Mandatum Life aims to provide, in the long run and before expenses and taxes, an overall bonus on insurance savings eligible for distribution of profit that is at least equivalent to the interest level on long-term fixed-income investments considered to have the lowest risk at any given time. According to the current interpretation, German bonds are viewed as the closest option for risk-free, long-term fixed-income investments.
For the time being, however, Mandatum Life’s return target on savings insurance corresponds to the interest level on Finnish bonds with a maturity of five years, and on pension insurance the return target corresponds to Finnish bonds with a maturity of ten years. The overall bonus consists of the technical rate of interest and additional bonuses that are determined annually.
Mandatum Life Insurance Company Ltd’s Board of Directors annually decides on the additional bonuses, taking into account, among other things, the general interest rate, the company’s long-term success in investment activities, the technical rate of interest on the insurance and the company’s solvency. Also taken into account are any future claims expenses that the company must prepare for which may be higher than originally anticipated for the type of insurance in question, due to, for example, a significant change in the mortality rate of the insured.
In risk insurance policies, the equity principle is applied in the form of increased sums payable at death or as insurance premium discounts.
The company aims for continuity in the level of additional bonuses.
The targets are valid until further notice. Mandatum Life Insurance Company Ltd’s Board of Directors retains the right to change the targets and principles within the scope of legislation governing insurance companies. The published distribution principles for bonuses and the application of the equity principle are not part of the insurance contract.
Profit sharing policy for the segregated group pension insurance portfolio
On 30 December 2014, a group pension insurance portfolio was transferred from Suomi Mutual to Mandatum Life. This portfolio has been segregated from the rest of Mandatum Life’s insurance portfolio. In connection with the transfer, a separate profit sharing policy was agreed upon for this portfolio, independent of the rest of Mandatum Life’s insurance portfolio. The profit sharing for the group pension insurance portfolio transferred from Suomi Mutual is based on the investment assets covering it, which are separate from Mandatum Life’s other investment assets, as described below.
When the realised investment return according to national accounting practice (FAS) exceeds the return requirement based on the discount rate for technical provisions valid on the first day of the year, 65 per cent of this excess amount is distributed to the insurance portfolio. The insurance portfolio’s share of the investment returns that exceed the discount rate can be distributed, for example, as an annual customer bonus, one-time benefit increases, or it can be set aside in the reserve for future bonuses, which is used to equalise the annual customer bonuses and safeguard the level of client bonuses and their continuity.
When the realized investment return according to the national accounting practice (FAS) falls below the return requirement based on the discount rate for technical provisions valid on the first day of the year, said return requirement is financed primarily from the reserve for future bonuses and thereafter from Mandatum Life’s equity. The share of the reserve for future bonuses that has been set aside, by a separate decision by Mandatum Life, for the insurance portfolio transferred from Suomi Mutual shall not be used to finance the above-mentioned return requirement.
The discount rate applied in the profit sharing policy for the group insurance portfolio transferred from Suomi Mutual has been 0.0 per cent since 2020.