Folksam - Annual Review 2013

Annual Review 2013

Your security is what we care about.Come along and get to know us better.

Welcome to the customers’ insur-ance company Every time we meet a customer, we also meet an

owner. And we have many owners. We insure nearly

one out of two people in Sweden and take care of

the pension for more than two million people. You

can insure your home, your car, your four-footed

friend and your pension with us. Our job is to ensure

that security accompanies every phases of life.

We can help you review your insurance coverage

so that it matches your living situation and family.

Your security is what our hearts beat for.

Our goalOur goal is to have the most satisfied customers of the in-surance and savings industry.Every time we meet a customer, we also meet an owner. Every-thing we say and do affects our customers’ perception of us.

Our visionOur vision is for people to feel secure in a sustainable world.As a significant investor, we have the possibility of influencing our surroundings to realize the vision.

Our promise to youWe are committed for you – so that you and your family are secure today and tomorrow.Our job is to create security for you and everything you care about. We work based on your needs when we design our offerings.

Good shall be better

This is Folksam

Customer-owned

An eventful 2013

The larger, the safer

Offers for every need

An organisation with the customer in focus

Growing numbers of customers are choosing us

Strong financial position

The customers are more satisfied than ever

High-profile corporate governance

A pioneer in sustainability issues

World-famous traffic research

We insure nine out of ten athletes

Attractive employer

Asset management

Risk management - a part of the business

New rules control development

Four brands, two Groups and 11 insurance companies

Folksam General

Folksam Life

Förenade Liv

KPA Pension

Group management and boards

4

6

8

18

20

22

23

24

30

34

38

40

42

44

47

52

54

58

64

66

72Con

tent

s26

28

50

4

Good shall be betterFolksam is the customers’ insurance com-

pany. For more than a century, we have

combined heart and mind to create security

for the individual as well as society in general.

Our commitment to what the customers care

about is continuing and during the year, en-

joyed more success than ever. Now, Folksam

is entering a new phase.

In 2013, our market share increased. In hard competition, we are now closing in on 16 per cent of the property damage market and 15 per cent of pension savings in Sweden. At the same time that we see customer loyalty growing, we are also continuously being entrusted with more assignments and can proudly note that the number of customer is stead-ily growing. Nearly one out of five pension savers currently chooses us.

Focus on existing customers is a success factor. Gather-ing one’s insurance with us should be rewarding and the number of customers who have more than one product is consequently growing. At year-end, 495,000 customers had insured both their home and their car with Folksam. Of these customers, 58,000 have also chosen us when saving for their pension.

Our financial strength provides good conditions for good returns on the long term. Handling risks and opportunities in asset management over time is one of our most impor-tant tasks. Our objective is not to provide the highest return in the industry every single year, but rather to avoid the big mistakes and thereby over time provide the highest return. Over a five-year period, Folksam’s customers have had an average annual total return of 8 per cent. This bears being compared with most forms of savings on the market.

Satisfied customers that talk about their experiences drive business. The measurements we took in 2013 show that our customers have never been more satisfied. At the same time, there are far too many conceivable customers who still do not see Folksam as an alternative. The fact that comparisons continuously prove that we are better than the competitors means that the proportion is constantly decreasing, but as long as there is a single person who cannot imagine becoming a customer of Folksam, we are not satisfied.

A growing stock yields more claims and sets higher require-ments on accessibility and personal treatment. We have to improve on this front. We are therefore continuing the work with accessibility and how we interact with the customer as a priority area. We must be there for our customers - creat-ing security through advice and support, both in daily life and when something unexpected occurs.

As the new President and CEO, I can confirm that the suc-cesses of recent years have given us an excellent platform for the future. After a long period of work, we can finally see the results of our work. Of course, this does not mean that we can begin to take it easy, rather that we have the conditions to shift up a gear.

Our financial strength is the prerequisite now that Folksam is entering a new phase - a phase with a focus on mod-ernisation, efficiency enhancement and consolidation. We must ensure that the operations and infrastructure, whether it involves expertise, systems or processes, are as effective as possible and that everything is in order. We will improve at what we are already good at. We will continue to provide security to our customers through good insur-ance solutions at the same time that we will become more efficient and find solutions that are even smarter than those we already have.

Good shall be better!

Jens HenrikssonStockholm, March 2014

5

Jens Henriksson

Age: 47 yearsFamily: Married and has three children, lives in Hägersten in southern Stockholm.

Began as the President and CEO of Folksam on 1 September 2013. Before that, he was the CEO of NASDAQ OMX Stockholm. Has also been the Executive Director and Board member for the IMF in Washington, D.C. and State Sec-retary at the Ministry of Finance.

Jens has also been a columnist for the news magazine Fokus and the Swedish daily Svenska Dagbladet.

6

This is FolksamFolksam is a customer-owned company. This means that

our customers are our owners and that our surplus goes

back to the policyholders. This is how we have always

worked. In insurance terms, this means that we are a mutual

company.

Thanks to our broad range of insurance and pension savings, we can see to the customers’ total needs. Folksam’s offering comprises auto and home insurance for households, business insurance in selected areas, occupational pensions and pension savings for private individuals as well as group life insurance.

Strong finances give us opportunities Our financial strength provides the customers good chances for a strong long-term return on their pension savings. Both Folksam Life and the subsidiary KPA Pension have significantly more assets than are needed to pay out the guaran-teed pensions. In the past five years, the average total return in KPA Pension and Folksam Life has been among the highest in the industry.

A sustainable worldWe get involved in what our customers care about and therefore do things that are not always associated with insurance companies. Our commitment involves such areas as the environment, traffic and ethical investment – all to encourage development towards a sustainable world.

7

Did you know that....

Folksam in figures

Total premium volume SEK 40.4 billion

Number of employees 3,640 people

Total assets under management SEK 304 billion

Solvency ratio in Folksam Life 161%

Average annual return in Folksam Life over five years 8.0%

Market share non-life insurance 15.9%

Market share life insurance 14.4%

... Folksam has existed for more than a century

... we influence traffic safety through our world-renown traffic research

... we are the insur ance company of sports and insure nine out of ten athletes in Sweden

... nearly one out of two Swedes are insured by Folksam

... nearly one out of five new pension savers chooses us

... we have worked with sustainable investments since 2001 and have ethical criteria on all assets under management

8

The story of Folksam is the story of our customersThe basic idea of all insurance is to distribute the risk across more people. This is the story

behind Folksam. It begins at time not so far from the present, just a bit more than 100 years

ago, when a large part of Sweden’s homes were uninsured.

The need for insurance was great, perhaps even greater than today. Many people lived in homes made of wood and open flames were needed for both heating and cooking. Right here, in the most flammable development, fire insurance was something unattainable. No insurance company insured anyone who was assessed in advance to be a bad deal.

The idea of a mutual insurance association grew out of the idea that everyone has the right to insurance. But starting such an association proved difficult; no bank was willing to provide loans and authorities demanded that

one could present subscribed insurance at a value of SEK 2 million. The situation looked bleak for the new entrepre-neurs. Nonetheless, by the end of the year, they had already managed to gather 6,000 subscriptions for fire insurance! After a few years, they finally had their SEK 2 million.

“Folket i samarbete” or “the people in cooperation” became Folksam. We were created by sharing the risk and the benefits and this is how we still work. We get involved in what our customers care about They are our owners. In the following pages, you will have the opportunity to meet a few of them.

9

Every time we meet a customer, we meet an owner.

Meet Jessica, Fredrik and Beathe who are all involved and own Folksam.

10

Jessica Nyberg

Owner since: 1995Jessica works in an art materials store and loves climbing.

11

I have yet to meet a jar I can’t open

If one of Jessica’s customers were to ask what she does in her free time, they might be surprised. Because the girl who quickly wraps up the brushes and paint at the cash register is a competitive climber.

Jessica has been climbing since she was 13. She practices three times a week and gladly spends her holidays in Thai-land, France, India or China - only places where she can climb. Luckily, her boyfriend shares her passion.

The kind of climbing Jessica does is called bouldering and is done without a rope, most often with a pad below, a mat that dampens the fall.

“Falling is a part of the sport,” says Jessica.

In bouldering, the climbing is done with little movement and it is often more athletically and technically challenging than other kinds of climbing. Jessica is strong, especially in her hands, which her friends gladly take advantage of when they need help opening anything from jam jars to pickle jars.

“I have yet to meet a jar I can’t open,” says Jessica and laughs. “No jar is impossible, some just take a bit more time.” Then she says: “No, don’t write that, it sounds like I’m bragging!” Which is hard to agree with, because this climbing art supply salesperson is more inclined to be humble. But strong.

12

Fredrik Josefsson

Owner since: 2007Fredrik invents games for the mobile phone and likes industrial design for fun.

13

The plastic can Fredrik is holding in his hand costs around SEK 400. Still, it is completely empty. “The top is also threaded wrong,” explains Fredrik. “I was thinking wrong when I made the sketch on the computer.”

The can is printed on a 3D printer at a company that is specialised on 3D printing. Owning one’s own 3D printer is still not within financial reach for most people, even if it would certain be worth the money. This is apparent when you hold up and look at a completely perfect item that needed neither form or assembly to be made. It feels like magic that the machine on its own was responsible for the production of the fully usable little plastic can (threaded

wrong or not). All that was needed was a prototype mate-rial and Fredrik’s computer file. This is actually no hocus pocus, though. Most people have no problem making something by removing material, which is after all how a sculptor works when cutting a statue out of a block of stone. In a 3D printer, the object is instead made by adding material.

Even his eyeglass frames are designed by Fredrik and printed from the same prototype material. “When you are happy with your design, you can print it out with a nicer material if you want. You can even fill the machine with metal.”

You can even fill the machine with metal.

14

Beathe Rörstrand

Owner since: 2005Beathe works as a service tech-nician supervisor and loves her motorcycle.

15

I don’t take any long trips exactly, but a lot of weekend tours.

Beathe’s black used Harley-Davidson Sportster is from 2001 and she is actually also one of its former owners.

“My daughter had managed to turn about one year old and demanded a lot of time. There won’t be much riding here,” noted Beathe cynically like many other parents of small children before her. So she sold her Harley. But when the bike came up for sale again, she could not resist becoming its owner again. Beathe explains the fact that a Harley-Davidson was the first choice by saying she is a speed freak. A fast Japanese bike would be dangerous in

her hands. The Harley invites more relaxed tours. “I don’t take any long trips exactly, but a lot of weekend tours and often enjoy doing so on my own. I pack a small lunch and a good book. Then I take a tour somewhere with some water, lie down on a blanket and read.”

16

17

You are involved and have influenceFolksam is a mutual company. This means that our customers are also our owners.

For us, it is important that the customers can be involved and influence what we do.

Folksam has no shareholders. Instead, it is influence from our four million customers that leads to decisions at the Annual General Meeting. The customers’ influence in the form of voting rights, the right of expression and proposal takes place through specially elected delegates. Delegates are either directly elected policyholders or appointed by large customer groups/organisations. In Folksam General, the customers are represented by 80 delegates and in Folk-sam Life by 75 delegates.

Multiple benefits by being customer ownedAs a customer-owned company, the entire surplus we generate goes back to the customers, either in the form of development of our offering or as a bonus. In light of the strong financial position in Folksam General, a long-term bonus programme was launched in 2012. The bonus rate in Folksam Life was increased twice in 2013 and is currently 6.0 per cent.

Internal audit

The Customer Ombudsman

External auditors

Nomination Committee

Audit committee

Remuneration Committee

Functions for internal governance and control

PolicyholdersRepresented by del-egates at the General Meeting. 80 people in Folksam General and 75 in Folksam Life.

General Meeting

Board

CEO

Group management

Finance committee

An eventful

2013Market share grewThe market shares grew in both the general and life opera-tions. Nearly one out of five new pension savers chooses us.

Sweden’s largest insurance companyWith a total annual premium volume of more than SEK 40 billion, Folksam is Sweden’s largest insurance company.

Life Insurance Company of the Year for second consecutive yearFolksam was named the Life Insurance Company of the Year in the Söderberg & Partners traffic light report for the second consecutive year.

New CEOJens Henriksson began as the new President and CEO in September.

Continued refinement To focus on our core business, the management right of Svenska Lärarfonder’s funds is being transferred to DNB.

Customers more satisfied than everFolksam’s measurements shows that our customers are more satisfied than ever before.

Folksam selectable in ITPFolksam became a selectable alternative for traditional insurance in the ITP collective agreement area. ITP is a collectively agreed occupational pension that private salaried employees receive in addition to their national pension.

SalusAnsvar is a part of FolksamDuring the year, we successfully moved over both compe-tencies and an insurance portfolio. Several large partner customers, especially Saco associations, are now a part of Folksam’s offering. The integration will be fully completed in 2015.

Most sustainable companyKPA Pension was named the most sustainable company in the finance industry in 2013. Folksam ended up third on the same list.

Home insurance received highest marksOur most extensive home insurance received the high-est marks in a comparison done by Konsumenternas Försäkringsbyrå. Konsumenternas Försäkringsbyrå has the goal of providing consumers impartial facts and guidance free of charge.

18

Årets livbolag 2011 och 2012

Du är en vinnare igen!

19

Life Insurance Company of the Year again

Folksam was named the Life Insurance Company of the Year in the Söderberg & Partners traffic light report for the second consecutive year. At the Insurance Awards 2013, Folksam was named the Life Insurance Company of the Year with the motivation:

“Folksam again showed that it is possible to provide a secure and stable traditional product that offers good, risk-adjusted return to the savers.”

20

The larger, the saferThe basic idea of all insurance is to distribute the risk across more people. Conse-quently, size is important. Nearly one out of two Swedes are insured by Folksam. More than two million people save for their pension with us. We are one of Sweden’s ten largest investors and manage assets of SEK 304 billion.

Folksam is one of a few insurance companies that have a strong position in both life and non-life insurance. In total, our customers pay in more than SEK 40 billion in annual premiums.

15 per cent of the entire insur-ance marketFolksam’s market share of the total premium volume in the Swedish insurance market was nearly 15 per cent in 2013.

Grew the most in the marketIn 2013, Folksam grew the most in the non-life insurance market. The total premium volume grew by just over 7 per cent. At year-end, we had 15.9 per cent of the total market of SEK 67 billion.

One out of five new pension sav-ers chooses usTwo million people save for their pen-sions with Folksam. The market share measured in total premium income for life insurance amounted to 14.4 per cent in 2013. This means that the premi-um income for old and new insurance policies was SEK 27 billion of the total market of SEK 185 billion.

M A R K E T S H A R E N O N - L I F E I N S U R A N C E

Länsförsäkringar 29,8%

If 18,3%

Trygg-Hansa 16,1%

Folksam 15,9%

Moderna 3,4%

Övriga 16,5%

Folksam15,9%

M A R K E T S H A R E TOTA L L I F E M A R K E T

Skandia 15,4%

Folksam 14,4%

AMF 10,3%

SEB Trygg Liv 8,5%

Swedbank 7,2%

Nordea Liv 7,0%

Alecta 6,5%

Länsförsäkringar 7,2%

Others 23,5%

Folksam14,4%

L A R G E S T P R E M I U M VO LU M E I N T H E I N D U S T RY

Source: Swedish Insurance Federation and pertains to premium volume December 2013 and previous 12 months.

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

Unit-linked, collective agreement and other life insurance

Non-life insurance

Premiums paid in, SEK bill ion

Fo

lksa

m LF

Ska

nd

ia

Ale

cta

AM

F

SE

B

Sw

ed

ban

k IF

Tryg

gH

ansa

No

rdea

SH

B

Ava

nza

Dan

ica

21

2009 2010 2011 2012 2013

350

300

250

200

150

100

50

0

A S S E T S U N D E R M A N AG E M E N T 2 0 0 9

2013 SEK 304 billion





Ethical criteria on all investments

Read more about how we work with responsible ownership on page 30.

Strategic asset management

Read more about how we invest the customers’ money on page 44.

Ethical criteria on all investmentsFolksam is one of Sweden’s ten largest investors and manages assets of SEK 304 billion. The assets managed are covered by criteria for the environ-ment, human rights and anti-corrup-tion and are invested in interest-bear-ing securities, shares, properties and alternative investments. Folksam’s holding of interest-bearing securities mainly consists of bonds issued by the Swedish government, Swedish munic-ipalities, Swedish mortgage institutes or Swedish companies.

Swedish equities SEK 47 bill ion

Non-Swedish equities SEK 43 bill ion

Swedish bonds SEK 185 bill ion

Non-Swedish bonds SEK 3 bill ion

Properties SEK 20 bill ion

Alternative investments SEK 5 bill ion

Hedging instruments SEK 1 bill ion

G O O D R I S K D I V E R S I F I CAT I O N I N T H E P O R T FO L I O

22

Offers for every needWe work with life and non-life insurance operations under several brand names with a focus

on the Swedish market. The offer can be divided into pension savings, personal risk, and

general insurance.

Our job is to provide security to our customers through good insurance solutions.

Pension savingsWe offer traditional life insurance within Folksam Life and KPA Pension. The traditional life insurance is a form of saving where we invest capital and manage the invested capital. This means that the saver does not need to choose the level of risk. We distribute the capital between equities, interest-bearing securities and other assets. This form of savings also has a guarantee on premiums paid in and an agreed guarantee interest. When there is a surplus from asset management, it is distributed to the savers with the help of bonus interest.

Unit-linked insurance means that the customer him or herself chooses the level of risk for his or her savings by choosing which funds the capital is invested in. We offer savings in unit-linked insurance in Folksam Life, Folksam Fondförsäkring, KPA Pensionsförsäkring and Folksam LO Pension.

In Folksam Fondförsäkring and Folksam Life, we offer a quality assured, guided range of 60 to 80 funds. We guide based on the parameters of return, low fees and ethical investment. Since we are not dependent on our own fund management company, we can always choose among the market’s best funds in every area.

Otherwise, a tailor-made range of funds is offered in the respective agreement area. For KPA Pension, the range of funds consists of SRI-screened funds. Folksam LO Fond-försäkring has a carefully selected range of external funds that meet the requirements in the agreement area.

Personal riskIn Folksam, there are four companies that offer personal risk insurance: Folksam Life, Folksam General, Förenade Liv and KPA Livförsäkring. Our group insurance com-prises group life and occupational group life insurance and health and accident insurance.

Health insurance reimburses loss of income or consists of fixed lump sums. Accident insurance reimburses costs that can arise in connection with an accident, and offers compensation in cases of invalidity. From group life and occupational group life insurance products, a non-recur-ring payment is made to the beneficiary when the insured person dies.

We have group life and health and accident insurance that is adapted to labour unions, companies and organisa-tions, and those for individual solutions.

Non-life insuranceFolksam offers non-life insurance in three companies; Folksam General, Folksam Skadeförsäkring and Tre Kro-nor. The latter is a “white brand”, meaning that it is a brand that stands for the actual product, which is then sold under another brand name.

Home insurance is the core in our non-life insurance offering. When the customers requested simple and clear offerings, we packaged the home insurance into Base, Me-dium and Plus, a move that makes it easier for the customer to choose the right insurance.

Read more about the various companies in Folksam on page 52.

An organisation with the customer in focusFolksam is organised into three business areas: Private, Partner and Collectively Agreed

Business and subsidiaries. In addition, there are seven central units.

The Private business area is responsible for sales and cus-tomer service regarding individual insurance and pension savings for private individuals. The responsibility pertains to both life and non-life insurance under the Folksam brand.

The Partner business area is responsible for Folksam’s business with partner and organisational customers. It includes the group insurance business and commercial insurance. The business pertains to non-life insurance, personal risk insurance and savings.

The Collectively Agreed Business area is responsible for the parties to collective bargaining agreements in the Swedish labour market. This includes, for instance, occupational group life insurance, health insurance and pension savings, as well as services and administration for the employers.

23

Folksam General

Förenade Liv

Svenska Konsument- försäkringar

Tre Kronor Försäkring

Folksam Skadeförsäkring (Finland)

Salus AnsvarGroup-wide units

Product and Claims

Private business

Partner

Collectively Agreed Business

Folksam Life

Folksam LO Pension

KPA Pensionsförsäkring

KPA Livförsäkring

Folksam Unit-linked insurance

The Customers

24

Growing numbers of customers are choosing usWe are continuing to grow in both the life and non-life markets. More customers and more

satisfied customers combined with a financial strength that is better than ever make us

one of the industry’s strongest players. This provides us with the conditions to continue

providing security and high returns.

Premiums comprise premiums earned in P&C insurance, premiums

written in life insurance, and receipts and fees from unit-linked insur-

ance investors.

TOTA L PR E M I U M VO LU M E

2013 SEK 40,438 million





2009 2010 2011 2012 2013

40

30

20

10

0

We have the offerings for every need in pension savings, personal risk and non-life insurance. Demand for our products is growing in all groups. The premium income increased by 15 per cent or SEK 5.2 billion in 2013 to total SEK 40.4 billion.

Pension savingsThe market share measured in total premium income for life insurance amounted to 14.4 per cent.

The premium volume in traditional insurance contin-ued to grow in 2013. Our strong key figures and the broad sales through our own sales force and agent cooperation contributed to the increase.

Premium payments received from policyholders in unit-linked insurance have increased sharply in the past five years. This is a result of the efforts we have made in the agent distribution market and in contractual pensions. An improved fund offering to the customers is another important success factor for the continued growth. The total unit-linked insurance assets in the four companies amounted to just over SEK 79 billion at year-end.

Collectively agreed pensions from employers account for a significant part of the premium volume. Since 2013, Folksam or one of our subsidiaries can be selected as the manager of the contractual pension in all agreement areas.

Within the Folksam brand, there is a continued devel-opment of the offering for the individual occupational pension market, occupational pensions from employers who do not have collective agreements.

TOTA L P R E M I U M I N C O M E L I F E I N S U R A N C E

2013 SEK 16.2 billion





2009 2010 2011 2012 2013

18

16

14

12

10

8

6

4

25

Personal riskThe premium volume for personal risk was stable during the year. We offer trade unions, companies and organisa-tions adapted group life and health and accident insur-ance. As the sports insurance company, Folksam provides accident insurance to those active in several of the largest sports associations in Sweden.

The efforts with individual accident insurance with sup-plements for financial invalidity and diagnosis insurance are continuing.

Thanks to a good return on assets, the premiums have been reduced in recent years for municipalities and county councils.

Non-life insurancePremium income increased in both household and home owner insurance as well as auto insurance. Sales increased, in part through bank cooperation and greater customer loyalty.

The commercial market continued to develop positively with a focus on small businesses, property and auto.

Continued focus on combination discounts increased the number of policies taken out. Gathering one’s insur-ance with us should be rewarding and the number of cus-tomers who have more than one product is consequently growing. At year-end, 495,000 customers had insured both their home and their car with Folksam. Of these customers, 58,000 have also chosen Folksam when saving for their pension.

The acquisition of SalusAnsvar accounts for contin-ued growth in the Swedish non-life insurance market and expands the collaboration with white-collar workers and university graduates.

25

TOTA L P R E M I U M I N C O M E N O N - L I F E I N S U R A N C E





2009 SEK 7.0 billion10

8

6

4

2

0

2009 2010 2011 2012 2013

26

Strong financial positionThe solvency ratio is the most important measure of financial strength for a life insurance

company. It indicates the market value of the company’s assets relative to the guaranteed

commitments to the customers.

The solvency ratio in KPA Pension and Folksam Life was 172 per cent and 161 per cent, respectively. This means that we have 72 per cent and 61 per cent, respectively, more assets than are needed to pay out the guaranteed pensions.

A high solvency ratio is also a prerequisite to be able to provide good future return on assets under management.

In 2013, the total return for Folksam Life and KPA Pen-sion amounted to 7.6 per cent and 8.2 per cent, respectively.

Seen over the last five-year period 2009-2013, the average total return on traditional insurance has been 8.0 per cent for Folksam Life and 8.3 per cent for KPA Pension.

Surplus that benefits the customersFolksam is a mutual insurance company. This means that our customers are our owners. The profit we make does not go to shareholders, but rather stays with our customers in the form of better insurance and bonuses.

In light of the strong financial position, the bonus was reinstated in Folksam General in 2012. The programme is long term and the size of the bonus is based on the profit for the year.

For 2013, SEK 278 million has been reserved. Disburse-ments will take place in 2014 and the bonus comprises a total of 1,750,000 customers.

In 2013, two increases of the bonus rate were carried out on traditional pension savings. The bonus rate was in-creased from 4.5 per cent before taxes and fees to 5 per cent in April and then to 6 per cent in June. The bonus rate was increased in light of Folksam’s strong development and the fact that the collective consolidation in the company (the ratio between the company’s assets and how much is dis-tributed to the policyholders) is above the set target level.KPA Pension uses rate of return instead of the bonus rate. The rate of return means that all returns are distributed directly to the savers’ accounts after every quarter.

The collective solvency ratio is therefore always 100 per cent at KPA Pension. The rate of return for 2013 was 8.0 per cent.

S O LV E N CY R AT I O FO L KS A M L I F E

2013 161 %

2012 144 %

2011 134 %

2010 158 %

2009 149 %

175

150

125

100

75

50

25

0

2009 2010 2011 2012 2013

27

Folksam Life at year-endSolvency ratio 161%

Collective funding ratio 120.4%

Bonus interest 6.0%

Total return 2013 7.6%

Average return 2009-2013 8.0%

Folksam General at year-endSolvency ratio, Parent Company 149.3%

Combined ratio 103%


Cooperative occupational pension at year-endCollective funding ratio 118.4%

Bonus interest 6.0 %

KPA Pension at year-endSolvency ratio 172%

Collective funding ratio 100%

Rate of return 8.0%


Average return 2009-2013 8.3%

Glossary

Solvency ratio The relationship between assets and technical pro-visions to cover future insurance commitments.

Collective funding ratioThe ratio between asset values and the com-pany’s total commitments.

Solvency ratioConsolidation capital in relation to one year’s premium income.

Bonus interestFolksam Life is a customer-owned company. Our surplus goes back to our owners through the bonus interest. The rate is not guaranteed, and the company can reclaim the part of the surplus that exceeds the guaranteed rate.

Total return ratio The sum of yield and realised and unrealised changes in the value of investment assets.

Bonus Folksam General is a customer-owned company. Our surplus goes back to our owners through the bonus.

TOTA L R E T U R N F I V E -Y E A R AV E R AG E 2 0 0 9 -2 0 1 3

Branschen 7,8 %

Folksam Life 8,0 %

KPA Pension 8,3 %

10

8

6

4

2

0

Branschen Folksam Life KPA Pension

TOTA L R E T U R N FO L KS A M L I F E

2013 7,6 %

2012 7,0 %

2011 6,5 %

2010 8,7 %

2009 10,3 %

10

8

6

4

2

0

2009 2010 2011 2012 2013

The combination discounts and bonus are examples of steps we have taken in recent years. What the customers think and what we do go hand in hand and the measurements show that

the customers have never been more satisfied than they are now.

Ten years ago, we looked more at what our existing customers thought about our existing products. We now involve the custom-ers from the beginning when we develop products and offers.

Jacqueline Sejersen In charge of research at Folksam

Background Has worked with surveys at Folksam for ten years.

The customers are more satis-fied than everOf the customers who have been in touch with us, 96 per cent say they are satisfied and

that it was easy for them to get through. In addition, they also feel that they received good

service.

The competition for customers is increasing at the same time that the differences between the players are decreas-ing. Consequently, how we handle contact with custom-ers is of major importance to customer satisfaction. To measure satisfaction and what the customers think of us, we continuously do surveys in Folksam.

When we measure satisfaction in our entire customer base, we use the Folksam Customer Index (FCI). In 2013, satisfaction among the customers developed well and ex-ceeded the set targets. The fact that our customers are more satisfied than ever is most clearly seen in our measurements of those who have been in contact with us. Nine out of ten customers who have had a claim or have been in contact with our customer service are satisfied.

Sensitivity and action have good resultsWhat the customers think and what we do go hand in hand with the results in our customer surveys. Some examples of measures are the combination discounts and the bonus meet the customers’ wishes that we see and appreciate them having many policies with us and being long time customers. The customers being claims free and taking preventive steps also provides discounts or lower costs on the insurance.

Since many customers feel that it is difficult to under-stand how insurance works, we are also working to make both the products and the information about them simpler and clearer for a better experience.

28

2929

High-profile corporate governanceOur customers care about how listed companies handle the issues of sustainability.

We influence the companies we invest in by applying environmental, human rights and

anti-corruption criteria.

We at Folksam firmly believe that companies that take responsibility for the environment and human rights are more profitable in the longer term. There are companies we have deliberately chosen not to invest in, regardless of how small their environmental impact is or how good a working environment they have. The exclusion criteria are tobacco and illegal weapons such as cluster munitions, anti-personnel mines and nuclear weapons. All companies within Folksam apply these criteria, with two exceptions. The subsidiary KPA Pension has decided on even tougher exclusion criteria and also does not invest in the alcohol industry or the commercial gambling industry.

For Folksam General, where auto, home and second home insurance has been certified with the Good Envi-ronmental Choice ecolabel, this means that investments in coal-fired power, nuclear power and uranium are also excluded.

Influencing companies to take responsibilityWe have SEK 304 billion under management on behalf of just over four million customers. This gives us the ability to influence and change society in the long term. Our objective of persuading companies to assume their social responsibility is very much for the public good, as we be-lieve that knowledge helps bring about positive change. We regularly publish reports and indices in which we present information on the companies’ performance in areas such as the environment, human rights and gender equality.

We influence in many ways: through meetings, letters, at AGMs and by conducting an active dialogue for con-structive changes.

30

Folksam's work on Corporate Governance2013 2012 2011 2010 2009 2008 2007 2006 2005

Number of companies with which Folksam has engaged in active dialogue

31 45 57 77 45 38 41 7 14

Number of Swedish general meetings in which Folksam participated

43 39 421 39 35 28 21 18 15

Nomination committees of which Folksam is a member 2 3 2 3 4 2 1

1 Includes an extraordinary general meeting

31

UN principles guide FolksamThe UN Principles for Responsible Investment (PRI) are a UN initiative launched in 2006 and aimed at introduc-ing sustainability issues into the investment process for institutional investors and pension managers. Folksam was the only Swedish investor to take part in drawing up the guidelines, which apply to the environment, social issues and corporate governance (ESG issues). Folksam was also one of the first investors to endorse the principles.

Principle 1

Folksam will incorporate ESG issues into invest-ment analysis and decision-making processes.

Principle 2

Folksam will be an active owner and incorporate ESG issues into its corporate governance policy and practices.

Principle 3

Folksam will seek appropriate disclosure on ESG issues by the entities in which it invests.

Principle 4

Folksam will promote acceptance and imple-mentation of the Principles for Responsible In-vestment within the investment industry.

Principle 5

Folksam will work together with other inves-tors to promote use of the Principles.

Principle 6

Folksam will report on its activities and progress towards implementing the Principles for Responsible Investment.

Year’s events in brief • Folksamparticipatedin43annualgeneralmeetings,

one extraordinary general meeting and was represent-ed on two nomination committees during the 2013 financial season. Besides this, Folksam was involved in a number of dialogues with corporate boards with regard to incentive systems.

• In2013,theoperationsof1,847companieswerere-viewed, focusing on their performance in relation to the environment and human rights. Folksam’s 20 largest Swedish holdings were contacted and meetings were held with six of these during the year. In addition to this, 20 Swedish companies were identified that ran the greatest risk of exposure to incidents in the environment and human rights. Four companies were selected, and meetings and teleconferences were held to examine the companies’ risk situation.

• In2013,Folksamvotedatatotalof251foreignAGMs.Among other matters, we voted for proposals that Sta-toil should conclude its oil sand extraction in Canada, and a proposal on expanded representation by female board members in BCE Inc.

• TheFolksamIndexofCorporateSocialResponsibilitywas presented for the sixth time in 2013. Ericsson re-ceived the highest rating for its work with human rights and Volvo received the highest rating for its environ-mental efforts. Ericsson received the year’s highest total rating in terms of both human rights and the environ-ment.

• Since2008,FolksamhasbeencooperatingwiththeNorwegian life insurance company, KLP, and Finnish pension company Ilmarinen, in the Nordic Engagement Cooperation (NEC). The purpose of NEC is to coor-dinate corporate governance activities for the environ-ment, human rights and anti-corruption. In 2013, NEC had a dialogue with 11 different companies, all based outside the Nordic region.

• TheDepartmentforResponsibleOwnershipwasrepresented at several seminars and panel discussions during the year, including at the “politician week” in Almedalen.

• Folksam’sDepartmentforResponsibleOwnership has run the blog “A Cat Among the Pigeons” (www.agarstyrning.folksamblogg.se) since 2009. This blog continued in 2013 and was also supplement-ed by a twitter account, @etikkatten, where the latest updates are regularly published.

Read more about the UN Principles for Responsible Investment (PRI) and how Folksam meets its commitment as a signer in Folksam’s sustainability report.

Carina Lundberg Markow Head of Responsible Ownership

32

When I came to Folksam in 2001, I saw the traffic researchers as role models.

She has been called troublesome and powerful, but has also been rewarded as a Super

Communicator. Carina Lundberg Markow, Head of Responsible Ownership, was the one

who began the work with ethical investment criteria in Folksam.

“When I came to Folksam in 2001, I saw the traffic researchers as role models. Their tests and reports were a good way to influence the auto industry and the customers and at the same time build the brand. My goal was that we should work with Folksam’s ethical investment criteria in the same way - with the foremost aim of influencing the companies.

Today, Folksam is among the ten largest owners on the stock exchange, but at that time, we were maybe the 18th or 19th largest.

“Then, it was difficult to be heard at the companies; they shrugged everything off. Many senior executives had not even reflected over sustainability issues. They were infu-riated. The strongest supporter group was environmental and sustainability managers who felt that they finally had somebody from the outside who was watching and wanted to emphasize their work.

The strategy has primarily been to reach listed compa-nies through the media and consequently, the trade press has been a main focus. Most of Folksam’s customers do not read the likes of Dagens Industri every day, however, and reaching out to them has been a challenge - there is still

a great deal to do.” To reach out to the customers, all of the employees are an important channel. Sustainability issues have proved to be a way to build new customer relations and cultivate existing customer relations. Carina has been successful in her strategy and is frequently seen in the media in Sweden.

“If you are going to talk about these issues, a person has to do it even if it happens that the person, rather than the organisation, is emphasized. I still think that the vast ma-jority of people associate me with Folksam. Talking about ethics in business, the environment and gender equality has meant that I have been viewed as troublesome - a role I am happy to accept if it is what is needed to get our message out. At the same time, the view of sustainability issues has become more modern. Today, I am not perceived as much as a troublemaker as I was a few years ago.”

What does the work look like today?“An incredible amount has happened and has done so quickly. Today, business leaders have better knowledge about what risks their companies run based on a sustain-ability perspective. A few have even realised that there is potential to increase their sales and thereby their profits.”

33

A pioneer in sustainability issuesFolksam has the ambition of being on the forefront in environmental and climate work and

has worked with sustainability issues since the 1960s. Environmental and climate issues are

of central importance to us - nobody will be able to afford insurance in the future if we do not

all help out to slow the climate changes. Because we are a large company, we have consid-

erable opportunities to exert an influence and our high environmental requirements have

contributed to a better environmental standard at several large subcontractors.

Both our auto and building damage operations are envi-ronmentally certified under ISO 14001. In 2011, our auto, home and second home insurance received the stringent Good Environmental Choice ecolabel from the Swedish Society for Nature Conservation. To conduct an active dialogue with our stakeholders, we worked with ISO 26000 in 2013, a guiding standard in social responsibility.

In 2013...

… and 2014, we will educate nearly 2,000 companies throughout Sweden in environmental impact.

… our purchasing organisation began working according to the substitution principle, which meant that all new procurement has been guided to more environmentally friendly alternatives.

… we worked out a digital platform for dialogue with our stakeholders.

All emissions are climate compensatedFolksam’s climate footprint from its own operationsamounts to 2,792 tonnes CO2e in 2013. The foremost emis-sion sources were air travel, road travel and heating, which together accounted for 94 per cent of the total emissions. These are the areas we are focusing on to reduce our cli-mate impact.

Folksam also calculates the climate impact from energy and water consumption from the properties Folksam invests in, which we describe in more detail in our sustaina-bility report.

For several years, we have climate compensated the climate footprint from our operations and our property portfolio through the Vi Agro-Forestry Programme tree-planting project. Vi Agro Forestry plants an average of five trees for every tonne carbon dioxide emitted. The total climatic impact that we compensate for amounts to 6,751 tonnes of carbon dioxide. This means that nearly 34,000 trees will be planted.

2013 2012 2011

Road travel 765 873 800

Air travel 1,092 1,092 940

Train travel 2 2 0.003

Heat 765 348* 371*

Electrical system 6 7 7

Printed matter 57 74 64

Paper 82 78 65

Coffee 21** 13 14

Water*** 2 2 Not included

Total tonnes CO2e 2,792 2,489 2,261

* Only the head office’s heating was included in the figures in 2012 and 2011

** For 2013, all coffee purchased for Folksam’s operations is reported

*** Only water consumption for the head office in Skanstull is included. Folksam’s other offices and Förenade Liv’s offices are not included in the reporting.

34

35

Clear guidelines for business travelOur travel policy provides all employees with clear guide-lines for business travel. It states that every journey should be well-planned and justified and that rail travel should be used for trips up to 500 kilometres, such as the route Stock-holm-Gothenburg, for environmental reasons.

Fewer offices results in lower electricity con-sumptionAll electricity purchased for Folksam’s and KPA Pension’s head office, the offices throughout Sweden and Folksam’s subsidiary Förenade Liv’s office premises is ecolabelled with the Good Environmental Choice ecolabel. Electric-ity consumption, and thereby the climatic impact, from the offices decreased in 2013 by approximately 11 per cent compared with 2012. The reason for the decrease is that we continued our reorganisation in 2013 to improve efficiency of the operations at the offices around the country.

From print to digital We have a clear ambition to reduce the number of printed materials by increasingly shifting from physical printed matter to publishing information in a digital format. This means that customers will have the opportunity to receive insurance conditions and invoices digitally. In 2013, 4 million fewer copies of insurance terms and conditions for non-life and group insurance, and the climate impact from printed materials decreased by 17 tonne CO2e. The decrease was also due to more detailed documentation being prepared during the year, which made it possible to calculate the total weight and thereby perform more exact calculations.

Environmentally friendly car repairs To reduce the environmental impact from car repairs, the repair shops that we engage extensively recycle spare parts instead of automatically choosing new spare parts. In addition, plastic parts and glass windows are repaired instead of always using new spare parts. Re-using and re-pairing instead of buying new does not just represent a gain for the environment, but is also a good deal for us and our customers. In 2013, this approach contributed to avoiding a 1,441-tonne mountain of waste and savings of just over SEK 147 million in the repair of damaged cars.

Suppliers are trained in Good Environmental Choice In 2013, the purchasing organisation held digital environ-mental training for all suppliers of claims adjustment in the construction sector, and also began the same training with suppliers in the auto sector. In total, this training was sent out to all 261 suppliers in construction, where all employ-ees with customer contact or who do claims adjustment were requested to participate. In 2013, we also began the distribution of the training to our 1,575 suppliers in auto. The training resulted in all participants receiving the infor-mation needed to create a fundamental understanding of the criteria that Good Environmental Choice sets, both on the certified products, but also on our suppliers of claims adjustment. The objective was to spread basic knowledge to the participants about how the environment is affected by the daily work methods in the respective industry, and how an operation can work to reduce its negative environ-mental impact.

Read more about our environmental efforts in the Folksam Sustainability Report.

Karin Stenmar Environmental and Climate Manager at Folksam

36

37

The environmental and climate issue permeates all we do in Folksam.

“Nobody will be able to afford insurance in the future if we do not take responsibility for

the climate issue - insurance companies will not be able to afford to do business and

individuals will not be able to afford to take out insurance.”

These are the words of Karin Stenmars, Environmental and Climate Manager at Folksam, when answering the question of why the environment is important to an insur-ance company.

“Our mission as an insurance company is not only to spread the risks between groups and individuals, but also over time. Individual events do not directly lead to premiums increasing. However, climate changes over time will affect our planet. More storms, higher water levels and more precipitation, with more damage as a result, are a few of the challenges to society.”

In recent years, there have been a lot of storms, is this something you notice in Folksam’s claims payments?

“Storm damage in particular has not hit us so hard, since our customers do not have so much forest insured. However, we are dominant in the home insurance market and there, we see an increase in water damage as a result of a wetter climate and increases in flooding. Housing close to the coast will be much more exposed in the future; there is talk of the water level rising by one metre in 80 years,” says Karin.

For this reason, Folksam works based on a comprehensive responsibility and uses its knowledge and strength to drive change, including by setting stringent environmental re-quirements on itself and the companies it cooperates with or invests its customers’ funds in. As an example, our auto, home and second home insurance products have been certified with the Good Environmental Choice ecolabel.

“Sustainability is about a long-term approach and it ap-plies regardless of whether we will manage pension funds, invest in the property market, repair damage to a house or influence which cars should be on our roads. What we do shall last for many years,” says Karin. This is the macrop-erspective, but we also need to talk about the issue from a microperspective. It is in daily life that we all can have an influence.

38

World-famous traffic researchThe knowledge Folksam’s traffic research provides is used to save lives in traffic. Fewer

traffic injuries also means lower injury costs and thus lower traffic insurance premiums,

which benefits our customers.

We use our research findings to exert influence in making traffic safer. Through our ties to universities, we can be involved and exert influence through national and inter-national networks. Consumer tests and information are also important tools since there is a demand for knowledge from independent parties regarding, for example, safe cars, child car seats and helmets in connection with purchases. We can also exert influence through our own insurance solutions where, for instance, the safest cars have reduced premiums.

Our traffic research focuses on:

• safercars• bicycling• motorcycles• speedlimitcompliance

The traffic research costs approximately SEK 7-8 per vehicle insurance policy and year.

Några av våra trafiksäkerhets- aktiviteter under 2013

Volvo superior in our ranking of safe cars“How safe is the car?” is Folksam’s ranking of the crash safety of cars and is based on the outcome of real ac-cidents. The highest rating in this year’s report went to Volvo’s models V70, XC70, S80, S60 and V60 from 2007 and forward. Their safety level is nearly 60 per cent higher than the average car and 12 percentage points better than number two on the list, Honda CRV 98-06.

Every year, we handle more than 50,000 road traffic claims. This gives us access to a large collective knowledge about how damage and injuries arise, how they can be avoided or limited. The make and model of car you are travelling in is very significant for the consequences of an accident.

Top listPer cent better than the average

Volvo V70/S80/S60/V60 07- 59

Honda CRV 98-06 47

Volvo V70/S80/S60 00-06 46

BMW 5-series 04-09 44

Audi A4 01-07 43

Mitsubishi Galant 97-03 42

VW Passat/CC 08- 42

Volvo XC90 02- 42

In this year’s report, we ranked 238 car models.

New agreement with OKQ8 and HertzUpon damage, many of our auto insurance customers get a rental car while their own car is in the workshop. We then ensure that the customers get sustainable cars by setting requirements on what safety and environmental standards the rental cars shall have. However, the greatest effect is on the used car market. Since the rental car companies most often replace their car fleet after 9-10 months, we are involved in influencing the standard of the cars in the second-hand market. The criteria are based on Folksam’s annual list over safe and sustainable cars.

Whiplash protection most effective for menWe carried out the first study in the world that shows how effective whiplash protection in cars is for men and women, respectively. The results show large differences in the pro-tective effect between the genders. The whiplash protection in one out of five cars has little or no protective effect for women, while the same protection functions well for men. One cause of the difference is that car makers for many years have worked based on the physiology of men in the development of whiplash protection.

60 per cent fewer skull injuries with bicycle helmetsOur study shows that bicycle helmets prevent 60 per cent of all bicycle-related head injuries that lead to chronic difficulties. Nearly four out of ten serious face injuries can also be prevented.

39

The study is based on just over 55,000 injuries reported by the emergency hospitals in Sweden between 2003-2012. The results were presented at the international scientific traffic safety conference IRCOBI in Gothenburg.

12 of 13 approved child bicycle helmets do not protect against the most common head injuriesWe presented a bicycle helmet test for child helmets just before the summer. Blows where the head is subjected to rotation are the most common kind of violence in a bicycle accident and can lead to brain injury. In spite of this the Swedish Consumer Agency’s certification tests of bicycle helmets do not include blows with rotation. Folksam’s more stringent test of the most common bicycle helmets for children and adolescents shows that only one of the 13 CE-approved helmets protect against injuries as a result of blows with rotation.

ABS brakes crucial to motorcyclist safetyOne of our studies shows that motorcyclists that ride with ABS brakes run a full 65 per cent lower risk of suffering injuries that lead to medical disability than motorcyclists who ride without ABS.

Of the approximately 300,000 motorcycles on Sweden’s roads, only around 18 per cent are equipped with ABS brakes. But there is a positive trend. Between 2008 and 2012, new sales of motorcycles with ABS increased from 15 per cent to 70 per cent. From 2016, ABS brakes are compul-sory on all new motorcycles over 125 cc. If all motorcycles had ABS, 13 deaths and 160 severe accidents could have been avoided every year. Motorcycles equipped with ABS receive a 15 per cent premium reduction with us.

Automatic brakes difficult for car buyers to chooseAutomatic emergency brakes are one of the car’s most im-portant protective systems. However, although the system is just as effective as anti-lock brakes and airbags, there are very few car makers who offer it as standard equipment. Moreover, there are several different kinds of automatic

brakes and it is difficult for the consumer to find out how the various systems work.

Earlier studies have mainly shown the accident-avoidan-ce effect of automatic brakes. Our new study shows that the damage-reducing effect is even higher due to the reduced crash violence in the crashes that nonetheless occur. Auto-matic brakes that engage upon rear-end collisions on roads with a speed limit up to 50 km/h reduce the drivers’ injuries in the car hit by a full 64 per cent. In about 40 per cent of cases, a collision still occurred, but without causing any in-juries. In addition, around 25 per cent of the accidents are estimated to have been avoided entirely. Cars with automa-tic brakes as a standard receive a premium reduction.

Studded or non-studded winter tyres?Before every winter season, voices are heard discussing what is best, studded or non-studded tyres. We therefore re-viewed test data for 44 studded, 31 Nordic non-studded and 11 Central European winter tyres to investigate what type of tyre works best in the winter in various parts of Sweden. The review assumed that there is a connection between braking distance and accident risk.

Our review shows that Nordic non-studded winter tyres are best adapted to the winter climate in southern and cen-tral Sweden. Although the braking distance is somewhat shorter with absolutely new studded tyres, it is most often bare ground in these parts of Sweden so that the studs are worn down and approach non-studded tyres after just a few years.

We can make a difference and help the customersBy analysing the injuries and damage that occur, we can provide advice on the best products and how one can pre-vent accidents and injuries. Another way is to integrate this knowledge into the insurance. Another example is that we have lower premiums for more environmentally sustaina-ble cars and motorcycles with ABS brakes. Yet another is that our home and auto insurance has the Good Environ-mental Choice ecolabel.

Motorcycles are an interesting area of research with large challenges. But our largest impact is within car and bicycle accidents where the most injuries are.

Matteo beginning with research was not a deliberate choice, but rather a desire to improve things. His interest in everything on wheels led him to the traffic field. His own interest in motorcycles has gone from riding as fast as possible to taking in the surroundings he passes.

Matteo Rizzi Traffic safety researcher in Folksam

Background: Mechanical engineer and doctoral student in engineering science. Began riding a moped at the age of 14 and is a passionate collector of motorcycles.

40

Folksam has a long history as an insurance provider and

partner for Swedish sports. Through cooperation with most

of the sports federations, nine out of ten active sports

practitioners are insured with us. Besides being an insur-

ance provider, we support sports through sponsorship and

injury-prevention research. Our hearts beat for sports!

Through the Swedish Sports Confed-eration’s basic research, all leaders and functionaries in 20,000 associations and 70 special confederations are insured with us. In addition, 53 of the 70 special associations have signed a licence or membership-linked accident insurance for the athletes. With 1.6 million practitioners insured, we have a total market share of just over 90 per cent. We are also an insurance provider within the elite division collectively agreed pension and insure just over 3,000 sports associations’ property.

Major cooperation agreements

• TheSwedishSportsConfede-ration’s basic research for all leaders and functionaries. • TheSwedishFootballAssociation’slicence insurance for 330,000 licensed players and 350,000 young people.

• TheSwedishGolfFederation’smember insurance with 500,000 members.

• TheSwedishFloorballFederation’slicence insurance for 120,000 licensed players.

Elite and exercise sports with a broad baseSponsorship is an important part of being the insurance company of sports. The objective of sponsorship is to build the brand by supporting both elite and exercise sports and creating and strengthening long-term relationships with Swedish sports. When we go in as a sponsor or partner, the sports shall have a broad support base and engage people regardless of age, gender, origin or social class. Through agreements with the associations, we primarily cooperate with football, track & field, sports for the disabled and cross-coun-try skiing.

Injury-prevention research A unique database of 16,000 registered sports injuries provides an opportunity for research and injury prevention efforts. Focus in 2013 has been on the knee control project, sudden death among young athletes and support for a doctoral candidate position in cooperation with the Swedish School of Sport and Health Sciences (GIH).

I am incredibly proud of the knee control ini-tiative and that our app

has been downloaded more than 50,000 times.

The knee control project is a concrete effort to prevent knee injuries for a new generation of girl footballers.

Lars-Inge SvenssonDirector, Folksam Sports

Background: Has had the benefit

of working with the Swedish sports

movement since the 1980s and as

the Director of Folksam Sports

since 2007.

We insure nine out of ten athletes

Knee control

Knee injuries are common in football and teenage girls are especially affected. The knee control project is an initiative by the Swedish Football Association and Folksam that began as early as 2008. The objective is to train football coaches, leaders, parents and players on how to exercise to prevent knee injuries among girl players aged 12 and up. A sim-ple exercise programme of 10-15 minutes sharply reduces the risk of serious knee injuries among girl football players.

Since 2013, the exercises have been gathered in the app, Knäkontroll (knee control). There are more than 30 filmed exercises with clear instruc-tions, infor-mation on the knee control study and news linked to exercise and sports injuries.

41

42

Attractive employerAs Sweden’s largest insurance company with several

subsidiaries, Folksam can offer many interesting career

opportunities in several businesses. Many employees also

appreciate working in a responsible company that has the

financial strength to make a difference.

Folksam has just over 3,600 employees in several cities and multiple compa-nies. They work with everything from claims adjustment and advice to IT, legal affairs and risk assessment. The right skills and long-term sustainable employees are a prerequisite for being able to offer insurance and pension savings that provide security.

Every employee is an important investment Every employee is a major and key investment - both for Folksam and the applicant. Managers are therefore trained to take a long-term view of Folksam’s supply of expertise and to always recruit and develop the employ-ees in consideration of the next phase of development.

In 2013, 529 employees were recruit-ed externally. Nearly as many switched jobs internally, either after having ap-plied for a new job on their own or due to a reorganisation. The largest part of the recruitment is in sales, claims adjustment and IT.

In 2013, the procedures and support in the staffing process were updated, in part to meet future requirements in the EU Solvency II directive - special aptitude testing of management and key individuals.

Support during organisation changes The work of recent years on changing the organisation in sales and claims - how we personally treat the customers - continued. The change work has been based on the customers’ wishes, market conditions and our need to be competi-tive even in the future. The change has

entailed major internal relocations for employees in different cities in Sweden and a cooperation forum worked to find the best possible solutions for the employees involved. For those thinking about the next career move, there is the possibility of career planning with an external coach.

In September 2012, Folksam announced the acquisition of the insurance company, Salus Ansvar, and in September 2013, around 130 new employees moved over to various parts of Folksam. In conjunction with the transition, the employees received a special introduction day and career talks tied to the receiving units.

Om oss

Number of employees 3,641

Employee turnover 9.8%

Average age, total 44.8 years

Sickness absence 4.2%

Gender distribution, total53% women47% men

Gender distribution, managers47% women53% men

Gender distribution in the boards 50% women50% men

Gender distribution in Group management 45% women 55% men

43

Safe and stimulating working environmentWe shall have a work environment that promotes good health, motivation and productivity. This means a workplace where the employees feel secure and have stimulating work and where consideration is taken to physical and psychosocial needs.

A change project that concerns the office workstations is under way. The project is focused on activity-based workplaces and the objective is to obtain a more efficient work organi-sation and more learning and to lower premises costs. We also encourage virtual meetings over the computer, which has a positive impact on both the environment and finances.

Efforts to reduce sicknessThe Swedish Work Environment Authority conducted six work environ-ment inspections in Folksam in 2012 and 2013. The results show that we have well conceived processes for the work environment efforts and the Swedish Work Environment Authority only had a few minor remarks that have now been resolved.

Sickness absence was 4.2 per cent in 2013. This was an increase that was seen in both Folksam and the rest of Sweden and it was probably due to several factors. To turn the developme-nt, analyses are conducted and action

plans prepared for groups with high sickness figures.

Diversity and equality We believe that diversity contributes to customer benefit, greater profitability and a more attractive workplace. Con-sequently, we work goal-oriented for an inclusive cooperation climate where the employees’ expertise is utilised and there is acceptance for differences. Through a clear and expertise-based staffing process, diversity is support-ed and the risk of discrimination is minimised.

The fact that Folksam currently has nearly 50 per cent women managers is an example of results of goal-oriented diversity work. In 2013, a revised diver-sity plan was prepared and the desire is that the diversity issues shall be even more integrated into the workday.

Market-based salaries In the review by the Equality Ombuds-man, Folksam’s work on equal wages received good marks. In a comparison of the average salary between male and female employees with similar jobs, the salary difference was approximately 4 per cent in 2013. To obtain fully equal salaries, Folksam surveys and anal-yses potentially non-objective salary differences in salary reviews every year, instead of just doing a survey once every three years as required by law.

The salary is set individually, is differ-entiated and shall be based on degree of difficulty and responsibility in the position and the employee’s expertise, experience and performance. For parental leave, Folksam provides a salary surplus so that the employees receive 90 per cent of the monthly salary regardless of income in the first 210 days.

Annual employee survey

In this year’s employee survey, the total index ended at 76* per cent. This is 4 per cent higher than the year before and the best total index measured in Folksam.

* Proportion of employees who responded in agreement to the question or market the rating 4 or 5 on a five-degree scale.

We have a good atmosphere where I work and you feel that your voice is heard. In contrast to when I worked at a bank, I think that it is easier to justify one’s stance in that we are customer owned.

Mårten mainly works with fund insurance and his duties include analysing profitability and creating models to describe how the business will develop.

Mårten Marcusworks as an actuary in Folksam

Background: Master of Science in Engineering Physics. Two years as an industrial doctoral student in finance with contact in the bank world.

44

Asset managementFolksam is one of Sweden’s ten largest investors and manages assets of SEK 304 billion.

The customer’s money is invested in interest-bearing securities, equities, properties and

alternative investments focused on long-term security.

Two thirds of all capital is invested in interest-bearing securities issued by the Swedish government, Swedish municipalities, Swedish mortgage institutes or Swedish companies. Folksam’s equities portfolios consist of listed Swedish and non-Swedish equities. At the end of the year, Folksam owned property assets, including property funds, totalling SEK 20 billion. The overwhelming majority of directly owned properties are located in Sweden and their market value totals SEK 16.2 billion. The value of the alter-native investments was SEK 5 billion at year-end. Alterna-tive investments are investments that have a low correlation with equity and interest rate markets.

Eleven companies with various investment emphasesFolksam consists of 11 insurance companies, all with dif-ferent profiles and emphases. Consequently, the Board of Directors of each company establishes individual objec-tives and levels of risk for the asset management, establish-ing the limits within which the capital may be invested.

The greatest risk for an insurance company is in the long run to not be able to cover its obligations towards policy-holders. To manage this risk, special consideration is given to the nature and duration of the insurance commitments in he composition of the investment assets.

Special rules apply to the asset management, mainly the placement regulations of the Insurance Business Act. In addition, we comply with the Financial Supervisory Au-thority´s regulations and general guidelines as well as each company’s rules for environmental and ethical consider-ations. The risk level of each company’s asset portfolio is monitored on an ongoing basis. It must be highly likely that the statutory requirements for each portfolio are able to be met and the risk level may not be so high as to endanger this, even during a very negative trend on the financial and insurance markets.

Folksam total, SEK billion 2013 2012 2011 2010 2009

Assets under management 304,299 275,380 252,653 235,070 215,005

of which interest bearing 189,721 184,329 174,906 148,621 137,242

of which equities 89,779 68,670 58,664 70,086 63,579

of which alternative investments 5,050 3,754 3,183 2,010 1,887

of which directly and indirectly owned property 19,749 18,627 15,900 14,353 12,297

Focus on stable returns

Folksam General SEK 32.1 bi l l ion

Folksam Life SEK 135.0 bil l ion

KPA Pension SEK 101.6 bi l l ion

Coop Pension Foundation SEK 22.6 bi l l ion

Other SEK 13.0 bi l l ion

M A N AG E D A S S E T S BY C O M PA N Y

Management MandatesFolksam’s asset management determines how assets are invested within the limits decided on by the boards. In order to achieve good risk diversification, the holdings are distributed between a wide variety of asset classes and mar-kets. Certain types of investments are managed internally, while others are managed externally. Positions managed internally are primarily conducted through derivatives to tailor each company’s level of risk. This may, for instance, involve stock options that decrease or increase the effects of fluctuations on the stock exchange. Interest derivatives are used, for example, to hedge disbursements of guaran-teed benefits to life insurance policyholders.

Management mandates are currently given to the internal functions of Folksam Fastigheter and Alternative investments, and externally to Swedbank Robur, Aktia Asset Management and DNB. The most extensive external management assignment is the one to Swedbank Robur and comprises approximately SEK 240 billion. Swedbank Robur also manages the majority of the continuous ad-ministration of transactions and securities holdings. The role of Folksam asset management is to be responsible for governance, monitoring and evaluation.

Folksam FastigheterBy owning the right properties, we create good returns in the management of our customers’ assets. The directly owned properties are managed by Folksam Fastigheter. We build, manage, let and develop these properties. With residential properties, nursing homes, offices and shops in attractive locations, we can also offer secure housing and attractive workplaces.

Alternative investmentsAlternative investments refer to an internal management mandate with a long investment horizon which aims to give policyholders access to unlisted assets. Investments must show a low correlation with the interest rate and equity markets and are made mainly in fund-like structures.

Alternative investments, SEK million

Hedge funds 288

Private Equity/Credit funds 1,026

Infrastructure/Energy 1,380

Other 2,356

Total 5,050

Folksam Fastigheter

Number of properties 130 Market value SEK 16,249 millionTotal rentable area 549,883 m2

Rental income SEK 1,058 million

45

46

Strategic company holdingsCorporate strategic investments are investments of particular strategic importance to each principal and are characterised by the fact that it is the Boards who decide on purchases or disposals.

One important strategic holding is Swedbank, where Folksam owns just over 9 per cent of the shares. At the end of the year, the value of the shares in Swedbank was nearly SEK 19 billion.

Total return ratioThe objective of investment management varies between the different companies. For Folksam Life and KPA Pensionsförsäkring AB, the objective is to achieve the highest level of real return under relevant risk and invest-ment limits, while in Folksam General and the rest of the companies, it is to contribute to stable and competitive premiums. For the life business, the objective should mean at the very least, an annual real rate of return of three per cent on average, measured over a ten-year period. Folksam has, for a number of years and in different market condi-tions, proved to be able to manage the risks and opportuni-ties in asset management in order to create long-term good returns for policyholders. The total return for 2013 was 7.7 per cent for Folksam General, 7.6 per cent for Folksam Life and 8.2 per cent for KPA Pensionsförsäkring AB.

Total return ratio

In per cent 2013 2012 2011 2010 2009

Folksam General 7.7% 8.2% 6.9% 6.7% 8.1%

Folksam Life 7.6% 7.0% 6.5% 8.7% 10.3%

KPA Pension 8.2% 7.2% 5.6% 8.2% 12.4%

47

Risk management – an key part of the businessA fundamental part of our business is assessing and managing risks. Through active,

controlled and business-based decisions on risks, we create conditions for offering the

customers insurance and savings solutions that create security.

In order to clarify management and responsibility for risk management and control, we divide activities into three lines of responsibility.

Three lines of responsibilityThe first line of responsibility is made up of business areas and units, parent companies and subsidiaries and outsourced business. They are responsible for directing operations so that the targets established by the board are achieved. They are responsible for risk management activi-ties, monitoring and compliance.

The second line of responsibility comprises Risk and compliance departments, and the chief group actuaries. They support and follow up the first line of responsibility on the basis of frameworks for risk management, and are responsible for having an overall picture of the risk situation in the company and report this to the board and the CEO.

The third line of responsibility consists of internal audit, which reviews and evaluates internal management and control on behalf of the Board.

Risk management in FolksamWe assess risk taking in relation to the possibility of achieving set targets in five steps.

1. Identification In the first step, we identify and disentangle all signifi-

cant risks we are exposed to both on the short and long terms.

2. Evaluation Risks are evaluated in a uniform manner and quantified

using generally accepted methods.

3. Management Here, we use regulations, processes and control ac-

tivities. The business and corporate management are responsible for prioritising and deciding on measures necessary to control or limit risk.

4. Follow up The business and control functions follow up on risks

and measures and ensure that the risks lie within decid-ed levels.

5. Reporting The board and CEO receive an all-round and factual

view of the total risk situation.

Ylva Wessén Manager of Risk Compliance in the Folksam General Group

48

49

Control is about responsibility to our customers and employees.

Risk and Compliance is responsible for following up that Folksam has good internal

control - that the company has control of risks and complies with laws, internal regulations

and generally accepted practice.

“There are higher demands on governance and control for businesses that require permits, which we are,” says Ylva Wessén, Manager of Risk and Compliance in the Folksam General Group. “Of course, it is ultimately about main-taining our permit, but we are also convinced that good control leads to a better and more commercial business.” We insure half of Sweden’s population and manage their pensions.

To follow up on shortcomings, all employees must report incidents that arise. Examples of incidents are thefts, fire, threats, technical and manual faults, computer virus-es, personal injuries, near accidents and improprieties. Incidents also include the cases when regulations are not followed. An example is Folksam’s ethical rules, one of our most important regulatory codes. They are about how we should be perceived and how we want to be - we are an insurance company that cares about our customers, we are personable, committed and responsible.

“We most often follow ethical rules without thinking about them - they are givens in many cases and common sense will get you far,” says Ylva. Just like we do not behave how-ever or impolitely in society in general, we shall not do so in our professional role.

We receive around 500 incident reports a year, which is too little, according to Ylva. It should be more, considering the number of employees, the matters we handle and the kind of business we have.

“Our attitude is that the more incidents that are report-ed, the better. You can do something about an issue only when you are aware of it.”

50

New rules control developmentInsurance is an important part of society’s safety net. Demands on the insurance industry

from both private customers and politicians are growing in pace with major changes in our

surroundings. The major increase in new regulations from the EU and the Swedish govern-

ment provides a clear illustration of a political need to create more control. Requirements of

greater transparency and comparability for the consumers is one example. At the same time,

the financial players must increase liquidity with the aim of making the systems more stable.

Solvency II is a European regulatory code for insurance companies. It is a part of a larger effort to create a uniform European financial market with greater protection for in-surance policyholders and improved competitiveness. The new rules in Solvency II strengthen the connection between solvency requirements and risks for insurance companies, and entail more stringent requirements on insurance com-panies having adequate capital to be able to live up to their commitments to the policyholders. Through greater risk control, the companies will be governed in a more sound and suitable manner.

Solvency II provides greater protection to the policyholdersWe began adapting to Solvency II as early as 2009. We have mainly focused on coordinating the adaptation of processes and system support we use for corporate govern-ance and reporting. Solvency II is an important part of the modernisation of Folksam and the rest of the industry, a development that is good for both the customers and for us as an insurance company.

The European Insurance and Occupational Pensions Authority (EIOPA) decided in autumn 2013 on preparatory guidelines for the Solvency II regulations. The Swedish Financial Supervisory Authority has decided that Swedish insurance companies shall comply with EIOPA’s guide-lines during the preparatory period 1 January 2014 until 1 January 2016 when Solvency II enters into effect. We have therefore increase focus on getting ready with our methods and processes for both corporate governance and reporting.

51

52

Four brands, two Groups and 11 insurance companiesFolksam comprises the two parent companies Folksam ömsesidig sakförsäkring (Folksam

General) and Folksam ömsesidig livförsäkring (Folksam Life) with subsidiaries. Two of the sub-

sidiaries in the insurance operations in Folksam Life are part-owned. These are Folksam LO

Fondförsäkring, which is 51 per cent owned, and KPA Pension, which is 60 per cent owned.

In Folksam General, the subsidiary Folksam Skadeförsäkring is part-owned at 51 per cent.

Of the group companies, Förenade Liv Gruppförsäkring (Förenade Liv) and the insurance companies in KPA Pension are not consolidated in the consolidated accounts in Folksam General and Folksam Life, respectively. The reason is that these companies are not dividend-paying and therefore all surplus in the companies goes to the policyhold-ers. To achieve economies of scale, the companies collabo-rate on distribution, administration and asset management.

Folksam GeneralFolksam General is customer-owned and undertakes gen-eral insurance activity principally focused on the Swedish household market. The company offers a full range of insurance policies to households and private individuals based on motor and household insurance supplemented by commercial insurance in selected areas.

Förenade Liv offers group insurance for life, health, accident, medical care and child and pregnancy insurance to employees and members through the employers and organisations that represent them. At the end of 2012, Folksam General acquired Förenade Liv from Folksam Life mainly to strengthen the market position in risk insurance. Folksam General acquired SalusAnsvar AB at 31 January 2013. The company in turn owns 49 per cent of Saco SalusAnsvar Försäkrings AB and 100 per cent of SalusAnsvar Personförsäkring AB. SalusAnsvar provid-ed insurance to Svenska Konsumentförsäkringar, a wholly owned subsidiary of Folksam General. In January 2014, the portfolio in Svenska Konsumentförsäkringar was transferred to the Parent Company Folksam General and the company will be discontinued.

At the beginning of 2012, Folksam General acquired 51 per cent of the shares in Folksam Skadeförsäkring (formerly Aktia) from Aktia Abp in Finland. Folksam Ska-deförsäkring conducts non-life insurance operations and is primarily active in the coastal area of Finland.

Tre Kronor offers non-life insurance in Sweden. Its business concept is to offer non-life insurance to compa-nies and organisations wishing to sell and market insur-ance under their own brand names. Tre Kronor currently

collaborates with Swedbank and 59 independent savings banks and in so doing reaches a broad market with general insurance products.

Folksam LifeFolksam Life is customer-owned and conducts life insur-ance business. The company offers occupational pensions and pension investments to private individuals, directly or through cooperation, but also group life insurance and other types of risk insurance.

Folksam Fondförsäkring conducts unit-linked insur-ance operations with ties to mutual funds. Customers can choose among a large number of selected funds, for exam-ple ethical funds, funds with low charges and award-win-ning top-performing funds.

KPA Pension is a brand and joint name for KPA Pen-sionsförsäkring, KPA Livförsäkring and KPA Pensions-service. KPA Pension is the leading pension company in the municipal sector and manages occupational pensions for employees of municipalities, county councils and municipal and cooperative companies. KPA Pensionsser-vice offers employer service for the handling of municipal pension commitments, administration of the employees’ individual pension choices and qualified consulting ser-vices, occupational group life insurance and professional pension advice. KPA Pension offers private individuals investments in private pension insurance and unit-linked insurance. KPA Pension is owned 60 per cent by the Folk-sam Group and 40 per cent by the Swedish Association of Local Authorities and Regions (SALAR). In 2013, KPA Pension acquired SPP Liv Pensiontjänst AB.

Folksam LO Pension is a brand focused on collective-ly agreed occupational pensions and principally covers administration and management of pension allocations made under the pensions agreement between the Con-federation of Swedish Enterprise and the Swedish Trade Union Confederation (LO). Operations are conducted in Folksam LO Fondförsäkring, which is owned by Folksam Life with 51 per cent and LO and several of their associa-tions with 49 per cent.

53

Folksam General

Svenska Konsument- försäkringar Tre KronorFörenade Liv SalusAnsvar

Folksam Non-life insurance

51%

Folksam Life

Svenska Lärarfonder

Folksam Fondförsäkring Folksam LO Pension51%

KPA Livförsäkring

KPA Pensionsförsäkring

KPA Pensionsservice

KPA Pension60%

54

Folksam GeneralFolksam General conducts property and casualty insurance business focused chiefly

on the Swedish market. The company offers a full range of insurance policies to households

and private individuals based on motor and household insurance supplemented by

commercial insurance in selected areas. The operating activities are carried out within

two business segments, Partners and Private.

Earnings and the market

Earned premiums and market shares The premium income (after reinsurance) in the Group increased by 7 per cent to SEK 10,974 million (10,287) and in the parent company to SEK 8,800 million (8,340). The premiums are increasing in all product areas as a result of premium adjustments, more insurance policies taken out and increased customer loyalty with fewer annulments. The portfolio development is positive in both auto and home.

Folksam General continued to focus on existing custom-ers and developing the relationships with their cooperative partners. Household insurance is the most strategically important product and comprises the core of the whole insurance offering.

Folksam General was the company that increased its market shares most in the Swedish non-life insurance mar-ket in the period 1 January-31 December 2013, compared with the year-before period. According to statistics from the Swedish Insurance Federation, Folksam General’s market share, measured in premiums paid in, increased to 15.9 per cent (15.4). The market share in the household market for the Folksam General Group amounted to 20.3 per cent (19.9).

Market shares measured by the number of policies to-talled 48.8 per cent (48.8) for home contents insurance, 28.3 per cent (28.1) in single-family homeowner’s insurance and 21.4 per cent (21.6) for private car insurance.

EarningsConsolidated earnings before appropriations and tax amounted to SEK 2,019 million (2,031) and SEK 2,056 million (1,874) for the parent company. The earnings for the insurance business are on a par with the previous year. The return on assets contributed just as strongly to the positive earnings in previous years.

Claims incurred (after reinsurance) increased during 2013 and amounted to SEK -8,984 million (-8,488) for the Group and SEK -7,188 million (-6,919) for the parent company. In 2013, the setting of reserves was revised with larger provisions as a result. The annuity reserves for traffic claims decreased at the same time as a result of a rising discount rate.

The total cost ratio in the Group and mother compa-ny decreased by two percentage points to 100 (102). The claims cost ratio amounted to 82 per cent (83) in the Group and the parent company.

The operating expense ratio in the Group and parent company decreased to 18 per cent (19). Operating expenses increased by SEK 25 million during the year. Claims ad-justment costs are increasing as a result of rising volumes, project costs and a reinforcement of the organisation.

Financial position Consolidation capital in the parent company continued to strengthen and amounted to SEK 13,526 million (11,616). At year-end 2013, the solvency ratio amounted to 149 per cent (139) in the parent company and the solvency factor amounted to 8.1 (7.5).

Folksam General’s bonus programme continues and for 2013, SEK 278 million was reserved. Disbursements will take place in 2014 and the bonus comprises a total of 1,750,000 customers.

55

Significant events during the financial yearThe boards of Folksam Life and Folksam General ap-pointed Jens Henriksson as the new President and CEO on 7 May. He succeeded Anders Sundström who had previ-ously notified that he would be resigning to pursue board work. Jens Henriksson began on 1 September 2013 and most recently came from a position as the CEO of Nasdaq OMX Stockholm.

In May 2013, it was decided that a consortium consisting of Folksam, Metso Corporation, Norrskenet AB and Peab AB would each invest USD 25 million for a total of USD 100 million in bonds issued by Northland Resources AB. Folksam’s investment is divided across Folksam ömsesi-dig livförsäkring (Folksam Life) and Folksam ömsesidig sakförsäkring (Folksam General).

Folksam General has a strong financial position and provides a bonus to the customers for the second consecu-tive year. Approximately SEK 278 million will be paid out to the customers.

On 31 January, Folksam General became the owner of SalusAnsvar AB with the subsidiaries SalusAnsvar Per-sonförsäkring AB and a 49% holding in Saco SalusAnsvar Försäkrings AB. The integration of both expertise and the insurance portfolio from SalusAnsvar has been successful. Several large partner customers, especially Saco associa-tions, are now a part of Folksam’s offering. Agreements on an expanded holding of 2 per cent have later been signed with the Saco associations concerning SACO SalusAnsvar Försäkrings AB.

Folksam General has signed an agreement on the acquisition of HSB’s property insurance portfolio. The acquisition comprises the roughly 500 tenant owners asso-ciations that are currently insured with HSB Försäkring. The premium volume for the assumed portfolio amounts to approximately SEK 25 million per year.

After an agreement with the Swedish Football Associa-tion, Folksam General invested in a jointly owned compa-ny that owns 11.1 per cent of Friends Arena in Solna. The agreement between Folksam and the Swedish Football Association covers the company that owns the actual prop-erty, Friends Arena, and not the operating company that rents and is responsible for the events.

Future developments After the strong earnings of recent years, Folksam General has a very strong financial position and with customer ownership in focus has paid bonus to the customers since 2013.

In the next few years, Folksam General is entering a phase of consolidation with a focus on efficiency enhance-ments and modernisation with its financial strength as a basis. The acquisition of SalusAnsvar has strengthened the Folksam brand through new partner relationships with several Saco associations and the integration project means that the company structure will be streamlined in the next few years. The customers in the current Svenska Konsumentförsäkringar AB and SalusAnsvar Person-försäkring AB are offered non-life insurance in Folksam General, which entails a higher volume in the parent company as of 2014.

The market share in the household market continues to increase and focus remains on the combination customer offer with auto and home insurance as a base. Customer loyalty is increasing with more insurance policies including supplemental insurance, combination customer discounts and bonuses.

A strategy review is being begun in 2014 to further strengthen Folksam General at the same time as a distinct improvement initiative for the operating activities. Claims expenses and pricing remain important areas of develop-ment and the steps taken in the terms review, reserve setting and purchasing are expected to contribute positively to strengthening the insurance result. The investment margin for the operating activities is being expanded to increase customer satisfaction and availability, mitigate operating deficiencies and enhance the efficiency of processes and IT system, which is expected to increase the operating expenses in the next few years to improve earnings after a few years.

Like the rest of the industry, Folksam will participate in the work preparing for Solvency II with an introduction date of 1 January 2016. The preparation work comprises Folksam’s own risk and solvency capital assessment, re-porting and corporate governance. On the longer term, the new regulations entail greater security for the customers and greater consideration of the cost of capital adequacy requirements in both customer offers and investments.

The return for the investment portfolio has in recent years strongly contributed to the now strong balance sheet, which provides good conditions for Folksam General to meet the new capital adequacy requirements placed on insurance companies. On the longer term, the insurance results were strengthened to balance the market risk in the investment portfolio.

56

Five-year summary and key ratios, SEK millionGROUP 2013 2012 20111 2010 20092

Earnings

Premiums written (after reinsurance) 11,265 10,223 9,697 9,125 8,552

Premiums earned (after reinsurance) 10,974 10,287 9,362 8,822 8,579

Return on capital net in insurance operations 470 524 641 643 626

Other technical income (after reinsurance) 31 30 26 30 107

Claims incurred, net -8,984 -8,488 -7,983 -7,265 -6,747

Operating expenses in insurance operations -2,010 -1,912 -1,734 -1,575 -1,608

Bonuses and rebates, net -290 -232 -9 -1 6

Other technical expenses (after reinsurance) – – – -38 -1

Insurance operation technical result 191 209 303 616 962

Remaining return on capital 1,981 1,825 1,457 1,074 1279

Other -153 -2 -11 23 13

Profit/loss before appropriations and income tax 2,019 2,032 1,749 1,713 2,254

Financial position

Investment assets at fair value 34,731 32,593 29,225 25,664 24,804

Technical provisions, (after reinsurance) 26,434 25,673 23,456 21,874 20,769

Solvency capital

Taxed equity 11,048 8,891 7,717 6,866 5,446

Subordinated liabilities - - - - 1,475

Deferred tax liability 3,047 2,485 2,462 2,255 1,745

Surplus value in investment assets

Investments in Group companies and associated companies 154 204 179 146 216

Other financial investment assets - - - - -

Total surplus value 154 204 179 146 216

Total solvency capital 14,250 11,580 10,358 9,267 8,882

Key ratios

Earnings from P&C insurance business

Claims ratio 82 83 85 82 79

Expense ratio 18 19 19 18 19

Combined ratio 100 102 104 100 97

Earnings from asset management

Yield, per cent 3 2.9 3.1 3.5 2.2 2.7

Total return, per cent 7.6 8.2 6.9 6.8 8.2

Financial position

Solvency ratio, per cent 126 113 107 102 104

1 Restated owing to change-over to full IFRS in consolidated financial state-ments and for provisions for pensions and similar liabilities. Earlier years are not recalculated in respect of this change of principle.

2 Restated owing to changed valuation principles for technical provisions not classified as occupational pension policies.

3 Yield has been restated for 2009 ac-cording to the change regulations FFFS 2009:12. .

Special accounts for applied ac-counting and valuation principles are provided in connection with annual report notes.

57

Five-year summary and key ratios, SEK millionPARENT COMPANY 2013 2012 1 2011 2010 2 2009

Earnings

Premiums written (after reinsurance) 9,061 8,332 8,292 7,989 7,607

Premiums earned (after reinsurance) 8,800 8,340 8,068 7,789 7,704


Other technical income (after reinsurance) 30 31 25 30 75


Operating expenses in insurance operations -1,631 -1,606 -1,472 -1,322 -1,378

Bonuses and rebates, net -290 -231 -9 -1 6

Other technical expenses (after reinsurance) – – – – -1

Insurance operation technical result 148 94 311 755 898

Remaining return on capital 1,914 1,781 1,079 999 1,301

Other -6 -1 -9 -3 -3

Profit/loss before appropriations and income tax 2,056 1,874 1,381 1,751 2,196

Financial position


Technical provisions, (after reinsurance) 23,269 22,763 21,719 20,302 19,422

Solvency capital

Taxed equity 4,022 3,025 2,189 2,131 1,920

Untaxed reserves 8,350 7,623 7,142 5,998 5,189

Subordinated liabilities – – – – 975

Deferred tax liability 999 764 562 546 315


Investments in Group companies and associated companies 154 202 179 146 216

Total surplus value 154 202 179 146 216


Capital base 13,427 11,563 10,033 8,548 7,838

Required solvency margin 1,655 1,550 1404 1,296 1,263

Consolidated capital base 13,609 11,699 10,110 8,607 7,971

Consolidated solvency margin 2,342 2,048 1,655 1,509 1,443

Key ratios

Earnings from P&C insurance business


Expense ratio 18 19 18 17 18

Combined ratio 100 102 104 99 97


Yield, per cent 3 2.5 2.7 3.2 2.3 3.0


Financial position


1 Restated owing to changed accounting principles of tangible assets and techni-cal provisions.

2 Restated owning to changed accounting principle of expenditures for develop-ment of internally generated intangible assets in accordance with RFR2. Earlier years are not recalculated in respect of this change of principle.

3 Restated owing to changed accounting principles for provisions to pensions and similar liabilities. Earlier years are not recalculated in respect of this change of principle.

4 Yield has been restated for 2009 according to the change regulations FFFS 2009:12. Presented key ratios with regard to yield for 2008 are calculated in accordance with FFFS 2008:26.

58

Folksam LifeFolksam Life conducts life insurance business focused on the Swedish market. We offer

occupational pensions and pension investments to private individuals, directly or through

collaborations, as well as group insurance and other personal risk insurance. Operations are

conducted in three business segments, Partner, Collectively Agreed Business and Private.

Earnings and the market

Premiums written and market shares The parent company’s premiums written net of reinsur-ance in the life insurance business increased by 16 per cent to SEK 7,899 million (6,792). This increase is mainly found in savings insurance where both occupational pensions and private savings insurance have contributed. Non-life insurance revenues decreased to SEK 670 million (755).

In traditional life insurance, premiums increased in 2013 in both private savings and occupational pensions. Folk-sam Life and the subsidiary KPA Pensionförsäkring are among the strongest alternatives on the market. During the year, Folksam Life became selectable within ITP and was elected the best life insurance company of the year at the industry’s Insurance Awards and named the life insurance company of the year by Söderberg & Partners.

The effort with individual occupational pensions in Folksam Life and its subsidiary Folksam Fondförsäkring AB has been successful and comprises offers in both tradi-tional insurance and unit-linked insurance, through own advisers, agents and partners.

In 2013, the total market share of Folksam Life with sub-sidiaries amounted to 14.4 per cent (15.3) measured as the total premiums for insurance open to competition accord-ing to Swedish Insurance Federation statistics. An inflow through transfers of an insurance portfolio to Folksam Fondförsäkring in 2012 contributed 1.9 per cent. Folksam is the second largest after Skandia measured in market share on total premiums. Within new policies, Folksam was the largest with a market share of 19.1 per cent (15.3).

Trades unions, companies and organisations such as various sports and athletics federations are offered custom-ised group life, health and accident insurance policies. The premium volume was stable during the year. The market share in group life insurance for Folksam Life amounted to 28 per cent (28).

EarningsConsolidated profit before appropriations and tax for 2013 amounted to SEK 14,812 million (10,168) and SEK 14,858 million (10,779) in the parent company Folksam Life. The

positive earnings are attributed mainly to higher long mar-ket interest rates that reduce the technical provisions and a good return on assets.

Life insurance provisions decreased by SEK 4,777 million (2,199) in 2013. The ten-year government bond rose by 0.99 percentage points, but the effect on the provisions decreased some through new discount rate curves from the Swedish Financial Supervisory Authority.

Claims incurred amounted to SEK 6,035 million (5,489), an increase compared with the previous year, and is mainly attributed to increased compensation for collectively agreed health insurance and for non-life insurance.

The total return ratio amounted to 7.6 (7.0) per cent. Over a number of years and in shifting market conditions, Folksam has demonstrated its ability to manage risks and opportunities in asset management. This creates long-term good returns on assets and thus safe pensions. The return has largely been generated by a strong development in the equity market and a lower interest difference between housing and government bonds. Over the last five-year period, the total return on assets has been 8.0 per cent (6.6) on average.

Operating expenses increased and amounted to SEK -747 million (-706). The higher operating expenses were primarily due to higher acquisition costs as a result of higher sales.

The proportion of administration expenses for the sav-ings operation amounted to 0.5 (0.5) per cent.

Financial position The solvency ratio was strengthened by 17 percentage points and amounted to 161 per cent (144) at year-end. The solvency ratio describes how well a life insurance company honours guaranteed commitments made to policyholders. In simple terms there are assets worth SEK 161 for every SEK 100 the customer is guaranteed. Folksam Life’s ability to provide good future rates of return on assets under man-agement is dependent upon its sound solvency ratio.

The collective funding ratio for defined contribution policies at year end amounted to 120 per cent (118) and 161 per cent (154) for defined benefits policies. The collective funding ratio describes the relationship between the com-

59

pany’s assets and the amount distributed to customers. The allocation includes both guaranteed and non-guaranteed obligations.

The bonus rate was increased from 4.5 per cent to 5 per cent on 27 March, and then to 6 per cent on 1 June 2013 for traditional insurance in the Folksam branch while the cooperative occupational pensions branch remained unchanged at 6 per cent. The bonus rate is re-assessed on a continuous basis in regard to financial market influence on the collective funding ratio.

Defined-benefit pensions, both vested paid-up policies and pensions under disbursement, were index linked for 2013 by 0.45 per cent, equal to the change in the CPI. For 2014, the decision has been made to adjust the pension sup-plements and paid-up policies upwards by 0.08 per cent.

In Group and occupational group life insurance, SEK 893 million (1,008) has been allocated to the fund for allo-cated bonuses. The fund now amounts to a total of SEK 4,258 million (3,365).

Significant events during the financial year The boards of Folksam Life and Folksam General ap-pointed Jens Henriksson as the new President and CEO on 7 May. He succeeded Anders Sundström who had previ-ously notified that he would be resigning to pursue board work. Jens Henriksson entered office on 1 September 2013.

In May 2013, it was decided that a consortium consisting of Folksam, Metso Corporation, Norrskenet AB and Peab AB would each invest USD 25 million for a total of USD 100 million in bonds issued by Northland Resources AB. Through the investment, the consortium obtains the right to appoint four out of a total of seven board members. The aim is to create a requisite influence and to contribute expertise with the assignment to restore confidence in Northland Resources AB. Folksam’s investment is divided across Folksam ömsesidig livförsäkring (Folksam Life) and Folksam ömsesidig sakförsäkring (Folksam General).

The Swedish Financial Supervisory Authority decided that new rules for calculating the insurance companies’ discount rate should begin to apply on 31 December 2013. The new discount rate is based on the principles behind the method in Solvency II. To calculate the rate, market data is used to determine a yield curve for durations up to ten years, after which the yield curve is drawn out between the ten-year point and a set long-term rate. The new method means that the discount rate is not as sensitive to market fluctuations as before since it is both market and model based.

At the same time, the Swedish Financial Supervisory Authority also published new instructions and forms for the Traffic Light supervisory tool, which measures the insurance companies’ various risk exposures.

As one of four companies, Folksam Life was selected in the procurement of traditional insurance for ITP, the collective bargaining agreement regarding pensions that applies to privately employed white-collar workers.

Continued efforts with individual occupational pensions are being pursued in Folksam Life and its subsidiary Folksam Fondförsäkring AB. The efforts with individual occupational pensions comprise offerings in both traditio-nal insurance and unit-linked insurance, through agents and partners, for instance. Folksam has also been chosen as an alternative in UIG 4, Sweden’s largest occupational pension plan outside the collective area.

Future developments Folksam Life enjoys a good financial position and a history of high returns. Distribution takes place broadly through both its own organisation, cooperation and brokers. De-mand for traditional insurance with equalized bonuses is increasing at the same time that Folksam, through its sub-sidiary Folksam Fondförsäkring and its developed fund offering, can offer the customers the products demanded in various market situations.

In the next few years, Folksam Life is entering a phase of consolidation with a focus on efficiency enhancements and modernisation with its financial strength as a basis. Folksam Life will continue to increase the premium vol-ume and the market share in the competitive market at the same time through the efforts with individual occupational pensions, both through its own sales force and through agency procured pension plans, combined with Folksam Life being selectable in ITP, the collectively agreed pension for private white-collar workers. A strategy review is being begun in 2014 to further strengthen Folksam Life at the same time as a distinct improvement initiative for the operating activities.

Focus in the past five years has been on capital strength and financial stability, which has yielded results and Folk-sam Life has a strong financial position today. Like the rest of the industry, Folksam Life will participate in the work preparing for Solvency II with an introduction date of 1 January 2016. The preparation work comprises Folksam’s own risk and solvency capital assessment, reporting and corporate governance. On the longer term, the new regula-tions entail greater security for the customers and greater consideration of the cost of capital adequacy requirements in both customer offers and investments.

The strategic asset allocation and risk management for the investment portfolio have in recent years strongly con-tributed to the now strong balance sheet, which provides good conditions for the new capital adequacy requirements placed on insurance companies.

In the next few years, Folksam Life has a number of key issues to address that have a material impact on the busi-ness. The Occupational Pension Company Commission, IORP, Solvency II and the Occupational Pension Commis-sion (taxation) are expected to provide clearer playing rules and conditions for the strategic emphasis for the company that currently conducts both occupational pension opera-tions and other life insurance.

60

Five-year summary and key ratios

GROUP, SEK million 2013 2012 2011 2010 20091

Earnings

Premiums earned net of reinsurance 670 755 694 700 723

Premiums written net of reinsurance 7,961 6,838 6,473 5,672 6,120

Return on capital, net 9,175 12,977 3,625 14,609 17,952


Change in life insurance provisions -5,745 -2,815 -13,917 -4,528 4,503

Operating expenses in insurance operations -1,193 -1,107 -996 -924 -951

Bonuses and rebates, net -902 -1,167 -932 -603 -261

Profit/loss, insurance operations 15,055 10,569 -8,963 9,268 22,459

Remaining return on capital 228 155 106 308 250

Other -471 -556 -514 -628 -543

Profit/loss for year before tax 14,812 10,168 -9,371 8,948 22,166

Financial position


Technical provisions 159,283 147,150 135,272 118,348 107,114

Solvency capital

Taxed equity 51,382 38,270 30,020 41,478 34,385



Investments in Group companies 207 207 207 207 207

Other financial investment assets 0 0 0 0 0

Total solvency capital 52,349 39,107 30892 42,261 35008

Key ratios


Yield, per cent 2 1.9 2.2 2.4 1.9 2.3


Financial position

Solvency ratio, per cent 2 253 198 171 24 21

1 Restated owing to change-over to full IFRS in consolidated financial statements.

2 The yield and solvency ratio have been restated in accordance with FFFS 2009:12.

61

Five-year summary and key ratiosPARENT COMPANY, SEK million 2013 2012 2011 2010 20091

Earnings

Premiums earned net of reinsurance 670 755 694 700 723


Return on capital net in insurance operations 9,268 8,430 6,977 8,941 10,314


Change in life insurance provisions 4,700 2,169 -18,184 382 11,998

Operating expenses in insurance operations -747 -706 -623 -549 -603

Bonuses and rebates, net -902 -1,168 -932 -603 -261

Insurance operation technical result 14,858 10,779 -10,125 8,885 22,650

Profit/loss before appropriations and income tax 14,858 10,779 -10,125 8,885 22,650

Financial position



Solvency capital

Equity 14,926 34,822 26,233 38,831 32,208




Investments in Group companies 2,713 2,283 2,379 2,085 1,887

Total surplus values 2,713 2,283 2,379 2,085 1,887


Collective solvency capital 26,274 22,513 19,713 18,600 14,944

Capital base 51,993 38,590 30,081 42,562 35,453

Required solvency margin 3,958 4,106 4,062 3,387 3,388

Capital base for the insurance group 52,683 38,558 30,002 42,062 34,874

Required solvency margin for the insurance group 5,882 5,980 5,970 4,913 4,921

1) Restated owing to provision for pen-sions and similar commitments. Earlier years are not recalculated in respect of this change of principle.

Continued on next page

62

Cont. Five-year summary and key ratiosPARENT COMPANY, SEK million 2013 2012 2011 2010 20091

Key ratios 2

Non-life business

Claims ratio 65 34 -101 83 70

Operating expense ratio 8 9 10 10 9

Combined ratio 73 44 -91 93 79

Life insurance operation

Management expense ratio 3 0.5 0.5 0.5 0.5 0.6

Management expense ratio for savings products 3 0.5 0.5 0.4 0.4 0.5

Acquisition expense ratio 3.7 3.6 3.3 2.4 2.3

Administration expense ratio for savings products 0.3 0.3 0.3 0.4 0.4

Administration expense ratio for risk products 5.8 5.6 6.6 6.4 5.8


Yield, per cent 4 2.7 2.9 3.2 2.6 2.9


Financial position


Collective funding level, per cent

Retrospective reserve method 120.4 118.0 115.6 116.0 113.1

Pension supplement method 160.7 153.9 150.9 146.4 139.3

1) Restated owing to provision for pen-sions and similar commitments.

2 Reported total return is calculated in accordance with the Swedish Insur-ance Federation’s recommendation for reporting total return.

3) Management expense ratio calculated in accordance with FFFS 2011:28. This ratio is calculated firstly for the life insurance operation and secondly for the investment products, excluding risk products.

4) The yield and solvency ratio have been restated in accordance with FFFS 2011:28.

63

64

Förenade Liv Förenade Liv conducts insurance business according to mutual principles and specialises

on insuring white-collar workers and university graduates through their organisations and

employers. The products offered are life, health, diagnosis, premium exemption, accident

and medical expenses insurance.

Earnings and the marketIn 2013, Förenade Liv reported earnings of of SEK 267 million (297) before appropriations and tax. The compa-ny’s underwriting result (excluding return on assets) was SEK 25 million (109). This year’s positive outcome was a combination of a good return on assets and a strong under-writing result. Premiums written before reinsurance rose to SEK 905 million (846).

Förenade Liv is the market leader in group insurance for white-collar workers and has distribution agreements with nine out of 16 trade unions and reaches 93 per cent of all TCO members. Förenade Liv also has distribution agree-ments with a total of four out of 23 organised trade unions within Saco. The business through agents corresponds to approximately 10% of the premium volume, which the commercial business also does.

Significant events during 2013On 22 April 2013, Sari Zander began as the new President of Förenade Liv.

In 2013, the preventive service “Samtalsstöd” (Counsel-ling) made a breakthrough. Vision, ST, Lärarförsäkringar and SULF have signed agreements for counselling for their members.

All company employees who have health and/or life insurance in Förenade Liv have received access to counsel-ling via the bonus. Company employees with life insurance who receive a special diagnosis or company employees who have health insurance and have been reported sick for at least three months are also entitled to one week’s rehabili-tation. This is also financed via the bonus.

Förenade Liv’s customers who get their compensation from the diagnosis insurance are now also offered reha-bilitation instead of or in combination with insurance compensation in cooperation with Svenska Re.

A beneficial insurance package has been developed for the Swedish Union for the Performing Arts and Film’s members who are self employed. FTF has renewed and modernised its agreement with regard to health, acci-dent and life insurance for its members. A youth package

including diagnosis insurance for members under the age of 36 has also been developed by FTF. Through automatic affiliation offerings, the degree of affiliation has increased markedly. The Swedish Police Union also renewed its agre-ement with Förenade Liv during the year.

Förenade Liv has developed a children’s insurance that also includes diagnoses that are often exempt such as ADHD, depression and eating disorders. TJ, SULF, KyrkA, SLF, Vision, FTF, the Swedish Union for the Performing Arts and Film, the Swedish Association of Road Transport Companies and Musikerna are some of Förenade Liv’s customers who chose to upgrade to the new children’s insurance.

Förenade Liv has established itself on the agent distri-bution market and has close cooperation with Söderberg & Partners. During the year, more than 20 new agreements have been signed. One example is the agreement with PRO where 400,000 members are offered accident and savings life insurance. Förenade Liv is also the exclusive supplier to Söderberg & Partners in their municipal and county council efforts.

The healthcare business has grown strongly. Among others, agreements have been signed with Swedbank and Sparbankerna where Förenade Liv is the insurance provid-er for the health insurance offered to the bank’s individual customers and companies.

A new business system has been deployed, which has im-proved the efficiency of Förenade Liv’s administration at the same time that the possibility of flexibility in the prod-uct range has increased. To increase efficiency towards companies and the agent distribution market, Förenade Liv has developed a partner web with online services where it is possible to access applications, plan information and fact documentation.

Since mid-2013, Förenade Liv has adjusted and ad-ministered Saco SalusAnsvar Försäkrings AB’s income insurance and as of September 2013, has also adjusted the health, accident, life and medical expenses insurance for SalusAnsvar Personförsäkring AB. Just over 20 employees have moved to Förenade Liv in conjunction with this.

65

Five-year summary and key ratios, SEK thousand

Earnings 2013 2012 2011 20101 2009

Premiums earned net of reinsurance 360,955 333,829 323,032 328,223 294,449


Return on capital, net 242,471 187,965 128,781 107,004 144,633

Claims incurred, net (including unadjusted claims) - 717,103 -1,459 -508,395 -447,064 -514,111

Change in life insurance provisions 11,018 -124,010 9,030 12,020 10,030

Operating expenses in insurance operations 111,055 -37,627 -18,062 -16,467 -24,499

Bonuses and rebates, net -24,000 -388,250 -60,000 -140,000 –

Other technical income and expenses – – – 2,226 –

Insurance operation technical result 267,496 297,121 219,434 197,166 246,411

Profit for the year 195,701 193,241 128,670 114,941 142,455

Financial position

Investment assets at fair value 3,411,300 3,008,722 2,828,922 2,632,395 2,369,693

Technical provisions 1,883,876 1,828,481 1,857,096 1,782,209 1,632,827

Solvency capital

Equity 1,385,229 1,189,529 996,287 867,617 757,139


Deferred tax liability 39,328 25,932 26,528 16,417 8,585

Total solvency capital 1,725,236 1,489,916 1,257,554 1,073,112 912,241

Capital base 1,727 1,499 1,258 1,073 913

Required solvency margin 238 170 160 156 138

Key ratios

Non-life business


Operating expense ratio * 14 (18) 13 (17) 11 (18) 12 (14) 11 (14)

Total expense ratio * 106 (110) 79 (84) 86 (93) 59 (61) 90 (93)

Life insurance operations

Management expense ratio ** 4.6 (4.3) 2.5 (5.5) 1.6 (5.1) 1.5 (4.3) 1.8 (4.4)

Administrative cost ratio, per cent 10.8 17.0 13.9 10.7 10.2


Yield, per cent 2.2 2.6 3.0 2.8 2.7


Financial position

Solvency ratio, per cent 190 (199) 181 (227) 146 (188) 119**(158) 145

* In 2009-2013, commissions and participations in reinsurance exceed the operating expenses of the life insurance business.

** Key ratios provided in parentheses have been calculated excluding operating expense revenue, primarily containing a share of profit from rein-surers to be comparable with previous years.

*** Management expense ratio is calcu-lated in accordance with FFFS 2009:12. This ratio is calculated firstly for the life insurance operation and secondly for the investment products, excluding risk products.

66

KPA Pension KPA Pension offers traditional pension insurance, unit-linked insurance, life

insurance, direct unit-linked savings, pension administration, selection centre and

asset management. Everything is with an ethical profile. The prioritised market is

the municipal sector in Sweden. All county councils and just over 80 percent of

Sweden’s municipalities have contracts with companies in KPA Pension. More

than one million employees have their pension in some form with KPA Pension.

67

KPA Pensionsförsäkring KPA Pensionsförsäkring’s business is a natural part of the complete KPA Pension’s

offering to employers, employees and pensioners. The company provides end-to-end

insurance solutions for employers’ pension obligations. The majority consists of the

employees’ individual selections, defined-contribution pension within various collective

agreement areas. The second part is defined-benefit pensions that are managed for

KAP-KL and PA-KFS.

EarningsThe Group’s profit before tax was SEK 14,026 million (6,979) and the parent company’s profit before tax was SEK 14,091 million (7,101). The premiums written for 2013 were SEK 9,889 million (7,713), of which premiums in the KAP-KL area constitute approximately SEK 7,210 million (6,280). Claims incurred amounted to SEK 2,617 million (2,204) to the insured, of which SEK 2,032 million (1,771) comprises basic pension and SEK 586 million (432) is bonus.

The life insurance provisions correspond to the expected capital value of the company’s guaranteed obligations according to insurance contracts less the expected capital value of future premiums paid in. Capital values are calcu-lated with consideration for assumptions regarding future interest rates, mortality and other risk measurements, operating expenses and tax. The provisions are calculated based on prudent assumptions. The change in the provi-sions amounted to SEK -792 million (-4,317) during the year.

Operating expenses in the insurance business increased by SEK 27 million and stood at SEK 258 million (231). Op-erating expenses relative to premiums written (operating expense ratio) amounted to 2.6 per cent (3.0).

Financial positionIn recent years, the company’s finances, measured by the solvency ratio, have strengthened. In 2011 and 2012, the decrease in long market interest rates meant that the provi-sions increased and the solvency ratio decreased. In 2013, the long market interest rates turned upwards, which im-proved the solvency ratio. On 31 December 2013, the Swed-ish Financial Supervisory Authority introduced a new method to calculate the interest rate that is used to measure the technical provisions. For KPA Pensionsförsäkring, the change meant that technical provisions increased by SEK 2.2 billion and the solvency ratio decreased by around 7 percentage points to 172 per cent.

Significant eventsIn the municipal collective agreement area where KPA Pension offers occupational pensions as a default alter-native, the labour market parties during the year signed a new pension agreement, AKAP-KL. The new agreement is entirely defined-contribution and comprises employees in the municipal sector born 1986 or later. The agreement already entered into effect on 1 January 2014 and has meant intensive work with changes in the KPA Pension IT system. At the same time, extensive systems development has been under way, primarily in the scope of the operations of the Pension Selection, to be able to implement the transfer right introduced in the municipal area in 2014.

In 2013, KPA Pension was also named a default selection company for employees in municipal companies by the employer organisation KFS. Altogether, this means that KPA Pension is now a default selection company for most employees in the municipal sector and has the parties’ con-fidence to manage the pension assets for the municipal and county council employees who do not choose a pension company themselves.

In 2013, KPA Pension acquired SPP Liv Pensiontjänst AB of which SPP Kommun is a part. SPP’s municipal pen-sion administration with associated IT systems and a small municipal insurance portfolio are thereby being trans-ferred to KPA Pension. In connection with the transaction being approved by the Swedish Competition Authority in October, KPA Pension established a new office in Sundsvall and some 30 new employees were transferred to KPA Pensionstjänst AB: The acquisition means that we have continued to invest in pension administration in the municipal sector. KPA Pension is taking over a modern IT platform that goes hand in hand with the web-based service development we are already working with for the employers in the municipal sector.

68

Future developmentsThe pension system is in constant change. It sets require-ments on the players in the municipal sector, which in turn set high requirements on us and the expertise we have in the pension area. We are continuing to work with these requirements and expectations to meet them in the best possible way. Today, KPA Pension is an important actor in pension issues and a company that takes an active social responsibility. This, together with our rapid growth and strong solvency, provides us good conditions of meeting future challenges.

The growth and our strong finances primarily benefit our savers in KPA Pensionsförsäkring AB. The assets under management have grown sharply since the beginning and the development will continue for a long time to come, which benefits the policyholders. Our solvency is among the best of all life insurance companies, which enables investments that provide good conditions for continued competitive returns, without risking the security we want to provide to the customers.

Five-year summary and key ratios, SEK million

Group 2013 2012 2011 20101 2009

Earnings

Premiums written 9,889 7,713 6,664 6,335 6,232

Return on capital, net in insurance operations 7,384 5,857 3,952 4,914 6,469

Claims incurred -2,054 -1,792 -1,547 -1,272 -1,036


Profit for the year 13,993 6,954 -8,465 7,215 14,932

Financial position



Solvency capital

Share capital 300 300 300 300 300

Other equity 42,607 29,247 22,678 31,592 24,491


69

* Redovisade nyckeltal avseende direktavkastning redovisas enligt FFFS 2008:26

** Redovisad totalavkastning är redovisad enligt Svensk Försäkrings rekommendation för rapportering av totalavkastning.

Direktavkastning och totalavkastning avser traditionell livförsäkring.


Parent company 2013 2012 2011 20101 2009

PROFIT*





Profit for the year 13,897 6,816 -8,473 7,180 14,894

Financial position*



Solvency capital

Share capital 300 300 300 300 300

Other equity 42,645 29,165 22,709 31,580 24,531


Collective funding ratio 1,586 1,563 1,017 643 484

Collective funding ratio, in % 102 102 101 101 101

Capital base 42,945 29,465 23,009 31,880 24,836

Required solvency margin 2,508 2,465 2,294 1,608 1,474

Solvency factor 17.1 12.0 10.0 19.8 16.8

Key ratios

Management expense ratio 0.3 0.3 0.3 0.3 0.4

Yield, per cent * 2.4 2.7 3.0 2.5 3.2

Total return, per cent** 8.2 7.2 5.6 8.2 12.4

70


2013 2012 2011 20101 2009

Earnings

Premiums written 341 336 499 482 462


Change in technical provisions -204 -92 158 385 -396

Claims incurred, net -326 -344 -359 -367 -403

Insurance operation technical result -52 1 316 686 -12

Profit/loss for the year 101 44 197 416 –

Financial position



Solvency capital 2,554 2,606 2,612 2,358 1,766

Deferred tax 75 44 47 39 -20

Collective funding ratio 2,479 2,562 2,565 2,320 1,785


Capital base 2,480 2,562 2,565 2,320 1,786

Required solvency margin 388 386 374 375 391

Capital base for the insurance group* 45,078 31,232 25,229 33,856 26,278

Required solvency margin for the insurance group* 2,896 2,869 2,667 1,984 1,865

KPA Livförsäkring Since 1 January 1963 KPA Livförsäkring AB insures employees in municipalities through a

life insurance (TGL-KL), which is a group insurance based on a central collective agreement

between the organisations for employers and employees within the municipality sector.

Earnings

Profit/loss for the yearProfit before appropriations and tax amounted to a loss of SEK 52 million (profit: 1). Profit for the year was SEK 101 million (44).

In 2013, the premiums written (net of premium tax deductions) were SEK 341 million (336), including reversals from the fund of bonuses allocated to insurance policies. Claims disbursed, including claims adjustment costs, amounted to a cost of SEK 326 million (344) for the year.

The average disbursement per insurance case amounted to 3.7 price base amounts (3.8).

Life insurance provisions and the provision for unad-justed claims decreased together during the year by SEK 125 million (78). This is primarily due to a lower number of sickness cases and a revision of the compensation provi-sion for non-approved claims.

The operating expenses decreased by SEK 3 million to SEK 16 million (21).

* KPA Livförsäkring AB and KPA Pensionsförsäkring AB are included here

71

Subsidiary KPA Pensionsförsäkring AB (publ) *





Profit/loss for the year 13,897 6,816 -8,473 7,180 14,894

Financial position



Solvency capital

Share capital 300 300 300 300 300

Other equity 42,645 29,165 22,708 31,580 24,531


Collective funding ratio 1,586 1,563 1,017 643 484


* Not consolidated with KPA Livförsäkring AB

Key ratios

Parent company KPA Livförsäkring AB


Yield, per cent * 2 2.7 3.3 3 3

Total return, per cent** 7.2 6.4 4.8 4.5 8.2

Solvency factor 6.4 6.6 6.9 6.2 4.6

* Reported key ratios pertaining to yield are presented for the years 2013-2009 as per FFFS 2008:26.

** Reported total return is reported in accordance with the Swedish Insurance Federa-tion's recommendation for reporting total return.

Key ratios

Subsidiary KPA Pensionsförsäkring AB*


Yield, per cent 2.4 2.7 3.0 2.5 3.2


Solvency factor

* Not consolidated with KPA Livförsäkring AB

17.1 12.0 10.0 19.8 16.8

Board Folksam General

Front row, from left

Ulf Andersson

Mikael A Carlsson, employee representative

Middle row, from left

Anders Lago

Karin Mattsson Weijber

Metta Fjelkner

Karl-Petter Thorwaldsson, Chairman

Kerstin Kujala, employee representative

Ann-Louise Andersson, employee representative

Back row, from left

Annika Strandhäll, Vice Chairman

Göran Lindblå

Anita Modin

Leif Linde

72

Not pictured:

Ella Niia,

Carina Malmer,

Magnus Ling

73

Board Folksam Life


Maj-Britt Johansson-Lindfors

Eva-Lis Sirén, Vice Chairman

Johnny Capor

Middle row, from left

Susanna Järnek, employee representative

Kristina Persson

Sune Dahlqvist

Anders L Johansson, employee representative

Göran Arrius

Back row, from left

Börje Enander, employee representative

Jan Rudén

Susanna Gideonsson

Sam Sandberg

Not pictured:

Nina Jarlbäck, Chairman

Annelie Nordström

Martin Linder

Board Förenade Liv


Kristian Silén

Stefan Holm

Git Claesson – Pipping

Linda Jonsson

Pia Carlsson Thörnqvist

Niklas Hjert

Back row, from left

Peter Lennartsson

Lars-Erik Klason

Eva-Lotta Nilsson

Sture Nordh

74

Board KPA PensionFront row, from left

Catrina Ingelstam

Ilmar Reepalu

Elisabeth Sasse

Ann-Charlotte Tollqvist

Back row, from left

Susanna Järnek

Jens Henriksson

Pia Carlsson Thörnqvist

Anders Knape

Håkan Sörman

75

76

Group management

Jens HenrikssonCEO

• born1967

• employedsince2013

• incurrentpositionsince2013.

Harriet PontánHead of HR

• born1953



AnnKristine Wuopio-MogestedtHead of Claims

• born1961



Daniel ErikssonHead of Product

• born1969



Gunnar FröderbergCIO

• born1953



Lars-Åke VikbergPresident of KPA PensionHead of Collectively Agreed Business BA

• born1966



77

Catrina IngelstamCFO

• born1961



Elisabeth SasseHead of Partner BA• born1966



Torbjörn EckerdalHead of Private BA

• born1958



Pia Carlsson ThörnqvistHead of Communications

• born1964



Tomas NorderheimDeputy CEO/Head of CEO Staff

• born1955



Address Postal address SE-106 60 Stockholm, Sweden Visitor address Bohusgatan 14 Telephone +46-771-960 960

For more information, please contact Christopher Casselblad, Investor Relations Telephone +46-8-722 66 34 E-mail [email protected]

Project Manager Christopher Casselblad

Production Manager Anna Holmgren

Art Direction, illustrations Markus Jansson

Graphic Design, infografik Monica Jälmevik

Copywriter Tina Helgöstam

Photographer Alexander Pihl page 5, 28, 32, 36, 39, 40, 43, 48, 72-77.

Bernd Eberle page 41

Andreas Lind other pages

Folksam is a customer-owned company. We offer insurance and pension savings. Nearly one out of two Swedes are insured by Folksam and we are one of Sweden’s largest asset managers. Our vision is for people to feel secure in a sustainable world.

folksam.se

S 11

987

13-0

9

Folksam - Annual Review 2013

Investor Relations

succeeded

northland

pointed jens

swedish mortgage

distinct improvement

nasdaq omx

collective

collectively