Estonian companies continued to expand into other Baltic countries in 2009. After SWEDBANK merged its Baltic Life operations into SWEDBANK Life Insurance SE, the trend towards consolidation and expansion into other Baltic countries was repeated in the Non- Life insurance sector. In the second half of 2009 IF P & C Insurance AS completed a merger process that saw its Latvian and Lithuanian companies turned into branches of its Estonian-based operation. In addition, a branch of AS SWEDBANK commenced activities in Latvia. As a result, there are significant differences between the overall business figures of Estonian insurance companies and their results directly linked to business concluded in Estonia.

Unit-linked still dominant

Estonian-based Life insurers collected insurance premiums of EUR133.4m in 2009, of which 61.9% was collected in Estonia, 20.7% in Latvia and 17.4% in Lithuania. Benefits paid out (including surrenders) totalled EUR67.95m, down a third on the 2008 figure, but the decrease was caused mainly by a drop in unit-linked life insurance surrenders while benefits of other insurance classes rose 18.1%.

At the end of 2009, Estonian Life insurers had 427,133 main contracts and 308,350 supplementary insurance contracts in force. The establishment of SWEDBANK Life Insurance SE increased the volume of main contracts by 45.7% and the volume of supplementary insurance contracts by 64.6%, adding 258,000 new contracts to the company’s portfolio. However, leaving aside SWEDBANK Life Insurance SEE’s Lithuanian portfolio the number of main insurance contracts declined 2%. The fall was driven by a high cancellation rate and a 39% decrease in new contracts.

Unit-linked life insurance continued to generate the largest premium volume, staying stable at 53.2%. And based on the volume of insurance premiums collected from new contracts, unit-linked life insurance was still the most popular class of insurance, accounting for almost 76% of all new insurance contract premiums.

Life insurance premiums on Estonian market fell 10% in 2009 to EUR76.7m and paid benefits amounted to EUR44.22m. SWEDBANK Life Insurance SEE remained the market leader in terms of premiums collected in Estonia, with almost 38%. Successful sales of unit-linked life insurance doubled SE SAMPO Life Insurance Baltic’s market share to 24% from 12% to rank it second in the market.

All life insurers ended 2009 with profit

All Life insurers ended 2009 in profit. Their total unaudited technical profit was EUR15.47m and the net profit was EUR15.78m, a considerable improvement on 2008’s loss of EUR19.05m.

Total Life insurance company assets rose 83.7% to EUR772m during the year. All life insurers increased their balance sheet volume, but the major factor behind the substantial growth was the establishment of SWEDBANK Life Insurance SE, which consolidated the figures of Lithuanian Life insurance market leader SWEDBANK gyvybÄ-s draudimas AB to the company’s portfolio.

Car sales drive the Non-life market

In 2009, the Non-Life insurance companies’ gross premiums volume totalled EUR236m, down 5% on the year after a 3% rise in 2008. The real decrease was even bigger as the results were improved by the premium volumes of Latvian and Lithuanian branches of IF P & C Insurance AS and the Latvian branch of AS SWEDBANK Varakindlustus that were included in the second half of 2009. Claims paid fell 3% to EUR134m.

As before, the Non-Life insurance market was dominated by land vehicle insurance. This is the class of insurance that has been affected the most by the financial crisis. A drastic drop in the sale of new cars and in the number of new leasing contracts will have a long-term affect on the Non-life insurance market.

The second biggest loser among the Non-life insurance classes was Commercial property insurance. In the context of severe economic conditions, companies are forced to cut expenses and this has influenced their insurance decisions. Nevertheless, despite the decrease in the volume of new housing loans, Household insurance business is supported by existing long-term loan contracts and by the resulting long-term obligation to insure the purchased property during the period of the loan contract.

Those insurers that experienced the biggest losses in 2009 lost almost one fifth of their premium volume. This gave the remaining companies an opportunity to increase their market share by merely maintaining their former premium volumes. Branches of foreign Non-life insurers account for 17% of the Non-life insurance market. The earlier rapid growth of branches stabilised in the second half of 2009.

Significant changes occurred in the market shares of Non-life insurers, with three major Non-life insurers capturing 77% of Non-life insurance market. The market was still led by If P & C Insurance AS, which increased its market share primarily due to its Lithuanian and Latvian branches. However, in the domestic market the premium volume of If P & C Insurance AS declined by more than the market average. ERGO Kindlustuse AS was ranked second despite being one of the biggest losers. Finally, SWEDBANK Varakindlustus managed to increase its market share by approximatly 2 percentage points, due to a positive evolution of the GWP volume of about 8%.

54% increase of the net profit

Last year turned out to be as good for the Non-life insurance sector as 2007. Both net and gross loss ratios fell, mainly as a result of a decline in loss frequency that was driven by a fall in traffic volume, and by a favourable climate and an improved traffic culture. The gross loss ratio of Non-life insurance was 60%, after 61% in 2008, and net loss ratio fell to 57%, after 62%. In this context the gross combined ratio that reflects the adequacy of the Non-life insurers’ tariffs was 83% in 2009 and the net combined ratio that reflects the profitability of insurers was 81%.

All in all, 2009 was profitable for Non-life insurance sector: investment profit totalled EUR14m, technical profit EUR40.58m and net profit was about EUR53m. The investment result improved considerably compared to 2008. The technical result was supported by a low loss ratio. The year ended with net profit by all insurers except one.