2010-02-11 07:32:00 CET
2010-02-11 07:32:14 CET
REGULATED INFORMATION
Pohjola Pankki Oyj - Financial Statement Release
OP-Pohjola Group's January-December 2009
OP-Pohjola Group Central Cooperative Company Release 11 February 2010 at 8.00am 1(45) Release category: Financial Statements Bulletin OP-Pohjola Group's January-December 2009 - Earnings before tax improved by 25% to EUR 464 million. Earnings at fair value (EUR 1,140 million) were an all-time best. - Total income increased robustly, by 13%. The increase in expenses shrunk to less than 1%. - Non-performing loan losses of the loan and guarantee portfolio remained as low as last year, at 0.4%. Credit losses increased as expected, rising to EUR 179 million. - The Group's market position improved clearly within corporate loans (1.9 percentage points) and mutual funds (0.9 percentage points). - Group member banks became the largest non-life insurance sales channel for private customers in 2009. - The Group's risk-bearing capacity is very strong. Tier 1 capital adequacy ratio stood at 12.6%. The financial and insurance conglomerate's capital buffers rose to EUR 2.1 billion. - The Group's full-year earnings for 2010 are expected to be about the same as in 2009. The greatest uncertainty is related to credit losses and changes in interest rates and the investment environment. Comments by Reijo Karhinen, Executive Chairman Our last year's performance exceeded our expectations. Although credit losses were clearly higher and net interest income lower, our earnings nevertheless improved considerably. This - considering the current conditions - was a fine achievement, and can be explained by exceptionally strong increase of Other income and by moderate expense increases. We had our sight bravely beyond the crisis on what lay ahead, instead of pulling the emergency brake. This was worth the gamble and the steep rise of our market share in corporate funding is a case in point: OP-Pohjola Group wants to grow and is able to carry its responsibility on a long-term basis. We promised to build as many companies as possible a bridge over troubled business - and did just that. The worst onslaught of the financial crisis is now behind us, but we are only taking the first steps on the road to recovery. The fall was abrupt but the rise no way near as quick, which means that 2010 will be full of financial challenges. I am nevertheless at ease, because I know that our operations rest on solid foundations: our capital base is excellent while credit losses will probably only be a fraction of our total capital. OP-Pohjola Group's Financial Statements Bulletin for 1 January-31 December 2009 OP-Pohjola Group's key indicators -------------------------------------------------------------------------------- | | 2009 | 2008 | Change* | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings before tax, EUR million | 464 | 372 | 24.6 | -------------------------------------------------------------------------------- | Banking and Investment Services | 471 | 532 | -11.6 | -------------------------------------------------------------------------------- | Non-life Insurance | 102 | 55 | 86.7 | -------------------------------------------------------------------------------- | Life insurance | -159 | -162 | -1.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonuses paid to customers, EUR | 142 | 132 | 7.7 | | million | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on equity (ROE), % | 5.9 | 4.1 | 1.8 | -------------------------------------------------------------------------------- | Return on equity at fair value, % | 14.7 | -6.0 | 20.7 | -------------------------------------------------------------------------------- | Cost/income, % | 53 | 54 | -1 | | (Banking and Investment Services) | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Average personnel | 12,632 | 12,615 | 0.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | 31 Dec | 31 Dec | Change* | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total assets, EUR billion | 80.4 | 75.7 | 6.2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital adequacy, %** | 12.6 | 12.6 | 0.0 | -------------------------------------------------------------------------------- | Tier 1 ratio, %** | 12.6 | 12.6 | 0.0 | -------------------------------------------------------------------------------- | Ratio of capital base to minimum | 1.58 | 1.40 | 0.17 | | amount of capital base*** | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-performing loan losses within | 0.4 | 0.4 | 0.0 | | loan and guarantee portfolio, % | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Market share, % | | | | -------------------------------------------------------------------------------- | Total loans | 32.7 | 32.0 | 0.7 | -------------------------------------------------------------------------------- | Total deposits | 33.2 | 33.8 | -0.6 | -------------------------------------------------------------------------------- | Capital invested in mutual funds | 23.4 | 22.5 | 0.9 | -------------------------------------------------------------------------------- | Of insurance savings through life | 20.0 | 19.4 | 0.6 | | and pension insurance | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | 2009 | 2008 | Change* | -------------------------------------------------------------------------------- | Of premiums written in life and | 25.0 | 29.3 | -4.3 | | 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 In 2009, the world economy drifted into its deepest recession in decades. The financial crisis coming to a head in late 2008 sent various economic regions around the world into a simultaneous nosedive never seen before. This crisis spread worldwide through lack of confidence in financial markets and through international trade. Measures taken by central banks and governments helped to restore confidence in financial markets. The world economy showed signs of stabilisation as early as the second quarter of 2009 and the second half saw a cautious recovery in industrialised countries' production figures after a steep fall. The worst of the world economic crisis was over in 2009. There is still extraordinarily great uncertainty over future economic development. Key world economic challenges in 2010 relate to the timely withdrawal of stimulus measures. Uncertainty over the private sector's ability to spearhead the drive towards economic growth in a situation in which the effects of public measures to boost economic growth will remain subdued cast a shadow over the world economic outlook. When it comes to Finnish GDP growth, 2009 was one of the poorest years ever experienced. In 2009, Finnish exports were roughly a quarter lower than a year ago. During the second and third quarters of 2009, the Finnish economy's decline levelled off in the same way as in other industrialised countries. 2010 is expected to be a year of economic recovery in Finland. Business and consumer confidence has become stronger. Stronger export markets will gradually revive exports and the diminishing threat of unemployment arising from the stabilising job market will pave the way for a stronger consumer demand. Capital spending will not probably pick up until 2011. Favourable developments in the number of building permits granted and housing starts, and improved housing markets point to a gradual recovery in residential construction spending during 2010. Over the course of 2009, Euribor interest rates hit a record low following the cuts of the ECB's key interest rate. The restored confidence in money markets also contributed to lower Euribor rates, which returned risk premiums to their pre-financial crisis level. The ECB is not expected to raise its key interest rate until the end of 2010. Short-term money market rates are expected to slowly move higher as early as the first half of 2010. In 2009, the sector's loan portfolio grew slightly because demand for home loans remained lively despite a weaker economic environment. The economic recovery and a modest increase in interest rates are expected to maintain slight growth in the loan portfolio in 2010 too. The economic crisis was reflected in corporate financing in 2009 and there are not yet any major signs of improvement on the horizon. Share indices soared in 2009 across the world from their March rock-bottom, and mutual fund assets increased vigorously after the previous year's plunge as a result of growth in the volume of net subscriptions and an improvement in the net asset value of funds. The recovery in capital markets also increased insurance savings. After three poor years, premiums written by life insurance companies began to rise, due mainly to higher premiums written arising from capital redemption contracts. Following their strong growth in 2008, growth in deposits virtually came to a halt in 2009. Funds from term deposits in particular were transferred to other savings vehicles. In 2009, growth in non-life insurance premiums written slowed down by a few percentage points year on year. This slowdown specifically applied to corporate insurance as a result of a fall in payroll bills and corporate net sales. The recession also reduced non-life insurance claims expenditure. OP-Pohjola Group's earnings and total assets January-December Pre-tax earnings exceeded last year's level clearly thanks to robust growth of Other operating income, coming to EUR 464 million (372)*. Impairments and fair value changes reducing the earnings were recognised to an amount of EUR 417 million in 2009 (278). Thanks to recovering capital markets, earnings before tax at fair value were record-high at EUR 1,140 million (-365). The Banking pre-tax earnings fell short of the year before 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 very good, which together with higher investment income improved the segment's overall result on the previous year. Non-life Insurance's operating combined ratio** improved to 87.7% (91.5). Life Insurance's earnings before tax at fair value were good: EUR 194 million (-565). Earnings before tax were eroded by impairment charges recognised on investments from the fair value reserve. The Group's revenues increased by 13% to EUR 2,051 million (1,823). Net interest income was EUR 1,070 million (1,189), or down by 10% year on year. Other income increased substantially, reaching EUR 981 million (634), up by 55% year on year. Banking's investment and net trading income increased by EUR 202 million as a result of higher derivatives trading income in particular. The comparison year's net trading income included a decrease of EUR 74 million in fair value from securities in the liquidity reserve, recognised in the profit and loss. Net commissions, totalling EUR 496 million (433), particularly thanks to higher lending fees, were higher than last year. Fund fees contracted from last year. Expenses stood at EUR 1,248 million (1,238), up by 0.8% year on year, mainly as a result of higher personnel costs. The 4.0% rise in personnel costs resulted mainly from pay increases agreed on in 2008. Other administrative expenses and Other operating expenses shrunk by a total of EUR 15 million despite a EUR 9 million increase in the Deposit Guarantee Fund contribution. Bonuses paid to owner-members and OP bonus customers rose by 7.7% and totalled EUR 142 million (132). Net impairment losses on loans and receivables increased to EUR 179 million (58). New impairment losses in gross terms totalled EUR 212 million, or up by EUR 130 million from last year. The majority of credit losses derived from corporate exposure. Value readjustments and cancellations of impairment losses totalled EUR 32 million (23). Impairment losses on receivables remained very low, at 0.32% of the loan and guarantee portfolio (0.11%). * Comparatives for 2008 are given in brackets. For income-statement and other aggregated figures, January-December 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 | 2009 | 2008 | Change, | Change, | | | | | EUR | % | | | | | mill. | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings before tax | 464 | 372 | 92 | 24.6 | -------------------------------------------------------------------------------- | Gross change in fair value | 677 | -737 | 1,413 | | | reserve | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax at | 1,140 | -365 | 1,505 | | | fair value | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on equity (ROE), % | 5.9 | 4.1 | | 1.8* | -------------------------------------------------------------------------------- | Return on equity at fair value, | 14.7 | -6.0 | | 20.7* | | % | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income | | | | | -------------------------------------------------------------------------------- | Net interest income | 1,070 | 1,189 | -119 | -10.0 | -------------------------------------------------------------------------------- | Net income from Non-life | 396 | 345 | 51 | 14.8 | | Insurance | | | | | -------------------------------------------------------------------------------- | Net income from Life Insurance | -120 | -139 | 19 | -14.0 | -------------------------------------------------------------------------------- | Net commissions and fees | 496 | 433 | 63 | 14.5 | -------------------------------------------------------------------------------- | Net trading and investment | 103 | -99 | 202 | | | income | | | | | -------------------------------------------------------------------------------- | Other operating income | 104 | 93 | 11 | 11.3 | -------------------------------------------------------------------------------- | Share of associates' | 1 | 1 | 1 | 77.5 | | profits/losses | | | | | -------------------------------------------------------------------------------- | Other income, total | 981 | 634 | 347 | 54.7 | -------------------------------------------------------------------------------- | Total income | 2,051 | 1,823 | 228 | 12.5 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Expenses | | | | | -------------------------------------------------------------------------------- | Personnel costs | 622 | 598 | 24 | 4.0 | -------------------------------------------------------------------------------- | Other administrative expenses | 310 | 328 | -18 | -5.4 | -------------------------------------------------------------------------------- | Other operating expenses | 316 | 312 | 3 | 1.0 | -------------------------------------------------------------------------------- | Total expenses | 1,248 | 1,238 | 10 | 0.8 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Impairment losses on | 179 | 58 | 121 | | | receivables | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Returns to owner-members and OP | | | | | | bonus customers | | | | | -------------------------------------------------------------------------------- | Bonuses | 142 | 132 | 10 | 7.7 | -------------------------------------------------------------------------------- | Interest on ordinary and | 18 | 22 | -4 | -19.1 | | supplementary cooperative | | | | | | capital | | | | | -------------------------------------------------------------------------------- | Total returns | 160 | 154 | 6 | 3.9 | -------------------------------------------------------------------------------- * Percentage points OP-Pohjola Group's total assets amounted to EUR 80.4 (75.7) on 31 December 2009. At the end of the review period, receivables from customers stood at EUR 53.0 billion (51.7) and deposits at EUR 34.6 billion (34.5). Debt securities issued to the public rose by 9.8% to EUR 19.9 billion (18.2). Pohjola Bank plc issued in 2009 two senior bonds, in May and August, with a maturity of three and five years, each worth EUR 750 million. In addition, OP Mortgage Bank issued in November a EUR 1.25-billion covered bond with a maturity of five years. Equity capital increased by 18.6% to EUR 6.2 billion (5.2). The capital base was increased not only by the financial period's earnings and the increased value of investment assets but also by EUR 171 million through a EUR 308 million subscription issue by Pohjola Bank plc, a subsidiary of OP-Pohjola Group Central Cooperative. The fair value reserve, adjusted for deferred tax assets, was EUR 54 million in the negative (minus EUR 556 million). This is mainly due to Life and Non-life Insurance investments. 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 276 million (51) were recognised in 2009. On 31 December, the cooperative capital investments and supplementary cooperative capital investments of the member cooperative banks' owner-members totalled EUR 750 million (695). Member banks' interest on the ordinary and supplementary cooperative capital recognised in 2009 totalled EUR 18 million (22). The Annual General Meeting of Pohjola Bank plc proposes that the company pay a dividend of EUR 0.34 for Series A shares and EUR 0.31 for Series K shares for 2009, totalling EUR 107 million (45). October-December Pre-tax earnings in the fourth quarter amounted to EUR 70 million (15). Income increased by 16% mainly thanks to higher net income from trading and non-life insurance and lower life insurance net losses. Reported expenses decreased by EUR 11 million. Year on year, fourth-quarter personnel costs increased by 2.6%, or EUR 4.2 million. Impairment losses on receivables came to EUR 52 million, or EUR 21 million higher year on year. The fair value reserve (gross) increased by EUR 131 million, while a year ago it shrank by EUR 299 million. Impairments of EUR 65 million were recognised in the fourth quarter. The Q4/2009 net interest income contracted by EUR 11 million from Q3/2009. Impairment losses on receivables were EUR 0.3 million less than in July-September. Net income from Non-Life Insurance went up from the previous quarter mainly owing to better investment performance. Pre-tax earnings were EUR 42 million lower than in the previous quarter. Pre-tax earnings at fair value were EUR 201 million as opposed to EUR 480 million in the preceding quarter. Fourth-quarter earnings analysis -------------------------------------------------------------------------------- | EUR million | Q4/ | Q4/ | Change, | Q3/ | Change, | | | 2009 | 2008 | % | 2009 | % | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings before tax | 70 | 15 | | 112 | -37.3 | -------------------------------------------------------------------------------- | Gross change in fair value | 131 | -299 | | 368 | -64.4 | | reserve | | | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax | 201 | -285 | | 480 | -58.1 | | at fair value | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Return on equity (ROE), % | 3.4 | -2.2 | 5.6* | 5.8 | -2.4* | -------------------------------------------------------------------------------- | Return on equity at fair | 9.7 | -18.7 | 28.4* | 24.2 | -14.6* | | value, % | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income | | | | | | -------------------------------------------------------------------------------- | Net interest income | 245 | 316 | -22.4 | 256 | -4.3 | -------------------------------------------------------------------------------- | Net income from Non-life | 94 | 72 | 31.9 | 113 | -16.4 | | Insurance | | | | | | -------------------------------------------------------------------------------- | Net income from Life | -31 | -49 | -36.3 | -60 | -47.9 | | Insurance | | | | | | -------------------------------------------------------------------------------- | Net commissions and fees | 125 | 102 | 23.1 | 120 | 4.8 | -------------------------------------------------------------------------------- | Net trading and investment | 27 | -46 | | 30 | -9.7 | | income | | | | | | -------------------------------------------------------------------------------- | Other operating income | 28 | 25 | 12.7 | 23 | 22.9 | -------------------------------------------------------------------------------- | Share of associates' | 0 | 0 | -11.3 | 1 | -42.6 | | profits/losses | | | | | | -------------------------------------------------------------------------------- | Other income, total | 244 | 104 | | 226 | 7.9 | -------------------------------------------------------------------------------- | Total income | 490 | 420 | 16.5 | 483 | 1.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Expenses | | | | | | -------------------------------------------------------------------------------- | Personnel costs | 154 | 158 | -2.6 | 142 | 8.5 | -------------------------------------------------------------------------------- | Other administrative | 87 | 97 | -11.0 | 67 | 29.5 | | expenses | | | | | | -------------------------------------------------------------------------------- | Other operating expenses | 88 | 84 | 4.5 | 71 | 23.7 | -------------------------------------------------------------------------------- | Total expenses | 328 | 339 | -3.3 | 280 | 17.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Impairment losses on | 52 | 31 | 65.4 | 52 | -0.5 | | receivables | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Returns to owner-members | | | | | | | and OP bonus customers | | | | | | -------------------------------------------------------------------------------- | Bonuses | 36 | 35 | 4.8 | 36 | 1.4 | -------------------------------------------------------------------------------- | Interest on ordinary and | 3 | 0 | | 3 | -2.4 | | supplementary cooperative | | | | | | | capital | | | | | | -------------------------------------------------------------------------------- | Total returns | 39 | 35 | 11.9 | 39 | 1.2 | -------------------------------------------------------------------------------- Capital adequacy Two sets of capital adequacy ratios are calculated for OP-Pohjola Group. OP-Pohjola Group is founded on the principles of 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 2010 in terms of operational risks. As a result of the financial crisis, banks' capital adequacy requirements will become tighter, in a effort to improve the quality of their capital base and to reduce the cyclic nature of capital requirements. These changes are only in their preparation stage, planned to be effective in 2012, and it is too early to predict precisely what their effects will be. However, OP-Pohjola Group's high capital adequacy provides a solid protection against even major legislation changes. Capital adequacy of the amalgamation of cooperative banks On 31 December, OP-Pohjola Group's capital adequacy ratio under the Credit Institutions Act and the Tier 1 ratio stood at 12.6%, that is, at the same level as the year before. The minimum capital adequacy ratio prescribed by law is 8%. -------------------------------------------------------------------------------- | Capital structure and capital adequacy | -------------------------------------------------------------------------------- | EUR million | 31 Dec | 31 Dec | Change, | Change, | | | 2009 | 2008 | EUR mill. | % | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital base | | | | | -------------------------------------------------------------------------------- | Tier 1 capital | 5,227 | 4,884 | 343 | 7.0 | -------------------------------------------------------------------------------- | Tier 2 capital | - | - | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total capital base | 5,227 | 4,884 | 343 | 7.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Risk-weighted assets, | 41,480 | 38,746 | 2,734 | 7.1 | | total | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Minimum capital | | | | | | requirement | | | | | -------------------------------------------------------------------------------- | Credit and counterparty | 3,005 | 2,832 | 174 | 6.1 | | risk | | | | | -------------------------------------------------------------------------------- | Market risk | 36 | 47 | -11 | -23.1 | -------------------------------------------------------------------------------- | Operational risk | 277 | 221 | 56 | 25.3 | -------------------------------------------------------------------------------- | Total | 3,318 | 3,100 | 219 | 7.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital adequacy ratio, | 12.6 | 12.6 | | 0.0* | | % | | | | | -------------------------------------------------------------------------------- | Tier 1 ratio, % | 12.6 | 12.6 | | 0.0* | -------------------------------------------------------------------------------- * Percentage points Tier 1 capital amounted to EUR 5,227 million on 31 December (4,884). The result for the year less the estimated dividend payout is regarded as Tier 1 capital. OP-Pohjola Group's Tier 1 capital increased by 7.0% during the year. 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 31 December, 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 on 31 December 2009. 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. EUR 7 million was redeemed under this authorisation and the remaining debts were included on 31 December under Tier 2 capital. At the end of the year, capital resources included the consolidation group's fair value reserve that was EUR 14 million in the black (84 in the red). On 31 December, insurance company investments, deducted in equal proportions from Tier 1 and 2 capital, came to EUR 2,341 million (2,159). EUR 162 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. The minimum capital requirement was EUR 3,318 million on 31 December (3,100), increasing by 7.1% in 2009. The most significant factor that contributed to this growth was the higher capital requirement concerning the loan and guarantee portfolio. 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. The financial and insurance conglomerate's minimum capital requirement consists of the credit institutions' consolidated minimum capital requirement and the insurance companies' joint minimum operating capital. On 31 December, OP-Pohjola Group's capital resources calculated according to the Act on the Supervision of Financial and Insurance Conglomerates exceeded the minimum amount specified in the Act by EUR 2,121 million (1,406). The insurance companies' equalisation provision is not included in the financial and insurance conglomerate's capital resources. On 31 December 2009, the combined non-life and life insurance equalisation provision less tax liabilities stood at EUR 527 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 | 31 Dec | 31 Dec | Change, | Change, | | | 2009 | 2008 | EUR mill. | % | -------------------------------------------------------------------------------- | OP-Pohjola Group's equity | 6,187 | 5,215 | 972 | 18.6 | | capital | | | | | -------------------------------------------------------------------------------- | Business-segment-specific | 1,843 | 1,873 | -30 | -1.6 | | items | | | | | -------------------------------------------------------------------------------- | Goodwill and intangible | -1,084 | -1,106 | 22 | -2.0 | | assets | | | | | -------------------------------------------------------------------------------- | Equalisation provision | -527 | -481 | -46 | 9.6 | -------------------------------------------------------------------------------- | Other items included in | -627 | -619 | -8 | 1.3 | | equity capital and | | | | | | business-segment-specific | | | | | | items, but not included in | | | | | | the conglomerate's capital | | | | | | resources | | | | | -------------------------------------------------------------------------------- | Conglomerate's capital | 5,792 | 4,882 | 910 | 18.6 | | base, total | | | | | -------------------------------------------------------------------------------- | Regulatory capital | 3,300 | 3,115 | 185 | 5.9 | | requirement for credit | | | | | | institutions | | | | | -------------------------------------------------------------------------------- | Regulatory capital | 371 | 361 | 10 | 2.8 | | requirement for insurance | | | | | | operations | | | | | -------------------------------------------------------------------------------- | Total minimum amount of | 3,671 | 3,476 | 195 | 5.6 | | conglomerate's capital | | | | | | base | | | | | -------------------------------------------------------------------------------- | Conglomerate's capital | 2,121 | 1,406 | 715 | 50.9 | | adequacy | | | | | -------------------------------------------------------------------------------- | Conglomerate's capital | 1.58 | 1.40 | | 0.17* | | adequacy ratio (capital | | | | | | resources/minimum of | | | | | | capital resources) | | | | | -------------------------------------------------------------------------------- * Change in ratio Risk exposure OP-Pohjola Group's risk-bearing capacity remained high and the risk position was stable, although the economic situation was poor in 2009. Thanks to high earnings at fair value and Pohjola's rights offering, the Group's risk-bearing capacity improved on the previous year. OP-Pohjola Group's credit risk exposure is stable. The recession weakened the credit portfolio quality and increased credit risks, but the proportion of non-performing and other doubtful receivables of the loan and guarantee portfolio is still quite low. The Group's financial position and liquidity remained strong. The low interest rates realised the Group's interest rate risk and weakened the net interest income. Favourable developments in the capital market increased investment income. OP-Pohjola Group's loan and guarantee portfolio stood at EUR 55.6 billion (53.9), or 3% higher year on year. Of the EUR 1.6 billion increase in the loan and guarantee portfolio, the majority was accounted for by the household sector. In 2009, home mortgages increased by 6% to EUR 25.7 billion, accounting for 46% (45%) by year-end of the Group's total loan and guarantee portfolio. Households accounted for 64% (63) and companies and housing associations 34% (34) of the entire loan and guarantee portfolio. OP-Pohjola Group's loan and guarantee portfolio is diversified. At the end of 2009, the largest single counterparty-related customer risk accounted for 6.9% (7.1) of the Group's capital resources. The biggest sector was the lease and management of flats, accounting for 16% of corporate exposure. The Group's corporate loan rating system covers almost all corporate customers. The purpose of rating is to put customers in different group according to the risk. The customer credit rating system is reassessed whenever necessary, but at least once a year. At the end of 2009, 97% of corporate exposures were rated. 49% (51) of the exposures fell into the top five credit portfolio categories (out of 12 categories), also known as investment grade. Exposures in the poorest categories (9-12) accounted for 6% (5). On 31 December 2009, OP-Pohjola Group's non-performing and zero-interest receivables came to EUR 223 million, up by 10% on the previous year. The ratio of non-performing and zero-interest loans to the loan and guarantee portfolio was 0.4% at the end of the financial year, the same as in 2008. Impairment losses on receivables were relatively low considering the economic situation, at a gross amount of EUR 212 million in 2009, which is 0.38% of the loan and guarantee portfolio. The Group's financial position and liquidity is good. Deposits accounted for about two-thirds of funding, this proportion being almost the same throughout the year, although deposit accounts became less lucrative as the interest rates fell. OP-Pohjola Group's financial position was boosted during the year thanks to bonds issued by Pohjola Bank plc and OP Mortgage Bank. Pohjola Bank plc maintains OP-Pohjola Group's liquidity reserve which mainly consists of notes and bonds eligible as collateral for central bank refinancing. Assets included in the liquidity reserve came to EUR 13.9 billion (13.1) at the end of 2009. The liquidity reserve and the means included in OP-Pohjola Group's liquidity management strategy ensure the Group's liquidity for at least 24 months. Low interest rates and declining credit growth eroded OP-Pohjola Group's net interest income. The falling net interest income was affected by the narrowing interest rate spread between loans and deposits and the rise in wholesale funding expenses. Market risk within non-life and life insurance is composed of the price, interest rate and currency risk. When market risks are assessed, we focus on those related to investments and technical provisions, primarily interest rate risk. Non-life Insurance's investment assets came to EUR 2.9 billion (2.4) and those of Life Insurance to EUR 4.1 billion EUR (3.9) on 31 December 2009. Insurance operations' technical provisions and the distribution of and profits from investment assets are covered in more detail in the sections dealing with individual business segments. Financial losses caused by operational risks were small. The credit ratings are as follows: -------------------------------------------------------------------------------- | Rating agency | Short-term debt | Long-term debt | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Fitch Ratings | F1+ | AA- | | (OP-Pohjola Group and | | | | Pohjola Bank plc) | | | -------------------------------------------------------------------------------- | Standard & Poor's (Pohjola | A-1+ | AA- | | Bank plc) | | | -------------------------------------------------------------------------------- | Moody's (Pohjola Bank plc) | P-1 | Aa2 | -------------------------------------------------------------------------------- Fitch Ratings provides a rating for both OP-Pohjola Group and Pohjola Bank plc. OP-Pohjola Group's financial position also has a considerable impact on credit ratings issued for Pohjola Bank plc alone. Standard & Poor's affirmed Pohjola's credit rating and retained the outlook as stable in January 2010. In September, Moody's downgraded Pohjola's credit rating for long-term debt to Aa2 but kept the rating for short-term debt at Prime-1-. The rating outlook remained negative. Fitch Ratings confirmed Pohjola's credit rating in July 2009, but changed the outlook for long-term debt to negative. The reason for the changes made by Moody's and Fitch was the sudden decline of the Finnish economy and its potential repercussions to Pohjola and OP-Pohjola Group, which operate mainly in Finland. 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 with the capacity to provide comprehensive services that can give a boost to both individuals and businesses. 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 | 2009 | Target | -------------------------------------------------------------------------------- | Capital adequacy (under | 1.40 | 1.58 | 1.5 | | the Act on the | | | | | Supervision of Financial | | | | | and Insurance | | | | | Conglomerates) | | | | -------------------------------------------------------------------------------- | Return on economic | 10.0% | 12.7% | 17% | | capital | | | | | (12-month rolling) | | | | -------------------------------------------------------------------------------- | Growth differential | -28.8% points | 11.7% points | > 0% points | | between income and | | | | | expenses, | | | | | percentage points | | | | | (12-month rolling) | | | | -------------------------------------------------------------------------------- Changes in OP-Pohjola Group's structure OP-Pohjola Group's consolidated financial statements include 220 member cooperative banks (227), 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 was merged with Haapaveden Osuuspankki on 31 December 2009. Kiukaisten Osuuspankki and Hinnerjoen Osuuspankki have decided to merge with Euran Osuuspankki. The planned date for the merger is 30 June 2010. 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 1,266,000 owner-members at the end of December, or 36,000 more than a year earlier. Group member banks and Helsinki OP Bank plc, which operates in the Greater Helsinki area, had a total of 1,098,000 OP bonus customers at the end of December. Loyal customer bonuses earned by OP bonus customers totalled EUR 142 million, up by 7.7% 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-December, OP bonus customers used a total of EUR 67 million (56) of bonuses on banking services and EUR 58 million (17) on Pohjola non-life insurance premiums. In 2009, OP bonuses have been used to pay over 914,000 insurance premiums, with 24.9% paid in full using bonuses. OP-Pohjola Group had 4,134,000 customers in Finland at the end of December. The number of private customers totalled 3,721,000 and that of corporate customers 413,000. In addition, OP-Pohjola Group has approximately 200,000 non-life insurance customers in the Baltic countries. In the year to December, the number of joint banking and non-life insurance customers in Finland increased by 74,000 to 1,067,000 as a result of cross-selling. On 31 December, loyal customer households numbered 425,000, increasing by 35,400 in 2009. 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 31 December 2008, OP-Pohjola Group had a staff of 12,504, down by 248 year on year. About 94% of OP-Pohjola Group's personnel are members in the Group's Personnel Fund. A long-term 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 OP-Pohjola Group's development and service centre and strategic owner institution, the Central Cooperative is also the central institution in charge of Group control and monitoring. 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 and service development 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 the EUR 78 million used for service development. EUR 46 million (43) of these expenses consisted of ICT procurement capitalised in the balance sheet in the report period. Of these investments, EUR 31 million (26) was allocated to banking and investment operations, EUR 9 million (11) to non-life insurance operations and EUR 6 million (6) 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 supervised 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 220 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 Investors' Compensation Fund, OP-Pohjola Group is also considered a single entity for purposes of compensation protection. Prospects for 2010 Following the deepest financial crisis in decades, the world economy turned into moderate growth thanks to measures taken by central banks and through public stimulus packages. The economy is expected to grow at a slow rate in 2010. Although the repercussions of the financial crisis on Finnish GDP were above average, Finland too is considered to have bottomed out by the end of 2009. The economy may have turned for the better and the financial markets stabilised, but predicting financial development is still difficult. Profit performance in the financial sector in 2010 will be weakened by sluggish growth, exceptionally low interest rates and consistently high credit losses. OP-Pohjola Group's 2010 result before taxes is expected to be at about the same level as in 2009. The greatest uncertainty is related to credit losses and changes in interest rates and the investment environment. All forward-looking statements in this Financial Statements Bulletin expressing the management's expectations, beliefs, estimates, forecasts, projections and assumptions are based on the current view of the future financial performance of OP-Pohjola Group and its various functions, and actual results may differ materially from those expressed in the forward-looking statements. Operations and earnings by business segment OP-Pohjola Group's business segments are Banking and Investment Services, Non-life Insurance and Life Insurance. Non-segment operations are presented in 'Other Operations'. OP-Pohjola Group's segment reporting is based on accounting policies applied in its financial statements. Amortisation on intangible assets arising from the Pohjola acquisition is allocated to the business segments. 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 | Income | Expense | Other | Earnings/lo | Earnings/lo | | | | s | items | ss before | ss before | | | | | | tax | tax | | | | | | 2009 | 2008 | -------------------------------------------------------------------------------- | Banking and | 1,701 | 903 | -328 | 471 | 532 | | Investment | | | | | | | Services | | | | | | -------------------------------------------------------------------------------- | Non-life Insurance | 419 | 317 | 0 | 102 | 55 | -------------------------------------------------------------------------------- | Life insurance | -94 | 65 | 0 | -159 | -162 | -------------------------------------------------------------------------------- | Other Operations | 396 | 333 | -12 | 51 | -24 | -------------------------------------------------------------------------------- | Eliminations | -372 | -370 | 0 | -1 | -29 | -------------------------------------------------------------------------------- | Total | 2,051 | 1,248 | -339 | 464 | 372 | -------------------------------------------------------------------------------- Banking and Investment Services - Mutual fund assets increased by 37%. The Group's market share of the value of the mutual funds rose by 0.9 percentage points to 23.4%. - The Group's market share of loans increased by 0.7 percentage points to 32.7% but as to deposits fell by 0.6 percentage points to 33.2%. - Earnings before tax shrank by 12% to EUR 471 million as a result of lower net interest income and higher credit losses. - Impairment losses on receivables increased to EUR 167 million (48). Within Banking and Investment Services, 2009 was a year 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 except in the first quarter; and the record-low interest rates sent the net interest income on a steep downward trend. OP-Pohjola Group had the biggest market shares in Finland in terms of deposits and credit volume in 2008. In 2009, the Group's market share in credits and fund capital improved further, but contracted in deposits. On 31 December, the Group's loan portfolio stood at EUR 52.6 billion (51.0), and the guarantee portfolio at EUR 3.0 billion (3.0). The loan portfolio grew by 3.2% (15) year-on-year. The market share of the loan portfolio increased year on year by 0.7 percentage point to 32.7%. The portfolio of home mortgages on 31 December amounted to EUR 25.7 billion (24.2). In the year to December, home mortgages increased by 6.4% (13).OP-Pohjola Group held 35.9% of the home mortgage portfolio on 31 December 2009, on the same level as last year. The average margin of new home mortgages in 2009 was double that in 2008. In the last quarter, however, margins fell somewhat as the price of banks' long-term funding turned down. The percentage of fixed-rate home mortgages of all home mortgages remained low at 1.9% (2.4). The housing market improved clearly. The volume of house sales brokered by OP-Kiinteistökeskus estate agents exceeded in the second half of 2009 that of the same period in 2007, the previous high point. The consumer credit portfolio totalled EUR 3.7 billion (3.7) at the end of the year, increasing in the year to December by 2.3% (11). On 31 December, the Group's corporate loan portfolio stood at EUR 13.4 billion (14), and the guarantee portfolio at EUR 2.7 billion (2.6). The corporate loan portfolio shrank by 5.0% during the year (+22). 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 2009 by 8.6%. The market share of corporate loans was 28.7% at the end of December, or up by 1.9 percentage points year on year. On 31 December, deposits totalled EUR 34.6 billion (34.5), or 0.2% higher than the previous year. A clear shift took place in the structure of deposits in 2009, from investment deposits to current accounts. Investment deposits shrank by 12.2% in the year to December (39), while current accounts increased by 15.5% (-1). The Group's market share of deposits was 33.2% at the end of December, or 0.6 percentage points lower than a year earlier. Capital invested in OP-Pohjola Group's mutual funds stood at EUR 12.7 billion (9.3) billion. The amount of capital increased along with the market trends by 36.8% in 2009. On 31 December, OP-Pohjola Group held a 23.4% market share of the capital of mutual funds registered in Finland, up by 0.9 percentage year on year. Net subscriptions to OP-Pohjola Group's mutual funds totalled EUR 1.6 billion (-2.3). On 31 December, assets managed by Pohjola Bank's Asset Management were worth EUR 33.1 billion (25.3), of which EUR 11.4 billion (8.5) was invested in OP-Pohjola Group's mutual funds. OP-Pohjola Group companies accounted for EUR 8.0 billion of assets managed by Pohjola Bank. Assets managed in accordance with the OP-Private operating model totalled EUR 3.6 billion (2.7). Stockbroking for households totalled some 908,000 in 2009, or up by 59.2% year on year. Earnings and risk exposure Banking and Investment Services's pre-tax earnings for 2009 were EUR 471 million (532), showing a 12% year-on-year decrease. Bonuses given out in the report period rose by 8% to EUR 142 million (132). Net interest income fell by 12.5% to EUR 981 million (1,121), while net commissions and fees rose by 19% to EUR 538 million (450). The fall in net interest income was caused by exceptionally low interest rates. Net trading and investment income totalled EUR 111 million (-27). Trading income developed extremely favourably, but on the other hand, revaluation losses were recorded of securities from the comparison period. Return of investments was burdened by EUR 19 million impairment losses related to available-for-sale investments. Personnel costs rose by 3.7% and other expenses by 2.7%. 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 53% (54). Impairments on receivables came to EUR 167 million (48), the increase being the result of a clearly weaker financial situation compared with last year. The amount of impairment losses was still quite low 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 223 million on 31 December, up by 10% year on year. Households' non-performing loan losses increased in the most. Non-performing and zero-interest loans are stated net of impairment losses on specific receivables and groups of receivables, which amounted to EUR 131 million (85). The ratio of non-performing and zero-interest loans to the loan and guarantee portfolio was about the same as last year at 0.4%. Banking and Investment Services, key figures -------------------------------------------------------------------------------- | EUR million | 2009 | 2008 | Change, | | | | | % | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | Net interest income | 981 | 1 121 | -12.5 | -------------------------------------------------------------------------------- | Impairment losses on | 167 | 48 | 247.3 | | receivables | | | | -------------------------------------------------------------------------------- | Other income | 720 | 489 | 47.3 | -------------------------------------------------------------------------------- | Personnel costs | 396 | 381 | 3.7 | -------------------------------------------------------------------------------- | Other expenses | 507 | 494 | 2.7 | -------------------------------------------------------------------------------- | Returns to owner-members and | 160 | 154 | 3.9 | | OP bonus | | | | | customers | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax | 471 | 532 | -11.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | 2009 | 2008 | Change, % | -------------------------------------------------------------------------------- | Home mortgages drawn down | 5,723 | 7,041 | -18.7 | -------------------------------------------------------------------------------- | Corporate loans drawn down | 6,325 | 8,271 | -23.5 | -------------------------------------------------------------------------------- | Net subscriptions to mutual | 1,618 | -2,308 | -170.1 | | funds | | | | -------------------------------------------------------------------------------- | No. of brokered property | 15,303 | 14,569 | 5.0 | | transactions | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR billion | 31 Dec 2009 | 31 Dec 2008 | Change, | | | | | % | -------------------------------------------------------------------------------- | Outstanding credit | | | | -------------------------------------------------------------------------------- | Home loans | 26 | 24 | 6.4 | -------------------------------------------------------------------------------- | Other loans to households | 10 | 10 | 2.7 | -------------------------------------------------------------------------------- | Corporate loans | 13 | 14 | -5.0 | -------------------------------------------------------------------------------- | Other loans | 4 | 3 | 18.4 | -------------------------------------------------------------------------------- | Total | 53 | 51 | 3.2 | -------------------------------------------------------------------------------- | Guarantee portfolio | 3 | 3 | 2.3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Deposits | | | | -------------------------------------------------------------------------------- | Total current and payment | | | | | transfer | | | | -------------------------------------------------------------------------------- | Households | 12 | 10 | 15.0 | -------------------------------------------------------------------------------- | Companies | 4 | 4 | 13.4 | -------------------------------------------------------------------------------- | Others | 2 | 2 | 22.6 | -------------------------------------------------------------------------------- | Total current and payment | 18 | 16 | 15.5 | | transfer | | | | -------------------------------------------------------------------------------- | Investment deposits | 17 | 19 | -12.2 | -------------------------------------------------------------------------------- | Total deposits | 35 | 35 | 0.2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Mutual funds | | | | -------------------------------------------------------------------------------- | Equity and hedge funds | 3.9 | 2.1 | 87.5 | -------------------------------------------------------------------------------- | Balanced funds | 1.5 | 1.3 | 12.7 | -------------------------------------------------------------------------------- | Long-term bond funds | 5.0 | 4.0 | 26.4 | -------------------------------------------------------------------------------- | Money market funds | 2.3 | 1.9 | 19.8 | -------------------------------------------------------------------------------- | Total value of mutual funds | 12.7 | 9.3 | 36.8 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Market share, % | 31 Dec | 31 Dec | Change, | | | 2009 | 2008 | % points | -------------------------------------------------------------------------------- | Total loans | 32.7 | 32.0 | 0.7 | -------------------------------------------------------------------------------- | Home mortgages | 35.9 | 35.9 | 0 | -------------------------------------------------------------------------------- | Corporate loans | 28.7 | 26.8 | 1.9 | -------------------------------------------------------------------------------- | Total deposits | 33.2 | 33.8 | -0.6 | -------------------------------------------------------------------------------- | Capital invested in mutual | 23.4 | 22.5 | 0.9 | | funds | | | | -------------------------------------------------------------------------------- | EUR million | | | | -------------------------------------------------------------------------------- | Non-performing and | | | Change, % | | zero-interest | | | | | receivables | | | | -------------------------------------------------------------------------------- | Households | 138 | 122 | 13.1 | -------------------------------------------------------------------------------- | Companies and housing | 70 | 63 | 11.8 | | associations | | | | -------------------------------------------------------------------------------- | Other | 15 | 18 | -17.3 | -------------------------------------------------------------------------------- | Total non-performing and | 223 | 203 | 10.0 | | zero-interest | | | | | receivables | | | | -------------------------------------------------------------------------------- | Non-performing and | 0.4 | 0.4 | 0.03* | | zero-interest receivables | | | | | within loan and guarantee | | | | | portfolio, % | | | | -------------------------------------------------------------------------------- * Percentage points Non-life Insurance - Total insurance premium revenue was up by 2%. Insurance premium revenue from private customers increased by 12%, but the recession cut revenues from corporate customers. - The number of loyal customer households increased by 9%, reaching 425,000 by the end of the year. - Non-life Insurance's earnings before tax improved to EUR 102 million (55). Non-life Insurance recorded very good profitability. The operating combined ratio stood at 87.7% (91.5). - Return on investments at fair value was 10.7% (-7.0). The non-life insurance business improved well in 2009. On 31 December, the number of loyal customer households within the Non-life Insurance segment totalled 425,000, showing a year-on-year increase of 9%. Insurance premium revenue rose by 2.1% to EUR 943 million (923). The growth in private customer business was largely based on the steep increase in insurance sales by Group member banks. Insurance premium revenue from Corporate Customers and the Baltic countries decreased due to the recession. Insurance premium revenue from Private Customers improved by 12%% to EUR 424 million. Insurance sales to private customers were transferred to Group member banks in October 2008 with excellent growth: non-life insurance sales to private customers rose by 29% in 2009. The reporting period saw the sales network strengthen when an increasing number of OP-Pohjola Group member banks joined the insurance sales network and increased the number of their insurance salespersons. OP-Pohjola Group member banks became Finland's biggest non-life insurance sales channel for private customers in 2009. Within Corporate Customers, insurance premium revenue decreased by 5% to EUR 461 million (485). The most drastic fall was seen in statutory workers' compensation insurance, considering that payroll bills which determine insurance premiums were on the decrease. Falling corporate net sales and profits have also been reflected in insurance premiums. In the Baltic States, insurance premium revenue fell by 2% to EUR 57 million (58). 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. OP-Pohjola Group's position as Finland's leading non-life insurer is estimated to have solidified in 2009. 55% 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 58 million in 2009 (18). Bonuses were used to pay almost 914,000 bills and some 228,000 bills were paid using bonuses alone. Earnings and risk exposure Pre-tax earnings from Non-life Insurance amounted to EUR 102 million (55). The balance on technical account was clearly better than last year. The combined ratio stood at 90.7% (94.7) and the operating combined ratio at 87.7% (91.5). Insurance premium revenue totalled EUR 943 million (923) and indemnities EUR 560 million (591). Net investment income recognised under earnings came to EUR 61 million (59), or EUR 2 million higher year on year. Investment income included EUR 37 million writedowns of available-for-sale securities (17). 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 190 (204) such losses in 2009, with their claims incurred retained for own account totalling EUR 85 million (84). The risk ratio was 58.4 (63.1). The non-life insurance segment's expenses grew by 3.6% to EUR 317 million (306). Personnel costs shrank by 1.3%, largely because the staff selling insurance to private customers joined the payroll of OP-Pohjola Group member cooperative banks in October 2008. Operating expenses as specified in the insurance company's profit and loss account and loss adjustment expenses grew to EUR 276 million (262). This growth coupled with a slowdown in insurance premium revenue weakened the cost ratio, standing at 29.3% (28.4). Non-life Insurance's year-end solvency capital stood at EUR 827 million (608). The ratio between solvency capital and insurance premium revenue (solvency ratio) was 88% (66). Thanks to the very good balance on technical account, the equalisation provision increased to EUR 417 million (362). On 31 December, the investment portfolio of Non-life Insurance totalled EUR 2.9 billion (2.4). Return on investments at fair value was 10.7% (-7.0). Of the investment portfolio, fixed-income investments accounted for 76% (81), listed equities for 10% (4) and equities, including unlisted investments, represented 13% (8). The fixed-income portfolio by credit rating remained healthy, with investment-grade exposure reaching 94% (94) and 80% of the exposure being at least A- grade receivables. The average residual maturity of the fixed-income portfolio was 4.9 years and the duration 3.3 years (4.3). Non-life Insurance: key figures -------------------------------------------------------------------------------- | EUR million | 2009 | 2008 | Change, | | | | | % | -------------------------------------------------------------------------------- | Insurance premium revenue | 943 | 923 | 2.1 | -------------------------------------------------------------------------------- | Insurance claims and benefits | 560 | 591 | -5.2 | -------------------------------------------------------------------------------- | Net investment income | 61 | 59 | 2.5 | -------------------------------------------------------------------------------- | Unwinding of discount and | -44 | -40 | 9.7 | | other items included in net | | | | | income | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 400 | 352 | 13.6 | | Insurance | | | | -------------------------------------------------------------------------------- | Other net income | 20 | 9 | 124.2 | -------------------------------------------------------------------------------- | Personnel costs | 110 | 111 | -1.3 | -------------------------------------------------------------------------------- | Other expenses | 207 | 195 | 6.4 | -------------------------------------------------------------------------------- | Earnings/loss before tax | 102 | 55 | 86.7 | -------------------------------------------------------------------------------- | Gross change in fair value | 188 | -226 | | | reserve | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax at fair | 291 | -171 | | | value | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | 2009 | 2008 | Change, | | | | | % | -------------------------------------------------------------------------------- | Insurance premium revenue | | | | -------------------------------------------------------------------------------- | Private Customers | 424.3 | 379.6 | 11.8 | -------------------------------------------------------------------------------- | Corporate Customers | 461.2 | 485.3 | -5.0 | -------------------------------------------------------------------------------- | Baltic States | 57.1 | 58.3 | -2.1 | -------------------------------------------------------------------------------- | Total insurance premium revenue | 943 | 923 | 2.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR billion | 31 Dec | 31 Dec | Change, | | | 2009 | 2008 | % | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | Insurance contract liabilities | | | | -------------------------------------------------------------------------------- | Discounted insurance contract | 1.3 | 1.3 | 5.0 | | liabilities | | | | -------------------------------------------------------------------------------- | Other insurance contract | 0.8 | 0.8 | -3.9 | | liabilities | | | | -------------------------------------------------------------------------------- | Total | 2.1 | 2.1 | 1.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investment portfolio | | | | -------------------------------------------------------------------------------- | Bonds and bond funds | 2.1 | 1.7 | 22.3 | -------------------------------------------------------------------------------- | Money market instruments | 0.1 | 0.3 | -63.7 | -------------------------------------------------------------------------------- | Equities and equity funds | 0.4 | 0.2 | 91.8 | -------------------------------------------------------------------------------- | Real property investment *) | 0.2 | 0.1 | 13.1 | -------------------------------------------------------------------------------- | Alternative investments | 0.2 | 0.1 | 39.3 | -------------------------------------------------------------------------------- | Total | 2.9 | 2.4 | 18.0 | -------------------------------------------------------------------------------- *) Includes real estate funds Life insurance - Business focus was moved, according to the new strategy, to unit-linked endowment insurance, with their premiums written increasing by 34%. - Return on investments at fair value was 8.8% (-12.0). - Profit for the period at fair value was good. Accounting results were burdened by considerable impairments concerning available-for-sale assets. The life insurance market's premiums written rose by 17.9% in the year to December 2009. The life insurance market increase was largely contributed by the fact that in addition to traditional insurance products, premiums written were channelled more than in previous years to capital redemption contracts containing asset management services. The premiums written in life and pension insurance of the Life Insurance segment stood at EUR 678 million (717), or down by 5.5% year on year. The life and pension insurance strategy was updated in 2009. The focus of sales was moved, according to the strategy, to unit-linked endowment insurance, which increased its premiums written by 34.4%. Premiums written in interest-bearing endowment insurance declined by 36.1%, and those of personal pension plans by 0.1%. The comparability of premiums written in life insurance is also affected by an insurance portfolio transfer of EUR 36 million included in the 2008 figures. Unit-linked premiums written accounted for 54.2%. OP-Pohjola Group increased its market share in life insurance savings to 20% (19.4). The market share in unit-linked insurance savings was 24.6% (24.2). The market share in premiums written fell by 4.3 percentage points to 25%. Claims paid by the Life insurance segment totalled EUR 499 million (642.6), of which surrenders accounted for EUR 138 million (332). Reported pension payout in 2009 came to EUR 60 million (49). Earnings and risk exposure Earnings before tax at fair value were good: EUR 194 million (-565). The fair value reserve change before tax stood at EUR 354 million (-403). Earnings before tax from Life Insurance were EUR -159 million (-162). The result in 2009 was eroded by a decrease in the fair value of investment assets recognised in the profit and loss that mostly originated in late 2008. Net losses from Life Insurance were EUR 110 million (losses of EUR 126 million). A provision worth EUR 12 million for future supplementary benefits was made in 2009, while a year earlier the provision was reversed by EUR 10 million. Net losses from investment assets other than those covering unit-linked insurance stood at EUR 63 million (losses of EUR 94 million). Investment income includes EUR 213 million impairments of available-for-sale securities (-27). Investment income was eroded during the comparison year by a negative valuation of EUR 100 million of notes and bonds recognised at fair value in the profit and loss. EUR 39 million of this was reflected in the result in 2009. Personnel costs totalled EUR 8.6 million (5.1). This increase is mainly attributed to higher pension costs allocated to the segment. Other expenses grew by 19.3% to EUR 57 million (48). Cost ratio was 84.0% (75.2). The cost ratio in which sales channel fees are excluded and in which all income to cover business expenses are included as income, came to 31.7% (29.1). Other expenses include EUR 30 million (26) in commissions paid to the sales network. Life Insurance's technical provisions totalled EUR 6.0 billion (5.3) on 31 December. Interest-bearing contract liabilities accounted for 61% and unit-linked 39% 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 8.8% (-12.0). The proportion of equities of the total investment assets increased to 17.2% (5.0). Fixed-income instruments accounted for 64.2% (73) of the investment assets. Investments under the 'investment grade' accounted for approximately 77% (83) of the fixed-income portfolio. The portfolio's modified duration was 3.6 years (3.6). Life Insurance's solvency margin was EUR 551 million (236). On 31 December, the solvency margin was 2.8-fold the required minimum. OP-Pohjola Group Central Cooperative invested a total of EUR 150 million in non-restricted equity in the beginning of the year. In addition to this investment, the quick recovery of investment markets increased OP Life Assurance Company's operating. Life Insurance: key figures -------------------------------------------------------------------------------- | EUR million | 2009 | 2008 | Change, % | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | Premiums written | 678 | 717 | -5.5 | -------------------------------------------------------------------------------- | Unit-linked | 368 | 299 | 23.1 | -------------------------------------------------------------------------------- | Other | 310 | 418 | -25.9 | -------------------------------------------------------------------------------- | Net investment income | 371 | -802 | -146.2 | -------------------------------------------------------------------------------- | Unit-linked | 433 | -708 | -161.2 | -------------------------------------------------------------------------------- | Other | -63 | -94 | -33.3 | -------------------------------------------------------------------------------- | Change in insurance contract | 653 | -590 | -210.7 | | liabilities | | | | -------------------------------------------------------------------------------- | Unit-linked | 761 | -758 | -200.3 | -------------------------------------------------------------------------------- | Other | -108 | 168 | -163.9 | -------------------------------------------------------------------------------- | Claims incurred | 499 | 643 | -22.3 | -------------------------------------------------------------------------------- | Other items | -7 | 12 | -155.6 | -------------------------------------------------------------------------------- | Net income from Life Insurance | -110 | -126 | -12.1 | -------------------------------------------------------------------------------- | Other income | 16 | 16 | 3.2 | -------------------------------------------------------------------------------- | Personnel costs | 9 | 5 | 67.2 | -------------------------------------------------------------------------------- | Other expenses | 57 | 48 | 19.3 | -------------------------------------------------------------------------------- | Earnings/loss before tax | -159 | -162 | -1.9 | -------------------------------------------------------------------------------- | Gross change in fair value | 354 | -403 | -187.8 | | reserve | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax at fair | 194 | -565 | -134.4 | | value | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | 2009 | 2008 | Change, % | -------------------------------------------------------------------------------- | Premiums written, FAS | | | | -------------------------------------------------------------------------------- | Endowment insurance | 385 | 382 | 1.0 | -------------------------------------------------------------------------------- | Pension insurance | 235 | 279 | -15.8 | -------------------------------------------------------------------------------- | Term life insurance | 71 | 73 | -2.8 | -------------------------------------------------------------------------------- | Other | 81 | 34 | 140.7 | -------------------------------------------------------------------------------- | Total premiums written | 771 | 767 | 0.6 | -------------------------------------------------------------------------------- | of which unit-linked | 377 | 317 | 18.7 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | Market share of premiums written | 25.0 | 29.3 | -4.3 | | in life and pension insurance, % | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR billion | 31 Dec | 31 Dec | Change, | | | 2009 | 2008 | % | -------------------------------------------------------------------------------- | Insurance savings | | | | -------------------------------------------------------------------------------- | Endowment insurance | 4.0 | 3.7 | 8.3 | -------------------------------------------------------------------------------- | Pension insurance | 1.9 | 1.5 | 22.4 | -------------------------------------------------------------------------------- | Capital redemption contracts | 0.2 | 0.1 | 51.8 | -------------------------------------------------------------------------------- | Total insurance savings | 6.1 | 5.4 | 13.2 | -------------------------------------------------------------------------------- | of which unit-linked | 2.4 | 1.6 | 47.8 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investment portfolio | | | | -------------------------------------------------------------------------------- | Bonds and bond funds | 2.5 | 2.3 | 9.1 | -------------------------------------------------------------------------------- | Money market instruments | 0.2 | 0.6 | -68.9 | -------------------------------------------------------------------------------- | Equities and equity funds | 0.7 | 0.2 | 251.4 | -------------------------------------------------------------------------------- | Real property investment **) | 0.3 | 0.3 | -4.5 | -------------------------------------------------------------------------------- | Alternative investments | 0.5 | 0.5 | -7.5 | -------------------------------------------------------------------------------- | Total investment portfolio | 4.1 | 3.9 | 7.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Market share of insurance savings | 20.0 | 19.4 | 0.6 | | in life and pension insurance, % | | | | -------------------------------------------------------------------------------- * Percentage points ** Includes real estate funds Other Operations Other Operations' pre-tax earnings for January-December were EUR 51 million, that is, EUR 75 million better than last year (EUR 24 million in the red). Net trading income was reduced last year by the EUR 71-million negative mark-to-market valuations of notes and bonds recognised at fair value through profit or loss. Towards the end 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'. The reclassification was reflected in higher year-on-year net trading income and net interest income. The price difference of reclassified notes and bonds recognised in the income statement in 2009 totalled EUR 20 million. Net investment income was EUR 72 million (39), net trading loss EUR 7 million (loss of EUR 61 million) and the net investment losses EUR 5 million (income of EUR 10 million). The return of investments was burdened by EUR 9 million impairment losses related to available-for-sale assets. 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 108 million (100) were personnel costs and EUR 225 million (235) other costs. Other Operations: key figures -------------------------------------------------------------------------------- | EUR million | 2009 | 2008 | Change, % | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | Net interest income | 72 | 39 | 83.1 | -------------------------------------------------------------------------------- | Net trading income | -7 | -61 | -88.9 | -------------------------------------------------------------------------------- | Net investment income | -5 | 10 | -151.1 | -------------------------------------------------------------------------------- | Other income | 336 | 334 | 0.7 | -------------------------------------------------------------------------------- | Expenses | 333 | 337 | -1.0 | -------------------------------------------------------------------------------- | Impairment losses on | 12 | 10 | 24.9 | | receivables | | | | -------------------------------------------------------------------------------- | Earnings/loss before tax | 51 | -24 | -313.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR billion | 31 Dec 2009 | 31 Dec 2008 | Change, % | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | Receivables from financial | 7.4 | 6.3 | 16.9 | | institutions | | | | -------------------------------------------------------------------------------- | Financial assets held for | 0.4 | 1.9 | -81.3 | | trading | | | | -------------------------------------------------------------------------------- | Investment assets | 6.5 | 2.5 | 164.1 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | Liabilities to credit | 4.6 | 3.4 | 36.3 | | institutions | | | | -------------------------------------------------------------------------------- | Debt securities issued to the | 17.5 | 17.1 | 2.5 | | 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 | Q1-4/ | Q1-4/ | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- | Interest income | 3,072 | 4,853 | -37 | -------------------------------------------------------------------------------- | Interest expenses | 2,002 | 3,664 | -45 | -------------------------------------------------------------------------------- | Net interest income (Note 2) | 1,070 | 1,189 | -10 | -------------------------------------------------------------------------------- | Impairments of receivables (Note 3) | 179 | 58 | | -------------------------------------------------------------------------------- | Net interest income after | 891 | 1,131 | -21 | | impairments | | | | -------------------------------------------------------------------------------- | Net income from Non-life Insurance | 396 | 345 | 15 | | operations | | | | | (Note 4) | | | | -------------------------------------------------------------------------------- | Net income from Life Insurance | -120 | -139 | -14 | | operations (Note 5) | | | | -------------------------------------------------------------------------------- | Net commissions and fees (Note 6) | 496 | 433 | 14 | -------------------------------------------------------------------------------- | Net trading income (Note 7) | 112 | -125 | | -------------------------------------------------------------------------------- | Net investment income (Note 8) | -9 | 25 | | -------------------------------------------------------------------------------- | Other operating income (Note 9) | 104 | 93 | 11 | -------------------------------------------------------------------------------- | Personnel costs (Note 10) | 622 | 598 | 4 | -------------------------------------------------------------------------------- | Other administrative expenses (Note | 310 | 328 | -5 | | 11) | | | | -------------------------------------------------------------------------------- | Other operating expenses (Note 12) | 316 | 312 | 1 | -------------------------------------------------------------------------------- | Returns to owner-members (Note 13) | 160 | 154 | 4 | -------------------------------------------------------------------------------- | Share of associates' profits/losses | 1 | 1 | 78 | -------------------------------------------------------------------------------- | Earnings before tax for the period | 464 | 372 | 25 | -------------------------------------------------------------------------------- | Income tax expense | 126 | 151 | -17 | -------------------------------------------------------------------------------- | Profit for the period | 338 | 221 | 53 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | OP-Pohjola Group statement of comprehensive | | | | income | | | -------------------------------------------------------------------------------- | EUR million | Q1-4/ | Q1-4/ | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- | Profit for the period | 338 | 221 | 53 | -------------------------------------------------------------------------------- | Change in fair value reserve | 677 | -737 | | -------------------------------------------------------------------------------- | Translation differences | 0 | 0 | | -------------------------------------------------------------------------------- | Income tax on other comprehensive | 175 | -191 | | | income | | | | -------------------------------------------------------------------------------- | Total comprehensive income for the | 839 | -324 | | | period | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Key figures and ratios | Q1-4/ | Q1-4/ | | | 2009 | 2008 | -------------------------------------------------------------------------------- | Return on equity, % | 5.9 | 4.1 | -------------------------------------------------------------------------------- | Return on equity at fair value, % | 14.7 | -6.0 | -------------------------------------------------------------------------------- | Return on assets, % | 0.43 | 0.31 | -------------------------------------------------------------------------------- | Cost/income ratio, % | 61 | 68 | -------------------------------------------------------------------------------- | Average personnel | 12,632 | 12,615 | -------------------------------------------------------------------------------- | Full-time | 11,520 | 11,464 | -------------------------------------------------------------------------------- | Part-time | 1,112 | 1,151 | -------------------------------------------------------------------------------- Definition of key figures and ratios Return on equity, % 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, % Profit for the period / Statement of financial position 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 adjustment expenses / Net insurance premium revenue x 100 Operating cost ratio, % Operating expenses before change in deferred acquisitions costs + loss adjustment expenses/ Expense loading x 100 OP-Pohjola Group quarterly performance -------------------------------------------------------------------------------- | | 2008 | 2009 | -------------------------------------------------------------------------------- | EUR million | Q4 | Q1 | Q2 | Q3 | Q4 | -------------------------------------------------------------------------------- | Interest income | 1,343 | 1,003 | 794 | 670 | 605 | -------------------------------------------------------------------------------- | Interest expenses | 1,026 | 716 | 512 | 414 | 359 | -------------------------------------------------------------------------------- | Net interest income | 316 | 287 | 282 | 256 | 245 | -------------------------------------------------------------------------------- | Impairments of | 31 | 29 | 46 | 52 | 52 | | receivables | | | | | | -------------------------------------------------------------------------------- | Net interest income after | 285 | 258 | 235 | 204 | 194 | | impairments | | | | | | -------------------------------------------------------------------------------- | Net income from Non-life | 72 | 69 | 120 | 113 | 94 | | Insurance operations | | | | | | -------------------------------------------------------------------------------- | Net income from Life | -49 | -21 | -8 | -60 | -31 | | Insurance operations | | | | | | -------------------------------------------------------------------------------- | Net commissions and fees | 102 | 130 | 121 | 120 | 125 | -------------------------------------------------------------------------------- | Net trading income | -30 | 28 | 26 | 33 | 25 | -------------------------------------------------------------------------------- | Net investment income | -16 | -8 | 0 | -3 | 2 | -------------------------------------------------------------------------------- | Other operating income | 25 | 25 | 27 | 23 | 28 | -------------------------------------------------------------------------------- | Personnel costs | 158 | 163 | 163 | 142 | 154 | -------------------------------------------------------------------------------- | Other administrative | 97 | 80 | 76 | 67 | 87 | | expenses | | | | | | -------------------------------------------------------------------------------- | Other operating expenses | 84 | 76 | 81 | 71 | 88 | -------------------------------------------------------------------------------- | Returns to owner-members | 35 | 38 | 44 | 39 | 39 | -------------------------------------------------------------------------------- | Share of associates' | 0 | 0 | 0 | 1 | 0 | | profits/losses | | | | | | -------------------------------------------------------------------------------- | Earnings before tax for | 15 | 124 | 157 | 112 | 70 | | the period | | | | | | -------------------------------------------------------------------------------- | Income tax expense | 45 | 61 | 20 | 27 | 18 | -------------------------------------------------------------------------------- | Profit for the period | -30 | 63 | 137 | 85 | 52 | -------------------------------------------------------------------------------- | Other comprehensive | | | | | | | income | | | | | | -------------------------------------------------------------------------------- | Change in fair value | -299 | -40 | 217 | 368 | 131 | | reserve | | | | | | -------------------------------------------------------------------------------- | Translation differences | 0 | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Income tax on other | -78 | -10 | 56 | 95 | 34 | | comprehensive income | | | | | | -------------------------------------------------------------------------------- | Total comprehensive | -251 | 34 | 298 | 358 | 149 | | income for the period | | | | | | -------------------------------------------------------------------------------- OP-Pohjola Group balance sheet -------------------------------------------------------------------------------- | EUR million | 31 Dec | 31 Dec | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- | Cash and cash equivalents | 3,235 | 2,393 | 35 | -------------------------------------------------------------------------------- | Receivables from credit institutions | 1,982 | 2,450 | -19 | -------------------------------------------------------------------------------- | Financial assets at fair value | 1,263 | 3,313 | -62 | | through profit or loss | | | | -------------------------------------------------------------------------------- | Derivative contracts | 1,423 | 1,470 | -3 | -------------------------------------------------------------------------------- | Receivables from customers | 52,992 | 51,708 | 2 | -------------------------------------------------------------------------------- | Non-life Insurance assets (Note 16) | 3,101 | 2,670 | 16 | -------------------------------------------------------------------------------- | Life Insurance assets (Note 17) | 6,331 | 5,093 | 24 | -------------------------------------------------------------------------------- | Investment assets | 6,468 | 2,441 | | -------------------------------------------------------------------------------- | Investments in associates | 17 | 17 | -2 | -------------------------------------------------------------------------------- | Intangible assets | 1,179 | 1,211 | -3 | -------------------------------------------------------------------------------- | Property, plant and equipment (PPE) | 761 | 762 | 0 | -------------------------------------------------------------------------------- | Other assets | 1,572 | 1,814 | -13 | -------------------------------------------------------------------------------- | Tax assets | 108 | 403 | -73 | -------------------------------------------------------------------------------- | Total assets | 80,430 | 75,746 | 6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Liabilities to credit institutions | 2,174 | 693 | | -------------------------------------------------------------------------------- | Financial liabilities at fair value | 71 | 138 | -49 | | through profit or loss | | | | -------------------------------------------------------------------------------- | Derivative contracts | 1,360 | 1,565 | -13 | -------------------------------------------------------------------------------- | Liabilities to customers | 37,606 | 37,082 | 1 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 2,279 | 2,238 | 2 | -------------------------------------------------------------------------------- | Life Insurance liabilities | 6,179 | 5,413 | 14 | -------------------------------------------------------------------------------- | Debt securities issued to the public | 19,945 | 18,164 | 10 | | (Note 18) | | | | -------------------------------------------------------------------------------- | Provisions and other liabilities | 1,832 | 2,393 | -23 | -------------------------------------------------------------------------------- | Tax liabilities | 925 | 971 | -5 | -------------------------------------------------------------------------------- | Cooperative capital | 622 | 570 | 9 | -------------------------------------------------------------------------------- | Subordinated liabilities | 1,250 | 1,304 | -4 | -------------------------------------------------------------------------------- | Total liabilities | 74,243 | 70,531 | 5 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Equity capital | | | | -------------------------------------------------------------------------------- | Share of OP-Pohjola Group's owners | | | | -------------------------------------------------------------------------------- | Share and cooperative capital | 358 | 362 | -1 | -------------------------------------------------------------------------------- | Fair value reserve (Note 19) | -54 | -556 | -90 | -------------------------------------------------------------------------------- | Other reserves | 2,604 | 2,375 | 10 | -------------------------------------------------------------------------------- | Retained earnings | 3,280 | 3,034 | 8 | -------------------------------------------------------------------------------- | Minority interest | - | - | | -------------------------------------------------------------------------------- | Total equity capital | 6,187 | 5,215 | 19 | -------------------------------------------------------------------------------- | Total liabilities and equity capital | 80,430 | 75,746 | 6 | -------------------------------------------------------------------------------- Statement of changes in equity capital -------------------------------------------------------------------------------- | EUR million | Share | Fair | Other | Retaine | Minorit | Total | | | and | value | reserve | d | y | equity | | | cooper | reserv | s | earning | interes | capital | | | ative | e | | s | t | | | | capita | | | | | | | | l | | | | | | -------------------------------------------------------------------------------- | Balance at 1 | 359 | -10 | 2,235 | 3,052 | 3 | 5,638 | | January 2008 | | | | | | | -------------------------------------------------------------------------------- | Increase of share | - | - | - | - | - | - | | capital | | | | | | | -------------------------------------------------------------------------------- | Transfer of | 7 | - | - | - | - | 7 | | cooperative | | | | | | | | capital to equity | | | | | | | | capital | | | | | | | -------------------------------------------------------------------------------- | Transfer of | - | - | 138 | -138 | - | - | | reserves | | | | | | | -------------------------------------------------------------------------------- | Profit | - | - | - | -77 | - | -77 | | distribution | | | | | | | -------------------------------------------------------------------------------- | Total | - | -545 | - | 221 | 0 | -324 | | comprehensive | | | | | | | | income for the | | | | | | | | period | | | | | | | -------------------------------------------------------------------------------- | Equity-settled | - | - | - | 0 | - | 0 | | share-based | | | | | | | | transactions | | | | | | | -------------------------------------------------------------------------------- | Other | -5 | - | 2 | -24 | -2 | -29 | -------------------------------------------------------------------------------- | Balance at 31 | 362 | -556 | 2,375 | 3,034 | - | 5,215 | | December 2008 | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Balance at 1 | 362 | -556 | 2,375 | 3,034 | - | 5,215 | | January 2009 | | | | | | | -------------------------------------------------------------------------------- | Transfer of | 4 | - | - | - | - | 4 | | cooperative | | | | | | | | capital to equity | | | | | | | | capital | | | | | | | -------------------------------------------------------------------------------- | Rights issue | - | - | 176 | - | - | 176 | -------------------------------------------------------------------------------- | Issue expenses | - | - | -7 | - | - | -7 | -------------------------------------------------------------------------------- | Transfer of | - | - | 62 | -62 | - | - | | reserves | | | | | | | -------------------------------------------------------------------------------- | Profit | - | - | - | -31 | - | -31 | | distribution | | | | | | | -------------------------------------------------------------------------------- | Total | - | 501 | - | 338 | - | 839 | | comprehensive | | | | | | | | income for the | | | | | | | | period | | | | | | | -------------------------------------------------------------------------------- | Equity-settled | - | - | - | 0 | - | 0 | | share-based | | | | | | | | transactions | | | | | | | -------------------------------------------------------------------------------- | Other | -7 | - | -2 | 0 | - | -10 | -------------------------------------------------------------------------------- | Balance at 31 | 358 | -54 | 2,604 | 3,280 | - | 6,187 | | December 2009 | | | | | | | -------------------------------------------------------------------------------- Cash flow statement -------------------------------------------------------------------------------- | EUR million | Q1-4/ | Q1-4/ | | | 2009 | 2008 | -------------------------------------------------------------------------------- | Cash flow from operating activities | | | -------------------------------------------------------------------------------- | Profit for the period | 338 | 221 | -------------------------------------------------------------------------------- | Adjustments to profit for the period | 1,211 | 891 | -------------------------------------------------------------------------------- | Increase (-) or decrease (+) in operating | -4,041 | -8,505 | | assets | | | -------------------------------------------------------------------------------- | Receivables from credit institutions | 391 | 30 | -------------------------------------------------------------------------------- | Financial assets at fair value through profit | 1,901 | -747 | | or loss | | | -------------------------------------------------------------------------------- | Derivative contracts | -36 | -89 | -------------------------------------------------------------------------------- | Receivables from customers | -1,479 | -6,135 | -------------------------------------------------------------------------------- | Non-life Insurance assets | -350 | -211 | -------------------------------------------------------------------------------- | Life Insurance assets | -849 | 501 | -------------------------------------------------------------------------------- | Investment assets | -3,894 | -1,427 | -------------------------------------------------------------------------------- | Other assets | 275 | -428 | -------------------------------------------------------------------------------- | Increase (+) or decrease (-) in operating | 1,375 | 5,316 | | liabilities | | | -------------------------------------------------------------------------------- | Liabilities to credit institutions | 1,481 | -433 | -------------------------------------------------------------------------------- | Financial liabilities at fair value through | -67 | 86 | | profit or loss | | | -------------------------------------------------------------------------------- | Derivative contracts | -9 | 104 | -------------------------------------------------------------------------------- | Liabilities to customers | 524 | 5,862 | -------------------------------------------------------------------------------- | Non-life Insurance liabilities | 43 | 68 | -------------------------------------------------------------------------------- | Life Insurance liabilities | 113 | -106 | -------------------------------------------------------------------------------- | Provisions and other liabilities | -710 | -266 | -------------------------------------------------------------------------------- | Income tax paid | -65 | -165 | -------------------------------------------------------------------------------- | Dividends received | 58 | 73 | -------------------------------------------------------------------------------- | A. Net cash from operating activities | -1,125 | -2,169 | -------------------------------------------------------------------------------- | Cash flow from investing activities | | | -------------------------------------------------------------------------------- | Increases in held-to-maturity financial assets | -416 | -209 | -------------------------------------------------------------------------------- | Decreases in held-to-maturity financial assets | 482 | 69 | -------------------------------------------------------------------------------- | Acquisition of subsidiaries, net of cash | 0 | -35 | | acquired | | | -------------------------------------------------------------------------------- | Disposal of subsidiaries, net of cash disposed | 1 | 14 | -------------------------------------------------------------------------------- | Purchase of PPE and intangible assets | -88 | -106 | -------------------------------------------------------------------------------- | Proceeds from sale of PPE and intangible | 5 | 1 | | assets | | | -------------------------------------------------------------------------------- | B. Net cash used in investing activities | -16 | -266 | -------------------------------------------------------------------------------- | Cash flow from financing activities | | | -------------------------------------------------------------------------------- | Increases in subordinated liabilities | 211 | 439 | -------------------------------------------------------------------------------- | Decreases in subordinated liabilities | -267 | -176 | -------------------------------------------------------------------------------- | Increases in debt securities issued to the | 55,596 | 47,716 | | public | | | -------------------------------------------------------------------------------- | Decreases in debt securities issued to the | -53,823 | -43,611 | | public | | | -------------------------------------------------------------------------------- | Increases in cooperative and share capital | 276 | 176 | -------------------------------------------------------------------------------- | Decreases in cooperative and share capital | -221 | -170 | -------------------------------------------------------------------------------- | Dividends paid and interest on cooperative | -52 | -101 | | capital | | | -------------------------------------------------------------------------------- | Returns to owner-members | -7 | 0 | -------------------------------------------------------------------------------- | Increases in invested unrestricted equity | 171 | - | -------------------------------------------------------------------------------- | Other | - | - | -------------------------------------------------------------------------------- | C. Net cash from financing activities | 1,885 | 4,273 | -------------------------------------------------------------------------------- | Net change in cash and cash equivalents | 744 | 1,838 | | (A+B+C) | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents at period-start | 2,538 | 700 | -------------------------------------------------------------------------------- | Cash and cash equivalents at period-end | 3,282 | 2,538 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Interest received | 3,152 | 5,213 | -------------------------------------------------------------------------------- | Interest paid | -2,474 | -3,402 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Adjustments to profit for the period | | | -------------------------------------------------------------------------------- | Non-cash transactions and other adjustments | | | -------------------------------------------------------------------------------- | Impairments of receivables | 190 | 52 | -------------------------------------------------------------------------------- | Unrealised net earnings in Non-life Insurance | 106 | 85 | -------------------------------------------------------------------------------- | Unrealised net earnings in Life Insurance | 501 | 229 | -------------------------------------------------------------------------------- | Change in fair value for trading | 42 | 17 | -------------------------------------------------------------------------------- | Unrealised net gains on foreign exchange | -23 | -13 | | operations | | | -------------------------------------------------------------------------------- | Change in fair value of investment property | 11 | 0 | -------------------------------------------------------------------------------- | Depreciation and amortisation | 135 | 134 | -------------------------------------------------------------------------------- | Share of associates' profits/losses | 0 | 0 | -------------------------------------------------------------------------------- | Other | 225 | 365 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Items presented outside cash flow from | | | | operating activities | | | -------------------------------------------------------------------------------- | Capital gains, share of cash flow from | -1 | -1 | | investing activities | | | -------------------------------------------------------------------------------- | Interest on cooperative capital | 18 | 22 | -------------------------------------------------------------------------------- | Other returns to owner-members | 7 | 0 | -------------------------------------------------------------------------------- | Total adjustments | 1,211 | 891 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents | | | -------------------------------------------------------------------------------- | Liquid assets | 140 | 183 | -------------------------------------------------------------------------------- | Receivables from credit institutions payable | 3,143 | 2,355 | | on demand | | | -------------------------------------------------------------------------------- | Total | 3,282 | 2,538 | -------------------------------------------------------------------------------- Notes Note 1. Accounting policies 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 | Premiums written, claims paid, change in | | Insurance operations | provision for unearned premiums and for unpaid | | | claims, investment income, expenses (interest, | | | dividends, realised capital gains and losses) | | | and impairments | -------------------------------------------------------------------------------- | Net income from Life | Premiums written, claims paid, change in | | Insurance operations | provision 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 | Office expenses, IT costs, other administrative | | expenses | 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 | Q1-4/ | Q1-4/ | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Loans and other receivables | 1,718 | 2,723 | -37 | -------------------------------------------------------------------------------- | Receivables from credit institutions | 93 | 73 | 28 | | and central banks | | | | -------------------------------------------------------------------------------- | Notes and bonds | 238 | 381 | -37 | -------------------------------------------------------------------------------- | Derivatives held for trading (net) | 79 | -16 | | -------------------------------------------------------------------------------- | Liabilities to credit institutions | -13 | -86 | -84 | -------------------------------------------------------------------------------- | Liabilities to customers | -472 | -1,010 | -53 | -------------------------------------------------------------------------------- | Debt securities issued to the public | -430 | -844 | -49 | -------------------------------------------------------------------------------- | Subordinated debt | -36 | -43 | -17 | -------------------------------------------------------------------------------- | Hybrid capital | -11 | -11 | 2 | -------------------------------------------------------------------------------- | Financial liabilities held for | -5 | -19 | -71 | | trading | | | | -------------------------------------------------------------------------------- | Other (net) | 4 | 17 | -76 | -------------------------------------------------------------------------------- | Net interest income before items | 1,165 | 1,166 | 0 | | under hedge accounting | | | | -------------------------------------------------------------------------------- | Derivatives under hedge accounting | -95 | 23 | | | (net) | | | | -------------------------------------------------------------------------------- | Total net interest income | 1,070 | 1,189 | -10 | -------------------------------------------------------------------------------- Note 3 Impairments of receivables -------------------------------------------------------------------------------- | EUR million | Q1-4/ | Q1-4/ | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Impairments of receivables | 199 | 73 | | -------------------------------------------------------------------------------- | Reversals of impairments | -22 | -17 | -30 | -------------------------------------------------------------------------------- | Payments on impaired receivables | -11 | -6 | -66 | | amortised from statement of | | | | | financial position | | | | -------------------------------------------------------------------------------- | Net change in group-specific | 12 | 8 | 54 | | impairments | | | | -------------------------------------------------------------------------------- | Total | 179 | 58 | | -------------------------------------------------------------------------------- Note 4 Net income from Non-life Insurance -------------------------------------------------------------------------------- | EUR million | Q1-4/ | Q1-4/ | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net insurance premium revenue | | | | -------------------------------------------------------------------------------- | Premiums written | 1,005 | 991 | 1 | -------------------------------------------------------------------------------- | Insurance premiums ceded to | -51 | -42 | -21 | | reinsurers | | | | -------------------------------------------------------------------------------- | Change in provision for unearned | -15 | -24 | 38 | | premiums | | | | -------------------------------------------------------------------------------- | Reinsurers' share | 4 | -1 | | -------------------------------------------------------------------------------- | Total | 943 | 923 | 2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net Non-life Insurance claims | | | | -------------------------------------------------------------------------------- | Claims paid | -595 | -602 | 1 | -------------------------------------------------------------------------------- | Insurance claims recovered from | 20 | 14 | 41 | | reinsurers | | | | -------------------------------------------------------------------------------- | Change in provision for unpaid | 30 | -30 | | | claims | | | | -------------------------------------------------------------------------------- | Reinsurers' share | -15 | 27 | | -------------------------------------------------------------------------------- | Total | -560 | -591 | 5 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net investment income, Non-life | | | | | Insurance | | | | -------------------------------------------------------------------------------- | Interest income | 68 | 70 | -4 | -------------------------------------------------------------------------------- | Capital gains and losses and | | | | | realised changes in fair value | | | | -------------------------------------------------------------------------------- | Notes and bonds | 7 | -16 | | -------------------------------------------------------------------------------- | Shares and participations | 15 | -27 | | -------------------------------------------------------------------------------- | Loans and receivables | 0 | 0 | | -------------------------------------------------------------------------------- | Property | 1 | 2 | -76 | -------------------------------------------------------------------------------- | Other | -21 | -10 | | -------------------------------------------------------------------------------- | Unrealised changes in fair value | | | | -------------------------------------------------------------------------------- | Notes and bonds | 1 | -4 | | -------------------------------------------------------------------------------- | Shares and participations | -20 | 4 | | -------------------------------------------------------------------------------- | Loans and receivables | -3 | 0 | | -------------------------------------------------------------------------------- | Property | 1 | 3 | -64 | -------------------------------------------------------------------------------- | Other | -2 | 1 | | -------------------------------------------------------------------------------- | Dividend income | 7 | 26 | -73 | -------------------------------------------------------------------------------- | Other | 4 | 3 | 25 | -------------------------------------------------------------------------------- | Total | 58 | 53 | 9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Unwinding of discount | -43 | -42 | -3 | -------------------------------------------------------------------------------- | Other | -1 | 2 | | -------------------------------------------------------------------------------- | Net income from Non-life Insurance | 396 | 345 | 15 | -------------------------------------------------------------------------------- Note 5 Net income from Life Insurance -------------------------------------------------------------------------------- | EUR million | Q1-4/ | Q1-4/ | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Premiums written | 703 | 745 | -6 | -------------------------------------------------------------------------------- | Reinsurers' share | -25 | -28 | 11 | -------------------------------------------------------------------------------- | Total | 678 | 717 | -5 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Claims incurred | | | | -------------------------------------------------------------------------------- | Benefits paid | -504 | -645 | 22 | -------------------------------------------------------------------------------- | Change in provision for unpaid | -13 | -47 | 73 | | claims | | | | -------------------------------------------------------------------------------- | Reinsurers' share | 5 | 3 | | -------------------------------------------------------------------------------- | Change in insurance contract | | | | | liabilities | | | | -------------------------------------------------------------------------------- | Change in life insurance provision | -640 | 602 | | -------------------------------------------------------------------------------- | Reinsurers' share | 11 | 25 | -57 | -------------------------------------------------------------------------------- | Total | -1,140 | -63 | 0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Other | -19 | 22 | | -------------------------------------------------------------------------------- | Total | -481 | 677 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net investment income, Life | | | | | Insurance | | | | -------------------------------------------------------------------------------- | Interest income | 53 | 44 | 19 | -------------------------------------------------------------------------------- | Capital gains and losses and | | | | | realised changes in fair value | | | | -------------------------------------------------------------------------------- | Notes and bonds | -8 | -26 | 69 | -------------------------------------------------------------------------------- | Shares and participations | 28 | -15 | | -------------------------------------------------------------------------------- | Loans and receivables | -8 | - | | -------------------------------------------------------------------------------- | Property | 0 | 0 | -77 | -------------------------------------------------------------------------------- | Other | -12 | -52 | 78 | -------------------------------------------------------------------------------- | Unrealised changes in fair value | | | | -------------------------------------------------------------------------------- | Notes and bonds | -3 | -100 | 97 | -------------------------------------------------------------------------------- | Shares and participations | -150 | -27 | | -------------------------------------------------------------------------------- | Loans and receivables | - | - | | -------------------------------------------------------------------------------- | Property | -1 | 0 | | -------------------------------------------------------------------------------- | Other | -15 | 18 | | -------------------------------------------------------------------------------- | Dividend income | 40 | 34 | 15 | -------------------------------------------------------------------------------- | Other | 6 | 15 | -62 | -------------------------------------------------------------------------------- | Assets serving as cover for | | | | | unit-linked policies | | | | -------------------------------------------------------------------------------- | Shares and participations | | | | -------------------------------------------------------------------------------- | Capital gains and losses | 65 | -30 | | -------------------------------------------------------------------------------- | Fair value gains and losses | 353 | -697 | | -------------------------------------------------------------------------------- | Other | 15 | 19 | -20 | -------------------------------------------------------------------------------- | Total | 362 | -816 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net income from Life Insurance | -120 | -139 | 14 | -------------------------------------------------------------------------------- Note 6 Commissions and fees -------------------------------------------------------------------------------- | EUR million | Q1-4/ | Q1-4/ | | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission income | | | | -------------------------------------------------------------------------------- | Lending | 139 | 102 | 37 | -------------------------------------------------------------------------------- | Deposits | 5 | 5 | -5 | -------------------------------------------------------------------------------- | Payment transfers | 132 | 121 | 9 | -------------------------------------------------------------------------------- | Securities brokerage | 22 | 20 | 11 | -------------------------------------------------------------------------------- | Securities issuance | 13 | 4 | | -------------------------------------------------------------------------------- | Mutual funds brokerage | 60 | 67 | -11 | -------------------------------------------------------------------------------- | Asset management and legal services | 54 | 51 | 5 | -------------------------------------------------------------------------------- | Insurance brokerage | 73 | 63 | 17 | -------------------------------------------------------------------------------- | Guarantees | 21 | 14 | 50 | -------------------------------------------------------------------------------- | Other | 48 | 46 | 4 | -------------------------------------------------------------------------------- | Total | 567 | 494 | 15 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Commission expenses | | | | -------------------------------------------------------------------------------- | Total | 71 | 61 | 17 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net commissions and fees | 496 | 433 | 14 | -------------------------------------------------------------------------------- Note 7 Net trading income -------------------------------------------------------------------------------- | EUR million | Q1-4/ | Q1-4/ | | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital gains and losses | | | | -------------------------------------------------------------------------------- | Notes and bonds | 37 | -15 | | -------------------------------------------------------------------------------- | Shares and participations | -3 | -2 | 10 | -------------------------------------------------------------------------------- | Derivatives | 123 | -26 | | -------------------------------------------------------------------------------- | Changes in fair value | | | | -------------------------------------------------------------------------------- | Notes and bonds | -9 | -51 | -82 | -------------------------------------------------------------------------------- | Shares and participations | 17 | -19 | | -------------------------------------------------------------------------------- | Derivatives | -66 | -11 | | -------------------------------------------------------------------------------- | Financial assets and liabilities | | | | | amortised at cost | | | | -------------------------------------------------------------------------------- | Capital gains and losses | | | | -------------------------------------------------------------------------------- | Loans and other receivables | 0 | - | | -------------------------------------------------------------------------------- | Dividend income | 0 | 1 | -35 | -------------------------------------------------------------------------------- | Net income from foreign exchange | 12 | -1 | | | operations | | | | -------------------------------------------------------------------------------- | Total | 112 | -125 | | -------------------------------------------------------------------------------- Note 8 Net investment income -------------------------------------------------------------------------------- | EUR million | Q1-4/ | Q1-4/ | | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Available-for-sale financial assets | | | | -------------------------------------------------------------------------------- | Capital gains and losses | | | | -------------------------------------------------------------------------------- | Notes and bonds | 2 | -5 | | -------------------------------------------------------------------------------- | Shares and participations | 0 | 1 | -69 | -------------------------------------------------------------------------------- | Other | - | - | | -------------------------------------------------------------------------------- | Dividend income | 9 | 12 | -24 | -------------------------------------------------------------------------------- | Impairment losses | -28 | -6 | | -------------------------------------------------------------------------------- | Total | -16 | 3 | | -------------------------------------------------------------------------------- | Investment property | | | | -------------------------------------------------------------------------------- | Rental income | 48 | 49 | -3 | -------------------------------------------------------------------------------- | Maintenance charges and expenses | -30 | -29 | 1 | -------------------------------------------------------------------------------- | Changes in fair value, capital gains | -11 | 2 | | | and losses | | | | -------------------------------------------------------------------------------- | Other | 1 | 1 | -8 | -------------------------------------------------------------------------------- | Total | 8 | 22 | -65 | -------------------------------------------------------------------------------- | Other | 0 | 0 | | -------------------------------------------------------------------------------- | Net investment income | -9 | 25 | | -------------------------------------------------------------------------------- Note 9 Other operating income -------------------------------------------------------------------------------- | EUR million | Q1-4/ | Q1-4/ | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income from property and business | 14 | 12 | 15 | | premises in own use | | | | -------------------------------------------------------------------------------- | Other | 90 | 81 | 11 | -------------------------------------------------------------------------------- | Total | 104 | 93 | 11 | -------------------------------------------------------------------------------- Note 10 Personnel costs -------------------------------------------------------------------------------- | EUR million | Q1-4/ | Q1-4/ | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Wages and salaries | 534 | 512 | 4 | -------------------------------------------------------------------------------- | Pension costs | 58 | 55 | 4 | -------------------------------------------------------------------------------- | Other social expenses | 31 | 31 | 0 | -------------------------------------------------------------------------------- | Total | 622 | 598 | 4 | -------------------------------------------------------------------------------- Note 11 Other administrative expenses -------------------------------------------------------------------------------- | EUR million | Q1-4/ | Q1-4/ | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Office expenses | 66 | 47 | 39 | -------------------------------------------------------------------------------- | IT expenses | 101 | 110 | -8 | -------------------------------------------------------------------------------- | Telecommunications expenses | 37 | 38 | -4 | -------------------------------------------------------------------------------- | Marketing expenses | 53 | 61 | -13 | -------------------------------------------------------------------------------- | Other administrative expenses | 54 | 71 | -25 | -------------------------------------------------------------------------------- | Total | 310 | 328 | -5 | -------------------------------------------------------------------------------- Note 12 Other operating expenses -------------------------------------------------------------------------------- | EUR million | Q1-4/ | Q1-4/ | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Expenses for property and business | 73 | 74 | -1 | | premises in own use | | | | -------------------------------------------------------------------------------- | Depreciation | 135 | 134 | 1 | -------------------------------------------------------------------------------- | Other | 107 | 104 | 3 | -------------------------------------------------------------------------------- | Total | 316 | 312 | 1 | -------------------------------------------------------------------------------- Note 13 Returns to owner-members -------------------------------------------------------------------------------- | EUR million | Q1-4/ | Q1-4/ | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonuses | 142 | 132 | 8 | -------------------------------------------------------------------------------- | Interest on cooperative capital | 18 | 22 | -19 | -------------------------------------------------------------------------------- | Total | 160 | 154 | 4 | -------------------------------------------------------------------------------- Note 14. Classification of financial instruments -------------------------------------------------------------------------------- | EUR million | Loans | Investm | Financi | Availab | Hedging | Total | | | and | ents | al | le-for- | derivat | | | | other | held to | assets | sale | ives | | | | receiv | maturit | at fair | financi | | | | | ables | y | value | al | | | | | | | through | assets | | | | | | | profit | | | | | | | | or | | | | | | | | loss* | | | | -------------------------------------------------------------------------------- | Assets | | | | | | | -------------------------------------------------------------------------------- | Cash and balances | 3,235 | - | - | - | - | 3,235 | | with central | | | | | | | | banks | | | | | | | -------------------------------------------------------------------------------- | Receivables from | 1,982 | - | - | - | - | 1,982 | | credit | | | | | | | | institutions and | | | | | | | | central banks | | | | | | | -------------------------------------------------------------------------------- | Derivative | - | - | 1,267 | - | 156 | 1,423 | | contracts | | | | | | | -------------------------------------------------------------------------------- | Receivables from | 52,992 | - | - | - | - | 52,992 | | customers | | | | | | | -------------------------------------------------------------------------------- | Non-life | 725 | - | 85 | 2,290 | - | 3,101 | | Insurance | | | | | | | | assets** | | | | | | | -------------------------------------------------------------------------------- | Life Insurance | 554 | - | 2,686 | 3,091 | - | 6,331 | | assets*** | | | | | | | -------------------------------------------------------------------------------- | Notes and bonds | - | 1,163 | 1,198 | 4,443 | - | 6,803 | -------------------------------------------------------------------------------- | Shares and | - | - | 65 | 406 | - | 471 | | participations | | | | | | | -------------------------------------------------------------------------------- | Other receivables | 3,637 | - | 456 | - | - | 4,093 | -------------------------------------------------------------------------------- | Total 31 December | 63,125 | 1,163 | 5,757 | 10,229 | 156 | 80,430 | | 2009 | | | | | | | -------------------------------------------------------------------------------- | Total 31 December | 62,545 | 1,198 | 6,661 | 5,224 | 117 | 75,746 | | 2008 | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | | | Financi | Other | Hedging | Total | | | | | al | liabili | derivat | | | | | | liabili | ties | ives | | | | | | ties at | | | | | | | | fair | | | | | | | | value | | | | | | | | through | | | | | | | | profit | | | | | | | | or | | | | | | | | loss*** | | | | | | | | * | | | | -------------------------------------------------------------------------------- | Liabilities | | | | | | | -------------------------------------------------------------------------------- | Liabilities to | - | - | - | 2,174 | - | 2,174 | | credit | | | | | | | | institutions | | | | | | | -------------------------------------------------------------------------------- | Financial | - | - | 71 | - | - | 71 | | liabilities held | | | | | | | | for trading | | | | | | | | (excl. | | | | | | | | derivatives) | | | | | | | -------------------------------------------------------------------------------- | Derivative | - | - | 1,195 | - | 166 | 1,360 | | contracts | | | | | | | -------------------------------------------------------------------------------- | Liabilities to | - | - | - | 37,606 | - | 37,606 | | customers | | | | | | | -------------------------------------------------------------------------------- | Non-life | - | - | 0 | 2,279 | - | 2,279 | | Insurance | | | | | | | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Life Insurance | - | - | 2,335 | 3,843 | - | 6,179 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Debt securities | - | - | - | 19,945 | - | 19,945 | | issued to the | | | | | | | | public | | | | | | | -------------------------------------------------------------------------------- | Subordinated | - | - | - | 1,250 | - | 1,250 | | loans | | | | | | | -------------------------------------------------------------------------------- | Other liabilities | - | - | - | 3,379 | - | 3,379 | -------------------------------------------------------------------------------- | Total 31 December | - | - | 3,601 | 70,476 | 166 | 74,243 | | 2009 | | | | | | | -------------------------------------------------------------------------------- | 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 31 December 2009, the fair value of these debt instruments was approximately EUR 88 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: -------------------------------------------------------------------------------- | 31 December 2009, EUR | Carryin | Fair | Effectiv | Impairments | | million | g | value | e | arising from | | | amount | | interest | credit risk | | | | | rate | | -------------------------------------------------------------------------------- | Loans and other receivables | 2,838 | 2,856 | 5.1 | 71 | -------------------------------------------------------------------------------- | Investments held to maturity | 798 | 761 | 4.2 | - | -------------------------------------------------------------------------------- | Available-for-sale financial | - | - | - | - | | assets | | | | | -------------------------------------------------------------------------------- | Total | 3,636 | 3,617 | | 71 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 31 December 2008, EUR | Carryin | Fair | Effectiv | Impairments | | million | g | value | e | arising from | | | amount | | interest | credit risk | | | | | rate | | -------------------------------------------------------------------------------- | 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 had not been reclassified but measured using fair values available in the market: -------------------------------------------------------------------------------- | | 1 Jan-31 Dec 2009 | 31 December 2008 | -------------------------------------------------------------------------------- | EUR million | Income | Fair | Income | Fair | | | statement | value | statement | value | | | | reserve | | reserve | -------------------------------------------------------------------------------- | Banking | 10 | 2 | -21 | -10 | -------------------------------------------------------------------------------- | Non-life Insurance | - | 27 | - | -24 | -------------------------------------------------------------------------------- | Life Insurance | 10 | 32 | 0 | -26 | -------------------------------------------------------------------------------- | Group Functions | 80 | 42 | -162 | -15 | -------------------------------------------------------------------------------- | Total | 100 | 103 | -183 | -75 | -------------------------------------------------------------------------------- Interest accrued on reclassified notes and bonds in January-December totalled EUR 137.9 million. Interest accrued from 1 July 2008, the reclassification date, totalled EUR 113 million. The price difference between the nominal value and acquisition value recognised in the income statement totalled EUR 43 million (19). Impairments recognised on bonds and notes totalled EUR 41 million (9). 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 | 31 Dec | 31 Dec | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investments | | | | -------------------------------------------------------------------------------- | Loan and other receivables | 379 | 419 | -9 | -------------------------------------------------------------------------------- | Shares and participations | 391 | 318 | 23 | -------------------------------------------------------------------------------- | Property | 78 | 81 | -5 | -------------------------------------------------------------------------------- | Notes and bonds | 1,381 | 1,075 | 29 | -------------------------------------------------------------------------------- | Other | 526 | 422 | 25 | -------------------------------------------------------------------------------- | Total | 2,755 | 2,316 | 19 | -------------------------------------------------------------------------------- | Other assets | | | | -------------------------------------------------------------------------------- | Prepayments and accrued income | 38 | 33 | 16 | -------------------------------------------------------------------------------- | Other | | | | -------------------------------------------------------------------------------- | Arising from direct insurance | 214 | 218 | -2 | | operations | | | | -------------------------------------------------------------------------------- | Arising from reinsurance operations | 89 | 100 | -11 | -------------------------------------------------------------------------------- | Cash in hand and at bank | 4 | 4 | 10 | -------------------------------------------------------------------------------- | Total | 346 | 355 | -3 | -------------------------------------------------------------------------------- | Non-life Insurance assets | 3,101 | 2,670 | 16 | -------------------------------------------------------------------------------- Note 17 Life Insurance assets -------------------------------------------------------------------------------- | EUR million | 31 Dec | 31 Dec | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investments | | | | -------------------------------------------------------------------------------- | Loan and other receivables | 446 | 422 | 6 | -------------------------------------------------------------------------------- | Shares and participations | 2,777 | 2,259 | 23 | -------------------------------------------------------------------------------- | Property | 122 | 123 | -1 | -------------------------------------------------------------------------------- | Notes and bonds | 496 | 550 | -10 | -------------------------------------------------------------------------------- | Other | 0 | 0 | -100 | -------------------------------------------------------------------------------- | Total | 3,841 | 3,354 | 15 | -------------------------------------------------------------------------------- | Assets covering unit-linked | | | | | insurance contracts | | | | -------------------------------------------------------------------------------- | Shares and participations | 2,381 | 1,614 | 48 | -------------------------------------------------------------------------------- | Other assets | | | | -------------------------------------------------------------------------------- | Prepayments and accrued income | 25 | 23 | 9 | -------------------------------------------------------------------------------- | Other | | | | -------------------------------------------------------------------------------- | Arising from direct insurance | 33 | 20 | 59 | | operations | | | | -------------------------------------------------------------------------------- | Arising from reinsurance operations | 50 | 38 | 32 | -------------------------------------------------------------------------------- | Cash in hand and at bank | 1 | 44 | -98 | -------------------------------------------------------------------------------- | Total | 108 | 125 | -13 | -------------------------------------------------------------------------------- | Life Insurance assets | 6,331 | 5,093 | 24 | -------------------------------------------------------------------------------- Note 18 Debt securities issued to the public -------------------------------------------------------------------------------- | EUR million | 31 Dec | 31 Dec | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bonds | 9,168 | 7,654 | 20 | -------------------------------------------------------------------------------- | Certificates of deposit, commercial | 10,549 | 10,322 | 2 | | papers and ECPs | | | | -------------------------------------------------------------------------------- | Other | 227 | 188 | 21 | -------------------------------------------------------------------------------- | Total | 19,945 | 18,164 | 10 | -------------------------------------------------------------------------------- Note 19 Fair value reserve after income tax -------------------------------------------------------------------------------- | EUR million | 31 Dec | 31 Dec | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Notes and bonds | 24 | -84 | | -------------------------------------------------------------------------------- | Shares and participations | -79 | -472 | -83 | -------------------------------------------------------------------------------- | Total | -54 | -556 | -90 | -------------------------------------------------------------------------------- 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. The fair value reserve before tax amounted to EUR -74 million (-751) and the related deferred tax asset came to EUR 19 million (195). On 31 December 2009, positive mark-to-market valuations of equity instruments before tax in the fair value reserve totalled EUR 180 million and negative mark-to-market valuations EUR 265 million. During 2007-09, impairments recognised from the fair value reserve in the income statement totalled EUR 367 million, of which EUR 276 million were recognised in 2009. Other notes Note 20 Collateral given -------------------------------------------------------------------------------- | EUR million | 31 Dec | 31 Dec | Change, % | | | 2009 | 2008 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Given on behalf of own liabilities | | | | | and commitments | | | | -------------------------------------------------------------------------------- | Mortgages | 1 | 1 | 0 | -------------------------------------------------------------------------------- | Pledges | 5,839 | 4,135 | 41 | -------------------------------------------------------------------------------- | Other | 600 | 400 | 50 | -------------------------------------------------------------------------------- | Total | 6,440 | 4,536 | 42 | -------------------------------------------------------------------------------- Note 21 Off-balance-sheet items -------------------------------------------------------------------------------- | EUR million | 31 Dec | 31 Dec 2008 | Change, % | | | 2009 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Guarantees | 1,391 | 1,180 | 18 | -------------------------------------------------------------------------------- | Other guarantee liabilities | 1,548 | 1,777 | -13 | -------------------------------------------------------------------------------- | Pledges | 1 | 1 | -43 | -------------------------------------------------------------------------------- | Loan commitments | 8,789 | 7,397 | 19 | -------------------------------------------------------------------------------- | Commitments related to short-term | 131 | 177 | -26 | | trade transactions | | | | -------------------------------------------------------------------------------- | Other | 785 | 485 | 62 | -------------------------------------------------------------------------------- | Total off-balance-sheet items | 12,644 | 11,018 | 15 | -------------------------------------------------------------------------------- Note 22 Derivative contracts 31 Dec 2009 -------------------------------------------------------------------------------- | EUR million | Nominal values / remaining term to | Fair values | | | maturity | | -------------------------------------------------------------------------------- | | <1 year | 1-5 | >5 | Total | Assets | Liabil | | | | years | years | | | ities | -------------------------------------------------------------------------------- | Interest rate | 42,048 | 45,394 | 12,995 | 100,437 | 1,155 | 1,104 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Currency | 11,274 | 1,959 | 489 | 13,722 | 239 | 338 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Equity and | 177 | 814 | 41 | 1,032 | 87 | 0 | | index-linked | | | | | | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Credit | 56 | 178 | - | 234 | 4 | 2 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Other derivatives | 3,850 | 252 | - | 4,102 | 3 | 24 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total derivatives | 57,406 | 48,597 | 13,525 | 119,528 | 1,488 | 1,469 | -------------------------------------------------------------------------------- 31 Dec 2009 -------------------------------------------------------------------------------- | EUR million | Nominal values / remaining term to | Fair values | | | maturity | | -------------------------------------------------------------------------------- | | <1 year | 1-5 | >5 | Total | Assets | Liabil | | | | years | years | | | ities | -------------------------------------------------------------------------------- | Interest rate | 30,177 | 45,771 | 11,891 | 87,839 | 1,093 | 1,006 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Currency | 12,634 | 1,128 | 1,037 | 14,799 | 426 | 734 | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Equity and | 127 | 525 | - | 652 | 21 | 2 | | index-linked | | | | | | | | derivatives | | | | | | | -------------------------------------------------------------------------------- | Credit | 188 | 179 | - | 367 | 4 | 21 | | derivatives | | | | | | | --------------------------------------------------------------------------------| Other derivatives | - | 16 | - | 16 | 1 | - | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total derivatives | 43,126 | 47,620 | 12,928 | 103,673 | 1,545 | 1,764 | -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- | 31 Dec 2009 | | | | -------------------------------------------------------------------------------- | EUR million | Associates | Management | Others | -------------------------------------------------------------------------------- | Loans | 100 | 4 | - | -------------------------------------------------------------------------------- | Other receivables | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Deposits | 0 | 11 | 63 | -------------------------------------------------------------------------------- | 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 | - | 5 | - | -------------------------------------------------------------------------------- | Performance-based pay | - | - | - | -------------------------------------------------------------------------------- | Holdings of related parties | | | | -------------------------------------------------------------------------------- | Number of share options | - | - | - | -------------------------------------------------------------------------------- | Number of shares | - | 155,676 | 5,784,097 | -------------------------------------------------------------------------------- | Number of participations | - | 4,799 | - | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 31 Dec 2008 | | | | -------------------------------------------------------------------------------- | EUR million | Associates | Management | Others | -------------------------------------------------------------------------------- | Loans | 147 | 3 | - | -------------------------------------------------------------------------------- | Other receivables | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Deposits | 6 | 11 | 36 | -------------------------------------------------------------------------------- | 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 | - | 4 | - | -------------------------------------------------------------------------------- | Performance-based pay | - | - | - | -------------------------------------------------------------------------------- | Holdings of related parties | | | | -------------------------------------------------------------------------------- | Number of share options | - | - | - | -------------------------------------------------------------------------------- | Number of shares | - | 99,587 | 3,680,793 | -------------------------------------------------------------------------------- | Number of participations | - | 5,512 | - | -------------------------------------------------------------------------------- The Financial Statements for 1 January-31 December 2009 have been prepared in accordance with IAS 34 (Interim Financial Reporting) as approved by the EU. The accounting policies applied are described in the 2009 financial statements. In 2009, Pohjola Group adopted the revised IAS 1 standard according to which the Group presents the statement of comprehensive income and the statement of changes in equity. These Financial Statements are based on unaudited figures. Given that all figures have been rounded off, the sum total of individual figures may deviate from the presented sums. Pohjola Bank plc will publish its own financial statements. OP-Pohjola Group will publish its 2009 annual report in the week beginning on 1 March 2010. The interim reports for three, six and nine months will be published on 5 May, 4 August and 3 November 2010, respectively. OP-Pohjola Group's financial performance will be presented by to the media by Executive Chairman Reijo Karhinen in a press conference on 11 February 2010 at 12 noon at Teollisuuskatu 1 b, Vallila, Helsinki. Helsinki, 11 February 2010 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, Senior Vice President (Corporate Communications), tel. +358 (0)10 252 8394 DISTRIBUTION NASDAQ OMX Helsinki Ltd London Stock Exchange Major media op.fi and pohjola.fi
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