-Pohjola Group income statement -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, % | 2008 | | | 20 | 20 | | | | | 09 | 08 | | | -------------------------------------------------------------------------------- | Interest income | 2,467 | 3,510 | -30 | 4,853 | -------------------------------------------------------------------------------- | Interest expenses | 1,642 | 2,638 | -38 | 3,664 | -------------------------------------------------------------------------------- | Net interest income (Note 2) | 825 | 873 | -5 | 1,189 | -------------------------------------------------------------------------------- | Impairments of receivables | 127 | 27 | | 58 | | (Note 3) | | | | | -------------------------------------------------------------------------------- | Net interest income after | 697 | 846 | -18 | 1,131 | | impairments | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 302 | 274 | 10 | 345 | | Insurance operations | | | | | | (Note 4) | | | | | -------------------------------------------------------------------------------- | Net income from Life Insurance | -89 | -90 | -2 | -139 | | operations (Note 5) | | | | | -------------------------------------------------------------------------------- | Net commissions and fees (Note | 371 | 331 | 12 | 433 | | 6) | | | | | -------------------------------------------------------------------------------- | Net trading income (Note 7) | 87 | -94 | | -125 | -------------------------------------------------------------------------------- | Net investment income (Note 8) | -11 | 41 | | 25 | -------------------------------------------------------------------------------- | Other operating income (Note | 76 | 68 | 11 | 93 | | 9) | | | | | -------------------------------------------------------------------------------- | Personnel costs (Note 10) | 468 | 440 | 6 | 598 | -------------------------------------------------------------------------------- | Other administrative expenses | 223 | 230 | -3 | 328 | | (Note 11) | | | | | -------------------------------------------------------------------------------- | Other operating expenses (Note | 228 | 228 | 0 | 312 | | 12) | | | | | -------------------------------------------------------------------------------- | Returns to owner-members (Note | 121 | 119 | 2 | 154 | | 13) | | | | | -------------------------------------------------------------------------------- | Share of associates' | 1 | 0 | | 1 | | profits/losses | | | | | -------------------------------------------------------------------------------- | Earnings before tax for the | 393 | 357 | 10 | 372 | | period | | | | | -------------------------------------------------------------------------------- | Income tax expense | 107 | 106 | 1 | 151 | -------------------------------------------------------------------------------- | Profit for the period | 286 | 251 | 14 | 221 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Profit attributable to: | | | | | -------------------------------------------------------------------------------- | OP-Pohjola Group's owners | 286 | 251 | 14 | 221 | -------------------------------------------------------------------------------- | Minority interest | - | - | | - | -------------------------------------------------------------------------------- | Total | 286 | 251 | 14 | 221 | -------------------------------------------------------------------------------- OP-Pohjola Group statement of comprehensive income -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, % | 2008 | | | 20 | 20 | | | | | 09 | 08 | | | -------------------------------------------------------------------------------- | Profit for the period | 286 | 251 | 14 | 221 | -------------------------------------------------------------------------------- | Change in fair value reserve | 546 | -437 | | -737 | -------------------------------------------------------------------------------- | Translation differences | 0 | 0 | 37 | 0 | -------------------------------------------------------------------------------- | Income tax on other | 141 | -113 | | -191 | | comprehensive income | | | | | -------------------------------------------------------------------------------- | Total comprehensive income for | 690 | -73 | | -324 | | the period | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total comprehensive income | | | | | | attributable to: | | | | | -------------------------------------------------------------------------------- | OP-Pohjola Group's owners | 690 | -73 | | -324 | -------------------------------------------------------------------------------- | Minority interest | - | - | | - | -------------------------------------------------------------------------------- | Total | 690 | -73 | | -324 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Key figures and ratios | Q1-3/ | Q1-3/ | | 2008 | | | 20 | 20 | | | | | 09 | 08 | | | -------------------------------------------------------------------------------- | Return on equity, % | 6.8 | 6.0 | | 4.1 | -------------------------------------------------------------------------------- | Return on equity at fair | 16.4 | -1.7 | | -6.0 | | value, % | | | | | -------------------------------------------------------------------------------- | Return on assets, % | 0.50 | 0.48 | | 0.31 | -------------------------------------------------------------------------------- | Cost/income ratio, % | 59 | 64 | | 68 | -------------------------------------------------------------------------------- | Average personnel | 12,670 | 12,575 | | 12,615 | -------------------------------------------------------------------------------- | Full-time | 11,572 | 11,452 | | 11,464 | -------------------------------------------------------------------------------- | Part-time | 1,098 | 1,123 | | 1,151 | -------------------------------------------------------------------------------- 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 of 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 -------------------------------------------------------------------------------- | | 2008 | 2009 | -------------------------------------------------------------------------------- | EUR million | Q3 | Q4 | Q1 | Q2 | Q3 | -------------------------------------------------------------------------------- | Interest income | 1,257 | 1,343 | 1,003 | 794 | 670 | -------------------------------------------------------------------------------- | Interest expenses | 952 | 1,026 | 716 | 512 | 414 | -------------------------------------------------------------------------------- | Net interest income | 305 | 316 | 287 | 282 | 256 | -------------------------------------------------------------------------------- | Impairments of receivables | 18 | 31 | 29 | 46 | 52 | -------------------------------------------------------------------------------- | Net interest income after | 287 | 285 | 258 | 235 | 204 | | impairments | | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 96 | 72 | 69 | 120 | 113 | | Insurance operations | | | | | | -------------------------------------------------------------------------------- | Net income from Life | -91 | -49 | -21 | -8 | -60 | | Insurance operations | | | | | | -------------------------------------------------------------------------------- | Net commissions and fees | 100 | 102 | 130 | 121 | 120 | -------------------------------------------------------------------------------- | Net trading income | -37 | -30 | 28 | 26 | 33 | -------------------------------------------------------------------------------- | Net investment income | 10 | -16 | -8 | 0 | -3 | -------------------------------------------------------------------------------- | Other operating income | 22 | 25 | 25 | 27 | 23 | -------------------------------------------------------------------------------- | Personnel costs | 130 | 158 | 163 | 163 | 142 | -------------------------------------------------------------------------------- | Other administrative expenses | 72 | 97 | 80 | 76 | 67 | -------------------------------------------------------------------------------- | Other operating expenses | 69 | 84 | 76 | 81 | 71 | -------------------------------------------------------------------------------- | Returns to owner-members | 42 | 35 | 38 | 44 | 39 | -------------------------------------------------------------------------------- | Share of associates' | 0 | 0 | 0 | 0 | 1 | | profits/losses | | | | | | -------------------------------------------------------------------------------- | Earnings before tax for the | 74 | 15 | 124 | 157 | 112 | | period | | | | | | -------------------------------------------------------------------------------- | Income tax expense | 28 | 45 | 61 | 20 | 27 | -------------------------------------------------------------------------------- | Profit for the period | 46 | -30 | 63 | 137 | 85 | -------------------------------------------------------------------------------- | Other comprehensive income | | | | | | -------------------------------------------------------------------------------- | Change in fair value reserve | -133 | -299 | -40 | 217 | 368 | -------------------------------------------------------------------------------- | Translation differences | 0 | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Income tax on other | -34 | -78 | -10 | 56 | 95 | | comprehensive income | | | | | | -------------------------------------------------------------------------------- | Total comprehensive income | -52 | -251 | 34 | 298 | 358 | | for the period | | | | | | -------------------------------------------------------------------------------- OP-Pohjola Group balance sheet -------------------------------------------------------------------------------- | EUR million | 30 Sep | 30 Sep | Change, % | 31 Dec | | | 2009 | 2008 | | 2008 | -------------------------------------------------------------------------------- | Cash and cash equivalents | 998 | 2,610 | -62 | 2,393 | -------------------------------------------------------------------------------- | Receivables from credit | 2,125 | 534 | | 2,450 | | institutions | | | | | -------------------------------------------------------------------------------- | Financial assets at fair value | 1,695 | 3,714 | -54 | 3,313 | | through profit or loss | | | | | -------------------------------------------------------------------------------- | Derivative contracts | 1,444 | 797 | 81 | 1,470 | -------------------------------------------------------------------------------- | Receivables from customers | 52,787 | 50,170 | 5 | 51,708 | -------------------------------------------------------------------------------- | Non-life Insurance assets | 3,111 | 2,849 | 9 | 2,670 | | (Note 16) | | | | | -------------------------------------------------------------------------------- | Life Insurance assets (Note | 6,016 | 5,675 | 6 | 5,093 | | 17) | | | | | -------------------------------------------------------------------------------- | Investment assets | 6,194 | 5,016 | 23 | 2,441 | -------------------------------------------------------------------------------- | Investments in associates | 16 | 28 | -42 | 17 | -------------------------------------------------------------------------------- | Intangible assets | 1,193 | 1,215 | -2 | 1,211 | -------------------------------------------------------------------------------- | Property, plant and equipment | 767 | 761 | 1 | 762 | | (PPE) | | | | | -------------------------------------------------------------------------------- | Other assets | 2,046 | 1,866 | 10 | 1,814 | -------------------------------------------------------------------------------- | Tax assets | 261 | 273 | -4 | 403 | -------------------------------------------------------------------------------- | Total assets | 78,654 | 75,508 | 4 | 75,746 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Liabilities to credit | 2,470 | 4,008 | -38 | 693 | | institutions | | | | | -------------------------------------------------------------------------------- | Financial liabilities at fair | 117 | 506 | -77 | 138 | | value through profit or loss | | | | | -------------------------------------------------------------------------------- | Derivative contracts | 1,575 | 770 | | 1,565 | -------------------------------------------------------------------------------- | Liabilities to customers | 36,837 | 35,424 | 4 | 37,082 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 2,480 | 2,469 | 0 | 2,238 | -------------------------------------------------------------------------------- | Life Insurance liabilities | 5,919 | 5,663 | 5 | 5,413 | -------------------------------------------------------------------------------- | Debt securities issued to the | 17,757 | 15,836 | 12 | 18,164 | | public (Note 18) | | | | | -------------------------------------------------------------------------------- | Provisions and other | 2,544 | 2,675 | -5 | 2,393 | | liabilities | | | | | -------------------------------------------------------------------------------- | Tax liabilities | 1,045 | 917 | 14 | 971 | -------------------------------------------------------------------------------- | Cooperative capital | 605 | 563 | 7 | 570 | -------------------------------------------------------------------------------- | Subordinated liabilities | 1,262 | 1,207 | 5 | 1,304 | -------------------------------------------------------------------------------- | Total liabilities | 72,611 | 70,038 | 4 | 70,531 | -------------------------------------------------------------------------------- Equity capital -------------------------------------------------------------------------------- | Share of OP-Pohjola Group's | | | | | | owners | | | | | -------------------------------------------------------------------------------- | Share and cooperative capital | 357 | 360 | -1 | 362 | -------------------------------------------------------------------------------- | Fair value reserve (Note 19) | -151 | -334 | -55 | -556 | -------------------------------------------------------------------------------- | Other reserves | 2,605 | 2,375 | 10 | 2,375 | -------------------------------------------------------------------------------- | Retained earnings | 3,232 | 3,070 | 5 | 3,034 | -------------------------------------------------------------------------------- | Minority interest | - | - | | - | -------------------------------------------------------------------------------- | Total equity capital | 6,042 | 5,470 | 10 | 5,215 | -------------------------------------------------------------------------------- | Total liabilities and equity | 78,654 | 75,508 | 4 | 75,746 | | capital | | | | | -------------------------------------------------------------------------------- Statement of changes in equity capital -------------------------------------------------------------------------------- | EUR million | Share | Fair | Other | Retaine | Minorit | Total | | | and | value | reserve | d | y | equity | | | coopera | reserv | s | earning | interes | capital | | | tive | e | | s | t | | | | capital | | | | | | -------------------------------------------------------------------------------- | Balance at 1 | 359 | -10 | 2,235 | 3,052 | 3 | 5,638 | | January 2008 | | | | | | | -------------------------------------------------------------------------------- | Increase of share | - | - | - | - | - | - | | capital | | | | | | | -------------------------------------------------------------------------------- | Transfer of | 4 | - | - | - | - | 4 | | cooperative | | | | | | | | capital to equity | | | | | | | | capital | | | | | | | -------------------------------------------------------------------------------- | Transfer of | - | - | 138 | -138 | - | - | | reserves | | | | | | | -------------------------------------------------------------------------------- | Profit | - | - | - | -77 | - | -77 | | distribution | | | | | | | -------------------------------------------------------------------------------- | Total | - | -324 | - | 251 | 0 | -73 | | comprehensive | | | | | | | | income for the | | | | | | | | period | | | | | | | -------------------------------------------------------------------------------- | Other | -4 | - | 2 | -18 | -2 | -23 | -------------------------------------------------------------------------------- | Balance at 30 | 360 | -334 | 2,375 | 3,070 | - | 5,470 | | September 2008 | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance at 1 | 362 | -556 | 2,375 | 3,034 | - | 5,215 | | January 2009 | | | | | | | -------------------------------------------------------------------------------- | Increase of share | - | - | 170 | - | - | 170 | | capital | | | | | | | -------------------------------------------------------------------------------- | Transfer of | 2 | - | - | - | - | 2 | | cooperative | | | | | | | | capital to equity | | | | | | | | capital | | | | | | | -------------------------------------------------------------------------------- | Transfer of | - | - | 62 | -62 | - | - | | reserves | | | | | | | -------------------------------------------------------------------------------- | Profit | - | - | - | -26 | - | -26 | | distribution | | | | | | | -------------------------------------------------------------------------------- | Total | - | 404 | - | 286 | - | 690 | | comprehensive | | | | | | | | income for the | | | | | | | | period | | | | | | | -------------------------------------------------------------------------------- | Other | -7 | - | -1 | -1 | - | -9 | -------------------------------------------------------------------------------- | Balance at 30 | 357 | -151 | 2,605 | 3,232 | - | 6,042 | | September 2009 | | | | | | | -------------------------------------------------------------------------------- Cash flow statement -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | | | 2009 | 2008 | -------------------------------------------------------------------------------- | Cash flow from operating activities | | | -------------------------------------------------------------------------------- | Profit for the period | 286 | 251 | -------------------------------------------------------------------------------- | Adjustments to profit for the period | 899 | 750 | -------------------------------------------------------------------------------- | Increase (-) or decrease (+) in operating | -4,008 | -8,532 | | assets | | | -------------------------------------------------------------------------------- | Receivables from credit institutions | 239 | -282 | -------------------------------------------------------------------------------- | Financial assets at fair value through profit | 1,672 | -1,368 | | or loss | | | -------------------------------------------------------------------------------- | Derivative contracts | -35 | -67 | -------------------------------------------------------------------------------- | Receivables from customers | -1,208 | -5,444 | -------------------------------------------------------------------------------- | Non-life Insurance assets | -352 | -279 | -------------------------------------------------------------------------------- | Life Insurance assets | -510 | 70 | -------------------------------------------------------------------------------- | Investment assets | -3,595 | -837 | -------------------------------------------------------------------------------- | Other assets | -219 | -327 | -------------------------------------------------------------------------------- | Increase (+) or decrease (-) in operating | 1,713 | 7,792 | | liabilities | | | -------------------------------------------------------------------------------- | Liabilities to credit institutions | 1,777 | 2,882 | -------------------------------------------------------------------------------- | Financial liabilities at fair value through | -21 | 455 | | profit or loss | | | -------------------------------------------------------------------------------- | Derivative contracts | -42 | 84 | -------------------------------------------------------------------------------- | Liabilities to customers | -245 | 4,203 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 169 | 207 | -------------------------------------------------------------------------------- | Life Insurance liabilities | 25 | -95 | -------------------------------------------------------------------------------- | Provisions and other liabilities | 51 | 56 | -------------------------------------------------------------------------------- | Income tax paid | -43 | -123 | -------------------------------------------------------------------------------- | Dividends received | 53 | 66 | -------------------------------------------------------------------------------- | A. Net cash from operating activities | -1,100 | 203 | -------------------------------------------------------------------------------- | Cash flow from investing activities | | | -------------------------------------------------------------------------------- | Increases in held-to-maturity financial | -371 | -32 | | assets | | | -------------------------------------------------------------------------------- | Decreases in held-to-maturity financial | 364 | 44 | | assets | | | -------------------------------------------------------------------------------- | Acquisition of subsidiaries, net of cash | -1 | -34 | | acquired | | | -------------------------------------------------------------------------------- | Disposal of subsidiaries, net of cash | 1 | 4 | | disposed | | | -------------------------------------------------------------------------------- | Purchase of PPE and intangible assets | -71 | -79 | -------------------------------------------------------------------------------- | Proceeds from sale of PPE and intangible | 6 | 1 | | assets | | | -------------------------------------------------------------------------------- | B. Net cash used in investing activities | -71 | -96 | -------------------------------------------------------------------------------- | Cash flow from financing activities | | | -------------------------------------------------------------------------------- | Increases in subordinated liabilities | 194 | 283 | -------------------------------------------------------------------------------- | Decreases in subordinated liabilities | -238 | -116 | -------------------------------------------------------------------------------- | Increases in debt securities issued to the | 39,860 | 28,830 | | public | | | -------------------------------------------------------------------------------- | Decreases in debt securities issued to the | -40,288 | -27,021 | | public | | | -------------------------------------------------------------------------------- | Increases in cooperative and share capital | 202 | 117 | -------------------------------------------------------------------------------- | Decreases in cooperative and share capital | -165 | -121 | -------------------------------------------------------------------------------- | Dividends paid and interest on cooperative | -52 | -101 | | capital | | | -------------------------------------------------------------------------------- | Returns to owner-members | -3 | 0 | -------------------------------------------------------------------------------- | Increases in invested unrestricted equity | 171 | - | -------------------------------------------------------------------------------- | Other | - | - | -------------------------------------------------------------------------------- | C. Net cash from financing activities | -319 | 1,870 | -------------------------------------------------------------------------------- | Net change in cash and cash equivalents | -1,490 | 1,977 | | (A+B+C) | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents at period-start | 2,538 | 700 | -------------------------------------------------------------------------------- | Cash and cash equivalents at period-end | 1,049 | 2,677 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest received | 2,514 | 1,917 | -------------------------------------------------------------------------------- | Interest paid | -2,000 | -1,333 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Adjustments to profit for the period | | | -------------------------------------------------------------------------------- | Non-cash transactions and other adjustments | | | -------------------------------------------------------------------------------- | Impairments of receivables | 134 | 31 | -------------------------------------------------------------------------------- | Unrealised net earnings in Non-life Insurance | 143 | 150 | -------------------------------------------------------------------------------- | Unrealised net earnings in Life Insurance | 302 | 197 | -------------------------------------------------------------------------------- | Change in fair value for trading | 52 | 97 | -------------------------------------------------------------------------------- | Unrealised net gains on foreign exchange | -18 | -3 | | operations | | | -------------------------------------------------------------------------------- | Change in fair value of investment property | 13 | -10 | -------------------------------------------------------------------------------- | Depreciation and amortisation | 97 | 97 | -------------------------------------------------------------------------------- | Share of associates' profits/losses | 0 | 1 | -------------------------------------------------------------------------------- | Other | 159 | 169 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Items presented outside cash flow from | | | | operating activities | | | -------------------------------------------------------------------------------- | Capital gains, share of cash flow from | 0 | -1 | | investing activities | | | -------------------------------------------------------------------------------- | Interest on cooperative capital | 15 | 22 | -------------------------------------------------------------------------------- | Other returns to owner-members | 3 | 0 | -------------------------------------------------------------------------------- | Total adjustments | 899 | 750 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents | | | -------------------------------------------------------------------------------- | Liquid assets | 139 | 127 | -------------------------------------------------------------------------------- | Receivables from credit institutions payable | 910 | 2,550 | | on demand | | | -------------------------------------------------------------------------------- | Total | 1,049 | 2,677 | -------------------------------------------------------------------------------- Notes Note 1. Accounting policies The Financial Statements Bulletin for 1 January-30 September 2009 was prepared according to IAS 34 (Interim Financial Reporting), as approved by the EU. The Financial Statements 2008 contain a description of the accounting policies applied by OP-Pohjola Group. In 2009, OP-Pohjola Group adopted the revised IAS 1 according to which the Group presents the statement of comprehensive income and the statement of changes in equity. The Interim Report is based on unaudited information. Since all figures in this report are rounded off, the sum of single figures may differ from the presented sum total. Summary of presentation of income statement: -------------------------------------------------------------------------------- | Net interest income | Received and paid interest on | | | fixed-income instruments, the | | | recognised difference between the | | | nominal value and acquisition value, | | | interest on interest-rate derivatives | | | and fair value change in fair value | | | hedging | -------------------------------------------------------------------------------- | Net income from Non-life Insurance | Premiums written, change in provision | | operations | for unearned premiums and for unpaid | | | claims, investment income, expenses | | | (interest, dividends, realised capital | | | gains and losses) and impairments | -------------------------------------------------------------------------------- | Net income from Life Insurance | Premiums written, change in provision | | operations | for unearned premiums and for unpaid | | | claims, investment income, expenses | | | (interest, dividends, realised capital | | | gains and losses) and impairments | -------------------------------------------------------------------------------- | Net commissions and fees | Commission income and expenses, and the | | | recognition of Day 1 profit related to | | | illiquid derivatives | -------------------------------------------------------------------------------- | Net trading income | Fair value changes in financial | | | instruments at fair value through | | | profit or loss, excluding accrued | | | interest, and capital gains and losses, | | | as well as dividends | -------------------------------------------------------------------------------- | Net investment income | Realised capital gains and losses on | | | available-for-sale financial assets, | | | impairments, dividends as well as fair | | | value changes in investment property, | | | capital gains and losses, rents and | | | other property-related expenses | -------------------------------------------------------------------------------- | Other operating income | Other operating income | -------------------------------------------------------------------------------- | Personnel costs | Wages and salaries, pension costs, | | | social expenses | -------------------------------------------------------------------------------- | Other administrative expenses | Office expenses, IT costs, other | | | administrative expenses | -------------------------------------------------------------------------------- | Other operating expenses | Depreciation/amortisation, rents and | | | other operating expenses | -------------------------------------------------------------------------------- Notes to the income statement and balance sheet Note 2 Net interest income -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, % | 2008 | | | 20 | 20 | | | | | 09 | 08 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Loans and other receivables | 1,390 | 1,935 | -28 | 2,723 | -------------------------------------------------------------------------------- | Receivables from credit | 75 | 42 | 79 | 73 | | institutions and central banks | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 195 | 275 | -29 | 381 | -------------------------------------------------------------------------------- | Derivatives held for trading | 55 | -1 | | -16 | | (net) | | | | | -------------------------------------------------------------------------------- | Liabilities to credit | -9 | -71 | 87 | -86 | | institutions | | | | | -------------------------------------------------------------------------------- | Liabilities to customers | -403 | -727 | -45 | -1,010 | -------------------------------------------------------------------------------- | Debt securities issued to the | -374 | -515 | -27 | -844 | | public | | | | | -------------------------------------------------------------------------------- | Subordinated debt | -27 | -32 | -17 | -43 | -------------------------------------------------------------------------------- | Hybrid capital | -9 | -7 | 31 | -11 | -------------------------------------------------------------------------------- | Financial liabilities held for | -4 | -14 | -68 | -19 | | trading | | | | | -------------------------------------------------------------------------------- | Other (net) | 5 | 11 | -59 | 17 | -------------------------------------------------------------------------------- | Net interest income before | 894 | 896 | 0 | 1,166 | | items under hedge accounting | | | | | -------------------------------------------------------------------------------- | Derivatives under hedge | -69 | -23 | | 23 | | accounting (net) | | | | | -------------------------------------------------------------------------------- | Total net interest income | 825 | 873 | -5 | 1,189 | -------------------------------------------------------------------------------- Note 3 Impairments of receivables -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, % | 2008 | | | 20 | 20 | | | | | 09 | 08 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Impairments of receivables | 156 | 37 | | 73 | -------------------------------------------------------------------------------- | Reversals of impairments | -39 | -18 | | -17 | -------------------------------------------------------------------------------- | Payments on impaired | -6 | -4 | -57 | -6 | | receivables | | | | | | amortised from | | | | | | statement of financial | | | | | | position | | | | | -------------------------------------------------------------------------------- | Net change in group-specific | 17 | 13 | 31 | 8 | | impairments | | | | | -------------------------------------------------------------------------------- | Total | 127 | 27 | | 58 | -------------------------------------------------------------------------------- Note 4 Net income from Non-life Insurance -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, % | 2008 | | | 20 | 20 | | | | | 09 | 08 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net insurance premium revenue | | | | | -------------------------------------------------------------------------------- | Premiums written | 839 | 847 | -1 | 991 | -------------------------------------------------------------------------------- | Insurance premiums ceded to | -42 | -41 | -3 | -42 | | reinsurers | | | | | -------------------------------------------------------------------------------- | Change in provision for | -91 | -119 | 24 | -24 | | unearned premiums | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | 6 | 9 | -38 | -1 | -------------------------------------------------------------------------------- | Total | 712 | 696 | 2 | 923 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net Non-life Insurance claims | | | | | -------------------------------------------------------------------------------- | Claims paid | -443 | -446 | 1 | -602 | -------------------------------------------------------------------------------- | Insurance claims recovered | 9 | 9 | -6 | 14 | | from reinsurers | | | | | -------------------------------------------------------------------------------- | Change in provision for unpaid | 17 | -28 | | -30 | | claims | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | -4 | 18 | | 27 | -------------------------------------------------------------------------------- | Total | -421 | -447 | 6 | -591 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net investment income, | | | | | | Non-life Insurance | | | | | -------------------------------------------------------------------------------- | Interest income | 52 | 53 | -1 | 70 | -------------------------------------------------------------------------------- | Capital gains and losses and | | | | | | realised changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | -5 | -17 | 67 | -16 | -------------------------------------------------------------------------------- | Shares and participations | 19 | -1 | | -27 | -------------------------------------------------------------------------------- | Property | 0 | 3 | -98 | 2 | -------------------------------------------------------------------------------- | Other | -17 | -4 | | -10 | -------------------------------------------------------------------------------- | Unrealised changes in fair | | | | | | value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 1 | -2 | | -4 | -------------------------------------------------------------------------------- | Shares and participations | -10 | -1 | | 4 | -------------------------------------------------------------------------------- | Property | 1 | 1 | -46 | 3 | -------------------------------------------------------------------------------- | Other | -6 | 1 | | 1 | -------------------------------------------------------------------------------- | Dividend income | 7 | 21 | -68 | 26 | -------------------------------------------------------------------------------- | Other | 2 | 1 | 75 | 3 | -------------------------------------------------------------------------------- | Total | 44 | 55 | -20 | 53 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Unwinding of discount | -32 | -31 | -2 | -42 | -------------------------------------------------------------------------------- | Other | -1 | 1 | | 2 | -------------------------------------------------------------------------------- | Net income from Non-life | 302 | 274 | 10 | 345 | | Insurance | | | | | -------------------------------------------------------------------------------- Note 5 Net income from Life Insurance -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, % | 2008 | | | 20 | 20 | | | | | 09 | 08 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Premiums written | 471 | 538 | -12 | 745 | -------------------------------------------------------------------------------- | Reinsurers' share | -17 | -23 | 26 | -28 | -------------------------------------------------------------------------------- | Net investment income | 298 | -503 | | -816 | -------------------------------------------------------------------------------- | Claims incurred | | | | | -------------------------------------------------------------------------------- | Benefits paid | -358 | -463 | 23 | -645 | -------------------------------------------------------------------------------- | Change in provision for unpaid | -12 | -12 | 6 | -47 | | claims | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | 4 | 2 | 98 | 3 | -------------------------------------------------------------------------------- | Change in insurance contract | | | | | | liabilities | | | | | -------------------------------------------------------------------------------- | Change in life insurance | -476 | 333 | | 602 | | provision | | | | | -------------------------------------------------------------------------------- | Reinsurers' share | 6 | 21 | -70 | 25 | -------------------------------------------------------------------------------- | Other | -5 | 19 | | 22 | -------------------------------------------------------------------------------- | Net income from Life Insurance | -89 | -90 | -2 | -139 | -------------------------------------------------------------------------------- Note 6 Commissions and fees -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, % | 2008 | | | 20 | 20 | | | | | 09 | 08 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission income | | | | | -------------------------------------------------------------------------------- | Lending | 108 | 77 | 39 | 102 | -------------------------------------------------------------------------------- | Deposits | 4 | 4 | -4 | 5 | -------------------------------------------------------------------------------- | Payment transfers | 96 | 91 | 6 | 121 | -------------------------------------------------------------------------------- | Securities brokerage | 16 | 15 | 8 | 20 | -------------------------------------------------------------------------------- | Securities issuance | 6 | 3 | | 4 | -------------------------------------------------------------------------------- | Mutual funds brokerage | 42 | 56 | -25 | 67 | -------------------------------------------------------------------------------- | Asset management and legal | 37 | 38 | -2 | 51 | | services | | | | | -------------------------------------------------------------------------------- | Insurance brokerage | 63 | 50 | 25 | 63 | -------------------------------------------------------------------------------- | Guarantees | 16 | 10 | 64 | 14 | -------------------------------------------------------------------------------- | Other | 31 | 34 | -10 | 46 | -------------------------------------------------------------------------------- | Total | 419 | 377 | 11 | 494 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission expenses | | | | | -------------------------------------------------------------------------------- | Total | 48 | 46 | 5 | 61 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net commissions and fees | 371 | 331 | 12 | 433 | -------------------------------------------------------------------------------- Note 7 Net trading income -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, % | 2008 | | | 20 | 20 | | | | | 09 | 08 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital gains and losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 30 | -16 | | -15 | -------------------------------------------------------------------------------- | Shares and participations | -3 | -1 | | -2 | -------------------------------------------------------------------------------- | Derivatives | 117 | 18 | | -26 | -------------------------------------------------------------------------------- | Changes in fair value | | | | | -------------------------------------------------------------------------------- | Notes and bonds | -1 | -81 | -99 | -51 | -------------------------------------------------------------------------------- | Shares and participations | 15 | -12 | | -19 | -------------------------------------------------------------------------------- | Derivatives | -80 | 0 | | -11 | -------------------------------------------------------------------------------- | Financial assets and | | | | | | liabilities amortised at cost | | | | | -------------------------------------------------------------------------------- | Capital gains and losses | | | | | -------------------------------------------------------------------------------- | Loans and other receivables | 0 | - | | - | -------------------------------------------------------------------------------- | Dividend income | 0 | 1 | -35 | 1 | -------------------------------------------------------------------------------- | Net income from foreign | 9 | -3 | | -1 | | exchange operations | | | | | -------------------------------------------------------------------------------- | Total | 87 | -94 | | -125 | -------------------------------------------------------------------------------- Note 8 Net investment income -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, % | 2008 | | | 20 | 20 | | | | | 09 | 08 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Available-for-sale financial | | | | | | assets | | | | | -------------------------------------------------------------------------------- | Capital gains and losses | | | | | -------------------------------------------------------------------------------- | Notes and bonds | 1 | -1 | | -5 | -------------------------------------------------------------------------------- | Shares and participations | -4 | 2 | | 1 | -------------------------------------------------------------------------------- | Other | - | - | | - | -------------------------------------------------------------------------------- | Dividend income | 8 | 11 | -24 | 12 | -------------------------------------------------------------------------------- | Impairment losses | -18 | 0 | | -6 | -------------------------------------------------------------------------------- | Total | -13 | 11 | | 3 | -------------------------------------------------------------------------------- | Investment property | | | | | -------------------------------------------------------------------------------- | Rental income | 36 | 38 | -3 | 49 | -------------------------------------------------------------------------------- | Maintenance charges and | 22 | 21 | 4 | 29 | | expenses | | | | | -------------------------------------------------------------------------------- | Changes in fair value, capital | -13 | 13 | | 2 | | gains and losses | | | | | -------------------------------------------------------------------------------- | Other | 0 | 0 | -19 | 1 | -------------------------------------------------------------------------------- | Total | 2 | 29 | -93 | 22 | -------------------------------------------------------------------------------- | Other | 0 | - | | - | -------------------------------------------------------------------------------- | Net investment income | -11 | 41 | | 25 | -------------------------------------------------------------------------------- Note 9 Other operating income -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, % | 2008 | | | 20 | 20 | | | | | 09 | 08 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income from property and | 10 | 9 | 11 | 12 | | business | | | | | | premises in own use | | | | | -------------------------------------------------------------------------------- | Other | 66 | 59 | 11 | 81 | -------------------------------------------------------------------------------- | Total | 76 | 68 | 11 | 93 | -------------------------------------------------------------------------------- Note 10 Personnel costs -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, % | 2008 | | | 20 | 20 | | | | | 09 | 08 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Wages and salaries | 397 | 377 | 6 | 512 | -------------------------------------------------------------------------------- | Pension costs | 49 | 43 | 14 | 55 | -------------------------------------------------------------------------------- | Other social expenses | 22 | 20 | 6 | 31 | -------------------------------------------------------------------------------- | Total | 468 | 440 | 6 | 598 | -------------------------------------------------------------------------------- Note 11 Other administrative expenses -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, % | 2008 | | | 20 | 20 | | | | | 09 | 08 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Office expenses | 48 | 34 | 43 | 47 | -------------------------------------------------------------------------------- | IT expenses | 74 | 77 | -3 | 110 | -------------------------------------------------------------------------------- | Telecommunications expenses | 26 | 28 | -7 | 38 | -------------------------------------------------------------------------------- | Marketing expenses | 37 | 43 | -15 | 61 | -------------------------------------------------------------------------------- | Other administrative expenses | 38 | 49 | -22 | 71 | -------------------------------------------------------------------------------- | Total | 223 | 230 | -3 | 328 | -------------------------------------------------------------------------------- Note 12 Other operating expenses -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, % | 2008 | | | 20 | 20 | | | | | 09 | 08 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Expenses for property and | 53 | 54 | 0 | 74 | | business | | | | | | premises in own use | | | | | -------------------------------------------------------------------------------- | Depreciation | 97 | 97 | -1 | 134 | -------------------------------------------------------------------------------- | Other | 78 | 77 | 1 | 104 | -------------------------------------------------------------------------------- | Total | 228 | 228 | 0 | 312 | -------------------------------------------------------------------------------- Note 13 Returns to owner-members -------------------------------------------------------------------------------- | EUR million | Q1-3/ | Q1-3/ | Change, % | 2008 | | | 20 | 20 | | | | | 09 | 08 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonuses | 106 | 98 | 9 | 132 | -------------------------------------------------------------------------------- | Interest on cooperative | 15 | 22 | -31 | 22 | | capital | | | | | -------------------------------------------------------------------------------- | Total | 121 | 119 | 2 | 154 | -------------------------------------------------------------------------------- Note 14. Classification of financial instruments -------------------------------------------------------------------------------- | EUR million | Loans | Invest | Financi | Availab | Hedging | Total | | | and | ments | al | le-for- | derivat | | | | other | held | assets | sale | ives | | | | receiv | to | at fair | financi | | | | | ables | maturi | value | al | | | | | | ty | through | assets | | | | | | | profit | | | | | | | | or | | | | | | | | loss* | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Assets | | | | | | | -------------------------------------------------------------------------------- | Cash and balances | 998 | - | - | - | - | 998 | | with central banks | | | | | | | -------------------------------------------------------------------------------- | Receivables from | 2,125 | - | - | - | - | 2,125 | | credit | | | | | | | | institutions and | | | | | | | | central banks | | | | | | | -------------------------------------------------------------------------------- | Derivative | - | - | 1,271 | - | 173 | 1,444 | | contracts | | | | | | | -------------------------------------------------------------------------------- | Receivables from | 52,787 | - | - | - | - | 52,787 | | customers | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | 765 | - | 88 | 2,257 | - | 3,111 | | assets** | | | | | | | -------------------------------------------------------------------------------- | Life Insurance | 489 | - | 2,481 | 3,045 | - | 6,016 | | assets*** | | | | | | | -------------------------------------------------------------------------------- | Notes and bonds | - | 1,235 | 1,638 | 4,109 | - | 6,983 | -------------------------------------------------------------------------------- | Shares and | - | - | 57 | 397 | - | 454 | | participations | | | | | | | -------------------------------------------------------------------------------- | Other receivables | 4,285 | - | 452 | - | - | 4,737 | -------------------------------------------------------------------------------- | Total 30 September | 61,449 | 1,235 | 5,988 | 9,809 | 173 | 78,654 | | 2009 | | | | | | | -------------------------------------------------------------------------------- | Total 30 September | 58,488 | 1,083 | 6,784 | 9,124 | 28 | 75,508 | | 2008 | | | | | | | -------------------------------------------------------------------------------- | Total 31 December | 62,545 | 1,198 | 6,661 | 5,224 | 117 | 75,746 | | 2008 | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | | Financial | Other | Hedging | Total | | | | liabilities at | liabili | derivat | | | | | fair value | ties | ives | | | | | through profit | | | | | | | or loss**** | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Liabilities | | | | | | | -------------------------------------------------------------------------------- | Liabilities to | - | - | - | 2,470 | - | 2,470 | | credit | | | | | | | | institutions | | | | | | | -------------------------------------------------------------------------------- | Financial | - | - | 117 | - | - | 117 | | liabilities held | | | | | | | | for trading (excl. | | | | | | | | derivatives) | | | | | | | -------------------------------------------------------------------------------- | Derivative | - | - | 1,397 | - | 178 | 1,575 | | contracts | | | | | | | -------------------------------------------------------------------------------- | Liabilities to | - | - | - | 36,837 | - | 36,837 | | customers | | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | - | - | - | 2,480 | - | 2,480 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Life Insurance | - | - | 2,123 | 3,796 | - | 5,919 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Debt securities | - | - | - | 17,757 | - | 17,757 | | issued to the | | | | | | | | public | | | | | | | -------------------------------------------------------------------------------- | Subordinated loans | - | - | - | 1,262 | - | 1,262 | -------------------------------------------------------------------------------- | Other liabilities | - | - | - | 4,194 | - | 4,194 | -------------------------------------------------------------------------------- | Total 30 September | - | - | 3,637 | 68,797 | 178 | 72,611 | | 2009 | | | | | | | -------------------------------------------------------------------------------- | Total 30 September | - | - | 3,027 | 66,929 | 82 | 70,038 | | 2008 | | | | | | | -------------------------------------------------------------------------------- | Total 31 December | - | - | 3,145 | 67,257 | 129 | 70,531 | | 2008 | | | | | | | -------------------------------------------------------------------------------- *Assets at fair value through profit or loss include financial assets for trading, financial assets at fair value through profit or loss at inception, and investments and investment property covering unit-linked insurance policies. **Non-life Insurance assets are specified in Note 16. **Life Insurance assets are specified in Note 17. ****Includes the balance sheet value of technical provisions related to unit-linked insurance policies. Debt securities issued to the public are carried at amortised cost. On 30 September 2009, the fair value of these debt instruments was approximately EUR 81 million higher than their carrying amount, based on information available in markets and employing commonly used valuation techniques. Subordinated liabilities are carried at amortised cost. Their fair value are substantially lower than their carrying amount, but determining fair values reliably is difficult in the current market situation. Note 15. Reclassified notes and bonds The table below shows the carrying amounts and fair values of the reclassified notes and bonds: -------------------------------------------------------------------------------- | 30 September 2009, EUR million | Carrying | Fair | Effectiv | Impairment | | | amount | value | e | s arising | | | | | interest | from | | | | | rate | credit | | | | | | risk | -------------------------------------------------------------------------------- | Loans and other receivables | 2,959 | 2,963 | 5.6 | 49 | -------------------------------------------------------------------------------- | Investments held to maturity | 860 | 818 | 4.5 | - | -------------------------------------------------------------------------------- | Available-for-sale financial | 60 | 60 | 5.1 | - | | assets | | | | | -------------------------------------------------------------------------------- | Total | 3,879 | 3,841 | | 49 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 31 December 2008, EUR million | Carrying | Fair | Effectiv | Impairment | | | amount | value | e | s arising | | | | | interest | from | | | | | rate | credit | | | | | | risk | -------------------------------------------------------------------------------- | Loans and other receivables | 3,611 | 3,440 | 5.4 | 10 | -------------------------------------------------------------------------------- | Investments held to maturity | 946 | 864 | 4.5 | - | -------------------------------------------------------------------------------- | Available-for-sale financial | 55 | 55 | 5.1 | - | | assets | | | | | -------------------------------------------------------------------------------- | Total | 4,612 | 4,358 | | 10 | -------------------------------------------------------------------------------- If notes and bonds were not reclassified and had been measured using fair values: -------------------------------------------------------------------------------- | | 1 Jan-30 Sep 2009 | 31 December 2008 | -------------------------------------------------------------------------------- | EUR million | Income | Fair | Income | Fair | | | statement | value | statement | value | | | | reserve | | reserve | -------------------------------------------------------------------------------- | Banking | - | - | -21 | -10 | -------------------------------------------------------------------------------- | Non-life Insurance | - | 26 | - | -24 | -------------------------------------------------------------------------------- | Life Insurance | 9 | 29 | 0 | -26 | -------------------------------------------------------------------------------- | Group Functions | 74 | 40 | -162 | -15 | -------------------------------------------------------------------------------- | Total | 83 | 95 | -183 | -75 | -------------------------------------------------------------------------------- Interest accrued on notes and bonds n January-September totalled EUR 111.7 million. The price difference between the nominal value and acquisition value recognised in net interest income totalled EUR 22.5 million. Impairments on notes and bonds totalled EUR 40 million. The Group used derivatives to hedge against interest rate risks, applying hedge accounting from 1 October 2008. Note 16 Non-life Insurance assets -------------------------------------------------------------------------------- | EUR million | 30 Sep | 30 Sep | Change, % | 31 Dec | | | 2009 | 2008 | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investments | | | | | -------------------------------------------------------------------------------- | Loan and other receivables | 388 | 67 | | 419 | -------------------------------------------------------------------------------- | Shares and participations | 356 | 437 | -19 | 318 | -------------------------------------------------------------------------------- | Property | 81 | 81 | 1 | 81 | -------------------------------------------------------------------------------- | Notes and bonds | 1,383 | 1,446 | -4 | 1,075 | -------------------------------------------------------------------------------- | Other | 526 | 422 | 25 | 422 | -------------------------------------------------------------------------------- | Total | 2,734 | 2,452 | 11 | 2,316 | -------------------------------------------------------------------------------- | Other assets | | | | | -------------------------------------------------------------------------------- | Prepayments and accrued income | 29 | 25 | 17 | 33 | -------------------------------------------------------------------------------- | Other | | | | | -------------------------------------------------------------------------------- | Arising from direct insurance | 243 | 260 | -7 | 218 | | operations | | | | | -------------------------------------------------------------------------------- | Arising from reinsurance | 99 | 109 | -9 | 100 | | operations | | | | | -------------------------------------------------------------------------------- | Cash in hand and at bank | 6 | 2 | | 4 | -------------------------------------------------------------------------------- | Total | 378 | 396 | -5 | 355 | -------------------------------------------------------------------------------- | Non-life Insurance assets | 3,111 | 2,849 | 9 | 2,670 | -------------------------------------------------------------------------------- Note 17 Life Insurance assets -------------------------------------------------------------------------------- | EUR million | 30 Sep | 30 Sep | Change, % | 31 Dec | | | 2009 | 2008 | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investments | | | | | -------------------------------------------------------------------------------- | Loan and other receivables | 408 | 20 | | 422 | -------------------------------------------------------------------------------- | Shares and participations | 2,683 | 2,549 | 5 | 2,259 | -------------------------------------------------------------------------------- | Property | 123 | 122 | 1 | 123 | -------------------------------------------------------------------------------- | Notes and bonds | 550 | 1,042 | -47 | 550 | -------------------------------------------------------------------------------- | Other | 0 | -1 | -100 | 0 | -------------------------------------------------------------------------------- | Total | 3,764 | 3,733 | 1 | 3,354 | -------------------------------------------------------------------------------- | Assets covering unit-linked | | | | | | insurance contracts | | | | | -------------------------------------------------------------------------------- | Shares and participations | 2,171 | 1,874 | 16 | 1,614 | -------------------------------------------------------------------------------- | Other assets | | | | | -------------------------------------------------------------------------------- | Prepayments and accrued income | 23 | 25 | -10 | 23 | -------------------------------------------------------------------------------- | Other | | | | | -------------------------------------------------------------------------------- | Arising from direct insurance | 3 | 9 | -71 | 20 | | operations | | | | | -------------------------------------------------------------------------------- | Arising from reinsurance | 45 | 33 | 34 | 38 | | operations | | | | | -------------------------------------------------------------------------------- | Cash in hand and at bank | 11 | 1 | | 44 | -------------------------------------------------------------------------------- | Total | 81 | 69 | 17 | 125 | -------------------------------------------------------------------------------- | Life Insurance assets | 6,016 | 5,675 | 6 | 5,093 | -------------------------------------------------------------------------------- Note 18 Debt securities issued to the public -------------------------------------------------------------------------------- | EUR million | 30 Sep | 30 Sep | Change, % | 31 Dec | | | 2009 | 2008 | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonds | 8,275 | 8,329 | -1 | 7,654 | -------------------------------------------------------------------------------- | Certificates of deposit, | 9,255 | 7,360 | 26 | 10,322 | | commercial papers and ECPs | | | | | -------------------------------------------------------------------------------- | Other | 228 | 147 | 55 | 188 | -------------------------------------------------------------------------------- | Total | 17,757 | 15,836 | 12 | 18,164 | -------------------------------------------------------------------------------- Note 19 Fair value reserve after income tax -------------------------------------------------------------------------------- | EUR million | 30 Sep | 30 Sep | Change, % | 31 Dec | | | 2009 | 2008 | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Notes and bonds | 34 | -113 | | -84 | -------------------------------------------------------------------------------- | Shares and participations | -185 | -221 | -16 | -472 | -------------------------------------------------------------------------------- | Total | -151 | -334 | -55 | -556 | -------------------------------------------------------------------------------- The negative fair value reserve may recover by means of asset appreciation and recognised impairments. Only the value changes in the fair value reserve are recognised which the management deem to fulfil the relevant requirements. Other notes Note 20 Collateral given -------------------------------------------------------------------------------- | EUR million | 30 Sep | 30 Sep | Change, % | 31 Dec | | | 2009 | 2008 | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Given on behalf of own | | | | | | liabilities and commitments | | | | | -------------------------------------------------------------------------------- | Mortgages | 1 | 1 | 0 | 1 | -------------------------------------------------------------------------------- | Pledges | 5,272 | 4,205 | 25 | 4,135 | -------------------------------------------------------------------------------- | Other | 1,104 | 350 | | 400 | -------------------------------------------------------------------------------- | Total | 6,376 | 4,556 | 40 | 4,536 | -------------------------------------------------------------------------------- Note 21 Off-balance-sheet items -------------------------------------------------------------------------------- | EUR million | 30 Sep | 30 Sep | Change, % | 31 Dec | | | 2009 | 2008 | | 2008 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Guarantees | 1,412 | 786 | 80 | 1,241 | -------------------------------------------------------------------------------- | Other guarantee liabilities | 1,611 | 1,873 | -14 | 1,794 | -------------------------------------------------------------------------------- | Pledges | 1 | 1 | -43 | 1 | -------------------------------------------------------------------------------- | Loan commitments | 8,657 | 7,947 | 9 | 7,686 | -------------------------------------------------------------------------------- | Commitments related to | 151 | 186 | -19 | 177 | | short-term | | | | | | trade transactions | | | | | -------------------------------------------------------------------------------- | Other | 772 | 514 | 50 | 485 | -------------------------------------------------------------------------------- | Total off-balance-sheet items | 12,605 | 11,307 | 11 | 11,384 | -------------------------------------------------------------------------------- Note 22 Derivative contracts -------------------------------------------------------------------------------- | | 30 Sep 2009 | -------------------------------------------------------------------------------- | EUR million | Nominal values / remaining term to | Fair values | | | maturity | | -------------------------------------------------------------------------------- | | <1 year | 1-5 | >5 | Total | Assets | Liabilit | | | | years | years | | | ies | -------------------------------------------------------------------------------- | Interest rate | 43,708 | 42,656 | 11,938 | 98,302 | 1,264 | 1,256 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Currency | 12,980 | 1,820 | 583 | 15,383 | 172 | 531 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Equity and | 99 | 744 | 38 | 881 | 69 | 0 | | index-linked | | | | | | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Credit | 138 | 178 | - | 316 | 3 | 5 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Other | 3,930 | 132 | - | 4,062 | 1 | 22 | | derivatives | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total | 60,855 | 45,530 | 12,559 | 118,943 | 1,508 | 1,815 | | derivatives | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | 30 Sep 2008 | -------------------------------------------------------------------------------- | EUR million | Nominal values / remaining term to | Fair values | | | 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 | 372 | | 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 | 885 | | derivatives | | | | | | | -------------------------------------------------------------------------------- Note 23 Related-party transactions 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. -------------------------------------------------------------------------------- | 30 Sep 2009 | | | | -------------------------------------------------------------------------------- | EUR million | Associates | Management | Others | -------------------------------------------------------------------------------- | Loans | 90 | 11 | - | -------------------------------------------------------------------------------- | Other receivables | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Deposits | 4 | 11 | 35 | -------------------------------------------------------------------------------- | Other liabilities | - | - | - | -------------------------------------------------------------------------------- | Interest income | 0 | 0 | - | -------------------------------------------------------------------------------- | Interest expenses | 0 | 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 | - | 4 | - | -------------------------------------------------------------------------------- | Performance-based pay | - | - | - | -------------------------------------------------------------------------------- | Holdings of related parties | | | | -------------------------------------------------------------------------------- | Number of share options | - | - | - | -------------------------------------------------------------------------------- | Number of shares | - | 127,889 | 5,784,097 | -------------------------------------------------------------------------------- | Number of participations | - | 5,013 | - | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 30 Sep 2008 | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | Associates | Management | Others | -------------------------------------------------------------------------------- | 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 | - | -------------------------------------------------------------------------------- Pohjola Bank plc will publish its own interim report. OP-Pohjola Group's financial performance will be presented by to the media by Executive Chairman Reijo Karhinen in a press conference on 5 November 2009 at 12 noon at Teollisuuskatu 1 b, Vallila, Helsinki. Helsinki, 5 November 2009 OP-Pohjola Group Central Cooperative Executive Board OP-Pohjola Group Central Cooperative Carina Geber-Teir Senior Vice President, Corporate Communications 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 Carina Geber-Teir, Executive Vice President (Corporate Communications), tel. +358 (0)10 252 8394 Distribution NASDAQ OMX Helsinki Ltd London Stock Exchange SWX Swiss Exchange Major media
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