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Taaleri Oyj Annual Report 2020
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BOARD OF DIRECTORS' REPORT AND FINANCIAL STATEMENTS 2020
Key figures
CEO's review
Board of Directors' report
Group financial statements
Parent company financial statements
Signatures
Auditor's report
TAALERI
TABLE OF CONTENTS
GROUP KEY FIGURES...3
CEO ROBIN LINDAHL...4
BOARD OF DIRECTORS' REPORT 1 JANUARY-31 DECEMBER 2020...5
OPERATING ENVIRONMENT...5
FINANCIAL RESULT...5
BUSINESS SEGMENTS...6
OTHER GROUP EVENTS DURING THE FINANCIAL PERIOD...9
CORPORATE RESPONSIBILITY...9
CHANGES IN GROUP STRUCTURE...9
CHANGES IN TAALERI'S EXECUTIVE MANAGEMENT TEAM...9
ANNUAL GENERAL MEETING 2020...9
TAALERI'S PERSONNEL...10
SHARES AND SHARE CAPITAL...11
CAPITAL ADEQUACY OF TAALERI...13
TAALERI'S RISK MANAGEMENT AND RISK POSITION...14
MATERIAL EVENTS AFTER THE FINANCIAL PERIOD...15
OUTLOOK...15
BOARD OF DIRECTORS' DIVIDEND PROPOSAL...15
KEY FIGURES...16
GROUP FINANCIAL STATEMENTS...20
CONSOLIDATED INCOME STATEMENT...21
CONSOLIDATED BALANCE SHEET...22
CONSOLIDATED STATEMENT OF CASH FLOWS...23
CHANGES IN GROUP EQUITY CAPITAL...24
SEGMENT INFORMATION...25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS...28
ACCOUNTING POLICIES FOR PREPARING
THE CONSOLIDATED FINANCIAL STATEMENTS...28
NOTES TO THE INCOME STATEMENT...37
NOTES TO THE BALANCE SHEET...43
NOTES CONCERNING RISK POSITION...55
OTHER NOTES...71
PARENT COMPANY FINANCIAL STATEMENTS...77
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS...80
SIGNATURES FOR THE FINANCIAL STATEMENTS
AND BOARD OF DIRECTORS' REPORT...96
AUDITOR'S REPORT...97
This Board of Directors' Report and financial statements for 2020 has not been prepared in accordance with the ESEF (European Single Electronic Format) regulations. The Board of Directors' report and financial statements in accordance with the ESEF regulations is an electronic xHTML file, in which the primary financial statements are marked up with XBRL tags. The ESEF requirement is based on the Transparency requirements for listed companies Directive (2004/109/EC) and its amending Directive, as well as the European Commission Delegated Regulation (2018/815/EC). In Finland, the directive has been incorporated into the Securities Markets Act (Section 7.5 of the SMA).
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TAALERI
GROUP KEY FIGURES
TAALERI GROUP 1.1.-31.12.2020
- Income increased by 3.3 per cent to EUR 69.5 (67.2) million.
- Continuing earnings grew 7.1 per cent to EUR 59.2 (55.3) million. The continuing earnings of Wealth Management decreased by 3 per cent, but the continuing earnings from assets under management increased by 8 per cent. The continuing earnings of the Energy segment doubled to EUR 9.2 (4.6) million and the Insurance segment's continuing earnings increased by 21 per cent to EUR 14.6 (12.1) million.
- Performance fees totalled EUR 7.1 (5.2) million.
- Income from investment operations was EUR 3.2 (6.7) million.
- Operating profit increased by 6.6 per cent to EUR 17.6 (16.5) million, or 25.3 (24.5) per cent of income.
- Earnings per share were EUR 0.46 (0.39).
- Assets under management grew 7.3 per cent to EUR 7.6 (7.1) billion.
- Insurance exposure totalled EUR 1.8 (1.8) billion.
- The Board of Directors' proposes a dividend of EUR 0.32 per share for 2020. The Board of Directors' has decided that the unpaid dividend of EUR 0.16 for 2019 will not be paid.
GROUP KEY FIGURES
| 2020 | 2019 | Long-term target | |
|---|---|---|---|
| Earnings key figures | |||
| Continuing earnings, MEUR | 59.2 | 55.3 | |
| Growth in continuing earnings, % | 7.1 | 6.3 | > 15.0 |
| Income, MEUR | 69.4 | 67.2 | |
| Operating profit, MEUR | 17.5 | 16.5 | |
| Operating profit, % | 25.3 | 24.5 | > 20.0 |
| Profit for the period, MEUR | 13.1 | 11.5 | |
| Return on equity*, % | 10.1 | 9.3 | > 15.0 |
| Balance sheet key figures | |||
| Equity ratio, % | 49.7 | 46.6 | > 30.0 |
| Group's capital adequacy ratio, % | 216.2 | 207.4** | |
| Per share key figures | |||
| Earnings/share, EUR | 0.46 | 0.39 | |
| Equity/share, EUR | 4.75 | 4.45 | |
| Share closing price, EUR | 8.12 | 8.42 | |
| Other key figures | |||
| Cost/income ratio excluding investment operations | 76.7 | 83.7 | |
| Cost/income ratio | 74.6 | 74.7 | |
| Number of full-time employees, average | 192 | 186 | |
| Market capitalization, MEUR | 229.8 | 238.3 | |
| Assets under management, BEUR | 7.6 | 7.1 | |
| Guaranty insurance portfolio, BEUR | 1.8 | 1.8 |
- Annualized
** Capital adequacy ratio includes the Board of Director's dividend proposal for 2019, of which the Board of Directors has decided on 18 February 2021 not to distribute EUR 4.5 million
Income statement items are compared with figures for the corresponding period last year. The balance sheet is compared to the situation at the end of 2019, unless otherwise stated.
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TAALERI | 4
CEO ROBIN LINDAHL
Taaleri's result for the second half of 2020 was strong, driven by the Energy and Insurance segments. From July to December, the Group's income increased by 18.5 per cent to EUR 43.3 million and operating profit by 46 per cent to EUR 14.8 million. The result was improved especially by investment returns, which strengthened towards the end of the year.
All in all, we can be satisfied with Taaleri's year in a challenging operating environment. The Group's income increased slightly to EUR 69.5 million, and operating profit increased to EUR 17.6 million, representing 25 per cent of income.
For the Wealth Management segment, the second half of the year was weaker than in the previous year due to the COVID-19 pandemic, but the trend took a positive turn towards the end of the year. Continuing earnings from assets under management grew, but continuing earnings other than those based on assets under management remained below the previous year's level. During July-December, assets under management took an upward turn, and in the last quarter sales increased to the best figures of the year. The segment's expense awareness remained good in the second half of the year.
I am especially pleased that in the SFR survey, institutional investors chose our wealth management as the best in Finland in challenger category. Particularly, investors appreciated our customer service, vision and resources.
Launched in June, our digital wealth management service specialising in impact investment has been well received by existing and new customers. The service offers all investors
the opportunity to invest in new projects benefiting the environment and society through a widespread ETF portfolio.
In accordance with our strategy, we continued the development of our real estate business into a separate operational unit. Our goal is to significantly increase the assets under management of real estate funds by seeking growth in new scalable products and expanding the investor base. During the financial year we launched our first special investment fund that invests in real estate, called Taaleri Real Estate. The fund started its investment activities towards the end of the year by acquiring rental homes, which are among the safest real estate categories in the COVID-19 market environment.
The Energy segment had a strong year and its continuing earnings doubled from last year. The continuing earnings for the second half of the year increased by 57 per cent to EUR 5.1 million, and the operating result showed a profit. The SolarWind II fund, which invests in industrial scale wind and solar power plants, reached EUR 320 million in investment commitments in November. The fund has been invested in by many major domestic and international institutional investors, and I am very proud of the international breakthrough achieved by our skilled Energy team. The fund will remain open to investors until June 2021, and its maximum size is EUR 400 million.
In the Insurance segment, Garantia turned in its best insurance technical result ever. In the second half of the year, the company's income increased by 26 per cent to EUR 13.6 million and operating profit by 39 per cent to EUR 9.2 million.
The combined ratio for the financial year was 37 per cent and the excellent result was due to successful underwriting, low claims incurred and low operating expenses. The investment return increased towards the end of the year and was moderate, given the chosen level of risk. Garantia started underwriting residential mortgage guarantees with a new banking partner. The issuance of guarantees to OP Financial Group's mortgage customers began at the beginning of October.
The COVID-19 pandemic is not over, although vaccines promise to alleviate the situation this year. I would like to warmly thank our staff for their committed and hard work and our customers for their trust in us during these exceptional times. Despite the unpredictability of the operating environment, we are determined to continue developing and implementing the company's strategy. Our goal this year too is to offer our customers profitable investments for the benefit of the environment and society alike.
I would like to warmly thank our staff for their committed and hard work and our customers for their trust in us during these exceptional times.
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TAALERI | 5
BOARD OF DIRECTORS' REPORT
1 JANUARY-31 DECEMBER 2020
OPERATING ENVIRONMENT
The COVID-19 pandemic had global public health and economic impacts in 2020. Central banks and governments responded to the crisis with rapid and substantial stimulus measures. Central banks lowered interest rates and launched bond purchase programmes which, despite the weak economic situation, kept financing conditions rather good and helped avert a global wave of bankruptcies. Governments introduced direct and indirect support measures. Investments in renewable energy were placed at the heart of the European Union's EUR 750 billion support package.
In the investment market, the year was unstable. The COVID-19 pandemic initially led to a sharp decline in stock prices, but the largescale monetary stimuli in the United States and Europe and the positive news on the development of the COVID-19 vaccine led to a reversal in price development. At the end of the year, many stock exchange prices rose to record levels, but regional differences were large.
In the real estate investment market, transaction volumes have been at a record high in recent years. In the spring the COVID-19 pandemic temporarily stopped the transaction market almost completely, but towards the end of the year the market clearly picked up. Uncertainties in the user market directed capital to the safest real estate categories: housing, public real estate and logistics.
The renewable energy market developed well, and we see especially the solar and wind power markets continuing to grow.
The effects of the pandemic on the Finnish economy began to be felt in the first quarter of the year, and in the second quarter the gross domestic product reduced markedly compared to the same time period the previous year.
Although the economy showed signs of recovery from the third quarter on, preliminary estimates have it that the gross domestic product fell by 3-4 per cent over the previous year.
The strong financial position of Finnish enterprises, their proven ability to adapt to the conditions and the support measures taken by the public sector towards enterprises contributed to the success of Finnish enterprises under the circumstances. Even the Finnish housing market was hardly affected by the pandemic crisis. The housing market slowed down temporarily in the spring, but the market quickly returned to normal during the summer.
FINANCIAL RESULT
INCOME AND OPERATING PROFIT
| EUR million | 2020 | 2019 | Change, % |
|---|---|---|---|
| Group income | 69.5 | 67.2 | 3.4% |
| Wealth Management | 46.7 | 44.5 | 4.7% |
| Insurance | 17.2 | 21.3 | -19.2% |
| Energy | 9.2 | 4.6 | 99.5% |
| Other operations | 0.1 | -1.6 | neg |
| Eliminations | -3.7 | -1.7 | |
| EUR million | 2020 | 2019 | Change, % |
| --- | --- | --- | --- |
| Group operating profit/loss | 17.6 | 16.5 | 6.3% |
| Wealth Management | 12.1 | 11.8 | 3.2% |
| Insurance | 9.9 | 12.7 | -21.9% |
| Energy | 0.2 | -2.6 | neg |
| Other operations | -4.7 | -5.3 | 11.9% |
The Group's share of the result of associated companies is taken into account in the segmentspecific income. Segment information is presented on page 25.
The Group's income in January-December 2020 increased by 3.3 per cent to EUR 69.5 (67.2) million. Continuing earnings grew 7.1 per cent to EUR 59.2 (55.3) million in 2020, which is below the Group's long-term target (over 15 per cent growth). The continuing earnings of Energy and Insurance segments outperformed the long-term targets, but Wealth Management did not meet the long-term target. The Group's fee and commission income was EUR 49.2 (46.1) million, of which the performance fees accounted for EUR 7.1 (5.2) million. Net income from insurance operations was EUR 17.2 (21.3) million, of which net income from guaranty insurance operations totalled EUR 14.6 (12.0) million. The net return on investments in insurance operations totalled EUR 2.5 (9.2) million, and the return on investments, at fair value, was 1.8 (8.1) per cent.
Taaleri Group's investment operations yielded EUR 3.2 (6.7) million. Taaleri Group's investment operations without Garantia's investment operations yielded EUR 0.6 (-2,5)
> The renewable energy market developed well, and we see especially the solar and wind power markets continuing to grow.
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TAALERI
million, which includes a fair value change of EUR -2.3 (-4.3) million from the Fellow Finance ownership.
The Group's operating profit was EUR 17.6 (16.5) million, which represents a growth of 6.6 per cent. The operating profit represented 25.3 (24.5) per cent of the Group's income and exceeds the Group's long-term operating profit target (more than 20 per cent).
The administrative costs totalled EUR 34.0 (33.7) million. Personnel costs totalled EUR 25.2 (24.2) million, which included variable salaries of EUR 5.3 (5.4) million. Other administrative expenses totalled EUR 8.8 (9.5) million and other operating expenses EUR 5.9 (5.2) million.
Profit for the financial period 2020 amounted to EUR 13.1 (11.5) million and the comprehensive income EUR 12.9 (13.2) million. The Group's return on equity was 10.1 (9.3) per cent and below the Group's long-term target (more than 15 per cent). Return on equity remained weak due to the Group's high capitalization.
TAALERI'S BALANCE SHEET, INVESTMENTS AND FINANCING
The balance sheet total of the Taaleri Group was EUR 268.0 (269.7) million. The Group's cash and cash equivalents totalled EUR 25.8 (20.1) million and investments EUR 194.8 (173.5) million, corresponding to 72.7 (64.3) per cent of the Group's balance sheet total.
The Group's interest-bearing liabilities amounted to EUR 64.7 (75.6) million, which consisted of EUR 34.9 (34.9) million in Taaleri Plc bond programs, EUR 14.9 (25.9) million in liabilities to credit institutions and the ten-year Tier 2 bond at EUR 14.8 (14.8) million issued by Taaleri Plc during the financial year 2019. Liabilities totalled EUR 134.8 (144.0) million and equity stood at 133.2 (125.7) million.
The equity ratio of Taaleri Group remained strong at 49.7 (46.6) per cent and exceeded the Group's long-term target 30 per cent.
BUSINESS SEGMENTS
Taaleri manages its business through three segments: Wealth Management, Insurance and Energy. Operations that do not belong to the segments are presented in Other operations.
WEALTH MANAGEMENT
Taaleri's Wealth Management segment offers wealth management services and investment solutions to private individuals and companies. In addition to services and allocation solutions based on the individual needs of our customers, our offering includes all traditional asset classes on the stock and money markets. We also offer various opportunities for co-investment and private equity investments.
| Wealth Management, EUR million | 2020 | 2019 | Change, % |
|---|---|---|---|
| Wealth Management fees | 37.5 | 38.8 | -3.4% |
| Performance fees | 7.1 | 5.2 | 37.0% |
| Investment operations | 2.1 | 0.6 | 261.7% |
| Income | 46.7 | 44.5 | 4.7% |
| Operating profit | 12.1 | 11.8 | 3.2% |
| Full-time personnel, average | 118 | 116 |
Wealth Management's income increased by 4.7 per cent and was EUR 46.7 (44.5) million in January-December 2020 due to performance fees and gains from disposals. Wealth Management's continuing earnings suffered from corona virus pandemic and totalled EUR 37.5 (38.8) million. Fee income arising from assets under management grew eventually 8 per cent from last year's level after the declining trend at the beginning of the year, but transaction-based income turned
to be lower than last year. Performance fees totalled EUR 7.1 (5.2) million and were accrued from several funds during the financial year. Investment operations from developed wind projects generated profit of EUR 2.1 (0.6) million.
Wealth Management's personnel expenses decreased by 2.7 per cent and totalled EUR 13.6 (14.0) million and other administrative expenses totalled EUR 12.1 million. Total expenses were EUR 34.5 (32.8) million.
Wealth Management's operating profit totalled EUR 12.1 (11.8) million, which corresponds to 26 (26) per cent of income.
Assets under management by Wealth Management grew by 6.0 per cent to EUR 7.1 (6.7) billion. Growth was strongest in the private equity funds and other assets that generate continuing earnings. Assets under management that generate continuing earnings grew 4.1 percentage points more than total assets under management.
| Assets under management, EUR million | 31.12.2020 | 31.12.2019 | Change, % |
|---|---|---|---|
| Assets under management | 7,121 | 6,715 | 6.0% |
| Mutual funds | 1,209 | 1,023 | 18.2% |
| Private equity funds | 1,282 | 1,223 | 4.9% |
| Wealth management | 4,629 | 4,469 | 3.6% |
During 2020, new investment commitments of EUR 153 million were raised in Taaleri Biorefinery, Taaleri SolarWind II Feeder Fund, Taaleri Debt Funds I, Taaleri Real Estate and Taaleri Impact. The Taaleri Mikro Markka and Mikro Rhein -funds were opened for new subscriptions, of which Taaleri Mikro Markka was returned to soft closed due to high demand immediately after the first subscription date. Taaleri
announced Finland's first digital asset management service specializing in impact investment, which makes impact investing accessible to everyone.
Taaleri Wealth Management was awarded the best ratings in challengers-category in SFR's Institutional Investor Survey. The survey interviews representatives from some 100 of Finland's largest institutional investors. Taaleri received top grades for customer service and for taking an active view on markets, among other mentions. Taaleri's resources were also rated the best.
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INSURANCE
The Insurance segment includes Garantia Insurance Company Ltd., an insurance company specializing in guaranty insurance. The objective of Garantia is to modernize collateral practices and provide customers with easy and cost-effective guaranty solutions and new business opportunities through digital channels. The company's business is divided into guaranty insurance and investment operations.
| Insurance, EUR million | 2020 | 2019 | Change, % |
|---|---|---|---|
| Net income from guaranty insurance operations | 14.6 | 12.1 | 21.5% |
| - of which Earned premiums, net | 14.9 | 13.4 | 11.0% |
| - of which Claims incurred, net | -0.3 | -1.4 | -80.1% |
| Net income from investment operations | 2.5 | 9.2 | -72.5% |
| Income | 17.2 | 21.3 | -19.2% |
| Operating expenses | -5.5 | -6.4 | -13.8% |
| Allocation of financing expenses | -1.7 | -2.2 | -19.7% |
| Operating profit before valuations | 9.9 | 12.7 | -21.9% |
| Change in fair value of investments | 0.2 | 1.8 | -89.4% |
| Result at fair value before tax | 10.1 | 14.5 | -30.4% |
| Insurance, EUR million | 2020 | 2019 | Change, % |
| --- | --- | --- | --- |
| Claims ratio, % | 4.0% | 12.1% | -8.1 pp. |
| Expense ratio, % | 32.7% | 43.0% | -10.3 pp. |
| Combined ratio, % | 36.7% | 55.1% | -18.4 pp. |
| Return on investments at fair value, % | 1.8% | 8.1% | -6.3 pp |
| Number of full-time personnel, average | 21 | 25 | -4 |
| Insurance, EUR million | 31.12.2020 | 31.12.2019 | Change, % |
| --- | --- | --- | --- |
| Investment portfolio, fair value, MEUR | 159 | 151 | 5.8% |
| Guaranty insurance portfolio, MEUR | 1,817 | 1,837 | -1.1% |
| Solvency ratio, % | 229.4% | 231.8% | -2.4 pp. |
| Credit rating | A- | A- | - |
In January-December 2020, the income of the Insurance segment was EUR 17.2 (21.3) million. The decrease in segment revenue was due to decreased net return from investment operations, attributable to the exceptional investment environment caused by the COVID-19 pandemic. Net income from investment operations in the financial year totaled EUR 2.5 (9.2) million. Net income from insurance operations in stead increased by 21.5 per cent to EUR 14.6 (12.1) million. The growth in net income from insurance operations was due to growth in net premiums earned and diminished claims incurred compared to the previous year.
The guarantee insurance portfolio decreased by 1.1 per cent from the end of the previous year to EUR 1,817 (1,837) million euros. The decrease was due to the segment's decision to discontinue the issuance of new commercial guarantees related to the construction industry as of January 1, 2020. However, the increase in the guarantee portfolio in other product groups was sufficient to compensate for the decrease in the volume of guarantees caused by discontinuation of commercial guarantees in the construction sector.
Operating expenses amounted to EUR 5.5 (6.4) million. Reduced operating expenses were an outcome of executed strategic rationalization measures and diminished personnel expenses. On average, the Insurance segment employed 21 (25) people during the financial year.
The Insurance segment's operating profit before valuations was EUR 9.9 (12.7) million. Result at fair value before tax was EUR 10.1 (14.5) million.
INSURANCE OPERATIONS
In January-December 2020, gross premiums written decreased 4.1 per cent to EUR 19.0 (19.8) million, but earned premiums increased by 11.0 per cent to EUR 14.9 (13.4) million. The decrease in premiums written was the result of Garantia's decision to cease underwriting construction sector related commercial bonds as of 1 January 2020. The development of premiums written from other product groups was, however, positive. Regarding premiums from residential mortgage guaranties, the year came up successful following the good development seen in the housing market and the new distribution channel obtained during the latter part of the year. The demand for corporate loan guaranties was supported by the accelerated demand for corporate financing in the spring.
Gross exposure of the guaranty insurance portfolio was EUR 1,817 (1,837) million at the end of 2020. Of the guaranty insurance exposure outstanding at the end of the year, consumer exposure made up 54 (45) per cent and corporate exposure made up 46 (55) per cent. The consumer exposure includes residential mortgage guaranties and rent guarantees underwritten to private households. The corporate exposure is comprised of corporate loan guaranties, commercial bonds, and other business-related guaranties. During the financial year, for the first time, the amount of consumer exposure exceeded that of corporate exposure.
Claims incurred amounted to EUR 0.3 (1.4) million during the financial year. Claims ratio decreased to 4.0 (12.1) per cent, and the ratio of claims incurred as a percentage of the guaranty insurance portfolio came down to 0.03 (0.09) per cent. No major claims occurred during the financial year, and the level of claims incurred remained low despite the poor development of the general economy.
The expense ratio of insurance operations decreased in 2020 to 32.7 (43.0) per cent, following increased premiums earned and diminished operating expenses. Combined ratio was 36.7 (55.1) per cent.
INVESTMENT ACTIVITY
Net income from investment operations in 2020 was EUR 2.5 (9.2) million and it mainly consisted of interest income and fair value changes. In addition, the change in the fair-value investment assets recognised in comprehensive income before taxes was EUR 0.2 (1.8) million. Hence, the return on investment at fair value totalled EUR 2.7 (11.0) million, or 1.8 (8.1) per cent. The investment portfolio was valued at EUR 159 (151) million at the end of the financial year.
RISK POSITION
The principal risks associated with the Insurance segment's business operations are the credit risk arising from guaranty insurance operations and the market risks concerning investments assets.
The risk position of insurance operations remained stable in 2020. Total guaranty insurance exposure remained close to the level seen the previous year. The share of consumer exposure as a proportion of total guaranty insurance exposure increased, and the share of corporate exposure decreased.
Investment-grade exposures, or exposures rated AAA... BBB-, accounted for 15.6 (12.6) per cent of the corporate guaranty portfolio. Insurance exposure rated BB- or above accounted for 73.2 (72.4) per cent. The share of the weak rating classes of C+ or lower increased slightly and stood
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at 3.7 (1.7) per cent. The principal sectors in the corporate guaranty insurance portfolio were construction at 35.4 (50.9) per cent and manufacturing at 24.7 (21.0) per cent. None of the other sectors exceeded 10 per cent of the portfolio. 44.8 (55.3) per cent of the construction sector exposure is reinsured.
As part of the Taaleri Group, Garantia falls within the scope of the large exposure regulation regime specified in the EU Capital Requirements Regulation. At the end of 2020, Garantia's largest single counterparty exposure amounted to 19.8 (21.2) per cent of Taaleri Group's own funds.
In investment operations, the level of risk was slightly reduced from the previous year. Fixed income investments (incl. cash and bank balances) made up 86.4 (84.4) per cent, equity & private equity investments 12.5 (14.4) per cent, and real-estate investments 1.1 (1.2) per cent of the investment portfolio. The fixed income investments mainly consist of investments in bonds of Finnish companies and Nordic credit institutions with strong creditworthiness. The share of investment-grade fixed income investments was 66.5 (54.5) per cent. The modified duration of fixed income investments was 3.5 (3.3).
CREDIT RATING
No changes took place in Garantia's credit rating or its outlook during 2020: On 14 October 2020, Standard & Poor's Global Ratings (S&P) confirmed Garantia Insurance Company Ltd.'s Issuer Credit Rating (ICR), Financial Strength Rating (FSR) and the Financial Enhancement Rating (FER) reflecting the company's solvency and willingness to meet its financial commitments at A- with stable outlook.
ENERGY
The Energy segment includes Taaleri Energia, which is a renewable energy project developer and fund manager. It has a significant team in European scale focusing on wind and solar energy, with solid engineering expertise, among other things. The company is currently raising funds in its fifth renewable energy fund. Taaleri Energia is one of the largest private equity investors in the Finnish wind power market: Taaleri Energia manages a 2.8-gigawatt wind and photovoltaic portfolio, development projects included. The funds managed by Energy are Wind Fund II-III, SolarWind I and SolarWind II. In addition, Taaleri Energia manages the investment in Nyby and Myllykangas wind farms on a mandate basis.
| Energy segment, EUR million | 2020 | 2019 | Change, % |
|---|---|---|---|
| Income | 9.2 | 4.6 | 99.5% |
| Operating profit before allocating the financing expenses | 1.8 | -1.4 | neg |
| Allocation of financing expenses | -1.6 | -1.2 | 38.1% |
| Operating profit | 0.2 | -2.6 | neg |
| Full-time personnel, average | 28 | 23 |
Energy segment's income in January-December 2020 doubled to EUR 9.2 (4.6) million. The operating profit before allocating the financing expenses was EUR 1.8 (-1.4) million and operating profit was EUR 0.2 (-2.6) million. Number of personnel in Energy segment increased by nine persons in 2020.
Taaleri Energia successfully exited its first wind project in the U.S. in June. The ready to build project has been developed in-house by Taaleri Energia. Taaleri Energia sold 93 per cent of Truscott Gilliland East -wind project to the Taaleri SolarWind II -fund, AIP, Mutual Pension Insurance Company
Ilmarinen and Akuo Energy. Taaleri Energia will remain as a minority owner with a seven per cent equity stake in the project. The transaction had no result impact on the 2020 result, as the profit impacts from the project will be gradually booked later.
Taaleri Energia's newest international renewable energy fund, Taaleri SolarWind II, exceeded the target size as the commitments reached EUR 320 million at the end of the period under review. The maximum size of the fund is EUR 400 million and the fundraising period has been extended to June 2021. The third-close investors include the European Bank for Reconstruction and Development (EBRD), the Finnish Church Pension Fund, Obligo Global Infrastruktur II Fund, YLE Pension Fund and the Nordic Environment Finance Corporation (NEFCO). The fund has already made investment decisions on wind farms in Finland, Norway, Poland and the US, as well as PV solar plant in Spain. All investments are currently under construction except for Spain.
The SolarWind I -fund's projects have been developing predominantly according to plan. The fund's first investment, the 158-MW Cibuk wind farm - the biggest in Serbia, received an interim Feed-in Tariff for two months as a result of local State of Emergency declared due to the COVID-19 pandemic. The fund's second investment, the 200-MW Baynouna solar power project in Jordan, was delayed due to the COVID-19 pandemic restrictions on local labour movements but it reached operational status in November. The fund's third investment, the 23-MW Slageryd wind farm in Sweden, is already producing electricity and commissioning is expected by the end of Q1 2021. The fund's fourth investment, the 13.5-MW Målajord wind farm project in Sweden, is currently under construction.
A group of Korean institutional investors lead by Hana Financial Investments and Korea Investments & Securities has bought Nyby's and Myllykangas wind farms from Taaleri Private Equity Funds. Taaleri Energia is managing these investments on behalf the new owners in the future.
OTHER OPERATIONS
Other operations include the Group administration services of Taaleri Plc that support the segments and the investments on the Group's own balance sheet, which are done primarily through Taaleri Sijoitus Oy. In 2020, investments were divided into strategic and non-strategic investments. On 31 December 2020, Taaleri had a total of EUR 45.2 million in investments, of which EUR 15.3 million were strategic and EUR 29.9 million non-strategic. Investments are described in more detail under segment information on page 38.
Strategic investments include investments that support Taaleri's core business and development of business segments. Such investments include for example seed investments in new funds. Existing strategic investments include investments in Fintol Oy, which produces tall oil in the near future, the real estate development company Sepos Oy, the real estate company Munkkiniemi Group Oy and Turun Toriparkki Oy.
Non-strategic investments include shares in Fellow Finance Oy, Inderes Oy, Mobify Invoices Oy, Ficolo Oy, Rauma Marine Constructions and Oima Oy, among others. In addition, non-strategic investments include a loan granted to the Barrie real estate project in Canada.
| Other operations, EUR million | 2020 | 2019 | Change, % |
|---|---|---|---|
| Income | 0.1 | -1.6 | 106.3% |
| Operating profit | -4.7 | -5.3 | 11.9% |
| Number of full-time personnel, average | 26 | 21 |
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TAALERI
| Other operations, EUR million | 31.12.2020 | 31.12.2019 | Change, % |
|---|---|---|---|
| Investments and receivables, fair value | 45.2 | 41.5 | 8.8% |
| - Strategic investments | 15.3 | 11.2 | 36.6% |
| Real estate | 9.0 | 8.7 | 3.6% |
| Bioindustry | 4.0 | 1.0 | 302.2% |
| Energy | 1.2 | 1.1 | 12.3% |
| Other investments | 1.1 | 0.5 | 134.2% |
| - Non-strategic investments | 29.9 | 30.3 | -1.5% |
| Real estate | 11.3 | 10.8 | 5.3% |
| Other investments | 18.5 | 19.6 | -5.3% |
In January-December 2020, income from Other Operations amounted to EUR 0.1 (-1.6) million and operating profit to EUR -4.7 (-5.3). Income for the year was burdened by a change in the fair value of Fellow Finance totalling EUR -2.3 (-4.3) million.
Investments and loan receivables totalled EUR 45.2 (41.5) million.
OTHER GROUP EVENTS DURING THE FINANCIAL PERIOD
CORPORATE RESPONSIBILITY
Together with our customers and partners, we strive to promote effective investment activities by implementing financially profitable projects with a positive impact on the environment and stakeholders. At the same time, we offer our employees meaningful work and a growth platform for development and for serving as social influencers. Taaleri's business segments work responsibly and comply with good governance and the principles of responsible investment in all their operations.
Taaleri is a forerunner in impact investing. We promote impact investment by offering our customers innovative and effective investment options. These include funds investing in renewable energy projects, the Forest Fund, the Rental Home Fund that provides affordable rental housing, the Circular Economy Fund and the Special Investment Fund Taaleri Impact. In addition, as part of our operations we take into account the ESG factors of investments, meaning the responsibility aspects of investments relating to the environment, society and governance.
In 2020, Taaleri launched the Special Investment Fund Taaleri Impact. Taaleri Impact is the first Finnish open impact fund that seeks not only financial returns but also measurable benefits to society and the environment. The fund invests its assets directly or through other funds in the stock market, the bond market and alternative investments. Through the Impact fund, small investors can also invest in micro loans, renewable energy projects, impactful listed and unlisted companies, and more. The Taaleri Impact special investment fund raised investments of EUR 18.7 million by the end of 2020.
In addition, during the financial year Taaleri announced Finland's first digital asset management service specialising in impact investment at impakti.fi. The service allows customers to build investment portfolios focused on impact investment. The portfolios consist of ETF funds meeting strict responsibility criteria and the Taaleri Impact Fund. By the end of 2020, approximately one thousand customers had invested through the Impakti service.
In 2020, Taaleri strongly promoted responsibility and ESG aspects as part of its operations and investments. Taaleri Wealth Management strengthened ESG considerations as part of portfolio management and ESG reporting. In Taaleri Energia and Taaleri's real estate business, ESG issues were promoted through policies and guidelines, among other things. In addition, we launched company-wide responsibility and ESG development work, which will continue in 2021.
As part of our responsibility work, we want to participate in communities that promote practices and standards relating to responsible investment and corporate responsibility. Taaleri is committed to the UN Principles for Responsible Investment (PRI) and reports annually based on the PRI. In 2020, we received the highest A+ rating in Strategy and Governance. In addition, we are signatories to the CDP (Carbon Disclosure Project). We are one of the founding members of FINSIF (Finland's Sustainable Investment Forum) and involved with FIBS (Finnish Business & Society), a network aiming to promote socially and financially sustainable businesses in Finland.
For more information on Taaleri's responsibility, visit our website at www.taaleri.com/en/corporate-responsibility.
CHANGES IN GROUP STRUCTURE
During the financial year Taaleri Energia exited the Truscott-Gilliland East wind farm project in Texas, USA, leaving Taaleri Energia with a seven per cent indirect holding in the project company TG East Wind Project LLC. In addition, Taaleri acquired all the non-controlling interests in Taaleri Veropalvelut Oy and at the end of the financial year Taaleri's holding in Taaleri Veropalvelut Oy is 100 per cent. Taaleri Sijoitus Oy's holding in Mobily Invoices Oy decreased to 61.82 (68.00) percent with the share issue.
Additionally, there were established and merged some management and project companies under Taaleri Pääomarahastot, Taaleri Sijoitus and Taaleri Energia.
CHANGES IN TAALERI'S EXECUTIVE MANAGEMENT TEAM
During the review period, Essi Sten was appointed Head of Taaleri Real Estate business and a member of Taaleri Group's Executive Management Team. She began her position on 1 April 2020. At his own request, Karri Haaparinne resigned from his position as Deputy CEO of Taaleri Plc and as a member of the Taaleri Group's Executive Management Team on 13 August 2020. Haaparinne continues to serve as a member of the boards of Taaleri Varainhoito Oy, Taaleri Sijoitus Oy and Garantia Insurance Company, as well as a member of the boards of certain co-investments.
ANNUAL GENERAL MEETING 2020
Taaleri Plc's Annual General Meeting was held on 18 May 2020 in Helsinki. The General Meeting adopted the financial statements for the 2019 financial period and granted the members of the Board of Directors and the CEO discharge from liability.
In accordance with the proposal of the Board of Directors, the General Meeting decided that, based on the balance sheet to be adopted for the financial period ending 31 December 2019, a dividend of EUR 0.16 per share be distributed and the remaining part of the distributable funds be retained in shareholders' equity. The dividend payment record date was 20 May 2020 and the dividend was paid on 28 May 2020.
In addition, the General Meeting authorised the Board of Directors to at a later date decide on a payment of a maximum dividend of EUR 0.16 per share for the financial year 2019 with a payment at one or more occasions. The authorisation is in force until the Annual General Meeting 2021. The Board was also authorised to decide on the record date and the date of payment of a possible dividend. Taaleri will notify of the decisions separately.
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TAALERI | 10
DECIDING ON THE REMUNERATION OF MEMBERS OF THE BOARD OF DIRECTORS
The General Meeting decided on the annual remuneration payable to the members of the Board of Directors as follows:
- Chairman of the Board of Directors EUR 50,000
- Vice Chairman of the Board of Directors EUR 36,000
- Chairman of the Audit Committee EUR 36,000
- Member of the Board of Directors EUR 30,000
The General Meeting decided that the members of the Audit Committee will be paid a meeting-specific fee of EUR 1,000 to the Chairman of the Audit Committee and EUR 500 to each other member of the Audit Committee.
The annual remuneration will cover the entire term of office and Committee work.
The Annual General Meeting decided additionally that travel, and accommodation expenses of the members are paid against invoices when the meeting of the Board of Directors and the Committees takes place outside members' domicile.
DECIDING ON THE NUMBER OF MEMBERS AND THE MEMBERS OF THE BOARD OF DIRECTORS AND ELECTION OF THE CHAIRMAN AND DEPUTY CHAIRMAN OF THE BOARD OF DIRECTORS
The General Meeting decided that the number of the members of the Board of Directors be set as six (6).
The current members of Board of Directors, Juhani Elomaa, Juha Laaksonen, Hanna Maria Sievinen, Elina Björklund and Tuomas Syrjänen, were re-elected to the Board of Directors. Further, Petri Castrén was elected as a new member of the Board.
The General Meeting decided to elect Juhani Elomaa as the chairman of the Board of Directors and Juha Laaksonen as a deputy chairman.
SELECTING THE AUDITOR AND DECIDING ON THE AUDITOR'S REMUNERATION
The General Meeting decided that Ernst & Young Oy, a firm of authorised public accounts, be re-elected as the company's auditor for a term ending at the close of the next Annual General Meeting. Ernst & Young Oy has announced that Ulla Nykky, Authorised Public Accountant, continues as the auditor with principal responsibility.
AUTHORISING THE BOARD OF DIRECTORS TO DECIDE ON THE PURCHASE OF THE COMPANY'S OWN SHARES
The General Meeting decided to authorize the Board of Directors' to decide on the repurchase of the company's own shares using assets belonging to unrestricted equity on the following conditions:
Up to 2,000,000 shares may be repurchased, corresponding to 7.05% of all the company's shares. The repurchase may be made in one or more instalments. The purchase price per share shall be the price given on the Helsinki Stock Exchange or another market-based price.
The shares may be repurchased to develop the company's capital structure, to finance or implement corporate acquisitions, investments or other arrangements related to the company's business operations, to be used as part of the company's incentive scheme, or to be cancelled if justified from the point of view of the company and its shareholders.
The authorisation issued includes the right to decide whether the shares will be repurchased in a private placement or in proportion to the shares owned by shareholders. The repurchase may take place through private placement only if there is a weighty financial reason for it from the company's perspective.
The Board of Directors has the right to decide on other matters concerning the repurchase of shares.
This authorisation is valid for 18 months from the date of the close of the Annual General Meeting.
This authorisation cancels the authorisation to purchase the company's own shares issued at the General Meeting of 20 March 2019.
AUTHORISING THE BOARD OF DIRECTORS TO DECIDE ON SHARE ISSUE
The General Meeting decided to authorise the Board of Directors to decide on the issue of new shares and the assignment of treasury shares in the possession of the company on the following terms:
The Board of Directors may issue new shares and assign treasury shares in the possession of the company up to a maximum of 2,500,000 shares, corresponding to 8.82% of all the company's shares.
The new shares may be issued and the treasury shares possessed by the company may be assigned to the company's shareholders in proportion to their ownership of shares or deviating from the shareholder's pre-emptive subscription right in a private placement, if there is a weighty financial reason for it from the point of view of the company, such as using the shares as consideration in potential corporate acquisitions or other arrangements that are part of the company's business operations, or to finance investments or as part of the company's incentive scheme.
The Board of Directors may also decide on a free-of-charge share issue to the company itself.
The new shares may be issued and the shares possessed by the company may be assigned either against payment or without payment. A private placement may only be without payment if there is an especially weighty financial reason for it from the point of view of the company and taking into account the benefit of all its shareholders.
The Board of Directors will decide on all other factors related to share issues and the assignment of shares.
The authorisation is valid until the end of the next Annual General Meeting, however no longer than 30 June 2021.
This authorisation cancels the authorisation issued at the General Meeting on 20 March 2019.
ORGANIZATION OF TAALERI PLC.'S BOARD OF DIRECTORS
In its organization held on 20 March 2019, Taaleri Plc's Board of Directors elected the following members and chairmen to its committees:
Hanna Maria Sievinen, Juhani Elomaa and Petri Castrén were elected as members of the Board of Directors' Audit Committee. The Board of Directors elected Hanna Maria Sievinen as Chairman of the Audit Committee.
Juhani Elomaa, Tuomas Syrjänen and Elina Björklund were elected as members of the Board of Directors' Remuneration Committee. The Board elected Juhani Elomaa as Chairman of the Remuneration Committee.
TAALERI'S PERSONNEL
The Group employed an average of 192 (186) full-time people during the financial year. There were 118 (116) full-time employees in the Wealth Management segment, 21 (25) in the Insurance segment and 28 (23) in the Energia segment. The full-time personnel of Other operations averaged 26 (21), including 6 Mobify Invoices employees. Of the personnel, 98 (99) per cent were employed in Finland.
During January-December 2020, the personnel costs of the Taaleri Group totalled EUR 25.2 (24.2) million, of which fixed personnel costs totalled EUR 20.0 (18.8) million. Personnel costs increased due to new recruitments mainly in Energy segment.
INCENTIVE SCHEMES
Taaleri has two share-based incentive schemes for the Group's key persons.
The 2017 incentive scheme has three earning periods lasting three years each. The Board of Directors will decide on the earning criteria and the targets to be set for each earning criterion at the beginning of each earning period. Any remuneration awarded under the scheme will be based on Taaleri Plc's total shareholder return. The first earning period expired 31 October 2020 as worthless. At the end of 2020, the bonuses paid correspond with the value of no more than
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TAALERI | 11
370,000 Taaleri Plc shares, including the part paid in cash. The bonus will be paid partly in company shares and partly in cash.
In addition, on 19 June 2019, Taaleri Plc's Board of Directors decided on the establishment of a new share-based incentive scheme for the company's CEO Robin Lindahl. In the scheme, the CEO will acquire a minimum of 200,000 euros worth of company shares. The share-based incentive scheme is a one-off, five-year scheme, and the earning period is 1 June 2019–15 June 2024. The earning period includes three measuring periods, which commence at the beginning of the earning period and end on 15 September in years
2022, 2023 and 2024. Any remuneration awarded under the scheme will be based on Taaleri Plc's total shareholder return. The remuneration paid will correspond to the value of no more than 249,000 Taaleri Plc shares, including the part paid in cash.
The 2015 incentive scheme expired on 31 December 2020. The 2015 incentive scheme was based on synthetic option rights, the bonus paid in cash. Taaleri Plc's Board of Directors had the right to require key personnel to purchase company shares to a maximum of 50 per cent of the received bonus amount.
SHARES AND SHARE CAPITAL
Taaleri's share on Nasdaq Helsinki
| January-December 2020 | No. of shares traded | Total value EUR | High EUR | Low EUR | Average* EUR | Last EUR |
|---|---|---|---|---|---|---|
| TAALA | 4,103,591 | 29,795,452 | 9.76 | 5.82 | 7.26 | 8.12 |
- Volume weighted average
Taaleri's share has been listed on Nasdaq Helsinki, among mid-cap companies, since 2016. The trading code is TAALA. On 31 December 2020, the company possessed 45,000 (45,000) treasury shares.
On 31 December 2020, Taaleri Plc's shareholders' equity was EUR 125,000.00 and the company had 28,350,620 registered shares.
Flaggings during the financial year 2020
During financial year 2020 there were no changes in shareholdings that would have required flagging.
Share distribution, 31 December 2020
| 31.12.2020 | % | 31.12.2019 | % | |
|---|---|---|---|---|
| Market capitalization, EUR million | 229.8 | 238.3 | ||
| No. of shareholders | 6,026 | 100.0 | 4,689 | 100.0 |
| Shareholding per group | ||||
| Private companies | 9,990,910 | 35.2 | 10,004,585 | 35.3 |
| Financial and insurance corporations | 2,189,490 | 7.7 | 2,082,873 | 7.3 |
| Public sector organizations | 30,837 | 0.1 | 30,837 | 0.1 |
| Non-profit institutions | 226,278 | 0.8 | 226,117 | 0.8 |
| Households | 14,123,403 | 49.8 | 13,876,933 | 49.0 |
| Nominee registrations and direct foreign shareholders | 1,789,702 | 6.3 | 2,129,275 | 7.5 |
10 biggest shareholders, 31 December 2020
| No. | % of shares | ||
|---|---|---|---|
| 1. | Veikko Laine Oy | 2,932,519 | 10.34 |
| 2. | Oy Hermitage Ab | 2,840,308 | 10.02 |
| 3. | Fennia Life Insurance Company Ltd | 1,728,582 | 6.10 |
| 4. | Elomaa Heikki Juhani | 1,723,278 | 6.08 |
| 5. | Swiss Life Luxembourg S.A. | 1,496,270 | 5.28 |
| 6. | Haaparinne Karri Erik | 1,452,936 | 5.12 |
| 7. | Lampinen Petri Juhani | 500,000 | 1.76 |
| 8. | Marthur Ranjit | 440,000 | 1.55 |
| 9. | Lehto Vesa | 362,510 | 1.28 |
| 10. | Neva-Aho Ronnie Juhani | 320,051 | 1.13 |
| Total, | 13,796,454 | 48.66 | |
| of which Nominee registrations | 207,752 | 0.73 |
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Share distribution by number of shares, 31 December 2020
| Owners | % | Shares | % | |
|---|---|---|---|---|
| 1-100 | 2,280 | 37.84 | 108,392 | 0.38 |
| 101-500 | 2,053 | 34.07 | 535,469 | 1.89 |
| 501-1,000 | 682 | 11.32 | 529,438 | 1.87 |
| 1,001-5,000 | 596 | 9.89 | 1,291,683 | 4.56 |
| 5,001-10,000 | 159 | 2.64 | 1,207,060 | 4.26 |
| 10,001-50,000 | 193 | 3.20 | 3,841,372 | 13.55 |
| 50,001-100,000 | 25 | 0.41 | 1,636,172 | 5.77 |
| 100,001-500,000 | 32 | 0.53 | 7,027,141 | 24.79 |
| 500,001- | 6 | 0.10 | 12,173,893 | 42.94 |
| Total | 6,026 | 100.0 | 28,350,620 | 100.00 |
Taaleri Plc's Board of Directors' ownership, 31 December 2020, including organizations with controlling interests
| No. | % of shares | ||
|---|---|---|---|
| Chairman | Juhani Elomaa | 1,989,934 | 7.02 |
| Vice Chairman | Juha Laaksonen | - | - |
| Member | Elina Björklund | 12,000 | 0.04 |
| Member | Petri Castrén | - | - |
| Member | Hanna Maria Sievinen | 7,900 | 0.03 |
| Member | Tuomas Syrjänen | 7,782 | 0.03 |
| Total | 2,017,616 | 7.12 |
Taaleri Executive Management Team ownership, 31 December 2020, including organizations with controlling interests
| No. | % of shares | ||
|---|---|---|---|
| CEO | Robin Lindahl | 34,513 | 0.12 |
| Legal counsel | Janne Koikkalainen | - | - |
| Head of Wealth Management | Perttu Purhonen | - | - |
| Head of Energy | Kai Rintala | - | - |
| Head of Insurance | Titta Elomaa | 20,854 | 0.07 |
| Head of Real Estate | Essi Sten | - | - |
| CFO | Minna Smedsten | 18,049 | 0.06 |
| Total | 73,416 | 0.26 |
Taaleri share price development since listing: 20 April 2013-31 December 2020
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TAALERI | 13
CAPITAL ADEQUACY OF TAALERI
CAPITAL ADEQUACY UNDER THE ACT ON THE SUPERVISION OF FINANCIAL AND INSURANCE CONGLOMERATES
Taaleri Group forms a financing and insurance conglomerate, according to the Act on the Supervision of Financial and Insurance Conglomerates (RaVa) (2004/699).
As a RaVa conglomerate, Taaleri Group discloses its own funds and capital adequacy in accordance with the capital adequacy regulations for financial and insurance conglomerates. Taaleri RaVa conglomerate's Tier 1 capital amounted EUR 118.5 (110.3) million, Tier 2 capital amounted EUR 14.8 (14.8) million and own funds amounted EUR 133.3 (125.1) million, with the minimum requirement being EUR 61.7 (60.3) million. On 31 December 2019 RaVa conglomerate's Tier 1 capital would have been EUR 114.8 million, Tier 2 capital EUR 14.8 (14.8) million and own funds EUR 129.6 million, if the Board of Director's decision on 18 February 2021 not to pay the second half of the 2019 dividend of EUR 4.5 million is taken into account. The conglomerate's capital adequacy was EUR 71.6 (64.8) million and the capital adequacy ratio was 216.2 (207.4) per cent, with the minimum requirement being 100 per cent. Correspondingly, on 31 December 2019 the conglomerate's capital adequacy would have been EUR 69.3 million and capital adequacy ratio 215.0 per cent, if the Board of Director's decision on 18 February 2021 not to pay the second half of the 2019 dividend of EUR 4.5 million is taken into account.
Within the Taaleri Group, the regulatory capital according to Solvency II is determined and reported not only for Garantia Insurance Company Ltd but also for Taaleri Plc as a part of the RaVa conglomerate. The total solvency capital requirement (SCR) of the parent company Taaleri Plc and the subsidiary Garantia Insurance Company Ltd was EUR 34.6 (29.5) million. The Financial Supervisory Authority confirmed in June 2020 a capital add-on totalling EUR 15.3 (19.8) million. The total solvency requirement was hence EUR 49.9 (49.3) million for the insurance business. The add-on is implemented because the risk profile of Garantia's non-life underwriting risk module differs from the underlying assumptions in the standard formula for the solvency capital requirement calculation.
Taaleri's own funds fully comprise its own unrestricted Tier 1 basic funds and a EUR 15 million Tier 2 bond issued by Taaleri Plc, in October 2019.
| Capital adequacy of RaVa conglomerate, EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Shareholders' equity of the Taaleri Group | 133,209 | 125,729 |
| Goodwill and other intangible assets | -6,778 | -6,533 |
| Non-controlling interests | 1,134 | 182 |
| Planned distribution of profit | -9,072 | -9,072* |
| Tier 1 Capital | 118,492 | 110,286 |
| Tier 2 Capital | 14,839 | 14,825 |
| Conglomerate's own funds, total | 133,332 | 125,130 |
| Financing business' requirement for own funds | 11,783 | 11,014 |
| Insurance business' requirement for own funds | 49,900 | 49,307 |
| Minimum amount of own funds of the conglomerate, total | 61,683 | 60,321 |
| Conglomerate's capital adequacy | 71,649 | 64,809 |
| Conglomerate's capital adequacy ratio | 216.2% | 207.4% |
- The Board of Director's dividend proposal for 2019, of which the Board of Directors has decided on 18 February 2021 not to distribute EUR 4.5 million
CAPITAL ADEQUACY ACCORDING TO THE ACT ON CREDIT INSTITUTIONS AND THE EU CAPITAL REQUIREMENTS REGULATION (BASEL III)
Within the Taaleri Group, the regulatory capital according to the Act on Credit Institutions (610/2014) and the EU Capital Requirements Regulation (CRR) (No 575/2013 of the European Parliament and of the Council) is determined and disclosed to the supervised parties operating in the Financing sector Taaleri applies the standardized approach in the regulatory capital calculation of the credit risk capital requirement.
Taaleri Group's target level for the own funds of the Financing sector is 1.3 times the internal risk-based capital requirement, calculated on the basis of the pillar 1 minimum capital requirement and additional pillar 2 risk-based capital requirement.
The Finnish Financial Supervisory Authority has on 4 June 2020 decided to prolong the permission to leave the insurance company holdings undeducted from the common equity Tier 1 capital (CET1) given to Taaleri Plc, pursuant to Article 49 (1) of the EU Capital Requirements Regulation (EU) 575/2013 (CRR), until 25 June 2021. The previous fixed term permit was valid until 31 December 2020 and was granted to Taaleri Plc 31 January 2019. The permission granted by the Finnish Financial Supervision Authority on 31 January 2019 was related to the reform of the capital requirements framework for investment firms that was pending in the European Union at that time and the understanding of the date of application of that new framework. The new framework was originally scheduled to come into effect on 31 December 2020, but the date has since been confirmed to 26 June 2021.
With the permission Garantia's acquisition expense of EUR 60.4 million can be left undeducted. The impact on the result accumulated by the insurance company investment is not included in the consolidated Common Equity Tier 1 of the investment service company. Equity investments include the Group's internal insurance company investment of EUR 60.4 million with a risk-weight of 100 per cent. If the CRR 49 permission were not applied and using the alternative calculation method, where the insurance company investment is deducted from the Common Equity Tier 1 and excluding the result of the financial period, were applied, the consolidated Common Equity Tier 1 of the investment service company would be EUR 19.0 million and equity EUR 33.8 million on 31 December 2020.
Taaleri's financing sector's Common Equity Tier 1 with the CRR 49 permission is EUR 71.1 (70.9) million and equity EUR 86.0 (85.7) million, of which the profit of January-December 2020, EUR 3.5 (4.3) million, is deducted. The risk-weighted commitments were EUR 226.9 (242.6) million, of which the share of credit risk was EUR 149.0 (156.4) million and the share of operational risk EUR 77.9 (86.2) million according to the standardized approach. The Financing sector's Tier 1 Capital adequacy ratio was 31.8 (29.2) capital adequacy ratio was 38.4 (35.3) per cent.
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TAALERI
| Financing sector's capital adequacy, EUR 1,000 (with the CRR 49 permission) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Common Equity Tier 1 before deductions | 79,929 | 81,228 |
| Deductions from the Common Equity Tier 1 | ||
| Goodwill and intangible assets | -6,428 | -6,184 |
| Non-controlling interests | 1,134 | 182 |
| Profit of the review period | -3,486 | -4,330 |
| Common Equity Tier 1 (CET1) | 71,149 | 70,896 |
| Tier 2 capital before deductions | 14,839 | 14,825 |
| Deductions from the Tier 2 capital | - | - |
| Tier 2 capital (T2) | 14,839 | 14,825 |
| Total capital (TC = T1 + T2) | 85,988 | 85,720 |
| Total risk-weighted commitments (total risk) | 226,872 | 242,584 |
| - of which the share of credit risk | 148,951 | 156,380 |
| of which insurance company holdings | 60,350 | 60,350 |
| - of which the share of operational risk | 77,921 | 86,204 |
| - of which the share of other risks | - | - |
| Common Equity Tier 1 (CET1) in relation to the amount of total risk (%) | 31.8% | 29.2% |
| Tier 1 capital (T1) in relation to the amount of total risk (%) | 31.8% | 29.2% |
| Total capital (TC) in relation to the amount of total risk (%) | 38.4% | 35.3% |
SOLVENCY ACCORDING TO THE INSURANCE COMPANIES ACT (SOLVENCY II)
Garantia's solvency remained near the level seen in the previous year. The company's basic own funds were EUR 114.1 (112.7) million at the end of the financial year, and solvency capital requirement was 49.7 (48.6) million. Solvency ratio, or the ratio of basic own funds to the solvency capital requirement, was 229.4 (231.8) percent.
Basic own funds grew in accordance with the profit for the financial year. Basic own funds include foreseeable dividends as a deduction, and these foreseeable dividends grew compared to the previous year. The growth in the solvency capital requirement was due to the growth in capital requirements for non-life underwriting risk and market risk. The growth in the capital requirement for underwriting risk was to a significant effect a consequence of changes in the standard parameters of Solvency II, used in solvency calculations, that came into effect on 1 January 2020. Had these parameters been already applied on 31 December 2019, Garantia's solvency ratio would have been 219.3 per cent at the end of financial year 2019.
Garantia's own funds are formed in full of unrestricted Tier 1 basic own funds. Garantia does not apply the transition arrangements in defining its basic own funds and Garantia's own funds do not include items classified as ancillary own funds. Garantia does not use the matching adjustment or the volatility adjustment in the calculation of technical provisions. Garantia applies the standard formula for solvency capital requirement calculation. Garantia does not use the simplified calculation in the standard formula's risk modules or submodules, or company-specific parameters instead of the parameters of the standard formula. Garantia does not apply the transition arrangements of technical provisions or market risk calculations.
As of 30 June 2018, Garantia's solvency capital requirement has included a capital add-on set by the Financial Supervisory Authority. The Financial Supervisory Authority assesses the amount of the capital add-on at least once a year. Most recently, on 29 May 2020, the Financial Supervisory Authority reviewed its decision on the capital add-on; the capital add-on was set to EUR 15.3 (17 June 2019: 19.8) million. The updated capital add-on has been included in the Company's Solvency Capital Requirement as of 30 June 2020. When making its decision on the capital add-on in the past year, the Financial Supervisory Authority for the first time took in to account the capital requirement calculated as per Garantia's internal economic capital model.
In its decision concerning the capital add-on, the Financial Supervisory Authority states that the risk profile of Garantia's non-life underwriting risk section differs from the basic assumptions of the Solvency Capital Requirement standard formula by more than 15 per cent, and hence the prerequisites for the capital add-on are still fulfilled. According to the assessment of the Financial Services Authority, no significant changes have occurred in the risk profile of the company since the previous decision, made on 17 June 2019. In addition, the Finnish Financial Supervisory Authority repeats its earlier view that the requirement to use an internal model is not appropriate for Garantia.
According to the Insurance Companies Act, Solvency II capital adequacy regulations do not fall within the scope of statutory auditing.
TAALERI'S RISK MANAGEMENT AND RISK POSITION
The task of risk management is to identify, assess, measure, treat and control risks in all Taaleri Group's businesses that influence the realization of the Group's strategic and operative goals, as well as to oversee compliance with the principles approved by the Taaleri Plc Board of Directors. Risk management aims to mitigate the likelihood of unforeseeable risks being realized, and their influence on and the threat they present to Taaleri Group's business operations. Risk management supports achievement of strategic goals by promoting better utilization of opportunities in all activities and more efficient distribution of risk-taking capacity to the different functions and projects within the defined risk appetite framework.
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TAALERI | 15
Taaleri Group's risks are divided into five main categories: strategic and business risk, credit risk, liquidity risk, market risk and operational risk (including compliance risk). In addition, Taaleri follows the development of political risks. The principles of Taaleri's risk and capital adequacy management are described on page 56 in note 38 to the 2020 financial statements.
The risk capacity of the Taaleri Group consists of a properly optimized capital structure, profitability of business operations and qualitative factors, including good corporate governance, internal control, and proactive risk and capital adequacy management. Taaleri Group's attitude towards risk-taking is based on careful consideration of an adequate risk/return relationship. Taaleri Plc's Board of Directors has decided that the Group may not in its activities take a risk that jeopardizes the target level set for the company's own funds.
SEGMENT-SPECIFIC RISKS
The main risks of Taaleri's Wealth Management segment consist mainly of operational risks and, to a slight extent, credit risks. The result of the Wealth Management segment is influenced by the development of assets under management, which depends on the progress of the private equity funds' projects and the development of the capital markets. The profit development is also influenced by the realization of performance fee and commission income tied to the success of investment operations. On the other hand, private equity fund management fees are based on long-term contracts that bring in a steady cash flow.
The insurance and investment activities carried out by Garantia Insurance Company are central to Taaleri's risk position. The main risks associated with Garantia's business operations are credit risks arising from guaranty operations, and the market risk regarding investment assets. Garantia's capital adequacy is strong and its risk position has remained stable.
The Energy segment's objective is to channel assets under management to renewable energy production projects and to other energy projects supporting sustainability. The goal is to internationalize and expand the Energy segment's business operations considerably, which naturally increase risks relating to the growth and internationalization of the operations. The Energy segment's earnings are impacted by its success in finding suitable projects, its ability to identify all risks related to renewable energy's international development, construction, financing and operations, and its success in the internationalization of its operations. The Energy segment's earnings are also affected by the success of its own investments in energy projects.
The most significant risks of the Other operations consist primarily of private investments and financing granted by Taaleri Sijoitus Oy as well as of credit risks related to Taaleri Plc's granted loans and receivables from credit institutions. The Other operations' returns consist of the fair value changes in investments and of profits/losses gained in connection with the sales of its investments. The earnings and result of the Other operations may thus vary significantly between periods under review.
Taaleri falls within the sphere of regulation of large customer risks defined in the EU Capital Requirements Regulation. At the end of the January-December 2020 review period, Taaleri's largest single customer risk was 19.8 (21.2) per cent of the Group's own funds and the liabilities of any (single) customer entity did not exceed the 25 per cent limit set by law.
MATERIAL EVENTS AFTER THE FINANCIAL PERIOD
Siri Markula has been appointed Taaleri Group's Head of Communications and Investor Relations on January 18, 2021 and Tero Saarno has been appointed Head of Taaleri's bioindustry business as of February 1, 2021.
Taaler's Shareholders' Nomination Board proposes to the Annual General Meeting scheduled for March 25, 2021 that the number of Board members be seven (7), and that Juhani Elomaa, Juha Laaksonen, Hanna Maria Sievinen, Tuomas Syrjänen, Elina Björklund and Petri Castrén will be re-elected as Board members, Peter Ramsay will be elected as a new Board member and that Juhani Elomaa will be elected Chairman of the Board and Juha Laaksonen will be elected Deputy Chairman of the Board.
OUTLOOK
SHORT-TERM RISKS AND CONCERNS
The coronavirus pandemic will continue to cause uncertainty in 2021. However, the global economy is likely to recover as coronavirus vaccinations progress and the restrictive measures in the global economy can be lifted. The most significant external uncertainties affecting the Group's operating profit are changes in the operating and regulatory environment and the development of the financial markets globally and especially in Finland.
The results of the Wealth Management and the Energy segments are influenced by the development of assets under management, which depends among other things on the progress of private equity fund projects and the development of capital markets. Profit development is also influenced by the realization of performance fees, which are tied to the success of the investment operations. The Energy segment's earnings are also affected by the success of its own investments in energy projects.
The Insurance segment's guaranty insurance business and investment activities have a major impact on Taaleri's operational income and capital adequacy.
The Other operations returns consist of the market value changes in investments and of sales profits/losses gained as well as returns of loans granted. The earnings and results of the Other operations may thus vary significantly between periods under review.
LONG-TERM FINANCIAL TARGETS
Taaleri's long-term targets are at least 15 per cent growth in continuing earnings, operating profit at least 20 per cent of income, return-on-equity at least 15 per cent and equity ratio at least 30 per cent.
The company aims to distribute a growing competitive dividend annually, with consideration to the company's financial and financing situation as well as the Group's capital adequacy requirement.
BOARD OF DIRECTORS' DIVIDEND PROPOSAL
The Board of Directors proposes that a dividend of EUR 0.32 per share, a total of EUR 9,057,798.40 be paid for the financial year 2020. The parent company's distributable funds were EUR 57,284,919.13, which includes EUR 9,265,339.98 in net profit for the year. The dividend is to be paid in one instalment. In addition, the Board of Directors has decided that an unpaid dividend of EUR 0.16 per share for 2019 will not be paid.
The dividend will be paid to shareholders who are registered in the list of shareholders maintained by Euroclear Finland Ltd on the record date, which is 29 March 2021. The dividend payment date proposed by the Board is 7 April 2021.
Helsinki, 18 February 2021
Taaleri Plc
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TAALERI
KEY FIGURES
| GROUP | 2020 | 2019 | 2018 |
|---|---|---|---|
| Income, EUR 1,000 | 69,406 | 67,208 | 72,513 |
| Operating profit (-loss), EUR 1,000 | 17,548 | 16,458 | 23,895 |
| - as percentage of turnover | 25.3% | 24.5% | 33.0% |
| Net profit for the period, EUR 1,000 | 13,102 | 11,479 | 21,637 |
| - as percentage of turnover | 18.9% | 17.1% | 29.8% |
| Basic earnings per share, EUR | 0.46 | 0.39 | 0.76 |
| Diluted earnings per share, EUR | 0.45 | 0.38 | 0.76 |
| Return on equity % (ROE) | 10.1% | 9.3% | 18.9% |
| Return on equity at fair value % (ROE) | 10.0% | 10.6% | 17.8% |
| Return on assets % (ROA) | 4.9% | 4.5% | 9.3% |
| Cost/income ratio | 74.6% | 74.7% | 67.0% |
| Cost/income ratio excluding investment operations | 76.7% | 83.7% | 75.4% |
| Price/earnings (P/E) | 17.7 | 21.5 | 9.3 |
| Number of full-time employees, avg | 192 | 186 | 183 |
| Equity ratio -% | 49.7% | 46.6% | 51.4% |
| Net gearing -% | 29.2% | 37.0% | 24.3% |
| GROUP | 2020 | 2019 | 2018 |
| --- | --- | --- | --- |
| Equity/share, EUR | 4.75 | 4.45 | 4.26 |
| Dividend/share, EUR 1) | 0.32 | 0.16 | 0.30 |
| Dividend/earnings, % 1) | 69.6% | 40.9% | 39.3% |
| Effective dividend yield, % 1) | 3.9% | 1.9% | 4.2% |
| Loan receivables, EUR 1,000 | 6,699 | 8,294 | 9,379 |
| Conglomerate's capital adequacy ratio, % | 216.2% | 207.4% 2) | 186.0% |
| Financing sector capital adequacy ratio, % | 38.4% | 35.3% | 24.9% |
| Number of shares at the end of period 2) | 28,305,620 | 28,305,620 | 28,305,620 |
| Average number of shares 2) | 28,305,620 | 28,305,620 | 28,305,620 |
| Share average price, EUR | 7.26 | 7.37 | 9.69 |
| - highest price, EUR | 9.76 | 8.64 | 11.80 |
| - lowest price, EUR | 5.82 | 6.66 | 7.08 |
| - closing price, EUR | 8.12 | 8.42 | 7.10 |
| Market capitalization, EUR 1,000 2) | 229,842 | 238,333 | 200,970 |
| Shares traded, thousands | 4,104 | 3,020 | 2,247 |
| Shares traded, % | 14% | 11% | 8% |
1) The Board's profit distribution proposal is 0.32/share for 2020.
2) Reduced by own shares acquired.
3) Capital adequacy ratio includes the Board of Director's dividend proposal for 2019, of which the Board of Directors has decided on 18 February 2021 not to distribute EUR 4.5 million
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TAALERI
INSURANCE OPERATIONS KEY FIGURES
Taaleri's insurance business operations consist entirely of Garantia Insurance Company Ltd. Garantia Insurance Company Ltd has been consolidated from 1 April 2015.
| EUR 1,000 | 2020 | 2019 | 2018 |
|---|---|---|---|
| Net income from insurance | 14,614 | 12,045 | 13,021 |
| Earned premiums, net | 14,885 | 13,406 | 12,277 |
| Claims incurred, net | -270 | -1,361 | 744 |
| Other income | 33 | 14 | 202 |
| Net income from investment operations | 2,534 | 9,208 | -734 |
| Operating expenses | -5,513 | -6,393 | -5,378 |
| Operating profit before valuations | 9,931 | 12,712 | 4,949 |
| Change in fair value of investments | 195 | 1,837 | -1,690 |
| Profit before taxes and non-controlling interests | 10,127 | 14,549 | 3,259 |
| Combined ratio, % | 36.7% | 55.1% | 34.9% |
| Claims ratio, % | 4.0% | 12.1% | -4.2% |
| Expense ratio % | 32.7% | 43.0% | 39.1% |
| Return on investments at fair value, % | 1.8% | 8.1% | -1.7% |
| Solvency ratio (S2), % 1) | 229.4% | 231.8% | 233.4% |
| Insurance exposure, EUR billion | 1.82 | 1.84 | 1.67 |
| Number of employees, avg | 21 | 25 | 26 |
1) The Solvency II regulations do not fall within the sphere of statutory auditing under the Insurance Companies Act. The Solvency II -figures have not been audited.
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TAALERI | 18
KEY FIGURES ACCOUNTING PRINCIPLES
| Basic earnings per share, EUR | Profit or loss attributable to ordinary share holders of the parent company |
|---|---|
| Weighted average number of ordinary shares outstanding - repurchased own shares | |
| Diluted earnings per share, EUR | Profit or loss attributable to ordinary share holders of the parent company |
| Weighted average number of ordinary shares outstanding + dilutive potential ordinary shares - repurchased own shares | |
| Profit for the period x 100 | |
| Return on equity (ROE), % | Total equity (average of the beginning and end of the year) |
| Total comprehensive income for the period x 100 | |
| Return on equity at fair value (ROE), % | Total equity (average of the beginning and end of the year) |
| Profit for the period x 100 | |
| Return on assets (ROA), % | Balance sheet total (average of the beginning and end of the year) |
| Fee and commission expense + interest expense + administrative expenses + depreciation + other operating expenses | |
| Cost/income ratio, % | Total income + share of associates' profit or loss |
| Fee and commission expense + interest expense + administrative expenses + depreciation + other operating expenses | |
| Cost/income ratio, % excluding investment operations | Fee and commission income + net income from guaranty insurance operations + interest income + other operating income |
| Price/Earnings (P/E) | |
| Price/Earnings (P/E) | Price of series B share at the end of the period |
| Earnings/share | |
| Price of series B share at the end of the period | |
| Equity ratio, % | Total equity x 100 |
| --- | --- |
| Balance sheet total | |
| Net gearing ratio, % | (Interest-bearing liabilities - cash and cash equivalents) x 100 |
| Total equity | |
| Equity/share, EUR | Equity attributable to ordinary share holders of the parent company |
| Number of shares at end of period - repurchased own shares | |
| Dividend/share, EUR | Dividend payable for the financial period x 100 |
| Weighted average number of ordinary shares | |
| Dividend/earnings, % | Dividend/share x 100 |
| Basic earnings per share | |
| Effective dividend yield, % | Dividend/share x 100 |
| Price of series B share at the end of the period | |
| Conglomerate's capital adequacy ratio, % | Conglomerate's total capital base |
| Conglomerate's minimum requirement of total capital base | |
| Total capital in relation to risk-weighted items | Total Capital (TC) |
| Risk-weighted items (Total risk) | |
| Common equity tier in relation to risk-weighted items | Common Equity Tier (CET1) |
| Risk-weighted items (Total risk) | |
| Market capitalization | Number of shares (A + B) at end of financial period, less repurchased own shares, multiplied by stock exchange price of series B share at end of financial period |
| Shares traded, % | |
| Shares traded during the financial period x 100 | |
| Weighted average number of ordinary shares outstanding |
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TAALERI | 19
KEY FIGURES FOR INSURANCE OPERATIONS
Combined ratio, %
Claims ratio, % + Expense ratio, %
Claims ratio, %
(Claims incurred + operating expenses allocated to claims paid) x 100
Insurance premium income
This key figure is calculated after the share of the reinsurers.
Expense ratio, %
(Operating costs - Group's allocated overhead and financing expenses
- operating expense allocated to claims paid) x 100
Insurance premium income
This key figure is calculated after the share of the reinsurers.
Solvency ratio (S2), %
Basic own funds x 100
Solvency capital requirement (SCR)
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TAALERI | 20
GROUP FINANCIAL STATEMENTS
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TAALERI | 21
GROUP FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
| EUR 1,000 | Note | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|---|
| CONTINUING OPERATIONS | |||
| Fee and commission income | 3 | 49,152 | 46,052 |
| Net income from insurance | 4 | 17,149 | 21,253 |
| From guaranty insurance operations | 14,614 | 12,045 | |
| From investment operations | 2,534 | 9,208 | |
| Net gains or net losses on trading in securities and foreign currencies | 5 | 920 | -139 |
| Income from equity investments | 6 | -1,610 | -1,812 |
| Interest income | 7 | 1,710 | 1,235 |
| Other operating income | 8 | 2,086 | 619 |
| TOTAL INCOME | 69,406 | 67,208 | |
| Fee and commission expense | 9 | -6,030 | -5,401 |
| Interest expense | 10, 49 | -3,415 | -3,142 |
| Administrative expenses | |||
| Personnel costs | 11, 44 | -25,241 | -24,197 |
| Other administrative expenses | 12 | -8,775 | -9,523 |
| Depreciation, amortisation and impairment of tangible and intangible assets | 13, 49 | -2,502 | -2,663 |
| Other operating expenses | 14, 49 | -5,868 | -5,229 |
| Expected credit losses from financial assets measured at amortised cost | 15 | -100 | -557 |
| Share of associates' profit or loss | 46 | 74 | -37 |
| OPERATING PROFIT | 17,548 | 16,458 | |
| Income tax expense | 16 | -4,447 | -4,979 |
| PROFIT FOR THE PERIOD | 13,102 | 11,479 |
Income is presented as gross figures, except for gains or losses on trading in securities and foreign currencies, which are presented as net figures to give a fair presentation of the operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| EUR 1,000 | Note | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|---|
| Profit for the period | 13,102 | 11,479 | |
| Items that may be reclassified to profit or loss | 17 | ||
| Translation differences | -325 | 215 | |
| Changes in the fair value reserve | 195 | 1,837 | |
| Income tax | -39 | -367 | |
| Items that may be reclassified to profit or loss in total | -169 | 1,685 | |
| Items that may not be reclassified to profit or loss | 17 | ||
| Changes in the fair value reserve | 6 | 10 | |
| Income tax | -2 | -1 | |
| Items that may not be reclassified to profit or loss in total | 4 | 9 | |
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 12,937 | 13,172 | |
| Profit for the period attributable to: | |||
| Owners of the parent company | 13,012 | 11,078 | |
| Non-controlling interests | 89 | 401 | |
| Total | 13,102 | 11,479 | |
| Total comprehensive income for the period attributable to: | |||
| Owners of the parent company | 12,848 | 12,772 | |
| Non-controlling interests | 89 | 401 | |
| Total | 12,937 | 13,172 | |
| Earnings per share for profit attributable | |||
| Basic earnings per share, profit for the period | 18 | 0.46 | 0.39 |
| Diluted earnings per share, profit for the period | 18 | 0.45 | 0.38 |
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TAALERI
CONSOLIDATED BALANCE SHEET
| Assets, EUR 1,000 | Note | 31.12.2020 | 31.12.2019 |
|---|---|---|---|
| Receivables from credit instutions | 19, 25, 26, 39, 41 | 25,786 | 29,102 |
| Receivables from the public and general government | 20, 25, 26, 39, 41 | 6,699 | 8,294 |
| Debt securities | 21, 25, 26, 39, 41 | 1,498 | 1,498 |
| Shares and units | 22, 25, 26, 39, 41 | 21,971 | 9,232 |
| Assets classified as held for sale | 23 | 5,357 | 7,666 |
| Participating interests | 22, 25, 26, 39, 41 | 9,248 | 6,423 |
| Insurance assets | 24, 25, 26 | 160,410 | 153,325 |
| Insurance receivables | 3,705 | 4,663 | |
| Investments | 156,705 | 148,662 | |
| Intangible assets | 27 | 6,775 | 6,531 |
| Goodwill | 5,097 | 5,097 | |
| Other intangible assets | 1,679 | 1,434 | |
| Tangible assets | 28, 49 | 2,944 | 4,435 |
| Owner-occupied properties | 2,427 | 3,622 | |
| Other tangible assets | 517 | 812 | |
| Other assets | 29 | 14,455 | 18,110 |
| Accrued income and prepayments | 30 | 11,237 | 22,851 |
| Deferred tax assets | 36 | 1,611 | 2,233 |
| 267,990 | 269,700 | ||
| Liabilities, EUR 1,000 | Note | 31.12.2020 | 31.12.2019 |
| --- | --- | --- | --- |
| LIABILITIES | 134,781 | 143,971 | |
| Liabilities to credit institutions | 25, 26, 31, 39, 41 | 14,939 | 25,929 |
| Debt securities issued to the public | 25, 26, 32, 39, 41 | 34,937 | 34,875 |
| Insurance liabilities | 24, 25, 26 | 34,676 | 32,303 |
| Other liabilities | 25, 33 | 5,401 | 6,509 |
| Accrued expenses and deferred income | 25, 34 | 14,623 | 13,940 |
| Deferred tax liabilities | 35 | 15,366 | 15,591 |
| Subordinated debt | 36 | 14,839 | 14,825 |
| EQUITY CAPITAL | 37 | 133,209 | 125,729 |
| Share capital | 125 | 125 | |
| Reserve for invested non-restricted equity | 35,814 | 35,814 | |
| Fair value reserve | -864 | -935 | |
| Translation difference | -89 | 236 | |
| Retained earnings or loss | 86,344 | 79,592 | |
| Profit or loss for the period | 13,012 | 11,078 | |
| Non-controlling interest | -1,134 | -182 | |
| 267,990 | 269,700 |
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TAALERI
CONSOLIDATED STATEMENT OF CASH FLOWS
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| Cash flow from operating activities: | ||
| Operating profit (loss) | 17,548 | 16,458 |
| Depreciation | 2,502 | 2,663 |
| Other adjustments | ||
| Changes in fair value of investments | 2,453 | -1,111 |
| Other adjustments | -343 | 522 |
| Cash flow before change in working capital | 22,160 | 18,532 |
| Change in working capital | ||
| Increase (-)/decrease (+) in loan receivables | 1,760 | 1,241 |
| Increase (-)/decrease (+) in current interest-free receivables | 8,680 | -15,654 |
| Increase (+)/decrease (-) in current interest-free liabilities | 800 | 7,695 |
| Cash flow from operating activities before financial items and taxes | 33,401 | 11,814 |
| Direct taxes paid (-) | -1,972 | -3,121 |
| Cash flow from operating activities (A) | 31,429 | 8,693 |
| Cash flow from investing activities: | ||
| Investments in tangible and intangible assets | -1,256 | -1,038 |
| Investments in subsidiaries and associated companies net of cash acquired | -2,750 | -614 |
| Other investments | -14,891 | -9,895 |
| Cash flow from investing activities (B) | -18,897 | -11,546 |
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
| --- | --- | --- |
| Cash flow from financing activities: | ||
| Changes in synthetic options | 897 | 828 |
| Transactions with non-controlling interests | -199 | - |
| Increase in subordinated debt | - | 15,000 |
| Decrease in debt securities issued to the public | - | -20,000 |
| Increase in non-current liabilities | 20,000 | 20,000 |
| Decrease in non-current liabilities | -31,000 | -1,000 |
| Dividends paid and other distribution of profit | ||
| To parent company shareholders | -4,529 | -8,492 |
| To non-controlling shareholders | -1,017 | -514 |
| Cash flow from financing activities (C) | -15,848 | 5,822 |
| Increase/decrease in cash and cash equivalents (A+B+C) | -3,315 | 2,969 |
| Cash and cash equivalents at beginning of period | 29,102 | 26,133 |
| Cash and cash equivalents at end of period | 25,786 | 29,102 |
| Net change in cash and cash equivalents | -3,315 | 2,969 |
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TAALERI
CHANGES IN GROUP EQUITY CAPITAL
| EUR 1,000 | Share capital | Fair value reserve | Reserve for invested non-restricted equity | Translation differences | Retained earnings | Total | Non-controlling interests | Equity total |
|---|---|---|---|---|---|---|---|---|
| 31.12.2019 | 125 | -935 | 35,814 | 236 | 90,671 | 125,911 | -182 | 125,729 |
| Changes to previous years | -89 | 89 | ||||||
| 1.1.2020 | 125 | -1,024 | 35,814 | 236 | 90,760 | 125,911 | -182 | 125,729 |
| Total comprehensive income for the financial period | 160 | -325 | 13,012 | 12,848 | 89 | 12,937 | ||
| Earnings for the period | 13,012 | 13,012 | 89 | 13,102 | ||||
| Other comprehensive income items | 160 | -325 | -165 | -165 | ||||
| Distribution of profit | -4,529 | -4,529 | -1,017 | -5,546 | ||||
| Dividend EUR 0.16/share | -4,529 | -4,529 | -4,529 | |||||
| Distribution of profit for subgroup | - | -1,017 | -1,017 | |||||
| Share-based payments payable as equity | 897 | 897 | 897 | |||||
| Shares sold to non-controlling interests¹) | -153 | -153 | -49 | -202 | ||||
| Other | -631 | -631 | 24 | -606 | ||||
| 31.12.2020 | 125 | -864 | 35,814 | -89 | 99,357 | 134,343 | -1,134 | 133,209 |
| 1.1.2019 | 125 | -2,414 | 35,814 | 21 | 87,173 | 120,720 | 1,662 | 122,381 |
| Total comprehensive income for the financial period | 1,478 | 215 | 11,078 | 12,772 | 401 | 13,172 | ||
| Earnings for the period | 11,078 | 11,078 | 401 | 11,479 | ||||
| Other comprehensive income items | 1,478 | 215 | 1,693 | 1,693 | ||||
| Distribution of profit | -8,492 | -8,492 | -514 | -9,006 | ||||
| Dividend EUR 0.30/share | -8,492 | -8,492 | -8,492 | |||||
| Distribution of profit for subgroup | - | -514 | -514 | |||||
| Share-based payments payable as equity | 828 | 828 | 828 | |||||
| Shares sold to non-controlling interests¹) | 80 | 80 | -1,731 | -1,651 | ||||
| Other | 3 | 3 | 3 | |||||
| 31.12.2019 | 125 | -935 | 35,814 | 236 | 90,671 | 125,911 | -182 | 125,729 |
¹) See note 45.
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TAALERI
SEGMENT INFORMATION
BUSINESS SEGMENTS
Taaleri Group's business segments are Wealth Management, Insurance, and Energy. Any activity not belonging to these segments is presented in Other operations.
The Wealth Management segment consists of the investment service company Taaleri Wealth Management Ltd and its subsidiaries, as well as Taaleri Private Equity Funds Ltd Group. The segment also includes Taaleri Kapitaali Oy. Fee and commission income is the most significant income item in the Wealth Management segment. Costs mainly comprise personnel and other administrative expenses as well as fee and commission expenses. The most significant type of business risk is operative risk, but the business also entails market risk and credit risk.
The Insurance segment comprises only Garantia Insurance Company Ltd. Garantia is an insurance company specialising in guaranty insurance. Garantia guarantees funding and other liabilities for Finnish companies and insures investment-related risks. The most significant income items in the Insurance segment are fee and commission income from guaranty insurance and investment income. The most significant risks in the guaranty business are insurance risks and investment risks.
The Energy segment comprises Taaleri Energia Oy and its subsidiaries. Taaleri Energia works actively in international energy infrastructure markets seeking new investment opportunities. Operations are based on a life-cycle model, which begins by seeking and selecting targets of development, then continuing on through project development, construction and operation to the controlled shutdown of energy plants.
Income from the Energy business is based on fund units from the Energy segment. The Energy business also develops projects whose income and costs are recorded in the financial period when the end result of the project can be reliably assessed. The Energy business also includes operating and maintenance services for wind farms from which annual fees are received. The most significant risks of the Energy business are country risks related to international projects and market risks and credit risks.
Other operations include the Group administration services of Taaleri Plc that support the segments and the investments on the Group's own balance sheet that are implemented through Taaleri Investments Ltd. The costs of services that support the business segments are allocated to the segments and charged monthly.
The segment reporting accounting principles are explained in greater detail in Note 2.
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Segment information - earnings
| 1 January-31 December 2020, EUR 1,000 | Continuing operations | Eliminations¹) | Total | |||
|---|---|---|---|---|---|---|
| Wealth management | Insurance | Energy | Other | |||
| Continuing earnings | 37,475 | 14,647 | 9,242 | 1,551 | -3,696 | 59,220 |
| Performance fees | 7,108 | - | - | - | 7,108 | |
| Investment operations | 2,068 | 2,534 | - | -1,449 | 3,153 | |
| Total income | 46,651 | 17,182 | 9,242 | 102 | 69,480 | |
| Fee and commission expense | -8,734 | -228 | -649 | -114 | 3,696 | -6,030 |
| Interest expense | -49 | - | -4 | -3,222 | -3,275 | |
| Personnel costs | -13,602 | -3,244 | -4,331 | -4,064 | -25,241 | |
| Direct expenses | -9,051 | -1,679 | -1,943 | -3,442 | -16,115 | |
| Depreciation, amortisation and impairment | -1,023 | -43 | -42 | -35 | -1,143 | |
| Impairment losses on loans and other receivables | 5 | - | - | -105 | -100 | |
| Operating profit before overhead costs | 14,197 | 11,987 | 2,273 | -10,881 | 17,577 | |
| Overhead costs | -2,049 | -318 | -467 | 2,834 | - | |
| Allocation of financing expenses | - | -1,738 | -1,618 | 3,355 | - | |
| Operating profit before valuations | 12,149 | 9,931 | 188 | -4,691 | 17,577 | |
| Change in fair value of investments | 31 | 195 | - | -26 | 201 | |
| Profit before taxes and non-controlling interests | 12,180 | 10,127 | 188 | -4,717 | 17,778 |
¹) The distribution of income related to energy funds between the Wealth Management segment and the Energy segment has been presented in segment reporting on a gross basis. Intra-group fee income and fee expense subject to this presentation are eliminated in segment reporting in a separate column.
Continuing operations
| 1 January-31 December 2019, EUR 1,000 | Wealth management | Insurance | Energy | Other | Eliminations¹) | Total |
|---|---|---|---|---|---|---|
| Continuing earnings | 38,784 | 12,059 | 4,632 | 1,472 | -1,651 | 55,296 |
| Performance fees | 5,188 | - | - | - | 5,188 | |
| Investment operations | 572 | 9,208 | - | -3,093 | 6,687 | |
| Total income | 44,544 | 21,267 | 4,632 | -1,621 | 67,171 | |
| Fee and commission expense | -6,485 | -279 | -232 | -57 | 1,651 | -5,401 |
| Interest expense | -33 | - | - | -2,919 | -2,953 | |
| Personnel costs | -13,985 | -3,845 | -2,705 | -3,662 | -24,197 | |
| Direct expenses | -8,904 | -1,858 | -2,141 | -3,405 | -16,308 | |
| Depreciation, amortisation and impairment | -1,076 | -42 | -43 | -57 | -1,218 | |
| Impairment losses on loans and other receivables | 68 | - | -469 | -157 | -557 | |
| Operating profit before overhead costs | 14,130 | 15,244 | -959 | -11,878 | 16,537 | |
| Overhead costs | -2,361 | -370 | -488 | 3,219 | - | |
| Allocation of financing expenses | - | -2,163 | -1,171 | 3,334 | - | |
| Operating profit before valuations | 11,769 | 12,712 | -2,619 | -5,325 | 16,537 | |
| Change in fair value of investments | 10 | 1,837 | - | - | 1,847 | |
| Profit before taxes and non-controlling interests | 11,778 | 14,549 | -2,619 | -5,325 | 18,384 |
¹) The distribution of income related to energy funds between the Wealth Management segment and the Energy segment has been presented in segment reporting on a gross basis. Intra-group fee income and fee expense subject to this presentation are eliminated in segment reporting in a separate column.
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Reconciliations
| Reconciliation of total income | 2020 | 2019 |
|---|---|---|
| Total income of segments | 69,480 | 67,171 |
| Share of associates' profit or loss allocated to total income of segments | -74 | 37 |
| Consolidated total income | 69,406 | 67,208 |
| Reconciliation of operating profit | 2020 | 2019 |
| Total earnings of segments before taxes and non-controlling interests | 17,778 | 18,384 |
| Change in fair value of investments | -201 | -1,847 |
| IFRS 16 Leases^{2)} | -29 | -79 |
| Consolidated operating profit | 17,548 | 16,458 |
2) The IFRS 16 Leases -standard is not applied in the segment reporting.
Further information is provided below on Taaleri Group's own balance sheet investments, the fair value of which exceeds EUR 1,000 thousand at the balance sheet date. Taaleri Group's own balance sheet investments are presented in segment reporting as part of the Other operations.
| Strategic investments, EUR 1,000 | Investment type | Purchase price 31.12.2020 | Fair value 31.12.2020 | Holding 31.12.2020 |
|---|---|---|---|---|
| Real estate investments | ||||
| Sepos Oy | Shares and participations | 2,500 | 2,439 | 30.0 % |
| Turun Toriparkki Oy | Shares and participations | 3,502 | 3,026 | 48.2 % |
| Munkkiniemi Group Oy | Shares and participations | 5 | 303 | 47.0 % |
| Munkkiniemi Group Oy | Loan | 2,360 | 2,409 | - |
| Bioindustry investments | ||||
| Fintoil Oy | Shares and participations | 3,425 | 3,425 | 27.4 % |
| Non-strategic investments EUR 1,000 | Investment type | Purchase price 31.12.2020 | Fair value 31.12.2020 | Holding 31.12.2020 |
| Real estate investments | ||||
| Taaleri Datacenter Ky (Ficolo) | Shares and participations | 2,900 | 2,908 | 29.5 % |
| TT Canada RE Holdings Corporation | Loan | 6,729 | 7,687 | - |
| Other investments | ||||
| Inderes Oy | Shares and participations | 448 | 1,463 | 10.8 % |
| Fellow Finance Oyj | Shares and participations | 2,974 | 5,357 | 25.9 % |
| Fellow Finance Oyj | Loan | 1,500 | 1,508 | - |
| Taaleri Telakka Ky | Shares and participations | 3,430 | 3,293 | 16.1 % |
Investments in the non-strategic investment portfolio have a project-specific exit plan. Taaleri's own co-investment projects will be divested at the same pace as other co-investors.
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TAALERI | 28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2020
ACCOUNTING POLICIES FOR PREPARING THE CONSOLIDATED FINANCIAL STATEMENTS
- BASIC INFORMATION ABOUT THE GROUP ... 29
- SUMMARY OF THE SIGNIFICANT ACCOUNTING POLICIES FOR PREPARING THE FINANCIAL STATEMENTS ... 29
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1 CORPORATE INFORMATION
Taaleri Plc is a Finnish public limited liability company. It is domiciled in Helsinki, Finland and its registered office is at Kasarmikatu 21 B, 00100 Helsinki. The company's shares are listed on the Nasdaq Helsinki stock exchange. Taaleri Plc and its subsidiaries form the Taaleri Group ("Taaleri" or "the Group"). The Taaleri Group consists of three business areas: Wealth Management, Insurance and Energy. Taaleri provides services to institutional investors, companies and private individuals. The Group's subsidiaries engaging in business are Taaleri Wealth Management and its subsidiaries, Taaleri Private Equity Funds Ltd Group, Taaleri Investments Ltd Group, Taaleri Energia Oy and Garantia Insurance Company Ltd. In addition, Taaleri has eight associated companies (see Group companies on page 124). Taaleri's principal place of business is Finland and its offices are located in Helsinki, Tampere, Turku, Pori, Oulu, Luxembourg, Spain and Nairobi. The operations of Taaleri are monitored by the Finnish Financial Supervisory Authority. Taaleri Group forms a financing and insurance conglomerate (RaVa conglomerate) and, therefore, it is within the scope of the Finnish Act on the Supervision of Financial and Insurance Conglomerates.
2 SUMMARY OF KEY ACCOUNTING POLICIES FOR THE FINANCIAL STATEMENTS
Key accounting policies applied to these consolidated financial statements are presented below. They have been applied consistently during all presented financial periods, unless otherwise stated.
2.1 BASIS OF PREPARATION
The consolidated financial statements of Taaleri have been prepared according to the International Financial Reporting Standards (IFRS). In the preparation of the financial statements, the IAS and IFRS standards and the SIC and IFRIC interpretations which were valid on 31 December 2020 have been followed. IFRS refers to the standards and interpretations which have been approved in accordance with Regulation (EC) No. 1602/2002 of the European Parliament and of the Council. In addition to IFRS, regulations and guidelines on investment service companies have been applied to the consolidated financial statements of Taaleri.
The consolidated financial statements have been prepared over 12 months for the financial period of 1 January - 31 December 2020. The Board of Directors of Taaleri Plc approved the consolidated financial statements for public release on 4 March 2021. Shareholders have the right to approve or reject the financial statements at the Annual General Meeting held after the release of the financial statements.
The information included in the financial statements is presented in EUR thousand, and prepared in accordance with an accounting model based on recoverable historical cost, unless otherwise stated in the accounting policies below. As the values presented in the financial statements have been rounded from their exact values, the sum of individual figures presented may differ from the sum total presented. Key figures have been calculated using exact values. The Board of Directors' report and the financial statements are available in Finnish and English. The Finnish version is the official version that will apply if there is any discrepancy between the language versions.
The preparation of financial statements according to IFRS requires certain key accounting estimates to be used. In addition, it requires that members of the management use judgement when applying the accounting policies. Section 2.18 offers a more detailed description on complex matters that require judgement, and assumptions or estimates that have a material impact on the group financial statements.
2.2 CONSOLIDATION PRINCIPLES
The consolidated financial statements include Taaleri Plc and its subsidiaries that the parent company controls. The group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. If there are changes to one or more of the elements of control, the group will reassess whether it still controls the subsidiary. If the group loses control over a subsidiary, it recognises any investment retained in the former subsidiary at its fair value on the day control is lost, and any change in the carrying amount is recognised through profit or loss.
The profit for the period attributable to the owners of the parent company and the non-controlling interests is presented in the consolidated income statement, and the attribution of other comprehensive income is presented in the separate statement of comprehensive income. The profit for the period and comprehensive income are allocated to non-controlling interests also if the proportion of non-controlling interests became negative. The proportion of non-controlling interests has been presented in shareholders' equity on the consolidated balance sheet, separate from equity attributable to the shareholders of the parent company. Non-controlling interests in an acquiree are measured at either fair value or the proportionate share in the recognised amounts of the acquiree's net identifiable assets. The measurement principle is defined separately for each purchase.
Associates, in which the parent company holds 20-50 per cent of the votes provided by all shares or in which it otherwise has significant influence, but not control, are consolidated using the equity method. If the investment in an associate has been made by a venture capital organization, the decision can be made to measure the investment at fair value through profit or loss in accordance with IFRS 9. When applying the equity method, investments are initially recognised at cost and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition. If the Group's proportion of an associate's losses exceeds the carrying amount of the investment, the investment is recognised as zero on the balance sheet and the losses exceeding the carrying amount are not consolidated, unless the Group is committed to fulfilling the associate's obligations. The Group's share of the associate's profit for the period is presented before the operating profit. The Group's proportion from changes recognised in other comprehensive income is recognised in the Group's other comprehensive income. When the Group loses its significant influence, the remaining holding is recognised at fair value, and the difference between the carrying amount and the fair value of the remaining holding and any transfer gains/losses is recognised through profit or loss. At the end of each reporting period, it is evaluated whether or not there is objective evidence of any decrease in the value of the investment in the associate. If there is such evidence, an impairment loss is defined as the difference between the recoverable amount of the investment and its carrying amount, and it is recognised in the income statement line item "Share of associates' profit or loss".
Subsidiaries or associates acquired during the financial period are consolidated from the date on which the Group obtained control or significant influence, and subsidiaries or associates sold are correspondingly consolidated until the date on which control or significant influence is lost. If required, adjustments are made to the financial statements of subsidiaries so that their accounting policies correspond with those of the Group.
All intra-group transactions, as well as receivables, liabilities, unrealised profit and internal distribution of profit are eliminated. Unrealised losses are not eliminated if the losses are caused by impairment.
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2.3 BUSINESS COMBINATIONS AND GOODWILL
Business combinations are accounted for using the acquisition method. Acquisition costs are defined as the acquisition-date fair value of the consideration transferred and any non-controlling interest in the acquired entity. For each business combination, the Group selects whether the non-controlling interests are measured at fair value or the present ownership instruments' proportionate share in the recognised amounts of the acquiree's identifiable net assets. Acquisition-related costs are recognised as expenses in the income statement over the periods, during which the costs are incurred and the corresponding services are received.
When the Group acquires a business, it evaluates assets and liabilities in the light of agreement terms, financial conditions and other related conditions prevailing on the acquisition date, to determine the correct classification. This evaluation includes the separation of embedded derivatives included in main agreements of the acquired business.
Any contingent consideration is recognised at fair value on the acquisition date. A contingent considerations which has been classified as an asset or liability, is a financial instrument and is within the scope of IFRS 9 (Financial Instruments), is measured at fair value, with any resulting gain or loss recognised either in profit or loss or in other comprehensive income in accordance with that IFRS. If a contingent considerations is not within the scope of IFRS 9, it is accounted for according to the applicable IFRS. A contingent consideration classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.
Goodwill is recognised at the original acquisition cost, which corresponds to the amount that the consideration transferred and any non-controlling interest in the acquired business, exceeds the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If the fair value of the acquired net assets exceeds the total
transferred contribution, the Group will reassess whether it has correctly identified all of the assets acquired and liabilities assumed, and it will review the procedures used to measure the amounts to be recognised at the acquisition date. If the fair value of the acquired net assets, even after the reassessment, exceeds the total transferred contribution, profit is recognised through profit or loss.
After the original recognition, goodwill is recognised at the acquisition cost less accrued impairment losses. Goodwill acquired through business combinations is allocated, for impairment testing purposes starting from the acquisition date, to the Group's cash-generating units which are expected to benefit from the business combination, regardless of whether or not other assets or liabilities of the object of acquisition are allocated to these entities. Cash generating units are either business segments or companies thereof.
Goodwill is tested annually against any impairment by discounting estimated future net cash flows using market-based discount factors. If the recoverable assets of a cash-generating unit are lower than their carrying amount, an impairment loss is recognised. Impairment losses associated with goodwill are not reversed in future periods.
When goodwill has been allocated to a cash-generating unit and an operation of the unit is disposed of, the goodwill allocated to the operation disposed of is included in the carrying amount of that operation when defining gains or losses on the disposal. Goodwill transferred in such a situation is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.
2.4 SEGMENT REPORTING
Taaleri Group has three operating segments: Wealth Management, Insurance and Energy. Operations not included in these three segments is presented under Other Operations. Operating segments are reported in a way which is consistent
with internal reporting to the chief operating decision maker. The Group's Executive Management Team has been designated as the chief operating decision maker, who is responsible for the allocation of resources to operating segments and the evaluation of their results.
Segment reporting follows the Taaleri Group's accounting policies for financial statements, except for the following exceptions. The standard IFRS 16 Leases is not applied in segment reporting. The income and expenses which are deemed to be directly attributable to each segment have been allocated to those segments. The segment reporting only includes group external income and expenses, except for the distribution of income related to energy funds between the Wealth Management segment and the Energy segment which has been presented in segment reporting on a gross basis from the financial year 2020 onwards. Intra-group fee income and fee expense subject to this presentation are eliminated in segment reporting in a separate column. Adjustments due to the change in presentation have been made to the reportable segment figures for both the financial years 2020 and 2019, so both reportable segment figures are comparable. The change in presentation has no effect on the reported operating profit or result of the segments. Assets and liabilities are not monitored on a segment level and are therefore not presented in the group financial statements. The profitability and result of the segments are assessed before tax.
2.5 NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction, the asset is available for immediate sale in its present condition, and the sale is highly probable. For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset, and
actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The management must be committed to the expected sale within one year after the classification.
A discontinued operation is a component of the Group that either has been disposed of, or is classified as held for sale, and represents a separate major line of business or is part of a separate major line of business that has been disposed of, or classified as held for sale. Assets classified as held for sale are measured at the smaller of their carrying amount, and fair value less than to sell. Assets that meet the requirements set for being held for sale are presented separately on the balance sheet and the result of discontinued operations are presented separately as a single amount in the statement of comprehensive income.
No depreciation is made on tangible or intangible assets if they have been classified as held for sale. Assets and liabilities held for sale are presented separately as current items on the balance sheet.
2.6 FOREIGN CURRENCY ITEMS
Items included in the financial statements of Group companies are measured in the currency of the economic environment in which the company is mainly operating (functional currency). The consolidated financial statements are presented in euros, which is the functional and presentation currency of the Group.
Transactions denominated in a foreign currency are translated at the exchange rate valid on the transaction date. Any receivables and liabilities denominated in a foreign currency and remaining open on the closing date are translated at the exchange rate valid on the closing date. Exchange rate gains and losses associated with actual business operations are recognised in the income statement line item Net gains or net losses on trading in foreign currencies.
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Income statements and balance sheets of Group companies (none of which are operating in a country with hyperinflation), using a functional currency other than the presentation currency of the Group, are translated into the presentation currency as follows: assets and liabilities on the balance sheet are translated at the exchange rate valid on the closing date and income and expenses on the income statement are translated at the period's average exchange rate. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation, and translated at the closing rate. All translation differences are recognised in other comprehensive income. If a subsidiary is disposed of, the cumulative translation differences are transferred to the income statement as part of the gain or loss on disposal.
2.7 FINANCIAL ASSETS AND LIABILITIES
Assets and liabilities are presented in the order of liquidity which, for the Taaleri Group, offers more reliable and significant information than the presentation of current and non-current items.
Financial assets
At initial recognition, the Group's financial assets are classified into the following categories: those measured at fair value through profit or loss, those measured at fair value through other comprehensive income and those measured at amortised cost. For the purpose of classification, financial assets are grouped into debt instruments, equity instruments and derivatives.
The classification of debt instruments depends on Taaleri's business model in the management of financial assets and the characteristics of the cash flows of the financial assets in question. Taaleri mainly manages its debt instruments according to two different business models. Due to the nature of the insurance operations, the objective of Garantia's investment operations is achieved by both collecting contractual cash flows and selling financial assets, i.e. applying the "hold to collect and sell" business model. Accordingly, debt instruments that pass the cash flow test are measured at fair value through other comprehensive income. For debt instruments other than those of insurance operations, the business model is mainly holding the debt instruments to collect contractual cash flows, meaning that debt instruments that pass the cash flow test are measured at amortised cost. This estimate is performed instrument-specifically, so the measurement basis is also determined instrument-specifically. In both insurance investment operations and the Group's other investment operations, debt instruments that do not pass the cash flow test are measured at fair value through profit or loss.
Changes in fair value from debt instruments measured at fair value through other comprehensive income are recognised in the fair value reserve. Interest income, impairment gains and losses as well as foreign exchange rate gains and losses are recognised in profit or loss. When a debt instrument is derecognised, the profit or loss in the fair value reserve is transferred, as an adjustment due to a change in the classification, from equity to profit or loss in the net gains from insurance investment operations, as the item belongs to the investment assets of insurance operations.
The carrying amount of debt instruments recognised at amortised cost includes the deductible item for expected credit losses, and interest income is recognised in interest income using the effective interest method. Sales gains and losses are recognised in profit or loss.
Debt instruments measured at fair value through profit or loss are measured at fair value, and any changes in fair value are recognised in profit or loss. Interest income, profits from funds, foreign exchange rate gains and losses as well as sales gains and losses are also recognised in profit or loss.
A business model indicates how financial assets are managed to achieve a certain business objective. In the "hold to collect" business model, the objective is to collect contractual cash flows; in the "hold to collect and sell" business model, the objective is achieved by both collecting contractual cash flows and selling financial assets; in the "trading" business model, the objective is achieved by actively trading in the financial assets. Determining the business model is based on estimating, for example, how the profitability of the financial assets is assessed, how the risks of the operations are managed and how often and to what extent the assets are traded in.
The characteristics of the cash flows of the debt instruments are evaluated in the cash flow test. If contractual cash flows do not consist solely of payments of principal and interest (basic lending arrangement), the instrument in question is measured at fair value through profit or loss. If the cash flows are subject to, for example, share prices or the debtor's financial situation, it is not a basic lending arrangement. At Taaleri, such debt instruments mainly consist of mutual fund investments, convertible bonds as well as profit-sharing and subordinated loans.
Investments in equity instruments are measured at fair value through profit or loss, meaning that changes in fair value, dividends, interest income, foreign exchange rate gains and losses as well as sales gains and losses are recognised in profit or loss. At the time of initial recognition, the management may make an irrevocable choice concerning a procedure according to which changes in fair value are recognised in other comprehensive income and will not later be recycled to profit or loss. In this case, dividend yields are recognised in profit or loss, but changes in fair value, foreign exchange rate gains and losses as well as sales gains and losses are recognised in other comprehensive income. Taaleri's non-strategic investments will be measured according to this procedure at fair value in other comprehensive income without recycling. Taaleri does not have significant non-strategic investments.
Investments in financial assets are originally recognised at fair value, to which transaction expenses are added, except if the financial asset in question is recognised at fair value through profit or loss, in which case the transaction expense is recognised in expenditure. When recognising financial instrument purchase and sales contracts, the date of the transaction is used as the basis for recognition.
Financial assets are derecognised when the Group has lost its contractual right to receive cash flows or moved the risks and profits outside the Group to a significant extent.
Cash and cash equivalents, which correspond to the "Receivables from credit institutions" item in the Group's balance sheet, comprise call deposits and fixed deposits.
Financial liabilities
At the time of initial recognition, the Group's financial liabilities are classified into those measured at fair value through profit or loss and those measured at amortised cost. The Group has not had any financial liabilities measured at fair value through profit or loss in the 2019 or 2020 financial periods.
Other loans are originally recognised at fair value, to which transaction expenses are added. Later, other loans are recognised at amortised cost using the effective interest method. Other liabilities are derecognised when their obligations have been met and their validity has expired.
Fair value measurement
The Group recognises the aforementioned financial instruments at fair value on the balance sheet or in the notes to the financial statements. The Group has no other assets or liabilities recognised at fair value. The fair value is the price that would be received to sell an asset, or paid to transfer a liability
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in an orderly transaction between market participants at the measurement date. The fair value of financial instruments quoted in active markets is based on prices quoted on the measurement date, and the fair value of financial instruments not quoted on active markets is based on the group's own valuation methods. All financial instruments which have been recognised at fair value on the balance sheet or the fair value of which is presented in the notes, are classified into three hierarchical levels according to the valuation techniques.
Level 1 includes instruments, the fair value of which is based on quoted prices for identical assets or liabilities in active markets. Markets are deemed to be active if price quotations are easily and regularly available, and they represent actual and regular market transactions between independent parties. The fair value of financial assets is based on buy quotations on the measurement date. Level 1 instruments mainly consist of quoted equity investments, equity and interest fund investments and bond investments which have been classified to be available for sale or recognised at fair value through profit or loss.
Level 2 includes instruments, the fair value of which is based on information other than quoted prices, but still on directly or indirectly observable information. To measure the fair value these instruments, the Group uses generally accepted valuation models, the input data of which is largely based on verifiable market information.
Level 3 includes instruments, the fair value of which is measured based on other than observable significant input data. Level 3 instruments mainly consist of unquoted equity investments. The value of these instruments is based on the best information available in the prevailing conditions. Often, they are recognised at acquisition cost or price details are obtained from third parties. A significant amount of managerial judgement is included in these measurements. Note 26 offers a more detailed description of the measurement methods applied to Level 3 instruments.
With regard to assets and liabilities presented repeatedly in financial statements, the Group defines when transfers have occurred between the hierarchical levels of fair value by reassessing the classification (on the basis of input data available at the lowest level, which is significant considering the entire measurement process) at the end of each reporting period.
Impairment
Impairments are based on an expected credit loss (ECL) model and impairments are recognised on all loans and debt instruments that are not measured at fair value through profit or loss, and on off-balance sheet liabilities.
Impairment is calculated using an individual credit risk calculation model based on the probability of default (PD), the loss given default (LGD), the exposure at default (EAD) and the maturity (M): ECL = PD * LGD * EAD * M(min 1 or M).
For the purpose of impairment testing, assets to be tested are divided into three stages. On the first stage are instruments whose credit risk has not increased significantly; on the second stage are instruments whose credit risk has increased significantly; and on the third stage are instruments whose value has decreased. For instruments on the first stage, a loss allowance for 12 month expected credit losses is recorded. For instruments on the second and third stages, a loss allowance for lifetime expected credit losses is recognised. On every reporting date Taaleri estimates whether the credit risks of instruments has increased significantly compared to the credit risk at initial recognition, and based on this defines the expected credit loss.
A significant increase in credit risk is estimated based on changes (or expected changes) in the credit rating. The credit rating is deemed to take into account sensible and reasonable information to the necessary extent. Additionally, the credit risk is estimated to have increased significantly if payments are over 30 days due.
The credit risk is deemed to have increased significantly if the counterparty's credit rating declines as follows:
- From investment grade, or rating classes AAA...BBB-, to rating class BB- or lower;
- From rating classes BB+...BB- to rating class B- or lower:
- From rating classes B+...B- to rating class C or lower.
The expected credit loss for loans measured at amortised cost is recognised in the P/L line item "Expected credit loss from financial assets measured at amortised cost" and booked against the book value of the loan. The expected credit loss for financial assets measured at fair value through other comprehensive income is recognised in the P/L line item "Net income from insurance, investment operations", when the asset is part of the insurance business' investment portfolio, and booked against the fair value reserve in other comprehensive income.
2.8 INSURANCE ASSETS AND LIABILITIES
Insurance contracts have been treated and valued according to the definition of the IFRS 4 standard. According to the definition, an insurance contract is a contract under which significant insurance risk has been passed from the policy holder to the insurer. The company has no financial contracts pertaining to the IFRS 4 standard which would deviate from insurance contracts in that a financial risk but no significant insurance risk is passed to the issuer of the contract.
Technical liabilities generated with regard to insurance contracts are mainly calculated according to national regulations. Deviating from national regulations, the equalisation provision is recognised, according to IFRS, in shareholders' equity adjusted with deferred taxes. Technical liabilities generated from insurance contracts consist of provision for unearned premium and claims provision. The provision for unearned premium includes the proportion of the insurance premium income accrued during the financial year and previous years, which is allocated to a period following the financial year relative to the risk. The claims provision consists of two parts: claims to be paid by the company after the financial year caused by known losses occurred during or before the financial year, and provisions made for unknown losses calculated using statistical methods for claims which have not been reported to the insurance company by the reporting date.
Investment assets of insurance operations are measured either at fair value through other comprehensive income or at fair value through profit or loss, depending on the business model used for managing the financial assets and the characteristics of the cash flows of the financial assets in question. More detailed measurement principles are presented in Section 2.7 Financial assets and liabilities.
Recognition and valuation of insurance contracts
Premiums written include the premiums from contract periods agreed in insurance contracts that have started during the financial period. Insurance premium receivables that are unlikely to be paid have been deducted from premiums written as credit losses. In addition to premiums, premiums written include start-up fees, management fees, waiver fees and other such one-off payments, premium rebates and credit losses. The provision for unearned premium includes the proportion of insurance premiums written accrued during the financial year and previous years, where the relevant risk is attributable to future financial periods.
Claims paid include claims paid during the financial period, regardless of the date of loss occurrence. Claims paid also include operating and depreciation expenses allocated to claims management for the financial year, income from the recovery of recourse receivables, and expenses arising from the collection of insurance receivables. According to guarantee insurance agreements, the insurance company generally has the right of recourse after a claim has been paid. Therefore,
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claims paid can be adjusted by the amount of the relevant recourse receivable. Recourse receivables from insurance claims are recognised in Garantia's accounting records at probable values that are calculated based on best possible information available on the evaluation date. The valuation of recourse receivables is updated in conjunction with financial statements and half-year financial reports. The provision for outstanding claims includes the claims that have occurred during or before the financial period and have not yet been paid.
Reinsurance receivables
"Reinsurance" refers to insurance contracts defined in the IFRS 4 standard, with which an insurance company can obtain compensation from another insurance company in case of an insurance event. The company utilises facultative reinsurance for corporate loan guarantees in those agreements which exceed the retention share of the insurance risk as defined by the company and in situations where collaterals cannot be utilised to sufficiently reduce the insurance risk. Commercial bond have mainly been reinsured using Quota Share reinsurance, under which all insurance contracts that have entered into force during the calendar year are reinsured. According to the IFRS 4 standard, the reinsurers' share of technical provisions are treated as an asset. If an insurance liability has been reinsured, the reinsurers' share of the claims paid is simultaneously recognised in a separate account as receivables from reinsurers reducing the amount of claims expenses. Similar recognitions are made for reinsurers' share of claims of recourse.
Adequacy testing for liabilities associated with insurance contracts
On the closing date, the adequacy of the insurance liabilities recognised on the balance sheet is evaluated. The testing is based on current estimates of future cash flows from insurance contracts.
2.9 TANGIBLE ASSETS
Tangible assets are recognised on the balance sheet if their acquisition cost can be measured reliably and it is probable that future economic benefits associated with the assets will flow to the company. Tangible assets are carried on the balance sheet at cost less any accumulated depreciation and accumulated impairment losses. Tangible assets mainly consist of machinery and equipment which are depreciated in four years. Depreciation of an asset begins when it is available for use. When an asset is classified as available for sale in accordance with IFRS 5, depreciation ceases.
The residual values and useful lives of assets are reviewed on every closing date, and they are changed as required. If the carrying amount of an asset is higher than the estimated recoverable amount, the carrying amount is immediately reduced to correspond to the recoverable amount. The gain or loss arising from the derecognition of an asset is included in profit or loss. Gains are recognised in other operating income and losses in depreciation and impairment. Gains or losses are determined as the difference between the net disposal proceeds and the carrying amount of the asset.
If there are indications that a tangible asset is impaired, the assets recoverable amount is estimated. If the recoverable amount is less than the assets carrying amount, the carrying amount is reduced to its recoverable amount. The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use.
2.10 INTANGIBLE ASSETS
Other intangible assets
Intangible assets are recognised on the balance sheet if their acquisition cost can be measured reliably and it is probable that future economic benefits associated with the assets will flow to the company. Other intangible assets are carried on
the balance sheet at cost less any accumulated depreciation and accumulated impairment losses. Intangible assets mainly consist of IT software development costs and licences, the useful life of which are 3-5 years. No internally generated intangible assets have been recognised on the balance sheet.
The gain or loss arising from the derecognition of an asset is included in profit or loss. Gains are recognised in other operating income and losses in depreciation and impairment. Gains or losses are determined as the difference between the net disposal proceeds and the carrying amount of the asset.
If there are indications that an intangible asset is impaired, the assets recoverable amount is estimated. If the recoverable amount is less than the assets carrying amount, the carrying amount is reduced to its recoverable amount. The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use.
Goodwill
Goodwill accounting policies have been presented in Section 2.3 (Business combinations and goodwill).
2.11 LEASE AGREEMENTS
Taaleri recognises right-of-use assets at the commencement date of the lease according to IFRS 16. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are recognised in tangible assets and are depreciated on a straight-line basis over the lease term. The lease term used is the non-cancellable lease period. Any renewal options are included if management deems it reasonably certain that they will be exercised.
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, and the exercise price of a purchase option reasonably certain to be exercised, and payments of penalties for terminating a lease, if the lease term reflects exercising the option to terminate. Lease liabilities are recognised in other liabilities and interest expenses in the interest expenses line item. In calculating the present value of lease payments, Taaleri uses its incremental borrowing rate, which management has defined as being the interest rate of the latest debt security issued to the public by Taaleri.
Taaleri applies an exemption on short-term leases (lease term less than one year) and on leases of low-value assets (below 5,000 euros). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
2.12 EMPLOYEE BENEFITS
Management long-term remuneration
All full-time Taaleri Group employees in Finland (except for the Group CEO, the Deputy CEO, senior advisors and compliance personnel, as well as employees of Taaleri Kapitaali Oy, the Energia segment, Garantia and Mobily Invoices Oy) belong to Taaleri Group's remuneration fund (Taaleri Palkkiorahasto h.r.). Part of the Group's annual remuneration is transferred to the remuneration fund according to predefined criteria.
The Group uses long-term remuneration systems for personnel based on which persons belonging to them may receive a bonus settled in Taaleri shares or cash for work performed during the vesting period. Depending on the payment method,
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these remuneration programmes are recognised either in equity or as cash-settled share-based payment transactions.
Share-based employee benefits paid in equity are measured at fair value at the moment of granting. The amount recognised in expenditure is amortised in personnel costs and as an increase in equity during the vesting period. Also in arrangements settled in the net amount - in which the Group is obliged to pay withholding tax on the bonus to be paid, due to which part of the bonus earned is spent on paying taxes - the bonus earned is treated as an asset fully paid in equity instruments, despite the tax part paid in money.
The estimated number of shares to be implemented is checked quarterly. The possible effects of adjustments made to the original estimates are recognised in the income statement as personnel costs, and the corresponding adjustment is made in equity.
Pensions
The statutory pension cover of the company's employees and management has been arranged using TyEL (employee pension) insurance agreements. Voluntary additional pension insurance has been taken out for members of the company's management. All of the Group's pension arrangements are defined-contribution plans. Expenses arising from statutory pension arrangements are recognised in the income statement under personnel costs and those arising from voluntary additional pension insurance is recognised under other administrative expenses. Insurance premiums are paid to the insurance company and recognised as expenses over the financial period, which the premiums cover. The defined-contribution plans have no other payment obligations.
2.13 CONTINGENT LIABILITIES
A contingent liability is a possible obligation that arises from past events, and whose existence will be confirmed by the
occurrence of an uncertain event not wholly in the control of the Group. In addition, an existing obligation which probably does not require that the payment obligation is met, or the amount of which cannot be estimated reliably, is considered to be a contingent liability. The Group's contingent liabilities are presented in the notes to the financial statements.
2.14 INCOME TAXES AND DEFERRED TAXES
Tax expenses consist of taxes based on the taxable income for the period, taxes for previous periods and deferred taxes. Taxes are recognised through profit or loss, unless they are associated with items recognised directly in shareholders' equity or other comprehensive income. In this case, taxes are recognised in the items in question. Taxes based on the taxable income for the period is calculated from the taxable income on the basis of tax rates valid in the specific country.
Deferred taxes are calculated on temporary differences between the carrying amount and taxable value. However, deferred tax liabilities are not recognised on the original recognition of goodwill. Deferred tax assets are recognised up to the amount at which it is likely that taxable income will be generated in the future, against which the temporary difference can be utilised. The Group's most significant temporary differences are generated from the elimination of the equalisation amount of guaranty liabilities in insurance activities and the measurement of investments at fair value. Deferred taxes are calculated using the tax rates regulated by the closing date or tax rates which have been approved in practice before the closing date.
2.15 REVENUE RECOGNITION PRINCIPLES
Revenue recognition principles for wealth management
Fee and commission income is based, for example, on fund units, asset management, securities brokerage and the issuance of securities. Taaleri Group's most significant commission income consists of fund units and asset management. Fee and commission expenses include commissions paid to others related to income recognised in commission income. Wealth management commissions are invoiced beforehand every quarter and accrued as income over every month. Securities brokerage transactions are recognised according to the trading date. The above mentioned revenues are recognised in Fee and commission income.
Project income and expenses are recognised during the financial period when the project outcome can be evaluated reliably. Short-term unfinished project expenses are activated on the balance sheet. Project income is presented in other operating income and, correspondingly, project expenses are recognised in other operating expenses.
Net income from securities trading includes changes in fair value of all financial instruments recognised at fair value through profit or loss. Net income from trading in foreign currencies includes net gains from foreign exchange transactions, as well as positive and negative foreign exchange differences from translating assets and liabilities into euros.
Revenue recognition principles for insurance activities
Revenue recognition principles for insurance activities have been described in Section 2.8 (Assets and liabilities from insurance activities). All income from insurance activities are presented in net income from insurance activities, apart from changes in fair value from financial assets measured at fair value through other comprehensive income, which are presented in the statement of comprehensive income.
Revenue recognition principles for the Energy business
Fee and commission income for the Energy business is based on Energy segment fund units. The Energy business also develops projects whose income and costs are recognised in the financial period when the end result of the project can be reliably assessed. Incomplete project costs are activated on the balance sheet. Fee and commission expenses include commissions paid to others related to income recognised in fee and commission income.
The Energy business also includes operating and maintenance services for wind farms, whose invoicing is based on a pre-agreed annual payment, which is recognised as income within the year as the year progresses.
Other income
Income from equity investments mainly includes dividend income from equity investments and transfer gains/losses from associates and subsidiaries, as well as available-for-sale financial assets. Dividends are mainly recognised after the Annual General Meeting of the distributing company has made its decision on the distribution of dividends.
Interest income and expenses on interest bearing assets and liabilities are recognized on an accrual basis. On receivables, the difference between the acquisition cost and the nominal value is recognised in interest income on an accrual basis, and on liabilities the difference is recognised in interest expenses on an accrual basis. The difference between the nominal value and acquisition cost of fixed-rate bonds is recognised in interest income and expenses over the loan term on an accrual basis.
The effective interest method has been applied to the recognition of interest income and expenses over the agreement term. When calculating the effective interest rate, the expected life of the financial instrument and the future cash flows are estimated based on all contractual terms. Received commissions, transaction costs and possible premiums or discounts, which are an integral part of the effective interest rate of the financial instrument, have been taken into account when recognising interest income and expenses.
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2.16 SHAREHOLDERS' EQUITY
The Group classifies instruments it has issued, into equity or liabilities (financial liabilities) on the basis of their characteristics. Equity instruments include any contracts which indicate a right to obtain a proportion of an entity's assets after deducting all of its liabilities. Costs related to the issuance or acquisition of equity instruments are accounted for as a deduction from equity. If the company reacquires its own equity instruments, those instruments are deducted from equity.
2.17 OPERATING PROFIT AND INCOME
The IAS 1 (Presentation of Financial Statements) standard does not define the concept of operating profit. The Group has defined it as follows: operating profit is the net amount of Total income, Fee and commission expenses, Interest expenses, Administrative expenses, Depreciation and Impairments, Other operating expenses and the Share of associate's profit or loss. All income statement items other than those listed above are presented below the operating profit.
Income included in the total income have been presented as a gross amount, apart from income from securities and currency trading and income from insurance, which are presented as a net amount to offer a fair view.
2.18 ACCOUNTING POLICIES REQUIRING MANAGEMENT'S JUDGMENT AND KEY UNCERTAINTIES REGARDING ESTIMATIONS
When preparing the financial statements, estimates and assumptions concerning the future need to be made, and their outcome may differ from the estimates and assumptions made. In addition, applying the accounting policies requires judgement.
Taaleri has taken into account the uncertainty in the preparation of the financial statements due to the coronavirus pandemic. The effects of the prevailing circumstances have been assessed in the estimates that require management's judgment and in the related key uncertainties. According to management's judgement coronavirus pandemic has not had a significant impact on the financial statements or items subject to estimations.
In 2015 Taaleri acquired Garantia insurance company. The purchase price paid, compared to the actual market value includes uncertainty and managerial judgement. The Group has measured assets and liabilities of the acquired company at fair value according to best estimates, but future guaranty losses involve significant uncertainties, particularly in a poor market situation. The fact that EUR 28.6 million was recognised in negative goodwill on the acquisition date of 31 March 2015, does not mean that no guaranty losses relating to the outstanding guaranties on the acquisition date, could occur in the future. On the acquisition date, the company was not aware of any guaranty losses which the company had not taken into account on its balance sheet and, according to IFRS, general unallocated provisions cannot be made.
The measurement of the liabilities associated with the guaranty operations offered by Garantia involve a number of factors and uncertainties subject to judgement. In addition to assumptions concerning the external operating environment, the evaluation is mainly based on the insurance mathematical analysis of its loss statistics. The managerial judgement is particularly required to define risks and the capital required for business operations, to price risks according to profitability and solvency objectives, to fulfil the obligations required by insurance agreements and to evaluate provisions for outstanding claims caused by loss events that have already occurred. According to management's judgement coronavirus pandemic has not had a significant impact on the measurement of the liabilities associated with the guaranty operations.
When assessing the Group's control in structured entities, the power of the Group to affect relevant activities and its exposure to variable returns are evaluated. The assessment of control is subject to judgement. The assessment of control is done in more detail, when the Group's share in the structured entity's net assets and returns exceeds 20 percent. The investee is consolidated as a subsidiary at the latest, when the Group's exposure to variable returns is significant and the Groups is able to use its power over the investee to affect the amount of the variable returns.
When recognising and measuring the acquired assets and liabilities in business acquisitions (Evervest Oy and Suomen Vuokravastuu Oy in 2018), thus affecting the recognised goodwill, managerial judgement has been used.
The values of businesses acquired through business combinations are based on estimated future development, estimated cash flows and the discount rate used. Goodwill is tested annually for impairment. The recoverable amount defined in impairment testing is often based on the value in use, the calculation of which requires estimates of future cash flows and the discount rate used. The possible effects of the coronavirus pandemic have been considered on the estimated cash flows in goodwill impairment testing. This has not had a significant impact on the outcome of the impairment testing. More detailed information on goodwill is provided in Note 27.
Managerial judgement is needed when measuring the unfinished projects of the Wealth Management and Energia segments. External costs associated with active projects have been recognised on the balance sheet if the net present value of the project is positive. Project expenses have been recognised through profit or loss if a project has ended or its net present value is negative. The coronavirus pandemic has caused delays in the progress of projects, but this has not had a material effect on the valuation of unfinished projects.
When classifying and measuring financial assets managerial judgement is needed, i.e. when deciding whether an equity instrument is strategic or not, which affects whether the instrument is measured through profit or loss or other comprehensive income without recycling. Evaluating expected credit loss requires judgement, i.e. when choosing which credit loss models and parameters to use. The expected credit loss model is described in more detail in section 2.7 of the accounting policies. The coronavirus pandemic has not had a significant impact on the definition of expected credit losses.
Management must evaluate when the markets of financial instruments are no longer deemed to be active. When the fair value of a financial instrument is measured using valuation methods, the management's judgement is required for the selection of the applicable valuation method. International Valuation Standards (IVS) and valuation methods based on their applications have been used to measure the fair value of private equity fund investments and unquoted shares and units. The valuations take a number of different factors into consideration, such as when an investment was made and at what price, the price development of quoted reference companies, local market conditions in the specific industry, realised and estimated operating results, and additional investments. Value analyses have usually been prepared for finished projects using a cash flow-based income approach and a comparative market-based measurement method. Funds including unfinished project have been measured at their acquisition cost. Estimates and managerial judgement is required in the valuations. Illiquid investments include uncertainty regarding the future realised gains or losses, compared to the estimated fair value.
Managerial judgement has been applied when measuring the fair value of synthetic options, and the amount recognised in profit or loss, from share-based payment schemes. Hence, deferred taxes from the synthetic options have been recognised in profit or loss and on the balance sheet. The coronavirus pandemic has not had a significant impact on entries arising from share-based payment schemes.
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Deferred taxes have been recognised from the equalisation amount of Garantia, the amount of which is based on loss statistics confirmed by the management and estimated future losses which involve judgement. Managerial judgement is needed when comparing the current period's loss ratio with the long-term expected average, on the basis of which the equalisation amount is either increased or decreased through profit or loss, which has a direct impact on the amount of deferred tax liabilities. The coronavirus pandemic has not had a significant impact on the measurement of equalisation amount.
2.19 APPLIED NEW AND REVISED STANDARDS
Starting from 1 January 2020, the Group has applied the following new and revised standards and interpretations with an impact on the financial statements:
- Improvements to IFRS. Annual improvements to standards are performed collectively once a year. The impact of these changes varies according to standard, but these changes have not had any significant impact on consolidated financial statements.
2.20 NEW AND REVISED STANDARDS TO BE APPLIED LATER
Several new standards and amendments to and interpretations of standards will only be adopted later than in the financial periods beginning 1 January 2020, and they have not been applied in the preparation of these consolidated financial statements. It is expected that the following revisions will have some impact on Taalen's financial statements:
IFRS 17 Insurance Contracts was issued in May 2017 as replacement for IFRS 4 Insurance Contracts. The standard will become applicable on 1 January 2023. The overall objective of IFRS 17 is to provide better information on the financial position and profitability of insurance companies. The purpose is to increase the transparency and improve the comparability of financial statements. The accounting in IFRS 17 differs from the Solvency II capital adequacy calculations that insurance companies currently use, and the technical provisions will therefore not be the same. IFRS 17 harmonizes the accounting for insurance liabilities and the application of local accounting policies will no longer be allowed. Under IFRS 17 the measurement of the insurance liability will be at fair value. The Group is assessing the impact of IFRS 17. The standard has not yet been endorsed by the EU.
No other IFRS standard or IFRIC interpretation already published but not yet valid is expected to have a material impact on the Group.
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NOTES TO THE INCOME STATEMENT
3 FEE AND COMMISSION INCOME 38
4 NET INCOME FROM INSURANCE 38
5 NET GAINS OR NET LOSSES ON TRADING IN SECURITIES AND FOREIGN CURRENCIES 39
6 INCOME FROM EQUITY INVESTMENTS 39
7 INTEREST INCOME 39
8 OTHER OPERATING INCOME 39
9 FEE AND COMMISSION EXPENSE 39
10 INTEREST EXPENSE 40
11 PERSONNEL COSTS 40
12 OTHER ADMINISTRATIVE EXPENSES 40
13 DEPRECIATION, AMORTISATION AND IMPAIRMENT ON TANGIBLE AND INTANGIBLE ASSETS 40
14 OTHER OPERATING EXPENSES 40
15 EXPECTED CREDIT LOSSES 41
16 INCOME TAXES 41
17 OTHER COMPREHENSIVE INCOME ITEMS 41
18 EARNINGS PER SHARE 42
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3 FEE AND COMMISSION INCOME
| 1.1.-31.12.2020, EUR 1,000 | Wealth management | Insurance | Energy | Other | Total |
|---|---|---|---|---|---|
| Wealth management fees and commissions | 32,831 | - | 9,094 | 119 | 42,044 |
| Performance fees | 7,108 | - | - | - | 7,108 |
| Total | 39,939 | - | 9,094 | 119 | 49,152 |
| 1.1.-31.12.2019, EUR 1,000 | Wealth management | Insurance | Energy | Other | Total |
| --- | --- | --- | --- | --- | --- |
| Wealth management fees and commissions | 36,276 | - | 4,555 | 33 | 40,864 |
| Performance fees | 5,188 | - | - | - | 5,188 |
| Total | 41,464 | - | 4,555 | 33 | 46,052 |
4 NET INCOME FROM INSURANCE
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| Earned premiums, net | ||
| Premiums written | 18,988 | 19,791 |
| Reinsurers' share | -243 | -1,009 |
| Change in provision for unearned premiums | -3,395 | -5,629 |
| Reinsurers' share | -465 | 254 |
| Total | 14,885 | 13,406 |
| Claims incurred, net | ||
| Claims paid | -1,080 | -482 |
| Reinsurers' share | 547 | 403 |
| Change in provision for outstanding claims | 592 | -3,084 |
| Reinsurers' share | -329 | 1,802 |
| Total | -270 | -1,361 |
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
| --- | --- | --- |
| Net income from investment operations | ||
| Financial assets at fair value through other comprehensive income | 2,326 | 2,366 |
| Interest income | 1,878 | 2,071 |
| Profit or loss from sales | 518 | 353 |
| Others | -70 | -58 |
| - of which change in expected credit loss | -70 | -58 |
| Financial assets at fair value through profit or loss | 208 | 6,842 |
| Financial assets that need to be measured at fair value through profit or loss | 208 | 6,842 |
| Change in fair value | -1,102 | 4,761 |
| Interest income | 1,622 | |
| From dividends | - | 1,873 |
| Profit or loss from sales | -77 | 209 |
| Other | -234 | |
| Total | 2,534 | 9,208 |
| Net income from insurance, total | 17,149 | 21,253 |
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5 NET GAINS OR NET LOSSES ON TRADING IN SECURITIES AND FOREIGN CURRENCIES
| Net gains or net losses on trading in securities, EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| From financial assets measured at fair value through profit or loss | ||
| Financial assets that need to be measured at fair value through profit or loss | 833 | -955 |
| Total | 833 | -955 |
| Net gains or net losses on trading in securities and foreign currencies, EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
| --- | --- | --- |
| Net gains or net losses on trading in securities by type | ||
| From shares and units | 833 | -955 |
| Sales profit and loss | 133 | 308 |
| Changes in fair value | 700 | -1,263 |
| Net gains or let losses on trading in securities, total | 833 | -955 |
| Net gains or net losses on trading in foreign currencies | 87 | 816 |
| Total | 920 | -139 |
6 INCOME FROM EQUITY INVESTMENTS
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| From financial assets recognised at fair value in profit or loss | 557 | 901 |
| Dividend income | 71 | 73 |
| Profit or loss from divestments | 485 | 829 |
| From assets classified as held for sale | -2,309 | -4,267 |
| Dividend income | - | 74 |
| Changes in fair value | -2,309 | -4,341 |
| From associated companies | - | 508 |
| Profit or loss from divestments | - | 508 |
| From group companies | 142 | 1,046 |
| Profit or loss from divestments | 142 | 1,046 |
| Total | -1,610 | -1,812 |
7 INTEREST INCOME
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| Interest income from other loans and receivables | ||
| From receivables from the public and general government | 1,537 | 1,167 |
| From Debt securities | 86 | 51 |
| Other interest income | 87 | 17 |
| Total | 1,710 | 1,235 |
Interest income do not include income from financial assets that are impaired.
8 OTHER OPERATING INCOME
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| Rental income | 5 | 8 |
| Income from wind projects | 1,642 | 171 |
| Other income | 439 | 439 |
| Total | 2,086 | 619 |
9 FEE AND COMMISSION EXPENSE
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| Wealth management fee and commission expenses | 5,039 | 4,835 |
| Other commission expenses | 991 | 567 |
| Total | 6,030 | 5,401 |
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10 INTEREST EXPENSE
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| Interest expenses from other liabilities | ||
| From liabilities to credit institutions | 1,062 | 629 |
| From receivables from credit institutions | 28 | 15 |
| From debt securities issued to the public | 2,165 | 2,342 |
| From subordinated debts | 154 | 154 |
| Other interest expenses | 5 | 2 |
| Total | 3,415 | 3,142 |
11 PERSONNEL COSTS
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| Wages, salaries and fees | 20,706 | 19,612 |
| - whereof variable fees | 3,585 | 3,859 |
| Pension expenses - from defined contribution plans | 3,115 | 3,297 |
| Share-based payments | 982 | 850 |
| Payable in cash | 982 | 850 |
| Social security contributions | 438 | 437 |
| Total | 25,241 | 24,197 |
12 OTHER ADMINISTRATIVE EXPENSES
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| ICT expenses | 4,504 | 3,719 |
| Marketing and communication expenses | 1,589 | 1,908 |
| Other expenses | 2,682 | 3,897 |
| Total | 8,775 | 9,523 |
13 DEPRECIATION, AMORTISATION AND IMPAIRMENT ON TANGIBLE AND INTANGIBLE ASSETS
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| Intangible assets | ||
| Planned depreciation | 935 | 978 |
| Tangible goods | ||
| Planned depreciation | 1,567 | 1,685 |
| Total | 2,502 | 2,663 |
14 OTHER OPERATING EXPENSES
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| Premises and other rental expenses | 723 | 601 |
| External services | 3,195 | 3,419 |
| Equipment rental and leasing | 90 | 162 |
| Fees paid to the company's auditors | 372 | 349 |
| Auditing fees | 264 | 284 |
| Tax services | 30 | 37 |
| Other | 79 | 28 |
| Other expenses | 1,488 | 698 |
| Total | 5,868 | 5,229 |
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15 EXPECTED CREDIT LOSSES
| EUR 1,000 | Amortised cost | At fair value through other comprehensive income^{1)} | Total |
|---|---|---|---|
| ECL 1.1.2020 | 665 | 434 | 1,099 |
| Additions due to purchases | 38 | 79 | 118 |
| Deductions due to derecognitions | 127 | -53 | 74 |
| Changes in risk parameters | - | 44 | 44 |
| Recognised in profit or loss | 165 | 70 | 235 |
| ECL 31.12.2020 | 830 | 504 | 1,334 |
| EUR 1,000 | Amortised cost | At fair value through other comprehensive income^{1)} | Total |
| --- | --- | --- | --- |
| ECL 1.1.2019 | 39 | 376 | 415 |
| Additions due to purchases | 628 | 63 | 692 |
| Deductions due to derecognitions | -3 | -44 | -47 |
| Changes in risk parameters | - | 40 | 40 |
| Recognised in profit or loss | 626 | 58 | 684 |
| ECL 31.12.2019 | 665 | 434 | 1,099 |
All financial assets subject to ECL calculations are on level 1, i.e. the credit risk has not increased significantly. There are no realised credit losses recognised in the presented financial periods.
1) Expected credit losses from financial assets measured at fair value through other comprehensive income all pertain to the insurance business, and therefore the expected credit loss has been recognised in net income from insurance investment operations. See Note 4.
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| Received payments related to loans that have been written-off | 65 | 68 |
| Change in ECL | -165 | -626 |
| Expected credit losses from financial assets measured at amortised cost recognised in profit or loss | -100 | -557 |
16 INCOME TAXES
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| From profit for the financial period | 4,427 | 4,842 |
| Taxes from previous periods | 227 | 13 |
| Deferred taxes | -207 | 124 |
| Total | 4,447 | 4,979 |
| Reconciliation of taxes on the income statement with profit before taxes | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
| --- | --- | --- |
| Operating profit (profit before taxes) | 17,548 | 16,458 |
| Taxes calculated at the tax rate of the parent company (20%) | 3,510 | 3,292 |
| Tax-free income | -73 | -143 |
| Non-deductible expenses | 967 | 1,811 |
| The use of taxable losses not previously booked | 4 | 177 |
| Unbooked deferred tax receivables from taxable losses | -207 | -226 |
| Share of the profits of associated and joint venture companies with taxes deducted | 15 | -7 |
| Taxes from previous financial periods | 227 | 89 |
| Other items | 5 | -14 |
| Taxes on the income statement | 4,447 | 4,979 |
The effective tax rate in 2020 was 25% (2019: 30%).
17 OTHER COMPREHENSIVE INCOME ITEMS
| Taxes concerning other comprehensive income | 1.1.-31.12.2020 | 1.1.-31.12.2019 | ||||
|---|---|---|---|---|---|---|
| EUR 1,000 | Pre-tax | Tax effect | After taxes | Pre-tax | Tax effect | After taxes |
| Changes in the fair value reserve | 201 | -41 | 160 | 1,847 | -368 | 1,478 |
| Items that may be reclassified to profit or loss | 195 | -39 | 156 | 1,837 | -367 | 1,470 |
| Items that may not be reclassified to profit or loss | 6 | -2 | 4 | 10 | -1 | 9 |
| Translation differences | -325 | - | -325 | 215 | - | 215 |
| Total | -124 | -41 | -165 | 2,062 | -368 | 1,693 |
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TAALERI | 42
18 EARNINGS PER SHARE
BASIC EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit or loss attributable to the company's shareholders by the weighted average of the number of shares outstanding - with the exception of repurchased own shares (Note 37 Equity).
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| Profit from continuing operations attributable to the owners of the parent company | 13,012 | 11,078 |
| Total | 13,012 | 11,078 |
| Weighted average number of ordinary shares outstanding (1,000 pcs) | 28,306 | 28,306 |
| Basic earnings per share, continuing operations, EUR | 0.46 | 0.39 |
DILUTED EARNINGS PER SHARE
Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding so that all dilutive potential ordinary shares are assumed to be converted into ordinary shares. The Group's dilutive potential ordinary shares consist of share-based incentive arrangements (options) payable as shares. They are taken into account like options, from the date of their granting when calculating the diluted earnings per share.
| EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| Profit from continuing operations attributable to the owners of the parent company | 13,012 | 11,078 |
| Total | 13,012 | 11,078 |
| Weighted average number of ordinary shares outstanding (1,000 pcs) | 28,306 | 28,306 |
| The dilutive effect of share options (1,000 pcs) | 777 | 541 |
| The weighted average of the number of shares when calculating the diluted earnings per share (1,000 pcs) | 29,083 | 28,847 |
| Diluted earnings per share, continuing operations, EUR | 0.45 | 0.38 |
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TAALERI | 43
NOTES TO THE BALANCE SHEET
19 RECEIVABLES FROM CREDIT INSTITUTIONS ... 44
20 RECEIVABLES FROM THE PUBLIC AND GENERAL GOVERNMENT ... 44
21 DEBT SECURITIES ... 44
22 SHARES AND UNITS ... 44
23 ASSETS CLASSIFIED AS HELD FOR SALE ... 45
24 INSURANCE ASSETS AND LIABILITIES ... 45
25 CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES ... 46
26 FINANCIAL INSTRUMENTS AT FAIR VALUE ... 48
27 INTANGIBLE ASSETS ... 49
28 TANGIBLE ASSETS ... 50
29 OTHER ASSETS ... 50
30 ACCRUED INCOME AND PREPAYMENTS ... 50
31 LIABILITIES TO CREDIT INSTITUTIONS ... 50
32 DEBT SECURITIES ISSUED TO THE PUBLIC ... 50
33 OTHER LIABILITIES ... 52
34 ACCRUED EXPENSES AND DEFERRED INCOME ... 52
35 DEFERRED TAX ASSETS AND LIABILITIES ... 52
36 SUBORDINATED DEBT ... 52
37 EQUITY CAPITAL ... 53
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19 RECEIVABLES FROM CREDIT INSTITUTIONS
| EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Repayable on demand | 25,786 | 29,102 |
| From domestic credit institutions | 25,729 | 28,064 |
| From foreign credit institutions | 57 | 1,038 |
| Other than repayable on demanded | - | - |
| From foreign credit institutions | - | - |
| Total | 25,786 | 29,102 |
Receivables from credit institutions correspond fully to the Group's cash balances. All cash balances are available for use by the group.
20 RECEIVABLES FROM THE PUBLIC AND GENERAL GOVERNMENT
| EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Other than repayable on demanded | ||
| Companies and housing associations | 4,871 | 6,691 |
| Households | 946 | 426 |
| Foreign | 883 | 1,177 |
| Total | 6,699 | 8,294 |
The group has subordinated receivables amounting to 2.5 (5.5) million euros. Information about impairment losses is presented in Note 15 to the income statement. The maturity dates of receivables are presented in Note 39.
21 DEBT SECURITIES
| EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Other than those issued by general government | ||
| Available for sale | ||
| Other debt securities (not publicly quoted) | 1,498 | 1,498 |
| Total | 1,498 | 1,498 |
22 SHARES AND UNITS
| Shares and units, EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Fair value through profit or loss | 21,474 | 8,736 |
| Fair value through other comprehensive income | 497 | 496 |
| Total | 21,971 | 9,232 |
| - of which publicly quoted | 38 | 40 |
| - of which shares in funds | 617 | 475 |
| Participating interests, EUR 1,000 | 31.12.2020 | 31.12.2019 |
| Acquisition cost | 9,513 | 6,763 |
| Share of the associates' profits | -265 | -339 |
| Total | 9,248 | 6,423 |
| Total | 31,219 | 15,655 |
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23 ASSETS CLASSIFIED AS HELD FOR SALE
| Assets classified as held for sale, EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Investments in associated companies | 5,357 | 7,666 |
| Total | 5,357 | 7,666 |
As Taaleri's associated company Fellow Finance Plc was listed on the First North exchange in October 2018, Taaleri Plc decided to reclassify the holding as an asset held for sale. Taaleri Plc has promoted and promotes actively and continuously the sale. Fellow Finance Plc is part of Taaleri's Other operations.
24 INSURANCE ASSETS AND LIABILITIES
| Insurance assets, EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Investments | ||
| Loans and other receivables | 134,970 | 125,138 |
| Shares and units | 21,735 | 23,525 |
| Total | 156,705 | 148,662 |
| Receivables | ||
| Arising out of direct insurance operations | 1,244 | 1,335 |
| Arising out of reinsurance operations | 2,460 | 3,328 |
| Total | 3,705 | 4,663 |
| Total | 160,410 | 153,325 |
| Insurance liabilities, EUR 1,000 | 31.12.2020 | 31.12.2019 |
| Provision for unearned premiums | 30,147 | 26,752 |
| Claims outstanding | 4,373 | 4,964 |
| Liabilities arising out of direct insurance operations | 56 | 61 |
| Liabilities arising out of reinsurance operations | 100 | 526 |
| Total | 34,676 | 32,303 |
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TAALERI | 46
25 CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES
Financial assets and liabilities 31 December 2020, EUR 1,000
| Financial assets | Amortised cost | At fair value through other comprehensive income | At fair value through profit or loss | Total | Fair value | ||
|---|---|---|---|---|---|---|---|
| Equity instruments1) | Others | Equity instruments | Others | ||||
| Receivables from credit institutions1) | 25,786 | 25,786 | 25,786 | ||||
| Receivables from the public and general government | 2,764 | 3,935 | 6,699 | 6,699 | |||
| Debt securities | 1,498 | 1,498 | 1,508 | ||||
| Shares and units | 497 | 20,857 | 617 | 21,971 | 21,971 | ||
| Insurance assets | 100,348 | 39,717 | 16,640 | 156,705 | 156,705 | ||
| Other financial assets | 20,309 | ||||||
| Financial assets total | 30,048 | 497 | 100,348 | 60,575 | 21,191 | 232,969 | |
| Participating interests | 9,248 | ||||||
| Other than financial assets | 25,774 | ||||||
| Assets in total 31 December 2020 | 267,990 | ||||||
| Financial liabilities | At fair value through profit or loss | Other liabilities | Total | Fair value | |||
| --- | --- | --- | --- | --- | |||
| Liabilities to credit institutions | 14,939 | 14,939 | 15,000 | ||||
| Debt securities issued to the public2) | 34,937 | 34,937 | 35,485 | ||||
| Subordinated debt | 14,839 | 14,839 | 15,154 | ||||
| Other financial liabilities | 16,349 | 16,349 | |||||
| Financial liabilities total | 81,063 | 81,063 | |||||
| Other than financial liabilities | 53,717 | ||||||
| Liabilities in total 31 December 2020 | 134,781 |
1) The carrying amount of these receivables are seen as the best estimate of their fair values.
2) Bonds included in Debt securities issued to the public are carried at amortised cost.
3) At initial recognition the Group's non-strategic investments are specifically classified as measured at fair value through profit or loss. Thus, dividend yields are recognised in profit or loss, but changes in fair value, foreign exchange rate gains and losses as well as sales gains and losses are recognised in other comprehensive income. These are not later recycled to profit or loss. The classification as a non-strategic investment is made instrument-by-instrument by management. Non-strategic investments include small investments in limited partnerships associated to Taaleri's private equity funds and equity investments in private companies not directly associated to Taaleri's business strategy. On 31.12.2020 the fair value of non-strategic investments was 497 (31.12.2019 496) thousand euros, of which none paid dividends in 2020 or 2019. No non-strategic investments were derecognised in 2020 or 2019.
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| Financial assets and liabilities 31 December 2019, EUR 1,000 | At fair value through other comprehensive income | At fair value through profit or loss | |||||
|---|---|---|---|---|---|---|---|
| Financial assets | Amortised cost | Equity instruments3) | Others | Equity instruments | Others | Total | Fair value |
| Receivables from credit institutions1) | 29,102 | 29,102 | 29,102 | ||||
| Receivables from the public and general government | 2,060 | 6,234 | 8,294 | 10,509 | |||
| Debt securities | 1,498 | 1,498 | 1,730 | ||||
| Shares and units | 496 | 8,260 | 475 | 9,232 | 9,232 | ||
| Insurance assets | 76,992 | 52,642 | 19,028 | 148,662 | 148,662 | ||
| Other financial assets | 27,046 | 27,046 | |||||
| Financial assets total | 59,706 | 496 | 76,992 | 60,902 | 25,738 | 223,835 | |
| Participating interests | 6,423 | ||||||
| Other than financial assets | 39,442 | ||||||
| Assets in total 31 December 2019 | 269,700 | ||||||
| Financial liabilities | At fair value through profit or loss | Other liabilities | Total | Fair value | |||
| --- | --- | --- | --- | --- | |||
| Liabilities to credit institutions | 25,929 | 25,929 | 26,162 | ||||
| Debt securities issued to the public2) | 34,875 | 34,875 | 35,967 | ||||
| Subordinated debt | 14,825 | 14,825 | 15,154 | ||||
| Other financial liabilities | 18,462 | 18,462 | |||||
| Financial liabilities total | 94,090 | 94,090 | |||||
| Other than financial liabilities | 49,881 | ||||||
| Liabilities in total 31 December 2019 | 143,971 |
1) The carrying amount of these receivables are seen as the best estimate of their fair values.
2) Bonds included in Debt securities issued to the public are carried at amortised cost.
3) At initial recognition the Group's non-strategic investments are specifically classified as measured at fair value through profit or loss. Thus, dividend yields are recognised in profit or loss, but changes in fair value, foreign exchange rate gains and losses as well as sales gains and losses are recognised in other comprehensive income. These are not later recycled to profit or loss. The classification as a non-strategic investment is made instrument-by-instrument by management. Non-strategic investments include small investments in limited partnerships associated to Taaleri's private equity funds and equity investments in private companies not directly associated to Taaleri's business strategy. On 31.12.2019 the fair value of non-strategic investments was 496 thousand euros, of which none paid dividends in 2019. No non-strategic investments were derecognised in 2019.
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TAALERI | 48
26 FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
| Fair value of assets 31 December 2020, EUR 1,000 | Level 1 | Level 2 | Level 3 | Fair value total |
|---|---|---|---|---|
| Receivables from credit institutions | 25,786 | 25,786 | ||
| Receivables from the public and general government | 5,964 | 735 | 6,699 | |
| Debt securities | 1,508 | 1,508 | ||
| Shares and units | 654 | 21,317 | 21,971 | |
| Insurance assets | 151,610 | 5,095 | 156,705 | |
| Total | 152,264 | 33,258 | 27,147 | 212,670 |
| Fair value of liabilities 31 December 2020, EUR 1,000 | Level 1 | Level 2 | Level 3 | Fair value total |
| --- | --- | --- | --- | --- |
| Liabilities to credit institutions | 15,000 | 15,000 | ||
| Debt securities issued to the public | 35,485 | 35,485 | ||
| Subordinated debt | 15,154 | 15,154 | ||
| Total | 65,639 | 65,639 | ||
| Fair value of assets 31 December 2019, EUR 1,000 | Level 1 | Level 2 | Level 3 | Fair value total |
| --- | --- | --- | --- | --- |
| Receivables from credit institutions | 29,102 | 29,102 | ||
| Receivables from the public and general government | 9,815 | 694 | 10,509 | |
| Debt securities | 1,730 | 1,730 | ||
| Shares and units | 516 | 8,716 | 9,232 | |
| Insurance assets | 144,166 | 4,496 | 148,662 | |
| Total | 144,682 | 40,647 | 13,907 | 199,235 |
| Fair value of liabilities 31 December 2019, EUR 1,000 | Level 1 | Level 2 | Level 3 | Fair value total |
| --- | --- | --- | --- | --- |
| Liabilities to credit institutions | 26,162 | 26,162 | ||
| Debt securities issued to the public | 35,967 | 35,967 | ||
| Subordinated debt | 15,154 | 15,154 | ||
| Total | 77,283 | 77,283 |
FAIR VALUE HIERARCHY
Level 1: Fair values are based on the prices quoted on the active market on identical assets or liabilities.
Level 2: Fair values are based on information other than quoted prices included within level 1 that are observable for the asset or liability, either directly (from prices) or indirectly (derived from prices). When measuring the fair value of these instruments, Taaleri Group uses generally accepted valuation models whose information is based to a significant degree on verifiable market information.
Level 3: Fair values are based on information concerning an asset or liability, which is not based on verifiable market information. Level 3 assets are mainly valued at a price received from an external party or, if no reliable fair value is available/ determinable, at purchase price.
ASSETS CLASSIFIED AT LEVEL 3
Assets categorised within level 3 consist of unquoted shares in private equity funds, stocks and debt securities. Shares in private equity funds are mainly measured at the latest fair value received from the management company. Unquoted shares are measured at fair value using discounted cash flow analysis or, if it is determined that fair value cannot be measured reliably, at acquisition cost.
| Reconciliation of assets categorised within level 3, EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| Fair value January 1 | 13,907 | 10,961 |
| Purchases | 4,343 | 14,376 |
| Sales and deductions | -615 | -10,073 |
| Change in fair value - income statement | 635 | -1,361 |
| Change in fair value - comprehensive income statement | 6 | 4 |
| Change of associated company or subsidiary to an investment | 8,872 | - |
| Fair value at end of period | 27,147 | 13,907 |
| Unrealised gains or losses attributable to fair value measurements of assets or liabilities categorised within level 3 held at the end of the reporting period recognised in profit or loss, EUR 1,000 | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
| --- | --- | --- |
| Net income from insurance | 21 | 32 |
| Net gains or net losses on trading in securities and foreign currencies | 614 | -1,394 |
| Total | 635 | -1,361 |
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TAALERI | 49
27 INTANGIBLE ASSETS
| EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Goodwill | 5,097 | 5,097 |
| Other intangible assets | 1,679 | 1,434 |
| IT systems and software | 1,679 | 1,434 |
| Total | 6,775 | 6,531 |
| 2020 | Goodwill | Other intangible assets |
| --- | --- | --- |
| Acquisition cost 1 January 2020 | 5,097 | 6,829 |
| Increases | - | 1,180 |
| Acquisition cost 31 December 2020 | 5,097 | 8,009 |
| Accumulated depreciation, amortisation and impairment 1 January 2020 | - | 5,395 |
| Depreciation during the financial period | - | 935 |
| Accumulated depreciation, amortisation and impairment 31 December 2020 | - | 6,330 |
| Book value 1 January 2020 | 5,097 | 1,434 |
| Book value 31 December 2020 | 5,097 | 1,679 |
| 2019 | Goodwill | Other intangible assets |
| --- | --- | --- |
| Acquisition cost 1 January 2019 | 5,097 | 5,896 |
| Increases | - | 933 |
| Acquisition cost 31 December 2019 | 5,097 | 6,829 |
| Accumulated depreciation, amortisation and impairment 1 January 2019 | - | 4,418 |
| Depreciation during the financial period | - | 978 |
| Accumulated depreciation, amortisation and impairment 31 December 2019 | - | 5,395 |
| Book value 1 January 2019 | 5,097 | 1,479 |
| Book value 31 December 2019 | 5,097 | 1,434 |
GOODWILL ALLOCATION AND IMPAIRMENT TESTING
Goodwill amounted to 5,097 (5,097) thousand euros on 31 December 2020. 4,750 (4,750) thousand euros was allocated to the Wealth Management segment and 347 (347) thousand euros to the Insurance segment.
In impairment testing, the recoverable amount of the unit is determined based on its value in use. Cash flow forecasts are based on predictions for a three-year period. Cash flows after the forecast period are extrapolated using an even 0.5% growth factor, which is assessed as being suitable for a growing business. Future cash flows are discounted using the weighted average cost of capital., which is 12.8 percent for the Wealth Management segment and 11.8 percent for the Insurance segment. Parameters used in determining the discount rate (risk-free interest, risk coefficient, risk premium and capital structure) are based on factors observed in companies engaged in similar or competing business and on the prevailing market conditions at the end of September 2020. The impairment testing of goodwill did not lead to recognition of impairment losses.
In conjunction with impairment testing, sensitivity analyses were carried out with regard to key assumptions, the discount rate and residual value growth factor. The variables used in the calculations are an increase of one percentage point in the discount rate and a decrease of one percentage points in growth following the forecast period. Separately examined, the sensitivity analyses did not show any risk of impairment.
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TAALERI | 50
28 TANGIBLE ASSETS
| EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Other tangible assets | 2,944 | 4,435 |
| Total | 2,944 | 4,435 |
| 2020 | 2019 | |
| Acquisition cost 31 December | 8,008 | 2,581 |
| Increase due to adoption of IFRS 16 | - | 5,323 |
| Acquisition cost 1 January | 8,008 | 7,904 |
| Increases | 76 | 104 |
| Acquisition cost 31 December | 8,084 | 8,008 |
| Accumulated depreciation, amortisation and impairment 1 January | 3,573 | 1,888 |
| Depreciations during the financial period | 1,567 | 1,685 |
| Accrued depreciation, amortisation and impairment 31 December | 5,140 | 3,573 |
| Book value on 1 January | 4,435 | 692 |
| Book value on 31 December | 2,944 | 4,435 |
29 OTHER ASSETS
| EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Fee and commission income receivables | 7,100 | 10,794 |
| Other | 7,355 | 7,316 |
| Total | 14,455 | 18,110 |
30 ACCRUED INCOME AND PREPAYMENTS
| EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Pension and employer insurance premiums | 23 | 10 |
| Interest receivables | 2,776 | 2,264 |
| Tax receivables | 252 | 29 |
| Development projects | 4,478 | 13,129 |
| Other accrued income | 3,707 | 7,419 |
| Total | 11,237 | 22,851 |
31 LIABILITIES TO CREDIT INSTITUTIONS
| EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Other liabilities to credit institutions | 14,939 | 25,929 |
| Total | 14,939 | 25,929 |
The instalment schedule was renegotiated during the spring 2020 due to the coronavirus pandemic. Taaleri Plc is in compliance with the monitored financial covenants (equity ratio >35% and receivables from credit institutions >EUR 6 million) for the loans. Part of Insurance Company Garantia's shares have been pledged for the loan, please see further details in Note 47 Contingent Liabilities.
32 DEBT SECURITIES ISSUED TO THE PUBLIC
| EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Publicly issued bonds | 34,937 | 34,875 |
| Total | 34,937 | 34,875 |
Taaleri Plc has issued one bond in 2016 and two in 2014. The bond issued in 2016 is listed on the Nasdaq HEL Corporate Bond market and the bonds issued in 2014 were listed on the Nasdaq First North Bond Market Finland. The bonds issued in 2014 were repaid in 2017 and 2019.
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TAALERI
Taaleri Plc bond 01/2016
| Bond organiser(s): | Danske Bank Oyj |
|---|---|
| Bond capital and currency: | EUR 35,000,000.00 |
| Number of bond shares: | 35,000 |
| Priority position of bond: | Same as issuer's other unsecured commitments |
| Settlement of bond: | Euroclear Finland Ltd.s value-share system |
| Unit size of bond shares: | EUR 1,000.00 |
| Minimum subscription of bond: | EUR 100,000.00 |
| Date of issue: | 20.12.2016 |
| Date of maturity: | 20.12.2021 |
| Repayment amount: | Nominal value of bond capital |
| Date(s) of repayment: | 20.12.2021 |
| The bond will be repaid in one instalment | |
| Interest: | Fixed interest, 4.25% p.a. |
| Interest payment dates: Each year on 20 December, beginning 20 December 2017 and ending 20.12.2021 | |
| Basis of interest calculation: | Actual/actual (ICMA) |
| Assumed banking day: | Following |
| Issuing agent and payment agent: | Danske Bank Oyj |
| Bond ISIN code: | FI4000232970 |
Taaleri Plc bond 02/2014
| Bond organiser(s): | Taaleri Wealth Management Ltd |
|---|---|
| Bond capital and currency: | EUR 20,000,000.00 |
| Number of bond shares: | 20,000 |
| Priority position of bond: | Same as issuer's other unsecured commitments |
| Settlement of bond: | EFI's OM value share system |
| Unit size of bond shares: | EUR 1,000.00 |
| Minimum subscription of bond: | EUR 10,000.00 |
| Date of issue: | 19.9.2014 |
| Date of maturity: | 19.9.2019 |
| Repayment amount: | Nominal value of bond capital |
| Date(s) of repayment: | 19.9.2019 |
| The bond will be repaid in one instalment | |
| Interest: | Fixed interest, 5.5% p.a. |
| Interest payment dates: Each year on 19 September, beginning 19 September 2015 and ending 19 September 2019 | |
| Basis of interest calculation: | Actual/actual (ICMA) |
| Assumed banking day: | Following |
| Issuing agent and payment agent: | Svenska Handelsbanken |
| Bond ISIN code: | FI4000108543 |
The covenants for the bonds are described in Note 38 'Principles for managing Group risk and capital adequacy'.
Further information about the bond programme can be found on the company's website (only in Finnish):
www.taaleri.com/fi/investor-relations/velkasijoittajat
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33 OTHER LIABILITIES
| EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Accounts payable | 1,403 | 1,616 |
| Accounts payable - purchases of financial instruments | - | - |
| Fee and commission liabilities | 981 | 653 |
| Tax account liabilities | 144 | 160 |
| Lease liabilities | 2,759 | 4,049 |
| Other liabilities | 114 | 31 |
| Total | 5,401 | 6,509 |
34 ACCRUED EXPENSES AND DEFERRED INCOME
| EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Accrued personnel costs | 2,503 | 2,372 |
| Cash settled share options | 89 | 89 |
| Accrued interest | 203 | 365 |
| Accrued tax | 3,442 | 1,738 |
| Other accrued expenses | 8,387 | 9,376 |
| Total | 14,623 | 13,940 |
35 DEFERRED TAX ASSETS AND LIABILITIES
| Deferred tax assets, EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| From employment benefits | 339 | 598 |
| From unused tax losses | 1,222 | 1,598 |
| From other IFRS adjustments | 49 | 38 |
| Total | 1,611 | 2,233 |
| Deferred tax liabilities, EUR 1,000 | 31.12.2020 | 31.12.2019 |
| From financial assets measured at fair value through profit or loss | 674 | 907 |
| From financial assets measured at fair value through other comprehensive income | 470 | 344 |
| From insurance equalisation provision | 14,222 | 14,340 |
| Total | 15,366 | 15,591 |
36 SUBORDINATED DEBTS
| EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Tier 2 bond | 14,839 | 14,825 |
| Total | 14,839 | 14,825 |
On 18.10.2019 Taaleri Plc issued Tier 2 notes totalling EUR 15 million. The Tier 2 Notes constitute a subordinated debt instrument, which is included in the Tier 2 capital referred to in Article 63 of Regulation (EU) No 575/2013 of the European Parliament and of the Council. The notes mature in ten years and bear a fixed interest rate of 5.0 per cent until 18 October 2024 and then onwards EUR 5-year mid-swap rate plus 5.33 per cent. The terms and conditions of the Notes include a call option after five years from the issuance and the company is also entitled to an early repayment before the call option under certain preconditions provided in the terms and conditions of the Notes.
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TAALERI | 53
37 EQUITY
SHARE CAPITAL
The company's share capital on 31 December 2020 was EUR 125,000 and the amount of shares 28,350,620. The company's shares do not have a nominal value. Trading in Taaleri Plc's shares are traded on the Nasdaq Helsinki main market. The shares' trading code is "TAALA" and ISIN code FI4000062195.
The parent company possesses 45,000 of its own shares. All shares issued have been paid for in full. The group uses share-based incentive schemes. The company has not issued convertible bonds or other than the above-mentioned special rights.
Share rights and restrictions
| Shareholders' priority for new shares when increasing share capital | Shareholders have priority for new shares in relation to the shares they already own. |
|---|---|
| Voting right | Each share entitles to one vote |
| Dividend right | Equal for all |
OTHER AUTHORISATIONS
At the General Meeting on 18 May 2020, the Board of Directors was authorised to acquire in one or more instalments a total of 2,000,000 shares. The purchase price per share is the price on the Helsinki stock exchange on the date of purchase of the shares, or another market-based price. Shares can be acquired to improve the company's capital structure, to finance business acquisitions and investments or to finance or complete arrangements of other companies. Shares can also be acquired to be used as part of the company's employee incentive scheme or to be canceled if its in the best interest of the company and the shareholders. The authorisation issued to the Board includes the right to decide whether the shares will be acquired in a targeted way or in relation to the shares owned by shareholders. The purchase may only be targeted if there is an important financial reason for it from the company's perspective. This authorisation is valid for 18 months from the date of the decision made at the meeting. The authorisation supersedes the previous authorisation.
At the Annual General Meeting on 18 May 2020, the Board of Directors was authorised to decide on the issuance of new shares and on the conveyance of own shares held by the company (treasury shares). The Board of Directors may issue new shares and convey treasury shares up to a maximum 2,500,000 shares. New shares may be issued and treasury shares conveyed to the company's shareholders in proportion to their current shareholdings or in derogation of the pre-emptive subscription right of the shareholders by means of a directed share issue if there is a weighty financial reason for the company to do so, such as the shares are to be used as consideration in possible company acquisitions or in other arrangements that are part of the company's business or to finance investments or as part of the company's incentive scheme. The Board of Directors may also decide on the issuance of shares without payment to the company itself. The new shares may be issued and treasury shares may be conveyed either against payment or without payment. A directed share issue may be executed without payment only if there is an especially weighty financial reason for the company to do so, taking the interests of all shareholders into account. The Board of Directors will decide on all other factors relating to the issuance and conveyance of shares. This authorisation is valid for one year from the date of the decision made at the meeting, but no longer than 30 June 2021. The authorisation supersedes the previous authorisation.
| Changes in number of shares 2020 | Total |
|---|---|
| Number of shares 1 January 2020 | 28,350,620 |
| Number of shares 31 December 2020 | 28,350,620 |
| Number of votes 31 December 2020 | 28,350,620 |
| Changes in number of shares 2019 | Total |
| Number of shares 1 January 2019 | 28,350,620 |
| Number of shares 31 December 2019 | 28,350,620 |
| Number of votes 31 December 2019 | 28,350,620 |
ISSUER'S RESERVES WITHIN EQUITY
The following are descriptions of the reserves within equity.
Reserve for invested non-restricted equity
Cash received in the share issues in 2013 and 2015 were recognized in the reserve for invested non-restricted equity.
Translation differences
Translation differences caused by the conversion of the financial statements of foreign units.
Fair value reserve
The change in fair value of financial assets measured at fair value through other comprehensive income is recognised in the fair value reserve. The fair value change of debt instruments is reclassified to profit or loss, when the instrument is derecognised or an expected credit loss is recognised. The fair value change of equity instruments is not reclassified to profit or loss at any time.
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| Changes in the Fair value reserve 2020
At fair value through other comprehensive income | | | |
| --- | --- | --- | --- |
| EUR 1,000 | Loans and receivables certificates | Stocks, shares and funds | Total |
| Fair value reserve 31 December 2019 | -21 | -915 | -935 |
| Changes to previous periods | - | -89 | -89 |
| Fair value reserve 1 January 2020 | -21 | -1,004 | -1,024 |
| Changes in fair value | 6 | 266 | 271 |
| Changes in expected credit losses | - | -70 | -70 |
| Deferred taxes | -2 | -39 | -41 |
| Fair value reserve 31 December 2020 | -17 | -847 | -864 |
| Changes in the Fair value reserve 2019
At fair value through other comprehensive income | | | |
| EUR 1,000 | Loans and receivables certificates | Stocks, shares and funds | Total |
| Fair value reserve 1 January 2019 | -29 | -2,385 | -2,414 |
| Changes in fair value | 10 | 1,896 | 1,905 |
| Changes in expected credit losses | - | -58 | -58 |
| Deferred taxes | -1 | -367 | -368 |
| Fair value reserve 31 December 2019 | -21 | -915 | -935 |
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TAALERI
NOTES CONCERNING RISK POSITION
38 PRINCIPLES FOR MANAGING GROUP RISK AND CAPITAL ADEQUACY 56
39 MATURITY OF FINANCIAL ASSETS AND LIABILITIES 67
40 CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES 68
41 SENSITIVITY ANALYSIS OF MARKET RISK 68
42 QUANTITATIVE INFORMATION ON INSURANCE RISK AND INSURANCE CONTRACT LIABILITIES 68
43 QUANTITATIVE INFORMATION ON INSURANCE INVESTMENT RISKS 70
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TAALERI | 56
38 GROUP'S RISK MANAGEMENT PRINCIPLES AND CAPITAL ADEQUACY
1. THE GROUP'S RISK MANAGEMENT
General
Based on the values, strategy and business plan of the Group, targets are set for Taaleri Group that take into account the future prospects and risks of Taaleri's businesses and the industries they operate in. The Group's values and strategic and operational objectives create a foundation for the management of the Group's risks and capital adequacy. Taaleri Group's risk appetite and risk capacity are defined in connection with its strategy, business plans and budgeting process. In addition to the strategy, business plan and annual budget, the Board of Directors of Taaleri Plc approves the Group structure and business organisation which strives to achieve the objectives.
The aim of internal control and risk management is to support and promote business by systematically taking care of risk control of the group and its companies and functions, by reviewing and following up risks and by treating the risks in an appropriate manner. Internal control is an integrated part of the operational management of Taaleri Group, and risk management is part of the Group's internal control.
The task of risk management is to identify, assess, measure, treat and control risks in all Taaleri Group's businesses that influence the realisation of the Group's strategic and operative goals, as well as to oversee that the principles approved by the Taaleri Plc Board of Directors are complied with. Risk management aims to reduce the likelihood of unexpected risks being realised and their impact to Taaleri Group's business operations. Risk management supports achievement of strategic goals by promoting better utilisation of opportunities in all activities and more efficient distribution of risk-taking capacity to the different functions and projects within the defined risk appetite framework.
Taaleri Group's risks are divided into five main categories: strategic and business operations risk, credit risk, liquidity risk, market risk and operational risk (including compliance risk).
Risk and capital adequacy management aims to assure Taaleri Group's risk capacity and liquidity and ensure the continuity of the Group's operations.
According to the rules of procedure of Taaleri Plc's Board of Directors, the Board confirms the Group's common objectives and targets, and approves the principles for internal control, risk and capital adequacy management.
Risk management is based on a systematic process. Risks affecting group's results, capital adequacy and liquidity are continuously monitored by risk control and finance functions. Operational, strategic and business risks are regularly assessed in risk reviews aiming to identify, assess, measure and treat risks that could affect the achievement of the Group's objectives and the amount of own capital.
Group Risk Officer is responsible for organising risk reviews in all Group companies and operations at least annually. Risks are continuously monitored, and risk events reported to the Board of Directors and the Executive Management Team on a quarterly basis.
Laws and regulations concerning the entire Group
In addition to the Investment Services Act, Credit Institutions Act and Insurance Companies Act, Taaleri Group is operating under the Act on Alternative Fund Managers and the Act on the Supervision of Financing and Insurance Conglomerates (699/2004), known as the RaVa-act, according to which the parent company of the group shall have proper corporate governance that enables the group to effectively manage its risk, adequate internal control and risk management systems, as well as adequate arrangements and plans for the recovery or dissolution of the group.
Taaleri is a financial group, whose parent company Taaleri Plc is listed on Nasdaq Helsinki's main market. The Taaleri Group comprises three business areas: Wealth Management, Insurance, and Energy. The Group's operational subsidiaries are: Taaleri Wealth Management Ltd and its subsidiaries, Taaleri Private Equity Funds Group, Taaleri Investments Group, Taaleri Energia Group and Garantia Insurance Company Ltd.
Taaleri Wealth Management Ltd is an investment management company operating under supervision of the Finnish Financial Supervisory Authority (FSA) and Taaleri Fund Management Ltd is a fund management company operating under supervision of the FSA. In addition, Taaleri Private Equity Funds Ltd and Taaleri Energia Funds Management Ltd have licences granted by the FSA to act as alternative funds managers. Garantia Insurance Company Ltd is an insurance company operating under supervision of the FSA.
All other Group companies belong to the RaVa Conglomerate, apart from Taaleri Tax Services Ltd, but it is, however, included in the conglomerate as part of the Wealth Management consolidation group. Taaleri's Wealth Management consolidation group includes Taaleri Wealth Management Ltd and its subsidiary Taaleri Fund Management Ltd. Taaleri Tax Services Ltd is also taken into account in the Taaleri Wealth Management consolidation group. The Financing sector comprises the Taaleri Wealth Management consolidation group, Taaleri Private Equity Funds Group, Taaleri Investments Group and Taaleri Energia Group. The conglomerate's insurance sector comprises Garantia Insurance Company Ltd. The structure of the RaVa conglomerate and different consolidation groups are illustrated in the figure below in section Capital adequacy management.
2. RISK MANAGEMENT ORGANISATION
The Board of Directors of Taaleri Plc take care of the Group's corporate governance and the appropriate organisation of its operations, which includes organising and maintaining adequate and effective internal control framework.
In matters concerning internal control and risk management, the highest decision-making body is the Board of Directors of Taaleri Plc, which is responsible for:
- ensuring that the Group always has sufficient own funds of adequate quality and distribution to cover regulatory minimum capital requirements and internal risk-based capital requirements
- approving the group risk strategy and risk appetite based on group strategy and annual planning
- approving plans in maintain capital adequacy in line with the risk strategy
- approving the definitions of risk appetite and risk capacity, setting a target level for capital adequacy and approving the levels and quality of capital required by the risk profile
- monitoring the integrity of the internal control system, including an efficient and robust risk management framework
- supervising the implementation of the Internal Audit Plan after the initial participation of the Audit Committee
- approving the Group's internal control, risk and capital management principles
- approving the liquidity management strategy and liquidity risk management principles
- approving the Group's general policies and principles (including dividend policy and financial strategy and policy)
- annually approving the principles for internal audit and the Group's continuity management principles and recovery plan
- regularly monitoring the development of the Group's businesses, risk capacity, risk situation, and capital adequacy as part of the company's general financial situation using quarterly risk management reports
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TAALERI | 57
The three lines of defense describe the structure and operation of risk management in the Taaleri Group. Taaleri Group's first line of defense consists of the Group's business operations, which perform daily risk management duties and ensure compliance with internal and external requirements. The Group's second line of defense consists of the risk control and compliance function and the Group's risk and capital committee, whose task is to develop, maintain and monitor the general operating and risk management principles and the internal control framework at Group level. The Group's third line of defense consists of the internal audit function.
The second and third lines of defense are independent of the controlled businesses, and report directly to the Board.
The Group executive management team is responsible for operational risk management as instructed by the Board of Directors. In matters related to internal control and risk management, the Group executive management team is responsible for promoting a culture within the Group that accepts regulatory compliance, internal control and risk management as a normal and necessary part of the Group's operations.
The Group's risk control is performed by the risk control function and the risk and capital management committee both operating under the Group CEO. The risk control and compliance function is responsible for the independent control of the Group's risks. Risk control function comprises of group risk officer, two compliance & risk managers and the persons responsible for risk control in the supervised group companies. The risk control function:
- maintains, develops and prepares the Group's internal control, risk and capital adequacy management principles
- supports business operations in risk management measures
- ensures that all material risks are identified, assessed and managed in the Group and Group companies and regularly reported to the Group management team and the Board of Directors
-
ensures that the Group's risks remain within established limits and ensures that risk measurement and risk control methods are appropriate and reliable
-
produces Group-level reporting on risks and risk management and ensures that the management team, the Audit Committee and the Board of Directors receive a reliable overall picture of the Group's risks
- supports Group companies in risk reviews and in development and implementation of risk and capital adequacy management
- assists management in planning the risk strategy and risk appetite of the Group and its businesses when the strategic goals are set
- ensures that risk management issues are properly taken into consideration in key business decisions.
The risk and capital committee is responsible for the effectiveness and efficiency of the Group's risk and capital adequacy management and it regularly reports to the Management Team, the Board's Audit Committee and the Board of Directors. The risk and capital committee supports business operations in risk management measures if needed, ensures that the Board of Directors has an overall picture of the risks faced by the entire Group, reviews and finalizes Group-level risk analyses, stress tests and risk reports prepared by the group risk officer, reviews and finalizes the Group's continuity and recovery plans, and processes new product and service descriptions.
The tasks of the Group Compliance are to:
- monitor compliance with regulations and internal guidelines
- advise the management team and the Board and other personnel on compliance with regulatory and internal guidelines
- assist Taaleri Plc's Board of Directors, the management team and other relevant bodies in regulatory compliance issues and related compliance risk management by keeping heads of businesses aware of the essential changes in regulations and the potential impact on business
- monitor and regularly evaluate the adequacy and effectiveness of the Group's measures and procedures to ensure compliance
- be responsible for management of anti-money laundering and AML training in the Group
INTERNAL CONTROL FRAMEWORK AND OPERATING PROCEDURES
1. BUSINESS OPERATIONS
- Risk and control environment
- Risk decisions in the daily operations
2. RISK AND CAPITAL COMMITTEE, GROUP RISK CONTROL AND COMPLIANCE
- Development of internal control, risk and capital adequacy management policies and principles.
- Independent compliance and risk control
3. INTERNAL AUDIT
- Independent and objective review and assurance
1ST LINE OF DEFENCE
comprises risk management and compliance activities performed in the day to day operations throughout Taaleri Group
2ND LINE OF DEFENCE
consists of the group's Risk and capital committee and Group risk control and compliance function. These organs develop and maintain the internal control framework and procedures and perform control activities that are independent of the business operations
3RD LINE OF DEFENCE
is an internal audit function that is independent of the Group's business and control operations. Internal audit assures that internal control, risk management, capital adequacy management and the management of Group's operations are properly and adequately performed
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The Group compliance officer is responsible for compliance. The Group Compliance consists of the Group compliance officer, compliance & risk managers and a compliance task group, which includes the Group compliance officer and the persons responsible for compliance related issues in the Group companies.
Internal Audit is an assurance function independent of the operational functions of the Taaleri Group companies. The internal audit function is set up by the Board of Directors and operates under the authority of the Group CEO. The Taaleri Group has outsourced the practical implementation of the Group's internal audit to an external service provider.
Internal audit is an independent, objective assurance and consulting activity designed to check the adequacy, effectiveness and efficiency of internal control. Internal audit supports the Group's senior and operational management (board, CEO, line managers) in managing and supervising operations.
The objective of the Group's internal audit is to support the Group in achieving its goals by providing a systematic approach to assessing and developing the effectiveness of risk management, risk control and management processes. Internal audit aims to add value to the organization and improve its performance.
Internal audit work is guided by national and international regulations as well as international standards of professional practice in the field, including ethical rules, professional standards, and practical guidelines.
Taaleri Group's risk and capital adequacy management is an integral part of the Group's management, decision-making and business planning. Capital adequacy management is based on a proactive approach that includes a group strategy taking into account the impact of the operating environment, annual plans, capital plans and risk strategies.
The Group's strategic planning process (strategy process) covers setting strategic goals, defining development projects, and preliminary financial forecasts for the coming years. Decisions on risk strategy and risk appetite in relation to the Group's risk capacity and expected returns are also made in the strategy process. Capital targets and risk and capital limits are set in the
internal capital adequacy assessment process which is part of the strategy process. Risk management development issues and projects are also agreed upon in the process.
The annual plans generated in the Group's strategy process include financial analyses of the impact of planned business developments on capital adequacy and risk-based capital requirements as well as on the capital plan.
The capital plan includes targets for the level of own funds of the Group and its affiliated companies for the current and at least the next two years. In the capital plan and risk-based capital calculations, the adequacy of own funds and the solvency of the Group is assessed in relation to the business plan and the risk profile of the business. The assessment also takes into account deteriorating market conditions and, for example, situations where operations are extended to new markets or new products and their impact on the amount of capital. If the amount of own funds seems inadequate, the Group's Board of Directors will decide on the necessary measures to improve capital adequacy. As such, the aspects of capital adequacy management and capital requirements are integral parts of the strategy process and are taken into account when deciding on the implementation of the measures.
In addition to the Group CEO, the Group management team participates in the strategy process. Taaleri Plc's Board of Directors approves the Group's strategy, annual plan and capital plan presented by the CEO.
Continuity and recovery plans
Business continuity planning is a holistic process that identifies the factors that threaten the continuity of the Group's operations and their consequences and provides the basis for resilience and effective countermeasures to safeguard the Group's stakeholders, reputation, brand, and operations. The aim of Taaleri Group's continuity planning is to prepare for possible disturbances in advance and to ensure the continuity and reliability of the Group's operations. Continuity planning is used to prepare for business interruptions so that operations can be continued, and losses can be limited in various business-related disruptions.
TAALERI GROUP INTERNAL CONTROL ORGANISATION
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The Group risk officer maintains continuity planning support material, on the basis of which the Group, its businesses and companies make their continuity plans, supported by the risk officer, if needed.
Based on the threat and vulnerability analyses, Taaleri Group's continuity plan reviews operating models for different situations in different business processes and analyses processes and disruptions. The continuity plan guides operations in various continuity situations and also takes into account disruptions in the processes of external service providers and suppliers.
The recovery plan sets out the measures to be taken in order to safeguard the continuation of operations in a situation where the financial position of the Group or its affiliated companies has significantly deteriorated. In addition, the Recovery Plan defines clear thresholds and qualitative criteria to identify situations where a plan needs to be implemented to ensure the continuity of the operations of the Group or its affiliated companies.
The continuity and recovery plans are annually reviewed. The Group risk officer is responsible for drafting the continuity and recovery plans and organising their annual updates. Taaleri Plc's Board of Directors approves the continuity management principles and the recovery plan.
3. CAPITAL ADEQUACY MANAGEMENT
Risk capacity and risk appetite
The risk capacity of the Taaleri Group consists of a properly optimised capital structure, profitability of business operations and qualitative factors, including good corporate governance, internal control and proactive risk and capital adequacy management. Through effective risk management, the Taaleri Group strives to ensure the continuity of the operations of the Group and its companies and the risk capacity required to achieve set strategic goals.
Taaleri Group's attitude towards risk-taking is based on careful consideration of adequate risk/return relationship.
Taaleri Plc's Board of Directors has decided that the Group may not in its activities take a risk that endangers the target level set for the company's own funds.
TAALERI GROUP'S CAPITAL ADEQUACY CALCULATION GROUPS
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Taaleri Plc's Board of Directors has separately defined Group internal limits for real estate, equity, country, exchange rate, interest rate and industry sector risks.
Capital management
The objective of Taaleri Group's capital management is to maintain an efficient capital structure that enables the management of usual financial obligations and ensures the continuity of the business also in exceptional circumstances. The Group's capital structure, i.e. how the Group's financing is organized and how it is divided into debt and equity is regularly monitored in connection with balance sheet management. The Group's strategic objective is to have at least 30 per cent equity ratio and a 15 per cent return on equity over the long term. The development of the Group's net gearing is also followed up.
Taaleri Plc has strengthened the Group's own funds by arranging two share issues in 2013 and 2015, which have raised a total of EUR 37.5 million to increase equity and strengthen the balance sheet structure. During 2019 Taaleri issued a EUR 15 million Tier 2 bond to further strengthen its own funds.
Capital plan
The capital plan includes targets for the level of Group's own funds. In the capital plan and risk-based capital calculations, the adequacy of own funds and the solvency of the Group is assessed in relation to the business plan and the risk profile of the business. If necessary, the Group's Board of Directors decides on measures to improve capital adequacy. Capital adequacy management and capital requirements are integral aspects of the strategy process and are taken into account when deciding on the implementation of the measures.
In Taaleri Group, the adequacy of own funds is regularly monitored by means of capital adequacy calculations carried out in connection with the monitoring of Group finances. Taaleri Group's Board of Directors sets a target level and a threshold level requiring corrective action for the amount of own funds in relation to the statutory minimum requirement. If own funds fall below the action level, measures to strengthen the capital base and/or reduce risks will be taken immediately.
Taaleri's goal is to keep the own funds at a level determined by the following:
- The minimum level of own funds shall be the highest of:
- the minimum capital (€ 730,000 / € 125,000) for an Investment Firm, an Investment Management Company or an Alternative Fund Manager (for licensed group companies) defined in the legislation for such companies, or
- the regulatory minimum capital requirement (calculated using the standardized approach for credit risk, market risk and operational risks), i.e. Pillar 1; or
- the risk-based capital requirement (Pillar 1 capital plus additional risk-based capital requirement, i.e. Pillars 1 + 2)
Taaleri Plc's Board of Directors has decided that the internal target level of own funds is 1.3 times the above defined minimum level of own funds and the own funds of the finance and insurance conglomerate (RaVa Group) formed by the Taaleri Group must not fall below 1.1 times the minimum level of own funds. The financial sector's and the insurance sector's consolidation groups' own funds target levels are consistent with the group-level capital management objectives.
The Board of Directors has set the threshold level requiring corrective action for own funds to be at 1.2 times the minimum level of own funds. The monitoring of the level of own funds covers the capital adequacy outcomes and the different phases of the capital adequacy management process, including the effect of stress tests scenarios to own funds. The results of stress tests are taken into account in proactive capital planning.
Taaleri Group's capital plans are updated at least once a year in connection with annual planning. Capital plans are also updated if the risk exposure, risk capacity or business profitability substantially changes.
In 2015, the Finnish Financial Supervisory Authority confirmed that Taaleri has become a financing and insurance conglomerate. The consolidated conglomerate solvency requirement for the whole group is prepared in accordance with the Act on the Supervision of Financing and Insurance Conglomerates (so-called Rava Act), and stress test scenarios with the same assumptions are made for the financial and insurance sectors.
The Finnish Financial Supervisory Authority has 31.1.2019 given Taaleri Plc. permission pursuant to Article 49 (1) of the EU Capital Requirements Regulation (EU) 575/2013 (CRR). The permission entitles Taaleri Plc. to not deduct the investments in the own funds instruments of Garantia Insurance Company Limited from the consolidated core capital (CET1) of the investment services firm. Garantia is part of Taaleri Plc's financing and insurance conglomerate supervised by the Financial Supervisory Authority. Instead of deduction, investments in insurance company should be risk-weighted in accordance with CRR Article 49 (4). The permit is for a fixed term and is valid until 25.6.2021. The permit concerns Garantia's acquisition cost of EUR 60 million that can be left undeducted. Neither is the impact of the accumulated profits by the insurance company included in the consolidated Common Equity Tier 1 of the financing sector consolidation group. When using this method allowed by the permission, the insurance company investment is treated as a risk-weighted item in the capital adequacy calculations for the financing sector consolidation group.
Adjustment measures and sources of capital
Taaleri can use adjustment measures and sources of capital specified in the internal capital adequacy assessment principles and recovery plan in a situation where the amount of own funds falls below the set threshold level in regular solvency monitoring. If necessary, measures can also be taken if the outcome of the stress scenario analysis shows an obvious possibility that the level of own funds will be lower than the threshold level in the near future.
Taaleri has access to back-up funding facilities and possibilities to reduce risk problems, cut costs and limit the distribution of profits when the situation so requires.
A. KEY RISKS AND RISK MANAGEMENT OF THE WEALTH MANAGEMENT SEGMENT (FINANCING SECTOR)
Strategic risk and business risk
In Taaleri Group, strategic risk is defined as the risk of unexpected change in the business or operating environment,
which affects the achievement of the Group's long-term goals, profitability or continuity of operations. Business risk is defined as the uncertainty in achieving Taaleri Group's current operational targets.
Strategic risks may arise, for example, from competition, changes in the operating environment, financial markets or customer behaviour, or choosing the wrong strategy. Business risks may arise from, for example, poor management, unexpected fluctuations in earnings or slow response to changes in the operating environment.
The most significant strategic and business risks in Taaleri Group are: focusing in wrong issues in the business plan, major changes in the operating and regulatory environment, failures in strategic investments, acquisition of new businesses and the integration of acquired companies into the Group, as well as the risks in internationalization of the operations. Strategic and business risks have been assessed by analysing the development of earnings, balance sheet and capital adequacy in different scenarios set in the strategy process, the baseline, bad, stress and crisis scenarios. In addition, strategic and business risks are assessed in connection with risk reviews and annual planning.
Strategic and business risk management aims to allocate risk-taking capacity to businesses and projects that have the best risk / return relationship, reduce the likelihood and impact of unexpected losses and reduce the threats to Group's reputation.
The management of these risks is based on the general principles and guidelines approved by the Group and adequate allocation of resources into the planning and management of operations. In addition, efforts are made to reduce uncertainty arising from strategic risks by actively monitoring legislative and regulatory changes and maintaining sufficient resilience to changes in the economy, business cycle and operating environment. Attempting to react proactively to potential risks aims at reducing the likelihood of the risk realising, impact of the risk if it realises, and vulnerability of the company when the risk realises.
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Credit risk
Credit risk in general refers to the risk that the borrower or other counterparty is unable to meet its obligation to the financial institution or that the value of the collateral is insufficient to cover the liability. Credit risks in Taaleri Group can be divided into credit risk (counterparty creditworthiness) and collateral risk.
Credit risk means that the counterparty is unable or unwilling to fulfil its contractual obligations. Collateral risk means that the collateral provided is not sufficient to cover the claim. Loans granted to customers are the largest source of credit risk, but credit risk also arises from other receivables, such as fee receivables from customers, liquid assets and investments, and off-balance sheet assets, such as issued guarantees and commitments made on behalf of the Group or Group companies.
The counterparties of the Taaleri Group companies are the Group's debtors, customers of the services of the Group companies, partners and subcontractors as well as banks and fixed income funds, to which the liquid funds of the Taaleri Group companies have been deposited.
In the financing sector, credit risk arises mainly from investments made by the parent company Taaleri Plc and Taaleri Investments Ltd, loans granted and bank receivables.
Taaleri Asset Management Ltd does not engage in lending activities, so the company's credit risk is comprised of counterparty risk. Taaleri Asset Management Ltd may invest its own funds only in financial institutions with high credit ratings or in liquid fixed income funds. The financial standing and development of business of Taaleri Asset Management's main counterparties is continuously monitored and changes in their risk standing are reported to the management team and the Board of Directors. The aim is to always diversify both credit risk and counterparty risk to more than one counterparty, depending on the market and the situation.
Taaleri calculates its minimum regulatory capital requirement for credit risks using the standardised approach.
Taking into account Taaleri's business model and the low amount of realised credit losses, the pillar 1 capital requirement is considered to adequately reflect the risk-based capital requirements of the financing sector, with the exception of the credit risk items of the Taaleri Investments Group and Garantia. For these items, the pillar 2 risk-based capital requirement for Taaleri Investments Group includes all balance sheet items, with the exception of receivables from credit institutions, weighed at a higher risk weight of 150%.
For Garantia's credit risk items, an additional pillar 2 risk-based capital requirement is added for Taaleri Ltd's investment in the insurance company by using Garantia's internal risk model (confidence level 99.5%, without diversification benefits) for those periods when the pillar 2 capital requirement becomes higher than the pillar 1 requirement.
Liquidity risk
Liquidity risk is the risk associated with the availability of refinancing that arises when the maturities of the receivables and liabilities are different. Liquidity risk also arises if receivables and liabilities are too concentrated on individual counterparties. Taaleri's liquidity is monitored daily and Taaleri has credit account that it can utilise in liquidity management. Liquidity is maintained by investing the excess liquidity buffer in low risk money market instruments that can be rapidly converted into cash.
Taaleri's cash flow consists of easily predictable management fees from funds and private equity funds, interest income on loans granted by Taaleri Plc and Taaleri Sijoitus Oy, relatively predictable performance related fees, and equity investments made by Taaleri Sijoitus Oy. Investment and exit activities may have a significant impact on cash flows. The management fees paid by alternative investment funds and co-investments are based on long-term contracts, and management fees from existing funds and projects can be relatively reliably forecasted for the next 12 months. The management fees of the mutual funds managed by Taaleri Fund Management Company Ltd and the amount of funds in the mutual funds are susceptible to changes in market values of the funds and customer subscriptions and redemptions.
The clientele of Taaleri's operations prone to liquidity risk is highly diversified and the risk concentrations are monitored regularly. In addition, the income stream is smoothed by the steady long-term inflow of income from existing alternative investment fund and co-investment projects. The aim is to reduce the concentration of Taaleri's operations by further expanding the customer base.
Taaleri's financial administration is responsible for the continuous monitoring of Taaleri's financial situation and balance sheet. The CFO monitors balance sheet items and the financial situation on a monthly basis and reports on the situation to the management team and the Group CEO. In addition, financial administration regularly conducts analytical reviews to monitor the items in the income statement and balance sheet.
Market risk
Market risk refers to the impact of market price fluctuations on the market value of financial assets and liabilities. Different types of market risk include interest rate, currency, equity, real estate and commodity risks.
Interest rate risk refers to the impact of changes in interest rates on the market value or net interest income of items in the Group's balance sheet or off-balance sheet, and thereby their impact on solvency. Currency risk refers to the effect of changes in exchange rates. Equity risk refers to the effect of changes in share prices. Commodity risk refers to the effect of changes in commodity prices.
The main items exposed to market risk in the financing sector are Taaleri Investment Ltd's investments and development projects. In addition, market risk arises from other interest rate and currency positions in the Group's balance sheet.
In Taaleri Asset Management Ltd, market risk arises mainly during settlement of customer trades. Taaleri Asset Management Ltd does not take positions in financial instruments or commodities for its own account and does not have a trading book or external debt, except for a credit account for trade settlements.
The equity investments of Taaleri Investments Group are mainly unlisted companies whose development is closely monitored by the management. Taaleri calculates a risk-based capital requirement for this market risk as 10% of the estimated investment assets of Taaleri Investments Group.
The market risks of Taaleri's liquidity buffer are limited as it is invested in short-term fixed income instruments and bank accounts. Therefore, Taaleri does not calculate risk-based capital for the market risk of the liquidity buffer.
Operational risk
Operational risk refers to the risk of losses stemming from inadequate or failed internal processes, people and systems or from external events. Operational risk also includes legal, compliance and information security risks. It is typical for operational risks that the loss caused by the risk is not always measurable. Operational risk effects may also be delayed and indirectly manifested, for example, as a loss of reputation.
In Taaleri, operational risks are primarily managed by developing internal processes and by providing good operating instructions and adequate training of personnel. The aim is to reduce the losses due to operational risks by reducing the likelihood and impact of the risks and reducing the company's vulnerability if the risk realises. Taaleri has comprehensive insurance coverage for operational, crime, property, business interruption and liability risks, which contributes to reducing the impact of potential risks. The adequacy of the insurance cover is assessed annually.
Efforts are made to manage the risks caused by abuse or fraud by setting up internal procedures and arranging responsibilities so that proper segregation of duties is achieved where possible. Control points assigned to different processes also play a key role in preventing abuse and errors. The Group's crime insurance covers damage caused by various internal and external misconduct. In addition, Taaleri's assets and premises are protected by, for example, monitoring and access rights.
Taaleri is dependent on leadership and the skills of key personnel and their commitment to Taaleri. Good reputation is important to Taaleri in order to maintain good customer and employee confidence.
Legal risks can be associated with contractual agreements with customers, service providers, suppliers and other external parties. The aim is to identify these risks through a detailed review of the contracts, using external expertise when necessary. The group companies and units are responsible for managing the operational risks in their operations.
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In the annual self-assessment of operational risks, Taaleri's personnel identify and assess the key operational risks in Group's operations. According to the self-assessment, the main sources of operational risk in Taaleri are currently process errors, regulatory and compliance risks, human errors, risks related to outsourcing and personnel risks.
Taaleri calculates its regulatory pillar 1 operational risk capital requirement from the end of 2018 according to the standardised approach. This amount is much higher than the actual realised operational risk losses and also higher than the risk-based pillar 2 capital requirement for operational risks estimated in the annual risk reviews.
Taaleri's principles of operational risk management, approved by the Board of Directors of Taaleri Group, describe in more detail the organisation of operational risk management and the methods for assessing, monitoring and reporting operational risk to the Board of Directors and the Financial Supervisory Authority.
5. KEY RISKS AND RISK MANAGEMENT OF THE INSURANCE SEGMENT
The company's risk management and solvency management are based on Garantia's values, Code of Conduct, strategy and business objectives. The purpose of risk management is to support the achievement of the company's objectives by identifying the company's threats and opportunities and ensuring that they remain within the limits of risk appetite and risk capacity. Internal control that has been reliably organised ensures the observance of the company's business strategy, the set targets and the principles and procedures related to risk and solvency management.
At Garantia, the principal goal of internal control and risk management is to secure the company's risk capacity and thus ensure the continuity of operations. Internal control covers the activities of all of the company's units and this includes the arrangement of appropriate reporting on all of the company's organisational levels. Risk management includes the identification, measurement, monitoring, management and reporting of the individual risks and combined effect of risks that the
THE ORGANISATION OF GARANTIA'S RISK MANAGEMENT
TAALERI PLC, BOARD OF DIRECTORS
TAALERI PLC, MANAGEMENT COMMITTEE
BOARD OF DIRECTORS
CEO AND MANAGEMENT COMMITTEE
LINE OF DEFENCE
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OPERATIVE RISK MANAGEMENT
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INDEPENDENT RISK MANAGEMENT
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AUDIT
ORGANISATION
Group Risk Management Committee
Accounts, Legal Affairs, Investments
Finance and Risk Management Compliance
The Actuarial Function and Appointed Actuary
Internal Audit
Credit committee
Collateral Committee
Rating Committee
TASK
- Applies risk management framework and single guidelines
- Operational monitoring
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Makes risk decisions
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Supports top management in arranging risk management
- Responsible for conditions for risk management and control
- Owns the risk management framework
- Steering and development of risk decision process
- Risk and capital calculation
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Risk monitoring
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Inspects and assesses the risk management framework and its application
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company is exposed to. Risk and solvency management is also integrated as an integral part of Garantia's business processes and planning and monitoring of operations.
Organisation, responsibilities and control of risk management
Internal control and risk management in Garantia are organised in accordance with a model in which internal control has three lines of defence. In accordance with this model, the tasks have been assigned to (1) units that take business risks in their operations by processing insurance policies, by making binding decisions for the company and by operating at the client interface (Operational risk management); (2) units that are responsible for risk control, carry out independent risk assessments and ensure that company guidelines and acts and other legal provisions are complied with (Independent risk management); and (3) independent internal audit (Internal audit). External control is the responsibility of the auditors and supervisory authorities. The Risk and capital committee of the Taaleri Group is responsible for the functioning and effectiveness of the group's risk management process. The Group Risk and capital committee, which is independent of the risk-generating business lines, supports and steers internal control and risk and solvency management at Garantia in order to ensure that group-level principles and guidelines are also applied in the company. The committee reports to the Taaleri Group's Management Team and Taaleri Plc's Board of Directors.
Garantia's Board of Directors is the supreme decision-making body in matters concerning Garantia's internal control, risk management and solvency management. The Board approves the principles and policies (incl. risk-taking limits) concerning internal control and risk management and their organisation and monitors and controls their effectiveness and the development of the risk and solvency position. Garantia's CEO, supported by the Management Team, is responsible for the arrangement of internal control and risk management practices in accordance with internal control and risk management principles.
The Board has appointed a Credit Committee, Collateral Committee and a Rating Committee, which, in accordance with the decision-making system approved by the Board, decide on matters within their purview. The Credit Committee is responsible for decisions relating to guaranty, claims and investments. The Collateral Committee is responsible for collateral assessment and for ensuring the quality and effectiveness of the collateral assessment process. The independent Rating Committee is responsible for approving credit ratings and for ensuring the quality and effectiveness of the ratings process. The Collateral Committee and Rating Committee report to the CEO and the Credit Committee reports to the Board of Directors.
The units in Garantia's organisation that are responsible for risk control carry out independent risk assessments and ensure that company guidelines, acts and other legal provisions are complied with, and thus form a so-called independent risk management function. The task of the independent risk management function is to assist the Board of Directors and other functions to ensure efficient risk management, to monitor the functioning of the risk management system and the company's general risk profile as a whole, to report on exposure to risks and to advise the Board in risk management matters, to identify and assess developing risks and to ensure the appropriateness of the risk models used to measure risks. The independent risk management function reports to the Taaleri Group Risk and Capital Committee, Garantia's Board of Directors and CEO.
Internal audit is an assessment, verification and consulting function that is independent of the company's operational activities. The task of internal audit is to support the company's management in the achievement of targets by providing a systematic approach to the assessment and development of the adequacy and efficiency of the organisation's risk management, control, management and administration processes. Internal audit's activities are based on an action plan that is compiled annually. Internal audit reports on its observations, conclusions and recommendations to the Boards of Directors of Taaleri Plc and Garantia.
DECISION-MAKING BODIES AND REPORTING RELATIONS
Risk management process
Garantia's risk management process is made up of the following areas:
- Operational planning;
- Capital management;
- Risk appetite;
- Identification and assessment of risks;
- Measurement of risks; and
- Control, treatment and reporting of risks.
Garantia's operational planning is made up of long-term (about 3 years) strategic planning and short-term (1 year) annual planning. Operational planning is based on an analysis of the operating environment, the competitive environment and own operations and also on the Taaleri Group strategy. Profit and solvency scenarios, and stress tests, risk review results, and a risk and solvency assessment are used to define the company's goals, projects supporting achievement of these goals and risk appetite. Every year the actuary presents the statements required by the Insurance Companies Act to the Board of Directors to support operational planning. The strategy and annual plan, including the own risk and solvency assessment, are confirmed by the company's Board of Directors, and the entire personnel are involved in its preparation.
Garantia's goal is to be a reliable partner and the company maintains strong solvency to ensure the continuity and stability
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ity of its operations. The Board has set Garantia's target level for capitalisation above the statutory solvency capital requirement, the minimum capital requirement required by credit rating agency Standard & Poor's for an AAA credit rating, and the economic capital model defined at a confidence level of 99.5%. Garantia only distributes dividends or returns capital to the owner when this does not put the A- credit rating or the internal solvency target levels of Garantia at risk. The purpose of capital management is to ensure in an anticipatory way that the company has adequate capital reserves for exceptional situations. The principal means to maintain balance between risks and actual capitalisation is to ensure profitable business operations and active risk management. If an imbalance is detected, balance is restored with management of profit and risk position, by refraining dividend payments or by acquiring new capital.
Risk appetite means the amount and type of risks that the company is prepared to take in order to achieve the targets set for its business. Garantia has moderate risk appetite and this is defined with so-called "risk-taking limits / risk indicators". The Board of Directors approves the risk-taking limits / risk indicators annually as part of the capital plan (solvency limits), credit risk policy (concentration risks and risk-taking limits concerning insurance operations), reinsurance policy (risk-taking limits concerning reinsurance) and the investment plan (risk-taking limits concerning investment activities).
Constant identification and assessment of risks in the business and operating environment are part of Garantia's risk and solvency management process. The principal risks associated with Garantia's business operations are credit risks arising from guaranty operations, investment risks regarding assets covering technical provisions and shareholders' equity, strategic risks and operational and compliance risks. The identification and assessment of risks are described separately for each risk below.
Garantia defines and assesses its capital requirement / measures the risk of its business operations with three different Value-at-Risk-based risk indicators. The primary indicator used in the steering of operations, measurement of risk and
assessment of capital adequacy is economic capital ("Internal risk capital") at a confidence level of 99.5%. When estimating its capital requirement, the company also uses the solvency capital requirement (SCR) based on the Solvency II standard formula at a confidence level of 99.5% including the capital add-on and the minimum capital requirement corresponding to AAA credit rating that is in accordance with the S&P's Insurance Capital Model. In addition to VaR-based risk indicators, Garantia measures, monitors and assesses the risks of its business operations and their development with other quantitative and qualitative risk indicators. The measurement of risks is described separately for each risk below.
Garantia's monitoring and reporting of risk and solvency position is divided into internal and external monitoring and reporting. External reporting means the information published for all stakeholders and reporting to the authorities. Garantia also reports on its operations to external credit rating agency Standard & Poor's. Internally risk and solvency position is reported to Garantia's Management Team and Board of Directors at least once a month and quarterly to the Taaleri Group Risk and Capital Committee and further to the Board of Directors of the Taaleri Group. The target of internal monitoring and reporting is to ensure that the company's risk and solvency position are within the limits of risk appetite.
Insurance risk
Insurance risk means a risk of loss arising from inadequate assumptions concerning pricing and technical provisions or an unfavourable change in the value of insurance liabilities. In guaranties, the insurance risk mostly consists of credit risk, i.e. the inability of the guaranteed counterparty to manage its financial and/or operational obligations under the contract in relation to the insured party. This may be the result of the default of the guaranteed counterparty (default risk) or the guaranteed counterparty may fail to fulfil a contractual obligation on time (delivery risk). The credit risk is also considered to include the counterparty risk of the reinsurers or the party providing other counter guaranties, which results from the default of the reinsurer or the party providing other counter
guaranties, and the value change risk, which is caused by changes in the fair value of the collateral.
The aim in the management of insurance risk related to guarantee insurance is credit risk is to ensure that the negative profit impacts arising from client and counterparty risks remain at acceptable levels and that the returns are adequate in relation to the risks taken. In guaranty insurance credit risks are reduced by means of client selection, active management of client relationships, monitoring of changes in the clients' operations, pricing, diversification and also typically with reinsurance and with collateral and covenant arrangements. Central to the management of credit risks is the process of underwriting insurance policies, which is controlled by the credit risk policy, reinsurance policy and decision-making system approved by the Board of Directors and the complementary process descriptions and guidelines on credit risk assessment, auditing of distribution partners, pricing, collateral and covenants approved by the Management Team. The risk management function monitors the functions and quality of the insurance process. In addition to the daily insurance process, credit risks are identified and assessed at least once a year with a risk survey compiled in conjunction with the annual planning.
The amount of insurance risk is measured by the economic capital model, by the solvency capital requirement (SCR) including and excluding the capital add-on and by S&P's insurance capital model. The insurance risk's economic capital is defined separately for each contract with internal ratings-based approach according to Basel II which considers the exposure at default (EAD), the instrument's credit rating (probability of default, PD), duration, and the loss given default (LGD), which depends on counter-collateral and reinsurance. The economic capital model also includes concentration risk. Garantia regularly assesses its economic capital model and the functionality of the parameters used in the calculation of the amount of economic capital, including the effectiveness of risk mitigating techniques as part of assessment of the accuracy of the LGD parameter. Credit risks specific to clients and groups of connected clients are assessed with the following indicators in addition to economic capital model: client's
rating and background variables, gross insurance exposure, the proportion reinsured and amount and type of other collateral, uncovered exposure, covenants and risk client status. The credit risk exposure of the insurance portfolio is assessed with the following indicators: gross exposure, proportion reinsured and other collateral, and uncovered exposure and economic capital figures by product group, rating class, industry, average maturity of exposure, claims incurred in relation to earned premiums and insurance exposure. The insurance risk position is monitored and reported to the Management Team and the Board of Directors every month.
Quantitative information on insurance risks and technical provisions are presented in note 42.
Actuarial assumptions
Under the Insurance Companies Act, insurance companies must adopt prudent calculation criteria for determining the technical provisions. The value of the technical provisions must always be adequate so that the company can be reasonably assumed to be able to manage its commitments. The criteria for calculating the technical provisions must be submitted to the Financial Supervisory Authority before the end of the financial year.
The provision for unearned premiums is determined as 'pro rata parte temporis'. The proportion of the premiums written of the valid insurance policies assigned to future financial years is determined on a guarantee basis. The outstanding claims provision consists of known and unknown claims. The individual claims due after the closing date are allocated on a claims basis as part of the known outstanding claims. A proportion of the premiums written accrued by the company during a financial year is allocated to outstanding claims unknown to the company on the closing date as part of unknown outstanding claims, using a specific coefficient. Actual technical provisions are not discounted.
The purpose of the equalization provision is to balance the impact of years with exceptional technical results. The equalization provision acts as a buffer, especially against growth in claims incurred. In Garantia's calculation bases for
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the equalization provision an amount corresponding to the claims incurred for the period in question of the provision is recognized annually into profit and loss until the equalization provision reaches the targeted amount. In the long term the equalization provision will gravitate to its target amount. The calculation of the target amount has been defined in the Insurance Companies Act.
Investment risks
The company's investments are used for covering the technical provisions and the equity capital, and their primary purpose is to secure the liquidity of insurance operations also in years with exceptionally high claims. Garantia's investment activities are long-term and the objective is primarily to secure capital and achieve stable and steadily increasing asset growth. Market, counterparty (credit risk) and liquidity risk are the risks affecting the investment activities.
Market risk means the possibility of losses or an unfavourable change in the economic situation due (directly or indirectly) to the fluctuation in the market prices and volatility of assets, liabilities and financial instruments. Changes in prices affect the value of investment assets and annual returns. The principal market risks are equity risk, interest rate risk, currency risk and property risk. The credit risk of investments is made up of counterparty risk and credit spread risk. Counterparty risk means the risk of default pertaining to the contractual counterparty. Credit spread risk describes the difference in price of risky interest rate instruments and risk-free interest rate instruments, in other words, the risk arising from a change in the credit margin.
The main aim in the management of investment risks is to keep the negative profit impacts arising from investments and the changes in the values of investments at acceptable levels in the long term, to ensure that investment returns are adequate in relation to the risks taken and to safeguard the company's liquidity. Garantia follows the principle of prudence defined in the Insurance Companies Act in its investment activities. Assets are only invested in the type of assets where the company is able to identify, measure, monitor, manage, control and report
the related risks. Investment activities should aim to ensure the security, convertibility into cash, rate of return and availability from location of investments, and to consider the nature of insurance agreements and the interests of the insured.
Investment risks are managed through effective diversification of the investments by asset class, sector, geographical area, credit category and counterparty, and by ensuring adequate liquidity of the investments. Central to the management of investment risks is the daily implementation of investment activity, which is controlled by the investment plan and decision-making powers approved by the Board. In addition to the daily investment activities and monthly reporting, investment risks are assessed at least once a year with a risk survey compiled in conjunction with the annual planning.
Capital requirements for investment risks are measured by means of the economic capital model, the Solvency Capital Requirement (SCR) and S&P's insurance capital model. In the economic capital model, investment risks are measured on an instrument-specific basis with Value-at-Risk calculation models for equity risk, currency risk, interest rate risk and credit risk. The credit risk with fixed income and private equity investments is defined with internal ratings-based method according to Basel II which considers the amount of investment, the instrument's credit rating, the loss given default and duration. In addition to economic capital, investment risks are measured based on asset class, by country, credit category, counterparty, modified duration, interest rate sensitivity and the amount of foreign currency denominated investments. The investment risk position is monitored and reported to the Management Team and the Board of Directors every month.
Quantitative information on insurance investment risks is presented in Note 43.
Operational risks
Operational risks mean the risk of loss resulting from deficient or faulty processes, human error, systems or external events.
Successful management of operational risks helps to ensure that the company's operations are properly organised and that the risks do not cause any unexpected direct or
indirect financial losses. Garantia is determined to maintain and strengthen a corporate culture that is positively disposed towards management of operational risks and internal control by continuously providing personnel with training and guidelines.
In order to manage the operational risks, it is central to identify and evaluate risks as well as to ensure the adequacy of the control and management methods. The principal tools in the management of operational risks are risk reviews at least once a year on each unit, continuous registration of operational risks, identification of corrective measures and the monitoring and reporting of these, continuity planning, principles for outsourcing, the planning and implementation of new products, knowing your customer (KYC) and prevention of money laundering and terrorist financing, and process descriptions and other working instructions and operating guidelines.
The extent of the operational risks is measured by the solvency capital requirement (SCR) and the amount of economic capital employed by operational risks, which is determined on the basis of the annual risk reviews. Actual risk events and near misses are monitored and registered, the corrective measures concerning these are specified and the implementation of the measures is followed. Operational risks are reported to the Management Team and the Board of Directors on a quarterly basis.
Other risks
Strategic risks are the risks that result from changes in the operating and competitive environment, slow reaction to changes, selection of the wrong strategy or business model or the unsuccessful implementation of a strategy. Reputational and regulatory risks are part of strategic risks. Reputational risk means the risk that unfounded or founded unfavourable publicity related to the company's business operations or relations weakens confidence in the company. Reputational risk is usually a consequence of a materialised operational or compliance risk which results in the deterioration of the company's reputation among its customers and other stakeholders. Reg-
ulatory risk means the risk that changes in laws or regulations will materially weaken the company's ability to carry out its business operations.
The principal method in the management of strategic risks is a systematic and continuous operational planning and monitoring process which makes it possible to identify and assess potential risks in the operating, competitive and regulatory environment and to update the strategy and manage the measures to treat risks. Reputational risk is managed proactively and long-term by operating in accordance with Garantia's values, observing regulation and the Code of Conduct confirmed by the Board of Directors and by communicating openly and equitably with different stakeholders. Strategic risks are monitored and assessed at least once a year with a risk review compiled in conjunction with the annual planning.
Compliance risks are the risks pertaining to legal or administrative consequences, economic losses or loss of reputation that result from the failure of the company to comply with laws, decrees or other regulations applicable to its operations. Legislative changes are actively monitored, and ongoing projects are regularly reported to the Board of Directors. The survey of risks conducted at Garantia in conjunction with annual planning also includes the identification and assessment of regulatory risks and the definition and monitoring of development measures to reduce the risks. Providing the personnel with guidelines and training is also central to managing compliance risks.
Concentration risk means all types of risks that could lead to such large losses that would endanger the solvency or financial position of insurance or reinsurance companies. The principal concentration risk in Garantia's business operations arises from the concentration risk of direct and indirect credit and counterparty risk in guaranty and/or investment operations. Garantia's total exposures contain large, individual group of connected clients and industry-specific credit risk concentrations. In addition, Garantia's guaranties and investments are concentrated in Finland. The selection of clients and investment targets and the continuous monitoring of changes in the situation of clients is emphasised above all in
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the management of the credit concentration risk. Concentration risk is measured and assessed in the economic capital model with a separate concentration risk model, according to large exposures, as laid down in the Capital Requirements Regulation of the EU and with risk limits specific to groups of connected clients.
Liquidity risk means the risk that insurance and reinsurance companies are unable to convert their investments or other assets into cash in order to meet their financial obligations that fall due for payment. Liquidity risk is limited at Garantia as premiums written are collected before claims are paid and the largest individual payments are insurance compensation payments to beneficiaries or distribution of profit / repayment of capital to shareholders and the payment dates for these payments are usually known well in advance. Garantia has no financial liabilities. The key tools for managing liquidity risk in Garantia are maintaining sufficient amount of cash to handle daily payments and the liquidity of the investment portfolio.
6. KEY RISKS AND RISK MANAGEMENT OF THE ENERGY SEGMENT
Main risks in Energy segment's operations include: market risk (significant failure in the selection or exit of individual or multiple investments and the resulting depreciation in value), exchange rate risk (potential significant changes in exchange rates for non-euro area investments), country risk (country and destination-specific legal and political risks, and their impact on individual investments); profitability risk (business risks of the fund's investments during construction and production phase). The energy price risk can also affect the value of the energy projects being developed and the profits of the energy funds. However, a significant part of the energy price risk is mitigated with fixed price energy contracts.
Taaleri Energia Ltd's subsidiary Taaleri Energia Funds Management Ltd (TEFM) has since June 2018 been authorized by the Finnish Financial Supervisory Authority to act as an alternative investment fund manager. TEFM is the manager of alternative investment funds in the Energy segment and takes care of risk management for the funds.
The Energy segment's investment-specific and especially international energy infrastructure investment risk management has been integrated into the Energy segment's operational processes that define quality criteria for investment projects and their review. International investment activities emphasize the need to commission external due diligence reports in addition to the analyses done by Energy segment personnel. Each project or transaction is reviewed by the Energy segment Investment Committee where experienced, independent infrastructure investment professionals challenge the investment proposals by Energia's investment managers. Each project or transaction is reviewed several times in the Investment Committee before the final investment decision is made. After the investment has been completed, the personnel of the Energy segment actively participate in project implementation and decision-making, from the investment to the exit. The Energy segment also continuously monitors the key factors that may affect the value of projects as part of risk management and investor reporting processes, and annually updates fund-specific risk analyses and stress tests.
Taaleri Energia Ltd also invests its own funds in development projects and its investment risk positions are monitored as part of the RaVa-Group risk management.
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39 MATURITY SPREAD OF FINANCIAL ASSETS AND LIABILITIES
| Financial assets 31.12.2020, EUR 1,000 | <3 months | 3-12 months | 1-5 years | 5-10 years | >10 years | Total |
|---|---|---|---|---|---|---|
| Receivables from credit institutions | 25,786 | 25,786 | ||||
| Receivables from the public and general government¹) | 6 | 954 | 4,632 | 1,212 | 6,804 | |
| Debt securities | 1,500 | 1,500 | ||||
| Other financial assets | 12,767 | 7,543 | 20,309 | |||
| Interest | 5 | 316 | 832 | 5 | 1,157 | |
| Financial assets total | 38,564 | 1,270 | 14,507 | 1,217 | - | 55,558 |
| Financial liabilities 31.12.2020, EUR 1,000 | <3 months | 3-12 months | 1-5 years | 5-10 years | >10 years | Total |
| --- | --- | --- | --- | --- | --- | --- |
| Liabilities to credit institutions¹) | 2,500 | 12,500 | 15,000 | |||
| Debt securities issued to the public¹) | 35,000 | 35,000 | ||||
| Subordinatd debt | 15,000 | 15,000 | ||||
| Other financial liabilities | 6,787 | 7,881 | 1,478 | 16,146 | ||
| - of which lease liabilities | 319 | 961 | 1,478 | 2,759 | ||
| Interest | 150 | 2,331 | 3,000 | 3,000 | 8,481 | |
| Financial liabilities total | 9,756 | 58,673 | 5,956 | 18,000 | - | 89,627 |
¹) The maturity of financial assets are shown at their original value before impairments.
The maturity spread for insurance assets and liabilities is presented in Notes 42 and 43.
| Financial assets 31.12.2019, EUR 1,000 | <3 months | 3-12 months | 1-5 years | 5-10 years | >10 years | Total |
|---|---|---|---|---|---|---|
| Receivables from credit institutions | 29,102 | 29,102 | ||||
| Receivables from the public and general government¹) | 12 | 61 | 7,145 | 8,459 | ||
| Debt securities | 1,500 | 1,500 | ||||
| Other financial assets | 19,790 | 7,257 | 27,046 | |||
| Interest | 744 | 2,080 | 149 | 2,973 | ||
| Financial assets total | 48,892 | 757 | 10,898 | 7,294 | - | 69,081 |
| Financial liabilities 31.12.2019, EUR 1,000 | <3 months | 3-12 months | 1-5 years | 5-10 years | >10 years | Total |
| --- | --- | --- | --- | --- | --- | --- |
| Liabilities to credit institutions¹) | 6,000 | 20,000 | 26,000 | |||
| Debt securities issued to the public¹) | 35,000 | 35,000 | ||||
| Subordinatd debt | 15,000 | 15,000 | ||||
| Other financial liabilities | 7,508 | 8,127 | 2,463 | 18,097 | ||
| - of which lease liabilities | 343 | 1,244 | 2,463 | 4,049 | ||
| Interest | 278 | 2,651 | 4,883 | 3,750 | 11,561 | |
| Financial liabilities total | 8,129 | 18,021 | 64,808 | 18,750 | - | 105,659 |
¹) The maturity of financial assets are shown at their original value before impairments.
The maturity spread for insurance assets and liabilities is presented in Notes 42 and 43.
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TAALERI | 68
40 CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
| 1.1.2020 | Cash flows | Change in fair value | 31.12.2020 | |
|---|---|---|---|---|
| Liabilities to credit institutions | 25,929 | -11,000 | 10 | 14,939 |
| Debt securities issued to the public | 34,875 | 62 | 34,937 | |
| Subordinated debt | 14,825 | 14 | 14,839 | |
| Total | 75,629 | -11,000 | 86 | 64,715 |
| 1.1.2019 | Cash flows | Change in fair value | 31.12.2019 | |
| Liabilities to credit institutions | 6,996 | 19,000 | -67 | 25,929 |
| Debt securities issued to the public | 54,815 | -20,000 | 60 | 34,875 |
| Subordinated debt | - | 15,000 | -175 | 14,825 |
| Total | 61,811 | 14,000 | -183 | 75,629 |
41 MARKET RISK SENSITIVITY ANALYSIS
A market risk sensitivity analysis has been prepared for the Group's significant market risks, which are interest rate risk and price risk. Sensitivity analyses are prepared by evaluating how each possible change in interest rate or prices might influence balance sheet items that are sensitive to them. The effect is calculated before taxes. Separate sensitivity analyses have been prepared for insurance assets and liabilities and are presented in Notes 41 and 42.
| EUR 1,000 | Risk variable | Change | 31.12.2020 | 31.12.2019 | ||
|---|---|---|---|---|---|---|
| Effect on earnings | Effect on equity | Effect on earnings | Effect on equity | |||
| Interest rate risk¹) | Interest | One percentage point | 262 | 262 | 36 | 36 |
| Price risk²) | ||||||
| Shares and units | Fair value | 10% | 2,147 | 2,197 | 874 | 923 |
| Receivables from the public and general government | Fair value | 10% | 394 | 394 | 623 | 623 |
| Assets classified as held for sale | Fair value | 10% | 536 | 536 | 767 | 767 |
¹) In the interest rate risk sensitivity analysis financial assets and liabilities on the balance sheet with a variable interest rate have been taken into account.
²) In the price risk sensitivity analysis financial instruments that are measured at fair value have been taken into account.
42 QUANTITATIVE INFORMATION ABOUT INSURANCE RISK AND TECHNICAL PROVISIONS
Taaleri's insurance operations consist only of the business of Garantia Insurance Company Ltd. Below is a presentation of quantitative information for Garantia. Garantia Insurance Co Ltd was merged with the Group on 1 April 2015.
| Trend in claims incurred, EUR 1,000 | Claims paid* | Change in provision for outstanding claims* | Claims incurred | %, of insurance exposure | Claims ratio, % |
|---|---|---|---|---|---|
| 2020 | -855 | 263 | -592 | 0.03% | 4.00% |
| 2019 | -336 | -1,282 | -1,618 | 0.09% | 12.2% |
| 2018 | 427 | 355 | 783 | -0.05% | -6.4% |
| 2017 | -343 | -736 | -1,079 | 0.07% | 10.1% |
| 2016 | -934 | -240 | -1,174 | 0.09% | 12.4% |
| 2015 | -1,421 | -71 | -1,492 | 0.13% | 15.1% |
| 2014 | -569 | 157 | -412 | 0.03% | 3.7% |
| 2013 | -2,526 | 121 | -2,405 | 0.18% | 22.2% |
| 2012 | -1,772 | 504 | -1,268 | 0.09% | 11.7% |
| 2011 | -4,827 | -753 | -5,580 | 0.44% | 50.8% |
| 2010 | -2,098 | 26 | -2,072 | 0.15% | 18.7% |
- Incl. reinsurers' share
| Insurance exposure by product groups, EUR million | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Consumer exposure | 972 | 828 |
| Corporate exposure | 844 | 1,009 |
| Total | 1,817 | 1,837 |
Consumer exposure includes residential mortgage loan guaranties and rent guaranties, where insurance risk is attributable to credit risk of households. Corporate exposure is made up of corporate loan guaranties, commercial bonds and other guaranties, where insurance risk is attributable to credit risk of corporates and other organisations.
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| Corporate insurance exposure by credit rating, EUR million | 31.12.2020 | 31.12.2019 |
|---|---|---|
| AAA...BBB- | 126 | 121 |
| BB+...BB- | 462 | 572 |
| B+...B- | 186 | 248 |
| C+ or weaker | 30 | 16 |
| Rated exposure total | 803 | 958 |
| Other exposure | 41 | 51 |
| Corporate exposure total | 844 | 1,009 |
| Corporate insurance exposure by industry, EUR million | 31.12.2020 | 31.12.2019 |
| --- | --- | --- |
| Construction | 285 | 488 |
| Manufacturing | 198 | 201 |
| Machinery and equipment industry (incl. repair) | 81 | 93 |
| Chemicals | 21 | 22 |
| Metals | 43 | 37 |
| Food | 25 | 30 |
| Other | 29 | 18 |
| Wholesale and retail trade | 65 | 58 |
| Finance and insurance | 60 | 58 |
| Transport and logistics | 57 | 28 |
| Water supply and waste management | 33 | 26 |
| Services | 22 | 35 |
| Other industries | 83 | 64 |
| Rated exposure total | 803 | 958 |
| Other exposure | 41 | 51 |
| Corporate exposure total | 844 | 1,009 |
Other exposure consists of exposure where insurance risk is not directly attributable to the creditworthiness or industry sector of the counterparty. Hence, this exposure has not been rated. The industry classification is based on the classification taxonomy of Statistics Finland.
| Technical provisions (FAS), EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Provision for unearned premiums | 29,815 | 25,955 |
| Provision for claims outstanding | 2,310 | 2,573 |
| Known provision for claims outstanding | 1,373 | 1,642 |
| Unknown provision for claims outstanding | 937 | 931 |
| Equalisation provision | 71,109 | 71,701 |
| Total | 103,234 | 100,228 |
Provision for unearned premiums and claims outstanding by estimated maturity 31 December 2020
| EUR 1,000 | <1 year | 1-2 years | 2-3 years | >3 years | Total |
|---|---|---|---|---|---|
| Provision for unearned premiums | 10,000 | 5,852 | 4,523 | 9,439 | 29,815 |
| Provision for claims outstanding | 2,310 | 2,310 | |||
| Total | 12,310 | 5,852 | 4,523 | 9,439 | 32,125 |
Provision for unearned premiums and claims outstanding by estimated maturity 31 December 2019
| EUR 1,000 | <1 year | 1-2 years | 2-3 years | >3 years | Total |
|---|---|---|---|---|---|
| Provision for unearned premiums | 8,965 | 5,103 | 3,801 | 8,084 | 25,955 |
| Provision for claims outstanding | 2,573 | 2,573 | |||
| Total | 11,538 | 5,103 | 3,801 | 8,084 | 28,528 |
The duration of the cash flow distribution of technical provision excluding equalization provision is 2.7 (2.7) years.
Sensitivity analysis of insurance operations 31 December 2020
| Risk parameter | Total amount, EUR 1,000 | Change in risk parameter | Effect on equity, EUR 1,000 | Effect on combined ratio, percentage point |
|---|---|---|---|---|
| Premium revenue | 14,885 | increases by 10% | 1,191 | improves 3.4pp |
| Claims incurred | 592 | increases by 10% | - | weakens 0.4pp |
| Large claim, EUR 10 million | - | EUR 10 million | - | weakens 67.2pp |
| Operating expenses | 5,030 | increases by 10% | -402 | weakens 3.4pp |
Sensitivity analysis is based on Garantia Insurance Company Ltd's FAS financial statements.
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Sensitivity analysis of insurance operations 31 December 2019
| Risk parameter | Total amount, EUR 1,000 | Change in risk parameter | Effect on equity, EUR 1,000 | Effect on combined ratio, percentage point |
|---|---|---|---|---|
| Premium revenue | 13,212 | increases by 10% | 1,059 | improves 5.1pp |
| Claims incurred | 1,618 | increases by 10% | - | weakens 1.2pp |
| Large claim, EUR 10 million | - | EUR 10 million | - | weakens 75.5pp |
| Operating expenses | 5,752 | increases by 10% | -460 | weakens 4.3pp |
Sensitivity analysis is based on Garantia Insurance Company Ltd's FAS financial statements.
43 QUANTITATIVE INFORMATION ABOUT INSURANCE INVESTMENT RISKS
Taaleri's insurance operations consist only of the business of Garantia Insurance Company Ltd. Below is a presentation of quantitative information from Garantia from 2017 and the comparison periods, based on the figures in Garantia's FAS financial statements.
Investment distribution at fair value, EUR million
31.12.2020 31.12.2019
| Fixed income investments* | 138 | 127 |
|---|---|---|
| Equity investments | 20 | 22 |
| Land and buildings | 2 | 2 |
| Total | 159 | 151 |
- Includes cash and bank balances. Fixed income investments include mainly bonds issued by Finnish corporates and Nordic banks.
Investment sensitivity analysis, 31 December 2020
Investment class
Investments at fair value, EUR million
Risk parameter
Change
Effect on equity, EUR million
| Bonds | 137.7 | Change in interest rate | 1% | 3.8 |
|---|---|---|---|---|
| Shares | 15.6 | Fair value | 10% | 1.2 |
| Capital investments | 6.1 | Fair value | 10% | 0.5 |
The sensitivity analysis is based on Garantia's FAS financial statements. When calculating the effects of changes, the market valuation has, however, been assumed before and after the change.
Investment sensitivity analysis, 31 December 2019
Investment sensitivity analysis, 31 December 2019
| Investment class | Investments at fair value, EUR million | Risk parameter | Change | Effect on equity, EUR million |
|---|---|---|---|---|
| Bonds | 127.3 | Change in interest rate | 1% | 3.3 |
| Shares | 19.0 | Fair value | 10% | 1.5 |
| Capital investments | 4.5 | Fair value | 10% | 0.4 |
The sensitivity analysis is based on Garantia's FAS financial statements. When calculating the effects of changes, the market valuation has, however, been assumed before and after the change.
Fixed-income portfolio (excl. bond funds) by maturity and credit rating 31 December 2020
| EUR million | <1 year | 1-3 years | 3-5 years | >5 years | Total | % |
|---|---|---|---|---|---|---|
| AAA...AA- | 0 | - | 5 | - | 5 | 4% |
| A+...A- | 1 | 8 | 7 | 3 | 18 | 13% |
| BBB+...BBB- | - | 12 | 21 | 28 | 61 | 44% |
| BB+ or weaker | 6 | 23 | 19 | 5 | 53 | 39% |
| Total | 7 | 44 | 51 | 36 | 138 | 100% |
Fixed-income portfolio (excl. bond funds) by maturity and credit rating 31 December 2019
| EUR million | <1 year | 1-3 years | 3-5 years | >5 years | Total | % |
|---|---|---|---|---|---|---|
| AAA...AA- | 0 | 4 | - | 5 | 9 | 7% |
| A+...A- | 0 | - | 15 | 1 | 16 | 13% |
| BBB+...BBB- | - | 2 | 28 | 15 | 44 | 35% |
| BB+ or weaker | 10 | 22 | 25 | - | 58 | 46% |
| Total | 11 | 28 | 68 | 20 | 127 | 100% |
Maturity date is the end of the term to maturity. If the instrument includes a call option, maturity is the first possible call date. The rating of an instrument is an issuer rating or senior debt rating published by an external rating agency. If an external rating is not available, Garantia's internal credit rating is used.
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TAALERI | 71
OTHER NOTES
44 NOTES CONCERNING PERSONNEL AND MANAGEMENT 72
45 INVESTMENTS IN SUBSIDIARIES 74
46 INVESTMENTS IN ASSOCIATED COMPANIES 74
47 CONTINGENT LIABILITIES 75
48 PENSION LIABILITIES 75
49 LEASES 75
50 RELATED PARTY DISCLOSURES 76
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TAALERI | 72
44 NOTES CONCERNING PERSONNEL AND MANAGEMENT
| Number of personnel | 2020 | 2019 | ||
|---|---|---|---|---|
| Average no. | Change | Average no. | Change | |
| Permanent full-time personnel | 192 | 6 | 186 | 3 |
| Temporary part-time personnel | 11 | 2 | 9 | -1 |
| Total | 203 | 8 | 195 | 2 |
SHARE OPTION PLANS AND SHARE BASED INCENTIVE SCHEMES FOR KEY EMPLOYEES
Share option plan 2015
The 2015 incentive scheme expired on 31 December 2020.
On 28 October 2015, the Board of Directors of Taaleri Plc decided on a share-based incentive scheme for the Group's key employees. Under the incentive scheme, key persons are issued synthetic option rights, and a potential bonus will be paid in 2019-2020 in cash. The company's Board of Directors may oblige a key employee to acquire company shares comprising up to 50% of the bonus. The payment in cash aims to cover tax and tax-like payments incurred by key employees from bonuses. If the employment of a key employee ends before 2018, in principle no bonus will be paid. The Board of Directors may oblige that person to purchase Taaleri shares, and to set a possible one-year limitation period for the shares. At the moment of granting, the bonuses paid based on the incentive scheme will correspond to the value increase of a total of no more than about 800,000 Taaleri Plc shares, including the part paid in cash. The given value of a share was set at EUR 9.00, which will be reduced by dividends distributed and by capital repayments before the usage date. The final value of a share will be the average price weighted by transaction amounts concluded in the 20 trading days prior to the synthetic option exercise date.
On the date of granting of 25 February 2016, the fair value of an option was set at EUR 1.77, on 12 May 2016 at EUR 2.07, on 22 June 2016 at EUR 1.80, on 16 December 2016 at EUR 1.36 and on 30 October 2017 at EUR 2.83. Because the recipient of an option is not entitled to receive dividends or capital repayments during the earnings period, the dividends expected have been deducted from the share price on the date of granting when setting the fair value.
The fair value of the payments to be settled in cash were reassessed on each reporting day up to the end of 2017. On 1 January 2018 the amendments to IFRS 2 came into force and since then the expense is recognised according to the initial date of granting until the end of the earnings period.
| Options outstanding (number of options) | 1.1.-31.12. 2020 | 1.1.-31.12. 2019 |
|---|---|---|
| Outstanding at the beginning of the period | 545,000 | 615,000 |
| Returned during the period | 25,000 | - |
| Exercised during the period | 92,000 | 70,000 |
| Expired during the period | 427,500 | - |
| Outstanding at the end of the period | - | 545,000 |
| Excercisable at the end of the period | - | - |
Share based incentive scheme 2017
On 30 October 2017, the Board of Directors of Taaleri Plc decided on a share-based incentive scheme for the Group's key employees. The scheme consists of three three-year earnings periods, namely 1/11/2017-31/10/2020, 1/11/2018-31/10/2021, and 1/11/2019-31/10/2022. At the beginning of each period, the Board of Directors decides on the earnings criteria and sets performance targets. Approximately twenty persons, including the members of the group's executive board, are part of the scheme. The potential bonuses from the scheme in the earnings periods 2017-2020, 2018-2021 and 2019-2022 are based on the total return of Taaleri Plc's share. The first earnings period expired 31 October 2020 as worthless. The potential bonus for the earnings period 2018-2021 corresponds to a maximum of the value of 240,000 shares, including the part paid in cash, and for the earnings period 2019-2022 243,455 shares. The possible bonus will be paid within approximately four years from the end of the earnings period in four instalments. The bonus is paid partly in shares and partly in cash. The payment in cash aims to cover tax and tax-like payments incurred by key employees from bonuses. If the employment of a key employee ends before the payment of the bonus, in principle no bonus will be paid. Shares received as a bonus may not be surrendered during a one-year waiting period. Shares received under the scheme must be held by the key employee until the value of the shareholding in the company corresponds to the key employee's yearly gross salary. This amount of shares must be held by the key employee as long as the employment in one of the group companies lasts.
On the date of granting on 30 October 2017, the fair value of a unit was set at EUR 5.07, on 29 October 2018 at EUR 0.11 and on 30 October 2019 at EUR 1.65. Because the recipient of a unit is not entitled to receive dividends or capital repayments during the earnings period, the dividends expected have been deducted from the share price on the date of granting when setting the fair value.
| Units outstanding | 1.1.-31.12. 2020 | 1.1.-31.12. 2019 |
|---|---|---|
| Outstanding at the beginning of the period | 552,044 | 397,500 |
| Granted during the period | - | 225,000 |
| Returned during the period | 6,888 | 70,456 |
| Exercised during the period | 137,000 | - |
| Outstanding at the end of the period | 408,156 | 552,044 |
| Excercisable at the end of the period | - | - |
CEO's share based incentive scheme
Taaleri Plc's Board of Directors has decided on the establishment of a new share-based incentive scheme for the company's CEO. In the scheme, the CEO will acquire a minimum of 200,000 euros of company shares. The share-based incentive scheme is a one-off, five-year scheme, and the earning period is 1 June 2019-15 June 2024. The earning period includes three measuring periods, which commence at the beginning of the earning period and end on 15 September in years 2022, 2023 and 2024. Any remuneration awarded under the scheme will be based on Taaleri Plc's total shareholder return (TSR). The remuneration paid will correspond to the value of no more than 249,000 Taaleri Plc shares, including the part paid in cash.
Determining fair value
In order to determine fair value, the Group uses the Black-Scholes model in option arrangements in which there are no special conditions for creating rights, ie. the 2013 and 2015 share option plans. The expected volatility is determined based on the actual price development of the parent company's shares, taking into account the validity period of the options still remaining. The fair value of shares in these option arrangements, based on which the shares are granted, is based on the quoted share price. Since 1 January 2018 the recognised expenses are based on the valuation at the time the rights were granted.
The valuations of synthetic options and share based incentive schemes on 31 December 2018 are based on accrued expenses based on fair values up until 1 January 2018, and from then on based on the valuations on the day the rights were granted. During 2020 expenses from options and other share based incentive schemes amounting to EUR 1.0 (0.9) million were recognised in personnel costs.
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| Share Options 2015, assumptions used | granted 2/2016 | granted 5/2016 | granted 6/2016 | granted 12/2016 |
|---|---|---|---|---|
| Weighted price of shares on the date of granting, EUR | 8.76 | 9.18 | 8.78 | 8.31 |
| Share price on 31 December 2020 | 8.12 | 8.12 | 8.12 | 8.12 |
| Share price on 31 December 2019 | 8.42 | 8.42 | 8.42 | 8.42 |
| Original issue price, EUR | 9.00 | 9.00 | 9.00 | 9.00 |
| Dividend-adjusted issue price, EUR | 7.86 | 7.86 | 7.86 | 7.86 |
| Expected volatility, % | 24.4% | 24.4% | 24.4% | 24.4% |
| Validity period on date of granting, years | 4.9 | 4.6 | 4.5 | 4.0 |
| Risk-free interest, % | 0.04% | 0.04% | 0.04% | -0.52% |
| Fair value of option at the time of granting, EUR | 1.77 | 2.07 | 1.80 | 1.36 |
| Share Options 2015, assumptions used | granted 10/2017 | |||
| --- | --- | |||
| Weighted price of shares on the date of granting, EUR | 10.75 | |||
| Share price on 31 December 2020 | 8.12 | |||
| Share price on 31 December 2019 | 8.42 | |||
| Original issue price, EUR | 9.00 | |||
| Dividend-adjusted issue price, EUR | 7.86 | |||
| Expected volatility, % | 23.4% | |||
| Validity period on date of granting, years | 3.17 | |||
| Risk-free interest, % | -0.43% | |||
| Fair value of option at the time of granting, EUR | 2.83 | |||
| Share based incentive scheme 2017, assumptions used | granted 10/2017 | granted 10/2018 | granted 10/2019 | |
| --- | --- | --- | --- | |
| Maximum value on the date of granting, EUR | 1,717,200 | 1,629,540 | 1,537,605 | |
| Share price on 31 December 2020 | 8.12 | 8.12 | 8.12 | |
| Share price on 31 December 2019 | 8.42 | 8.42 | 8.42 | |
| Allocation price of share | 10.60 | 8.23 | 7.27 | |
| Expected actualisation rate | 59.15% | 1.49% | 25.74% | |
| Discount rate | 10.0% | 10.0% | 10.0% | |
| CEO share based incentive scheme 2019, assumptions used | granted 6/2019 | |||
| --- | --- | |||
| Maximum value on the date of granting, EUR | 1,752,960 | |||
| Share price on 31 December 2020 | 8.12 | |||
| Share price on 31 December 2019 | 8.42 | |||
| Allocation price of share | 7.04 | |||
| Expected actualisation rate | 26.61% | |||
| Discount rate | 10.0% |
The expected actualisation rate is determined based on the future share price estimated using the Capital Asset Pricing Model, where Taaleri's company specific beta coefficient and the market risk is used. The risk free rate is based on government loans.
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TAALERI | 74
45 INVESTMENTS IN SUBSIDIARIES
CHANGES IN SUBSIDIARY SHAREHOLDINGS 2020
During 2020 Taaleri divested its holding in wind farm project located in Texas, USA, by reducing its holding in TGE Taaleri LLC and its subsidiary TG East Wind Project LLC to seven (100.0) per cent.
In addition, during 2020 Taaleri acquired all of the non-controlling interests in Taaleri Veropalvelut Oy and at the end of the financial year Taaleri's holding in Taaleri Veropalvelut Oy is 100.0 (95.0).
Taaleri Sijoitus Oy's holding in Mobily Invoices Oy decreased to 61.8 (68.0) percent with the share issue.
Additionally, during 2020, there were established and merged some management - and project companies under Taaleri Pääomarahastot, Taaleri Sijoitus and Taaleri Energia. All group companies are listed on the financial statements of the parent company.
CHANGES IN SUBSIDIARY SHAREHOLDINGS 2019
Taaleri Energia acquired Taaleri Energia Iberia SL in Spain and established Taaleri Solarwind II GP S.a.r.l. In Luxembourg during the financial period.
During the financial period Taaleri divested its holding in the property investment TT Canada RE Holding (100.0) and its subsidiary Norther Lights Enterprises (85.0), and reduced its holding in Taaleri Datacenter to 31.2 (100.0) per cent.
During the reporting period Taaleri reduced its ownership in Taaleri Energia by 2.0 percent to commit its Energia segment's key operative individuals. At the end of the financial period Taaleri had a 78.6 (80.6) per cent stake in the company. The effect of the sale is included in the table below.
Taaleri Wealth Management Ltd's wholly owned subsidiary Kultataaleri Oy was merged into its parent company on 31.12.2019.
Additionally, during the financial period, management and project companies were established and merged under Taaleri Private Equity Funds and Taaleri Energia.
| Effects on the equity attributable to owners of the parent of any changes in its ownership interest in a subsidiary that do not result in a loss of control, EUR 1,000 | 2020 | 2019 |
|---|---|---|
| From an addition to the share owned in subsidiaries | -246 | - |
| From a reduction in the share owned in subsidiaries without loss of control | 93 | 80 |
| Net effect on equity | -153 | 80 |
There is not a material non-controlling interest in the group.
46 INVESTMENTS IN ASSOCIATED COMPANIES
CHANGES IN ASSOCIATED COMPANIES SHAREHOLDINGS 2020
On 31 December 2020 the group had nine associated companies; Fellow Finance Plc, Hernesaaren Kehitys Oy, Munkkiniemi Group Oy, Taaleri Datacenter Ky, Fintoil Oy, Taaleri SolarWind II SPV, Turun Toriparkki Oy, Masdar Taaleri Generation and Sepos Oy. None of these is considered material to the group. The associated companies, except for Fellow Finance Plc and Fintoil Oy, are consolidated using the equity method. Fellow Finance Plc is classified as held for sale (see Note 23). Venture capital investment committed to associated company Fintoil is decided to measure at fair value through profit or loss in accordance with IFRS 9. A profit of 73 thousand euros from continuing operations of the associated companies has been recognised in the Group in the income statement item 'Share of associates' profit or loss'. The associated companies have neither discontinued operations nor comprehensive income items.
During the reporting period Taaleri acquired a 30.0 percent share in Sepos Oy after which it is consolidated as associated company. In addition, Taaleri's holding in Taaleri Datacenter Ky decreased to 29.5 per cent and holding in Fintoil Oy increased to 27.4 per cent.
CHANGES IN ASSOCIATED COMPANIES SHAREHOLDINGS 2019
On 31 December 2019 the group had eight associated companies; Fellow Finance Plc, Hernesaaren Kehitys Oy, Munkkiniemi Group Oy, Taaleri Datacenter Ky, Fintoil Oy, Taaleri SolarWind II SPV, Turun Toriparkki Oy and Masdar Taaleri Generation. None of these is considered material to the group. The associated companies, except for Fellow Finance Plc and Fintoil Oy, are consolidated using the equity method. Fellow Finance Plc is classified as held for sale (see Note 23) and Fintoil as an investment that is valued at fair value. A loss of 37 thousand euros from continuing operations of the associated companies has been recognised in the Group in the income statement item 'Share of associates' profit or loss'. The associated companies have neither discontinued operations nor comprehensive income items.
During the reporting period former subsidiary Taaleri Datacenter Ky had a capital call, after which Taaleri's share in the company is 31.2 per cent and it became an associated company. At the same time Taaleri Datacenter Ky's subsidiary Ficolo Oy ceased to be Taaleri's associated company. Additionally Taaleri acquired a 33.3 per cent share in Hernesaaren Kehitys Oy, a 50.0 percent share in Taaleri SolarWind II SPV, a 50.0 percent share in Masdar Taaleri Generation and 21.6 percent in Fintoil Oy.
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TAALERI | 75
47 CONTINGENT LIABILITIES
| Commitments not recognised as liabilities, EUR 1,000 | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Total gross exposures of guaranty insurance | 1,816,527 | 1,837,468 |
| Guarantees | 2,000 | 2,000 |
| Investment commitments | 4,658 | 8,200 |
| Pledged securities | 15,000 | 10,000 |
| Credit limits (unused) | 10,200 | 10,200 |
| Total | 1,848,385 | 1,867,868 |
Garantia has received information that a matter concerning a potential insurance event and a EUR 5 million claim with penalty consequences and legal fees has become pending in the Helsinki District Court on 29 December 2017. The insurance claim concerns a pension fund which was a loan guaranty customer of Garantia in 2011 and which was placed in liquidation in December 2011 under the Pension fund act (1164/1992, as amended) and subsequently declared bankrupt on 5 February 2018, related to which Garantia originally received a claim on 30 December 2011. The processing of the case in the district court has not yet begun, due to other pending investigations related to the pension fund. Garantia considers that the claim is still unfounded, which is why it has not been entered in the profit and loss account as a provision for outstanding claims.
48 PENSION LIABILITIES
Statutory pension cover for the company's employees and management is arranged through a TyEL insurance policy. Additional voluntary pension insurance has been taken out for the company's management. The company has no unrecognised pension liabilities. All the company's pension arrangements are defined contribution plans.
49 LEASES
| Right-of-use assets 2020, EUR 1,000 | Office spaces | Cars | Equipment | Total |
|---|---|---|---|---|
| Book value 1 January 2020 | 3,622 | 220 | 128 | 3,971 |
| Increases | 4 | 31 | - | 35 |
| Remeasurements | 12 | - | - | 12 |
| Decreases | - | -7 | - | -7 |
| Depreciation | -1,212 | -117 | -31 | -1,359 |
| Book value 31 December 2020 | 2,427 | 127 | 97 | 2,651 |
| Lease liabilities 31 December 2020 | 2,759 | |||
| Right-of-use assets 2019, EUR 1,000 | Office spaces | Cars | Equipment | Total |
| --- | --- | --- | --- | --- |
| Book value 1 January 2019 | 4,846 | 351 | 126 | 5,323 |
| Increases | 3 | 145 | 125 | 272 |
| Decreases | - | -89 | -91 | -180 |
| Depreciation | -1,226 | -187 | -32 | -1,445 |
| Book value 31 December 2019 | 3,622 | 220 | 128 | 3,971 |
| Lease liabilities 31 December 2019 | 4,049 | |||
| Items recognised in profit and loss related to lease agreements | 1.1.-31.12.2020 | 1.1.-31.12.2019 | ||
| --- | --- | --- | ||
| Interest expense | 140 | 189 | ||
| Depreciation | 1,359 | 1,445 | ||
| Costs related to short term agreements | 571 | 541 | ||
| Costs related to agreements concerning low value assets | 31 | 32 | ||
| Costs related to agreements not in the scope of IFRS 16 | 13 | 27 | ||
| Total | 2,114 | 2,234 |
Interest expenses are recognised in interest expenses on the income statement. Costs related to short term agreements and agreements concerning low value assets are recognised in other operating expenses.
Cash flows related to lease agreements amounted to EUR 2,086 (2,155) thousand in 2020.
Key figures
CEO's review
Board of Directors' report
Group financial statements
Parent company financial statements
Signatures
Auditor's report
TAALERI | 76
50 RELATED PARTY DISCLOSURES
The parent company and its subsidiaries and associated companies belong to the group's related parties. Related parties also include the members of the Board of Directors and the executive board as well as their related parties.
The following belong to the company's related parties:
1) Someone who, by virtue of shareholding, options or convertible bonds has or may have at least 20 percent of the company's stocks or shares, or the voting rights attached to them, or a corresponding shareholding or voting right in an organisation belonging to the group, or in an organisation exercising control in the company, unless the significance of the company that is the subject of ownership is minor in terms of the whole group.
2) A member and deputy member of the Board of Directors, CEO and Deputy CEO, and somebody in a similar position in a company as referred to in point 1.
3) The children and spouse of someone as referred to in point 2, or someone in a marital relationship with that person.
4) An organisation and foundation in which an above-mentioned person, either alone or with another person, has control as specified in Chapter 1, Paragraph 5 of the Accounting Act.
Business transactions made with the company and companies belonging to the group have been carried out on terms equivalent to those that prevail in arm's length transactions. Companies belonging to the Group are listed on page 111.
On 31 December 2020 the Chairman of the board Juhani Elomaa was among the 10 largest shareholders of the company.
Related party transactions with associated companies and related parties, EUR 1,000
| 2020 | Sales | Purchases | Receivables | Liabilities |
|---|---|---|---|---|
| Associated companies | 761 | - | 4,713 | - |
| Other related parties | 200 | - | 5,002 | - |
| 2019 | Sales | Purchases | Receivables | Liabilities |
| --- | --- | --- | --- | --- |
| Associated companies | 1,206 | - | 7,410 | - |
| Other related parties | 177 | - | 5,265 | - |
MANAGEMENT SHAREHOLDINGS
At the end of 2020, members of the company's Board of Directors and Group Management Team owned a total of 2,147,721 of the company's shares, which corresponds to 7.6% of the shares and the voting rights attached to all shares. The shareholdings of the members of the company's Board of Directors and Senior Management Team in the company, including related party holdings:
| Name | Position | Number of shares |
|---|---|---|
| Juhani Elomaa¹ | Chairman of the Board of Directors | 2,069,483 |
| Titta Elomaa² | Managing Director Garantia | 2,060,109 |
| Robin Lindahl | CEO | 34,513 |
| Minna Smedsten | CFO | 18,049 |
| Elina Björklund | Member of the Board of Directors | 12,000 |
| Hanna Maria Sievinen | Member of the Board of Directors | 7,900 |
| Tuomas Syrjänen | Member of the Board of Directors | 7,782 |
| Total | 2,149,727 | |
| Total of share capital, % | 7.6% |
¹ Juhani Elomaa's shareholding consists of 2,069,483 shares, 266,656 of which are owned by E-Capital Oy, in which he has a controlling interest, and 79,549 are owned by other related parties.
² Titta Elomaa's shareholding consists of 2,060,109 shares, of which 2,039,255 are owned by other related parties.
FRINGE BENEFITS OF SENIOR MANAGEMENT
Senior management consists of the Board of Directors and the Executive Board¹. Compensation paid or payable to them for their work consists of the following items:
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Salaries, bonuses and other fringe benefits | 2,364 | 2,515 |
| Benefits to be paid at the end of employment | 1,004 | 1,106 |
| Total | 3,368 | 3,621 |
¹ The composition of Taaleri's Executive Board changed during the 2020 and 2019 financial periods. The benefits of those who left the Executive Board are included in the table from the time when they belonged to the team.
Key figures | CEO's review | Board of Directors' report | Group financial statements | Parent company financial statements | Signatures | Auditor's report
TAALERI | 77
PARENT COMPANY FINANCIAL STATEMENTS
Key figures
CEO's review
Board of Directors' report
Group financial statements
Parent company financial statements
Signatures
Auditor's report
TAALERI | 78
PARENT COMPANY FINANCIAL STATEMENTS
PARENT COMPANY INCOME STATEMENT
| EUR | Note | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|---|
| Fee and commission income | 2 | 4,988 | 5,700 |
| Net gains or net losses on trading in securities and foreign currencies | 3 | -1,426 | 88,198 |
| Net gains or let losses on trading in securities | -1,288 | 88,267 | |
| Net gains or net losses on trading in foreign currencies | -139 | -69 | |
| Income from equity investments | 4 | 9,000,000 | 7,573,887 |
| Interest income | 5 | 1,838,113 | 1,569,397 |
| Other operating income | 6 | 2,420,674 | 2,731,371 |
| INCOME FROM INVESTMENT SERVICES | 13,262,348 | 11,968,553 | |
| Fee and commission expense | 7 | -41,278 | -40,481 |
| Interest expense | 8 | -3,221,945 | -2,919,135 |
| Administrative expenses | |||
| Personnel costs | 9 | ||
| Wages, salaries and fees | -2,629,797 | -2,577,056 | |
| Other benefits | -401,915 | -465,357 | |
| Pension expenses | -379,072 | -419,357 | |
| Social security contributions | -22,843 | -46,000 | |
| Personnel costs, total | -3,031,712 | -3,042,413 | |
| Other administrative expenses | 10 | -1,014,429 | -1,330,107 |
| Depreciation, amortisation and impairment of tangible and intangible assets | 11 | -7,105 | -19,030 |
| Other operating expenses | 12 | -2,113,861 | -1,800,949 |
| Expected credit losses from financial assets measured at amortised cost | 13 | -94 | 7,979 |
| OPERATING PROFIT (LOSS) | 3,831,924 | 2,824,419 | |
| Appropriations | 14 | 5,500,000 | 4,700,000 |
| Income taxes | 15 | -66,584 | -18,721 |
| PROFIT (LOSS) FOR THE PERIOD | 9,265,340 | 7,505,698 |
PARENT COMPANY BALANCE SHEET
| Assets | Note | 31.12.2020 | 31.12.2019 |
|---|---|---|---|
| Receivables from credit institutions | 16, 29, 30, 31, 32 | 1,735,620 | 13,448,693 |
| Receivables from the public and general government | 17, 29, 30, 31, 32 | 34,610,035 | 29,916,129 |
| Debt securities | 18, 29, 30, 31, 32 | 1,497,738 | 1,497,738 |
| Shares and units | 19, 29, 30, 31 | 23,130 | 24,418 |
| Participating interests | 19, 29, 30, 31 | 3,153,624 | 2,997,624 |
| Shares and units in group entities | 19, 29, 30, 31 | 77,942,995 | 77,942,995 |
| Intangible assets | 20 | 3,553 | 10,658 |
| Other assets | 21 | 1,211,363 | 191,661 |
| Accrued income and prepayments | 22 | 3,372,600 | 4,188,241 |
| Deferred tax assets | 23 | 1,670 | 1,652 |
| 123,552,329 | 130,219,809 | ||
| Liabilities | Note | 31.12.2020 | 31.12.2019 |
| --- | --- | --- | --- |
| LIABILITIES | 66,142,410 | 77,546,331 | |
| Liabilities to credit institutions | 24, 29, 30, 31, 32 | 14,938,748 | 25,929,151 |
| Debt securities issued to the public | 25, 29, 30, 31, 32 | 34,936,919 | 34,874,547 |
| Other liabilities | 26 | 233,721 | 244,279 |
| Accrued expenses and deferred income | 27 | 1,193,972 | 1,673,541 |
| Subordinated debt | 28 | 14,839,051 | 14,824,813 |
| EQUITY | 33 | 57,409,919 | 52,673,478 |
| Share capital | 125,000 | 125,000 | |
| Non-restricted reserves | 36,139,665 | 36,139,665 | |
| Reserve for invested non-restricted equity | 36,139,665 | 36,139,665 | |
| Retained earnings or loss | 11,879,914 | 8,903,115 | |
| Profit (loss) for the period | 9,265,340 | 7,505,698 | |
| 123,552,329 | 130,219,809 |
Key figures
CEO's review
Board of Directors' report
Group financial statements
Parent company financial statements
Signatures
Auditor's report
TAALERI
PARENT COMPANY CASH FLOW STATEMENT
| Note | 1.1.-31.12.2020 | 1.1.-31.12.2019 | |
|---|---|---|---|
| Cash flow from operating activities: | |||
| Operating profit (loss) | 3,831,924 | 2,824,419 | |
| Depreciation | 7,105 | 19,030 | |
| Other adjustments | |||
| Changes in fair value of investments | |||
| - at fair value through profit or loss | 1,381 | -34,766 | |
| Cash flow before change in working capital | 3,840,410 | 2,808,683 | |
| Change in working capital | |||
| Increase (-)/decrease (+) in loan receivables | -4,694,000 | -8,933,291 | |
| Increase (-)/decrease (+) in current interest-free receivables | -134,275 | -953,061 | |
| Increase (+)/decrease (-) in current interest-free liabilities | -523,662 | -456,238 | |
| Cash flow from operating activities before financial items and taxes | -1,511,527 | -7,533,907 | |
| Direct taxes paid (-) | -16,647 | - | |
| Cash flow from operating activities (A) | -1,528,174 | -7,533,907 | |
| Cash flow from investing activities: | |||
| Investments in subsidiaries and associated companies | -156,000 | 33,291 | |
| Other investments | - | 5,000,000 | |
| Cash flow from investing activities (B) | -156,000 | 5,033,291 | |
| Note | 1.1.-31.12.2020 | 1.1.-31.12.2019 | |
| --- | --- | --- | --- |
| Cash flow from financing activities: | |||
| Increase in Subordinated debt | - | 15,000,000 | |
| Decrease in Debt securities issued to the public | - | -20,000,000 | |
| Increase (+) in non-current liabilities | 20,000,000 | 20,000,000 | |
| Decrease (-) in non-current liabilities | -31,000,000 | -1,000,000 | |
| Paid and received group contributions | 5,500,000 | 3,000,000 | |
| Dividends paid and other distribution of profit | -4,528,899 | -8,491,686 | |
| Cash flow from financing activities (C) | -10,028,899 | 8,508,314 | |
| Increase/decrease in cash and cash equivalents (A+B+C) | -11,713,073 | 6,007,698 | |
| Cash assets at the beginning of the financial period | 13,448,693 | 7,440,995 | |
| Cash assets at the end of the financial period | 1,735,620 | 13,448,693 | |
| Difference in cash assets | -11,713,073 | 6,007,698 |
Key figures
CEO's review
Board of Directors' report
Group financial statements
Parent company financial statements
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TAALERI
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
ACCOUNTING POLICIES FOR PREPARING THE FINANCIAL STATEMENTS
- ACCOUNTING POLICIES FOR PREPARING THE PARENT COMPANY FINANCIAL STATEMENTS ... 81
NOTES TO THE INCOME STATEMENT
- FEE AND COMMISSION INCOME ... 82
- NET GAINS OR NET LOSSES ON TRADING IN SECURITIES AND FOREIGN CURRENCIES ... 82
- INCOME FROM EQUITY INVESTMENTS ... 82
- INTEREST INCOME ... 82
- OTHER OPERATING INCOME ... 82
- FEE AND COMMISSION EXPENSE ... 83
- INTEREST EXPENSE ... 83
- PERSONNEL COSTS ... 83
- OTHER ADMINISTRATIVE EXPENSES ... 83
- DEPRECIATION, AMORTISATION AND IMPAIRMENT ON TANGIBLE AND INTANGIBLE ASSETS ... 83
- OTHER OPERATING EXPENSES ... 83
- EXPECTED CREDIT LOSSES ... 84
- APPROPRIATIONS ... 84
- INCOME TAXES ... 84
NOTES TO THE BALANCE SHEET
- RECEIVABLES FROM CREDIT INSTITUTIONS ... 85
- RECEIVABLES FROM THE PUBLIC AND GENERAL GOVERNMENT ... 85
-
DEBT SECURITIES ... 85
-
SHARES AND UNITS ... 85
- INTANGIBLE ASSETS ... 86
- OTHER ASSETS ... 86
- ACCRUED INCOME AND PREPAYMENTS ... 86
- ACCRUED TAX ASSETS ... 86
- LIABILITIES TO CREDIT INSTITUTIONS ... 86
- DEBT SECURITIES ISSUED TO THE PUBLIC ... 86
- OTHER LIABILITIES ... 87
- ACCRUED EXPENSES AND DEFERRED INCOME ... 87
- SUBORDINATED DEBT ... 87
- ITEMS DENOMINATED IN DOMESTIC AND FOREIGN CURRENCY AND CONSOLIDATED ITEMS ... 87
- CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES ... 88
- FAIR VALUES AND CARRYING AMOUNTS OF FINANCIAL ASSETS AND LIABILITIES, AND FAIR VALUE HIERARCHY ... 90
- MATURITY ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES ... 91
- INCREASES AND DECREASES OF EQUITY DURING THE FINANCIAL PERIOD ... 91
NOTES CONCERNING GUARANTEES AND CONTINGENT LIABILITIES
- GUARANTEES AND CONTINGENT LIABILITIES ... 92
- PENSION LIABILITIES ... 92
- LEASING AND OTHER RENTAL LIABILITIES ... 92
LIST OF ACCOUNTING BOOKS USED
3
SUBSIDIARIES AND ASSOCIATED COMPANIES
94
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CEO's review
Board of Directors' report
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TAALERI | 81
ACCOUNTING POLICIES FOR PREPARING THE FINANCIAL STATEMENTS
1 ACCOUNTING PRINCIPLES OF THE PARENT COMPANY'S FINANCIAL STATEMENTS
Taaleri Plc's financial statements have been prepared in accordance with the principles of Finnish bookkeeping legislation, the Act on Investment Services, the Ministry of Finance decree on the financial statements of an investment service company, the Accounting Act and regulations and guidelines of the Finnish Financial Supervisory Authority concerning accountancy, financial statements and annual reports in the financial sector. The financial statements have been prepared for the 12-month period 1 January -31 December 2020.
Revenue recognition principles
Capital gains and losses and changes in value of shares and units have been recorded as net gains from securities trading.
Income from equity investments -group mainly consists of dividend yield from equity investments and capital gains/losses from associates and Group companies and available-for-sale financial assets. Dividends are primarily recognised as income when the annual general meeting of the company distributing the dividends has made a decision on the distribution of dividends.
Interest income and expenses are recorded on a payment basis from interest-bearing assets and liabilities.
Foreign currency items
Foreign currency transactions are recorded based on the exchange rate on the day of the transaction. Foreign currency receivables and liabilities outstanding at the end of the financial period are measured based on the exchange rate on the date of closing the books. Exchange rate gains and losses related to actual business are recorded in the income statement under net gains on trading in foreign currencies.
Taxes
Tax expense consists of taxes based on taxable income in the period and tax from previous financial periods.
Financial instruments
IFRS 9 is applied when classifying and measuring financial instruments. The accounting principles have been presented in detail in note 2 of the group financial statements. The classification of Taaleri Plc's financial assets and liabilities according to IFRS 9 has been presented in Note 30.
When recording financial instrument purchase and sales contracts, the date of the transaction is used as the basis for recognition.
Receivables from credit institutions includes receivables from credit institutions referred to in the Act on Credit Institutions and from similar foreign credit institutions, deposits made in them and sums paid to creditors based on guarantees and other off-balance sheet commitments.
Receivables from the public and general government includes credit issued to parties other than credit institutions and central banks, other such receivables and sums paid to creditors based on guarantees and other off-balance sheet commitments.
Shares, investment units and other such units, excluding shares in subsidiaries and associates, which give the right to the equity of an organisation are recognised in the balance sheet item "Shares and units".
Liabilities to credit institutions includes liabilities to credit institutions and to central banks. A liability is considered payable on demand, if it can be terminated immediately or within no more than one banking day.
Liabilities to the public and general government includes liabilities to parties other than credit institutions and central banks.
Debt securities issued to the public includes bonds issued by Taaleri Plc in 2016-2019. Loan interest and transaction expenses are amortised over the maturity period of the loans.
Subordinated debts include Tier 2 note issued by Taaleri Plc in 2019. The Tier 2 notes constitute a subordinated debt instrument.
Transaction expenses from liabilities to credit institutions and from debt securities issued to the public are presented in the income statement item "Interest expense".
Fixed assets
Intangible assets are carried on the balance sheet at cost less any accumulated depreciation. IT project and system costs, among other things are activated as other long-term expenditure. Tangible assets are carried on the balance sheet at cost less any accumulated depreciation. If, at the end of the financial period, the estimated recoverable amount from intangible or tangible assets is found to be fundamentally and permanently lower than their carrying amount, the difference is recorded in profit or loss as an impairment loss.
The depreciation plan is as follows:
| Computer software | straight-line depreciation, 4 years |
|---|---|
| Other intangible rights | straight-line depreciation, 3 years |
| Other long-term expenditure | straight-line depreciation, 3 years |
| Machinery and equipment | straight-line depreciation, 4 years |
Key figures
CEO's review
Board of Directors' report
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Parent company financial statements
Signatures
Auditor's report
TAALERI
NOTES TO THE INCOME STATEMENT
2 FEE AND COMMISSION INCOME
| 1.1.-31.12.2020 | 1.1.-31.12.2019 | |
|---|---|---|
| Other fees | 4,988 | 5,700 |
| Total | 4,988 | 5,700 |
3 NET GAINS OR NET LOSSES ON TRADING IN SECURITIES AND FOREIGN CURRENCIES
| Net gains or net losses on trading in securities | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
|---|---|---|
| From financial assets measured at fair value through profit or loss | ||
| Financial assets that need to be measured at fair value through profit or loss | -1,288 | 88,267 |
| Total | -1,288 | 88,267 |
| Net gains or net losses on trading in securities and foreign currencies | 1.1.-31.12.2020 | 1.1.-31.12.2019 |
| --- | --- | --- |
| Net gains or net losses on trading in securities by type | ||
| From shares and units | -1,288 | 88,267 |
| Sales profit and loss | - | 61,481 |
| Changes in fair value | -1,288 | 26,786 |
| Net gains or let losses on trading in securities, total | -1,288 | 88,267 |
| Net gains or net losses on trading in foreign currencies | -139 | -69 |
| Total | -1,426 | 88,198 |
4 INCOME FROM EQUITY INVESTMENTS
| 1.1.-31.12.2020 | 1.1.-31.12.2019 | |
|---|---|---|
| From group companies | 9,000,000 | 7,500,000 |
| Dividend income | 9,000,000 | 7,500,000 |
| From associated companies | - | 73,887 |
| Dividend income | - | 73,887 |
| Total | 9,000,000 | 7,573,887 |
5 INTEREST INCOME
| 1.1.-31.12.2020 | 1.1.-31.12.2019 | |
|---|---|---|
| From receivables from the public and general government | 480,102 | 656,932 |
| Other interest income | -142 | 1,040 |
| From group companies | 1,358,153 | 911,425 |
| Total | 1,838,113 | 1,569,397 |
6 OTHER OPERATING INCOME
| 1.1.-31.12.2020 | 1.1.-31.12.2019 | |
|---|---|---|
| From other companies | 4,642 | 7,580 |
| From group companies | 2,416,032 | 2,723,791 |
| Total | 2,420,674 | 2,731,371 |
Key figures
CEO's review
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TAALERI | 83
7 FEE AND COMMISSION EXPENSE
| 1.1.-31.12.2020 | 1.1.-31.12.2019 | |
|---|---|---|
| From other operations | 41,278 | 40,481 |
| Total | 41,278 | 40,481 |
8 INTEREST EXPENSES
| 1.1.-31.12.2020 | 1.1.-31.12.2019 | |
|---|---|---|
| From liabilities to credit institutions | 891,493 | 417,711 |
| From receivables from credit institutions | 11,246 | 4,969 |
| From debentures issued | 1,572,582 | 2,342,149 |
| From subordinated debts | 746,406 | 154,110 |
| Other interest expenses | 218 | 196 |
| Total | 3,221,945 | 2,919,135 |
9 PERSONNEL COSTS
| 1.1.-31.12.2020 | 1.1.-31.12.2019 | |
|---|---|---|
| Wages, salaries and fees | 2,629,797 | 2,577,056 |
| Pension expenses | 379,072 | 419,357 |
| Social security contributions | 22,843 | 46,000 |
| Total | 3,031,712 | 3,042,413 |
During the 2020 financial period, a total of EUR 1,148 (1,272) thousand in salaries and fees were paid to the Board of Directors, the CEOs and Deputy CEO including the voluntary pension insurance. During the financial period, the average number of personnel employed by the parent company was 17 (16).
The salaries and bonuses paid to the company's current and previous CEO in 2020 including fringe benefits and pension insurance amounted to EUR 731 (732) thousand. If his employment is terminated by the company, the CEO is entitled to severance pay corresponding to 12 months salary. The CEO is entitled to a statutory pension and his retirement age is determined within the framework of the statutory pension system. The company's CEOs are entitled to a voluntary pension insurance paid for by the company, which cost was EUR 180 (110) thousand in 2020.
10 OTHER ADMINISTRATIVE EXPENSES
| 1.1.-31.12.2020 | 1.1.-31.12.2019 | |
|---|---|---|
| Voluntary personnel expenses | 338,804 | 305,543 |
| Marketing and communication expenses | 238,780 | 364,719 |
| Group internal administrative services | 171,314 | 203,166 |
| Other expenses | 265,532 | 456,679 |
| Total | 1,014,429 | 1,330,107 |
11 DEPRECIATION, AMORTISATION AND IMPAIRMENT ON TANGIBLE AND INTANGIBLE ASSETS
| 1.1.-31.12.2020 | 1.1.-31.12.2019 | |
|---|---|---|
| Intangible assets | ||
| Planned depreciation | 7,105 | 19,030 |
| Total | 7,105 | 19,030 |
12 OTHER OPERATING EXPENSES
| 1.1.-31.12.2020 | 1.1.-31.12.2019 | |
|---|---|---|
| Premises and other leasing expenses | 26,732 | 17,498 |
| Equipment rental and leasing | 65,106 | 132,662 |
| Fees paid to the company's auditors | 109,356 | 123,954 |
| Auditing fees | 100,378 | 108,500 |
| Other | 8,978 | 15,454 |
| Other expenses | 1,912,667 | 1,526,835 |
| Total | 2,113,861 | 1,800,949 |
Key figures
CEO's review
Board of Directors' report
Group financial statements
Parent company financial statements
Signatures
Auditor's report
TAALERI
13 EXPECTED CREDIT LOSSES
| Amortised cost | |
|---|---|
| ECL 1.1.2020 | 8,258 |
| Additions due to purchases | 94 |
| Deductions due to derecognitions | - |
| Recognised in profit or loss | 94 |
| ECL 31.12.2020 | 8,352 |
| Amortised cost | |
| --- | --- |
| ECL 1.1.2019 | 16,237 |
| Additions due to purchases | 1,021 |
| Deductions due to derecognitions | -9,000 |
| Recognised in profit or loss | -7,979 |
| ECL 31.12.2019 | 8,258 |
All financial assets subject to ECL calculations are on level 1, i.e. the credit risk has not increased significantly. There are no realised credit losses recognised in the presented financial periods.
| 1.1.-31.12.2020 | 1.1.-31.12.2019 | |
|---|---|---|
| Expected credit losses from financial assets measured at amortised cost | -94 | 7,979 |
| Recognised in profit or loss | -94 | 7,979 |
14 APPROPRIATIONS
| 1.1.-31.12.2020 | 1.1.-31.12.2019 | |
|---|---|---|
| Group contributions received | 5,500,000 | 5,000,000 |
| Group contributions paid | - | 300,000 |
| Total | 5,500,000 | 4,700,000 |
15 TAXES
| 1.1.-31.12.2020 | 1.1.-31.12.2019 | |
|---|---|---|
| From profit for the financial period | 68,619 | 17,125 |
| Taxes from previous periods | -2,016 | - |
| Deferred taxes | -19 | 1,596 |
| Total | 66,584 | 18,721 |
Key figures
CEO's review
Board of Directors' report
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Parent company financial statements
Signatures
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TAALERI
NOTES TO THE BALANCE SHEET
16 RECEIVABLES FROM CREDIT INSTITUTIONS
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Repayable on demand | ||
| From domestic credit institutions | 1,735,620 | 13,448,693 |
| Receivables from credit institutions, total | 1,735,620 | 13,448,693 |
17 RECEIVABLES FROM THE PUBLIC AND GENERAL GOVERNMENT
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Other than repayable on demanded | ||
| Group *1 | 31,944,000 | 24,250,000 |
| Personnel | 306,035 | 306,129 |
| Other companies | 2,360,000 | 5,360,000 |
| Total | 34,610,035 | 29,916,129 |
| Total amount of subordinated receivables: | ||
| *1 Group internal | 31,944,000 | 24,250,000 |
18 DEBT SECURITIES
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Other than those issued by general government | ||
| Available for sale | ||
| Other debt securities (not publicly quoted) | 1,497,738 | 1,497,738 |
| Total | 1,497,738 | 1,497,738 |
19 SHARES AND UNITS
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Shares and units | 23,130 | 24,418 |
| Fair value through profit or loss | 18,896 | 20,183 |
| Fair value through other comprehensive income | 4,235 | 4,235 |
| - of which publicly quoted | 18,896 | 20,183 |
| - of which shares in funds | - | - |
| Shares and units in associated companies | 3,153,624 | 2,997,624 |
| Shares and units in group companies | 77,942,995 | 77,942,995 |
| Carrying amount total | 81,119,750 | 80,965,038 |
| - of which at acquisition cost | 81,100,855 | 80,944,855 |
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TAALERI
20 INTANGIBLE ASSETS
| 2020 | IT systems | Total |
|---|---|---|
| Acquisition cost 1 January | 85,659 | 85,659 |
| Acquisition cost 31 December | 85,659 | 85,659 |
| Accumulated depreciation, amortisation and impairment 1 January | 75,001 | 75,001 |
| Depreciation during the financial period | 7,105 | 7,105 |
| Accrued depreciation 31 December | 82,106 | 82,106 |
| Carrying amount 1 January | 10,658 | 10,658 |
| Carrying amount 31 December | 3,553 | 3,553 |
| 2019 | IT systems | Total |
| --- | --- | --- |
| Acquisition cost 1 January | 85,659 | 85,659 |
| Acquisition cost 31 December | 85,659 | 85,659 |
| Accumulated depreciation, amortisation and impairment 1 January | 55,971 | 55,971 |
| Depreciation during the financial period | 19,030 | 19,030 |
| Accrued depreciation 31 December | 75,001 | 75,001 |
| Carrying amount 1 January | 29,688 | 29,688 |
| Carrying amount 31 December | 10,658 | 10,658 |
21 OTHER ASSETS
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Group internal receivables | 1,129,639 | 18,620 |
| VAT receivables | 78,222 | 141,303 |
| Other | 3,501 | 31,738 |
| Total | 1,211,363 | 191,661 |
22 ACCRUED INCOME AND PREPAYMENTS
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Group internal | 3,202,844 | 3,642,090 |
| Accrued interest | 67,044 | 416,012 |
| Tax accruals | - | 23,443 |
| Other accrued income | 102,712 | 106,696 |
| Total | 3,372,600 | 4,188,241 |
23 DEFERRED TAX ASSETS
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| From expected credit losses | 1,670 | 1,652 |
| Total | 1,670 | 1,652 |
24 LIABILITIES TO CREDIT INSTITUTIONS
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Other than repayable on demanded | 14,938,748 | 25,929,151 |
| Total | 14,938,748 | 25,929,151 |
The instalment schedule was renegotiated during the spring 2020 due to the coronavirus pandemic. Taaleri Plc is in compliance with the monitored financial covenants (equity ratio >35% and receivables from credit institutions >EUR 6 million) for the loans. Part of Insurance Company Garantia's shares have been pledged for the loan, please see further details in Note 34 Guarantees and contingent liabilities.
25 DEBT SECURITIES ISSUED TO THE PUBLIC
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Publicly issued bonds | 34,936,919 | 34,874,547 |
| Total | 34,936,919 | 34,874,547 |
Taaleri Plc has issued one bond in 2016 and two in 2014, of which one was repaid in 2017 and one in 2019. The bond issued in 2016 is listed on the Nasdaq HEL Corporate Bond market and the bonds issued in 2014 were listed on the Nasdaq First North Bond Market Finland. See note 32 Debt securities issued to the public to the consolidated financial statements.
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TAALERI | 87
26 OTHER LIABILITIES
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Accounts payable | 142,355 | 77,197 |
| Other liabilities | 68,664 | 4,998 |
| Other group internal liabilities | 22,702 | 162,085 |
| Total | 233,721 | 244,279 |
27 ACCRUED EXPENSES AND DEFERRED INCOME
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Group internal accrued expenses | 16,220 | 314,824 |
| Holiday pay liability | 298,508 | 260,675 |
| Accrued interest | 202,816 | 364,772 |
| Accrued tax | 50,659 | 17,125 |
| Other accrued expenses | 625,769 | 716,146 |
| Total | 1,193,972 | 1,673,541 |
28 SUBORDINATED DEBTS
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Tier 2 bond | 14,839,051 | 14,824,813 |
| Total | 14,839,051 | 14,824,813 |
On 18.10.2019 Taaleri Plc issued Tier 2 notes totalling EUR 15 million. The Tier 2 Notes constitute a subordinated debt instrument, which is included in the Tier 2 capital referred to in Article 63 of Regulation (EU) No 575/2013 of the European Parliament and of the Council. The notes mature in ten years and bear a fixed interest rate of 5.0 per cent until 18 October 2024 and then onwards EUR 5-year mid-swap rate plus 5.33 per cent. The terms and conditions of the Notes include a call option after five years from the issuance and the company is also entitled to an early repayment before the call option under certain preconditions provided in the terms and conditions of the Notes.
29 ITEMS DENOMINATED IN DOMESTIC AND FOREIGN CURRENCY AND CONSOLIDATED ITEMS
| 2020 | EUR | Other than EUR | Total | Group internal |
|---|---|---|---|---|
| Receivables from credit institutions | 1,735,620 | - | 1,735,620 | |
| Receivables from the public and general government | 34,610,035 | - | 34,610,035 | 31,944,000 |
| Debt securities | 1,497,738 | - | 1,497,738 | |
| Shares and units | 81,119,750 | - | 81,119,750 | 77,942,995 |
| Other assets | 4,589,185 | - | 4,589,185 | 4,332,484 |
| Total | 123,552,329 | - | 123,552,329 | 114,219,479 |
| Liabilities to credit institutions | 14,938,748 | - | 14,938,748 | |
| Debt instruments issued to the public | 34,936,919 | - | 34,936,919 | |
| Subordinated debt | 14,839,051 | - | 14,839,051 | |
| Other liabilities | 1,427,693 | - | 1,427,693 | 38,922 |
| Total | 66,142,410 | - | 66,142,410 | 38,922 |
| 2019 | EUR | Other than EUR | Total | Group internal |
| --- | --- | --- | --- | --- |
| Receivables from credit institutions | 13,448,693 | - | 13,448,693 | |
| Receivables from the public and general government | 29,916,129 | - | 29,916,129 | 24,250,000 |
| Debt securities | 1,497,738 | - | 1,497,738 | |
| Shares and units | 80,965,038 | - | 80,965,038 | 77,942,995 |
| Other assets | 4,392,211 | - | 4,392,211 | 3,660,710 |
| Total | 130,219,809 | - | 130,219,809 | 105,853,706 |
| Liabilities to credit institutions | 25,929,151 | - | 25,929,151 | |
| Debt instruments issued to the public | 34,874,547 | - | 34,874,547 | |
| Subordinated debt | 14,824,813 | - | 14,824,813 | |
| Other liabilities | 1,917,821 | - | 1,917,821 | 476,909 |
| Total | 77,546,331 | - | 77,546,331 | 476,909 |
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TAALERI | 88
30 CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES
Financial assets and liabilities 31 December 2020
| Financial assets | Amortised cost | At fair value through other comprehensive income | At fair value through profit or loss | ||
|---|---|---|---|---|---|
| Equity instruments^{4)} | Others | Equity instruments | Others | ||
| Receivables from credit institutions^{1)} | 1,735,620 | ||||
| Receivables from the public and general government | 15,750,035 | 18,860,000 | |||
| Debt securities | 1,497,738 | ||||
| Shares and units^{5)} | 4,235 | 18,896 | |||
| Other financial assets | |||||
| Financial assets total | 18,983,393 | 4,235 | - | 18,878,896 | - |
| Participating interests | |||||
| Shares and units in group entities | |||||
| Other than financial assets | |||||
| Assets in total 31 December 2020 | |||||
| Financial liabilities | At fair value through profit or loss | Other liabilities | Total | ||
| --- | --- | --- | --- | ||
| Liabilities to credit institutions | 14,938,748 | 14,938,748 | |||
| Debt securities issued to the public^{2)} | 34,936,919 | 34,936,919 | |||
| Subordinated debt | 14,839,051 | 14,839,051 | |||
| Other financial liabilities | 1,377,034 | 1,377,034 | |||
| Financial liabilities total | - | 66,091,751 | 66,091,751 | ||
| Other than financial liabilities | 50,659 | ||||
| Liabilities in total 31 December 2020 | 66,142,410 |
1) The carrying amount of these receivables are seen as the best estimate of their fair values.
2) Bonds included in Debt securities issued to the public are carried at amortised cost. Their fair value on 31 December 2020 was 50,639,315 (51,124,686) euros.
3) Shares and units are measured at fair value.
4) At initial recognition the company's non-strategic investments are specifically classified as measured at fair value through profit or loss. Thus, dividend yields are recognised in profit or loss, but changes in fair value, foreign exchange rate gains and losses as well as sales gains and losses are recognised in other comprehensive income. These are not later recycled to profit or loss. The classification as a non-strategic investment is made instrument-by-instrument by management. Non-strategic investments include small investments in limited partnerships associated to Taaler's private equity funds and equity investments in private companies not directly associated to Taaler's business strategy. On 31 December 2020 the fair value of non-strategic investments was 4,235 (4,235) euros, of which none paid dividends in 2020 or 2019. No non-strategic investments were derecognised in 2020 or 2019.
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TAALERI
Financial assets and liabilities 31 December 2019
| Financial assets | Amortised cost | At fair value through other comprehensive income | At fair value through profit or loss | Total | ||
|---|---|---|---|---|---|---|
| Equity instruments^{a)} | Others | Equity instruments | Others | |||
| Receivables from credit institutions^{1)} | 13,448,693 | 13,448,693 | ||||
| Receivables from the public and general government | 9,056,129 | 20,860,000 | 29,916,129 | |||
| Debt securities | 1,497,738 | 1,497,738 | ||||
| Shares and units^{2)} | 4,235 | 20,183 | 24,418 | |||
| Other financial assets | 4,122,662 | 4,122,662 | ||||
| Financial assets total | 28,125,222 | 4,235 | - | 20,880,183 | - | 49,009,640 |
| Participating interests | 2,997,624 | |||||
| Shares and units in group entities | 77,942,995 | |||||
| Other than financial assets | 269,549 | |||||
| Assets in total 31 December 2019 | 130,219,809 | |||||
| Financial liabilities | At fair value through profit or loss | Other liabilities | Total | |||
| --- | --- | --- | --- | |||
| Liabilities to credit institutions | 25,929,151 | 25,929,151 | ||||
| Debt securities issued to the public^{2)} | 34,874,547 | 34,874,547 | ||||
| Subordinated debt | 14,824,813 | 14,824,813 | ||||
| Other financial liabilities | 1,900,696 | 1,900,696 | ||||
| Financial liabilities total | - | 77,529,206 | 77,529,206 | |||
| Other than financial liabilities | 17,125 | |||||
| Liabilities in total 31 December 2019 | 77,546,331 |
1) The carrying amount of these receivables are seen as the best estimate of their fair values.
2) Bonds included in Debt securities issued to the public are carried at amortised cost. Their fair value on 31 December 2019 was 51,124,686 euros.
3) Shares and units are measured at fair value.
4) At initial recognition the company's non-strategic investments are specifically classified as measured at fair value through profit or loss. Thus, dividend yields are recognised in profit or loss, but changes in fair value, foreign exchange rate gains and losses as well as sales gains and losses are recognised in other comprehensive income. These are not later recycled to profit or loss. The classification as a non-strategic investment is made instrument-by-instrument by management. Non-strategic investments include small investments in limited partnerships associated to Taaleri's private equity funds and equity investments in private companies not directly associated to Taaleri's business strategy. On 31 December 2019 the fair value of non-strategic investments was 4,235 euros, of which none paid dividends in 2019. No non-strategic investments were derecognised in 2019.
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TAALERI | 90
31 FAIR VALUES AND CARRYING AMOUNTS OF FINANCIAL ASSETS AND LIABILITIES, AND FAIR VALUE HIERARCHY
| 2020 | Carrying amount | Fair value |
|---|---|---|
| Financial assets | ||
| Receivables from credit institutions | 1,735,620 | 1,735,620 |
| Receivables from the public and general government | 34,610,035 | 34,610,035 |
| Debt securities | 1,497,738 | 1,507,906 |
| Shares and units | 23,130 | 23,130 |
| Total | 37,866,524 | 37,876,692 |
| Financial liabilities | ||
| Liabilities to credit institutions | 14,938,748 | 15,000,000 |
| Debt securities issued to the public | 34,936,919 | 35,485,205 |
| Subordinated debt | 14,839,051 | 15,154,110 |
| Total | 64,714,718 | 65,639,315 |
| 2019 | Carrying amount | Fair value |
| --- | --- | --- |
| Financial assets | ||
| Receivables from credit institutions | 13,448,693 | 13,448,693 |
| Receivables from the public and general government | 29,916,129 | 32,130,737 |
| Debt securities | 1,497,738 | 1,730,267 |
| Shares and units | 24,418 | 24,418 |
| Total | 44,886,978 | 47,334,115 |
| Financial liabilities | ||
| --- | --- | --- |
| Liabilities to credit institutions | 25,929,151 | 26,161,944 |
| Debt securities issued to the public | 34,874,547 | 35,966,899 |
| Subordinated debt | 14,824,813 | 15,154,110 |
| Total | 75,628,510 | 77,282,953 |
Financial instruments measured at fair value
| 2020 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Shares and units | ||||
| Fair value through profit or loss | 18,896 | 18,896 | ||
| Fair value through other comprehensive income | 4,235 | 4,235 | ||
| Receivables from the public and general government | 18,860,000 | 18,860,000 | ||
| Total | 18,896 | 18,860,000 | 4,235 | 18,883,130 |
| 2019 | Level 1 | Level 2 | Level 3 | Total |
| --- | --- | --- | --- | --- |
| Shares and units | ||||
| Fair value through profit or loss | 20,183 | 20,183 | ||
| Fair value through other comprehensive income | 4,235 | 4,235 | ||
| Receivables from the public and general government | 20,860,000 | 20,860,000 | ||
| Total | 20,183 | 20,860,000 | 4,235 | 20,884,418 |
LEVELS OF HIERARCHY
Level 1: Fair values are based on the prices quoted on the active market on identical assets or liabilities.
Level 2: Fair values are based on information other than quoted prices included within level 1 that are observable for the asset or liability, either directly (from prices) or indirectly (derived from prices). When measuring the fair value of these instruments, Taaleri Group uses generally accepted valuation models whose information is based to a significant degree on verifiable market information.
Level 3: Fair values are based on information concerning an asset or liability, which is not based on verifiable market information. Level 3 assets are mainly valued at a price received from an external party or, if no reliable fair value is available/ determinable, at purchase price.
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TAALERI
32 MATURITY ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES
| 31.12.2020 | <3 months | 3-12 months | 1-5 years | 5-10 years | Total |
|---|---|---|---|---|---|
| Receivables from credit institutions | 1,735,620 | 1,735,620 | |||
| Receivables from the public and general government¹) | 18,116,125 | 16,500,000 | 34,616,125 | ||
| Debt securities | 1,500,000 | 1,500,000 | |||
| Liabilities to credit institutions¹) | 2,500,000 | 12,500,000 | 15,000,000 | ||
| Debt securities issued to the public¹) | 35,000,000 | 35,000,000 | |||
| Subordinated debt | 15,000,000 | 15,000,000 | |||
| 31.12.2019 | <3 months | 3-12 months | 1-5 years | 5-10 years | Total |
| --- | --- | --- | --- | --- | --- |
| Receivables from credit institutions | 13,448,693 | 13,448,693 | |||
| Receivables from the public and general government¹) | 8,750,000 | 5,672,125 | 15,500,000 | 29,922,125 | |
| Debt securities | 1,500,000 | 1,500,000 | |||
| Liabilities to credit institutions¹) | 6,000,000 | 20,000,000 | 26,000,000 | ||
| Debt securities issued to the public¹) | 35,000,000 | 35,000,000 | |||
| Subordinated debt | 15,000,000 | 15,000,000 |
¹) The maturity of financial assets and liabilities are shown at their original value before impairments.
33 INCREASES AND DECREASES OF EQUITY DURING THE FINANCIAL PERIOD
| 1.1.2020 | Increase | Decrease | 31.12.2020 | |
|---|---|---|---|---|
| Share capital | 125,000 | 125,000 | ||
| Reserve for invested non-restricted equity | 36,139,665 | 36,139,665 | ||
| Retained earnings or loss | 16,408,813 | 4,528,899 | 11,879,914 | |
| Profit (loss) for the period | - | 9,265,340 | 9,265,340 | |
| Total | 52,673,478 | 9,265,340 | 4,528,899 | 57,409,919 |
| Parent company distributable assets 31 December 2020 | 57,284,919 | |||
| 1.1.2019 | Increase | Decrease | 31.12.2019 | |
| --- | --- | --- | --- | --- |
| Share capital | 125,000 | 125,000 | ||
| Reserve for invested non-restricted equity | 36,139,665 | 36,139,665 | ||
| Retained earnings or loss | 17,394,801 | 8,491,686 | 8,903,115 | |
| Profit (loss) for the period | - | 7,505,698 | 7,505,698 | |
| Total | 53,659,467 | 7,505,698 | 8,491,686 | 52,673,478 |
Parent company distributable assets 31 December 2019 52,548,478
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TAALERI
NOTES CONCERNING GUARANTEES AND CONTINGENT LIABILITIES
34 GUARANTEES AND CONTINGENT LIABILITIES
| Off balance sheet items | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Pledged securities | 15,000,000 | 10,000,000 |
| Credit limits (unused) | 5,000,000 | 5,000,000 |
| Total | 20,000,000 | 15,000,000 |
35 PENSION LIABILITIES
Statutory pension cover for the company's employees and management is arranged through a TyEL insurance policy. Additional voluntary pension insurance has been taken out for the company's management. The company has no unrecognised pension liabilities.
36 LEASING AND OTHER RENTAL LIABILITIES
| 31.12.2020 | <1 year | 1-5 years |
|---|---|---|
| Leasing payments | 69,993 | 34,356 |
| Total | 69,993 | 34,356 |
| 31.12.2019 | <1 year | 1-5 years |
| --- | --- | --- |
| Leasing payments | 47,581 | 37,792 |
| Total | 47,581 | 37,792 |
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TAALERI | 93
LIST OF ACCOUNTING BOOKS USED
List of accounting journals
| Income Statement | in paper form |
|---|---|
| Balance sheet | in paper form |
| Journal | in paper form |
| General ledger | in paper form |
| Purchases ledger | in electronic form |
| Salary bookkeeping | outsourced |
Document types and means of storage
| TITO | Bank statements | in paper form |
|---|---|---|
| NRD | Nordea bank statements | in paper form |
| DANSKE | Danske Bank statements | in paper form |
| MUTI | Other bank statements | in paper form |
| EL | Electronic purchase invoices | in electronic form |
| M2 | Travel expense entries | in electronic form |
| PT | General ledger entries | in paper form |
| JT | Accrual entries | in paper form |
| MT | Memo vouchers | in paper form |
All bookkeeping material is kept at the company's own premises as required by law.
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TAALERI
SUBSIDIARIES AND ASSOCIATED COMPANIES
| Parent company | Registered office | Business ID | |
|---|---|---|---|
| Taaleri Oyj | Helsinki | 2234823-5 | |
| Parent company's direct shareholdings | Registered office | Business ID | Group ownership |
| Taaleri Energia Oy | Helsinki | 2772984-6 | 78.55% |
| Taaleri Pääomarahastot Oy | Helsinki | 2264327-7 | 100.00% |
| Taaleri Sijoitus Oy | Helsinki | 2432616-0 | 100.00% |
| Taaleri Varainhoito Oy | Helsinki | 2080113-9 | 100.00% |
| Vakuutusosakeyhtiö Garantia | Helsinki | 0944524-1 | 100.00% |
| Subgroup of Taaleri Varainhoito Oy | Registered office | Business ID | Group ownership |
| --- | --- | --- | --- |
| Evervest Oy | Helsinki | 2710163-7 | 100.00% |
| Taaleri Rahastoyhtiö Oy | Helsinki | 2062840-1 | 100.00% |
| Taaleri Veropalvelut Oy | Helsinki | 2504066-6 | 100.00% |
| Taaleri Asunnot GP Oy | Helsinki | 3164868-6 | 100.00% |
| TT Syöttörahasto GP Oy | Helsinki | 2504070-3 | 100.00% |
| TT Syöttörahasto II GP Oy | Helsinki | 2677052-1 | 100.00% |
| TT Syöttörahasto III GP Oy | Helsinki | 2637390-5 | 100.00% |
| Subgroup of Taaleri Sijoitus Oy | Registered office | Business ID | Group ownership |
| --- | --- | --- | --- |
| Mobify Invoicing Oy (ent. ClarkApps Oy) | Turku | 2714418-6 | 61.82% |
| Taaleri Biohiili GP Oy | Helsinki | 3151705-3 | 100.00% |
| Taaleri Biojalostamo GP Oy | Helsinki | 3115228-5 | 100.00% |
| Taaleri Datacenter GP Oy | Helsinki | 2859905-1 | 100.00% |
| Taaleri Geoenergia GP Oy | Helsinki | 2808431-4 | 100.00% |
| Taaleri Kapitaali Oy | Helsinki | 2772994-2 | 70.00% |
| Galubaltis GP Oy | Helsinki | 2840499-8 | 100.00% |
| Taaleri Merenkulku GP Oy | Helsinki | 2766357-6 | 100.00% |
| Taaleri Telakka GP Oy | Helsinki | 2743458-9 | 100.00% |
| Taaleri Varustamo GP Oy | Helsinki | 2870420-2 | 100.00% |
| Erdwärme Oberland GmbH | Munchen, Saksa | HRB 180649 | 82.47% |
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TAALERI
| Subgroup of Taaleri Pääomarahastot Oy | Registered office | Business ID | Group ownership |
|---|---|---|---|
| Taaleri Aurinkotuuli GP Oy | Helsinki | 2787459-2 | 100.00% |
| Taaleri Aurinkotuuli II GP Oy | Helsinki | 2948690-5 | 100.00% |
| Taaleri Afrikka Rahaston hallinnointiyhtiö Oy | Helsinki | 2606112-7 | 100.00% |
| Taaleri Afrikka Rahasto II GP Oy | Helsinki | 2772992-6 | 100.00% |
| Taaleri Porin Asuntorahaston hallinnointiyhtiö Oy | Helsinki | 2364138-8 | 100.00% |
| Taaleri Rauman Asuntorahaston hallinnointiyhtiö Oy | Helsinki | 2373394-4 | 100.00% |
| Taaleri Asuntorahasto VI hallinnointiyhtiö Oy | Helsinki | 2481017-1 | 100.00% |
| Taaleri Asuntorahasto VII GP Oy | Helsinki | 3161704-6 | 100.00% |
| Taaleri Kasvurahastot I GP Oy | Helsinki | 3011817-3 | 100.00% |
| Taaleri Kiertotalous GP Oy | Helsinki | 2745010-8 | 100.00% |
| Taaleri Kiinteistökehitysrahaston hallinnointiyhtiö Oy | Helsinki | 2689264-1 | 100.00% |
| Taaleri Linnainmaankulman hallinnointiyhtiö Oy | Helsinki | 2413559-1 | 100.00% |
| Taaleri Biotehtaan hallinnointiyhtiö Oy | Helsinki | 2459599-3 | 100.00% |
| Taaleri Metsärahaston hallinnointiyhtiö Oy | Helsinki | 2512332-2 | 100.00% |
| Taaleri Metsärahasto III hallinnointiyhtiö Oy | Helsinki | 2652535-8 | 100.00% |
| Taaleri Georahasto I GP Oy | Helsinki | 2873880-8 | 100.00% |
| Taaleri Oaktree Syöttörahaston hallinnointiyhtiö Oy | Helsinki | 2442491-6 | 100.00% |
| Taaleri Ovitehtaan hallinnointiyhtiö Oy | Helsinki | 2577306-9 | 100.00% |
| Taaleri Päiväkotikiinteistöt GP Oy | Helsinki | 2993761-4 | 100.00% |
| Taaleri Tallikiinteistöt GP Oy | Helsinki | 2921262-1 | 100.00% |
| Taaleri Tonttirahaston hallinnointiyhtiö Oy | Helsinki | 2669135-6 | 100.00% |
| Taaleri Tonttirahasto II GP Oy | Helsinki | 2781839-8 | 100.00% |
| Taaleri Tuulitehtaan hallinnointiyhtiö Oy | Helsinki | 2382657-7 | 80.00% |
| Nybyn TP Oy | Helsinki | 2557805-2 | 100.00% |
| Myllykankaan TP Oy | Helsinki | 2577307-7 | 100.00% |
| Taaleri Tuulitehdas II hallinnointiyhtiö Oy | Helsinki | 2623494-8 | 100.00% |
| Taaleri Tuulitehdas III GP Oy | Helsinki | 2748305-7 | 100.00% |
| Taaleri Tuulirahasto IV GP Oy | Helsinki | 2990792-5 | 100.00% |
| Taaleri Tuuli II Feeder GP Oy | Helsinki | 3155719-4 | 100.00% |
| Taaleri Tuuli III Feeder GP Oy | Helsinki | 3155720-7 | 100.00% |
| Taaleri Aurinkotuuli Feeder GP Oy | Helsinki | 3155769-6 | 100.00% |
| Taaleri Velkarahastot I GP Oy | Helsinki | 3133283-3 | 100.00% |
| Taaleri Vuokrakoti GP Oy | Helsinki | 2787453-3 | 100.00% |
| Subgroup of Taaleri Energia Oy | Registered office | Business ID | Group ownership |
| --- | --- | --- | --- |
| Taaleri Energia Funds Management Oy | Helsinki | 2833245-3 | 100.00% |
| Taaleri Energia Operations Oy | Helsinki | 2710646-2 | 100.00% |
| Oltavan Tuulipuisto GP Oy | Helsinki | 2992126-8 | 100.00% |
| Posion TP Oy | Helsinki | 2994201-8 | 100.00% |
| Siikajoen TP Oy | Helsinki | 3167933-5 | 100.00% |
| Taaleri Energia Holding S.a.r.l. | Luxemburg | B223063 | 100.00% |
| Taaleri Energia North America LLC | Delaware, USA | 6716103 | 100.00% |
| Taaleri Solarwind II GP S.a.r.l. | Luxemburg | B232448 | 100.00% |
| Global Evenor SL | Madrid | B88293154 | 100.00% |
| Taaleri Energia Iberia SL | Madrid | B88293139 | 100.00% |
| Global Berserker SL | Madrid | B88365135 | 100.00% |
| Eldorado Solar Power Holding LLC | USA | 0803524720 | 100.00% |
| Eldorado Solar Power LLC | USA | 0803524711 | 100.00% |
| Deville Holding LLC | USA | 0803524735 | 100.00% |
| Deville Solar LLC | USA | 0803524732 | 100.00% |
| Associated companies consolidated using the equity method | Registered office | Business ID | Group ownership |
| --- | --- | --- | --- |
| Fellow Finance Oyj | Helsinki | 2568782-2 | 25.91% |
| Sepos Oy | Helsinki | 2614256-8 | 30.00% |
| Taaleri Datacenter Ky | Helsinki | 2842816-4 | 29.50% |
| Turun Toriparkki Oy | Turku | 2034713-2 | 48.15% |
| Munkkiniemi Group Oy | Helsinki | 2910063-8 | 47.00% |
| Hernesaaren Kehitys Oy | Helsinki | 2953535-9 | 33.32% |
| Taaleri SolarWind II SPV Sarl | Luxemburg | B234588 | 50.00% |
| Masdar Taaleri Generation | Belgrad, Serbia | 21511501 | 50.00% |
Key figures | CEO's review | Board of Directors' report | Group financial statements | Parent company financial statements | Signatures | Auditor's report
TAALERI | 96
SIGNATURES FOR THE FINANCIAL STATEMENTS AND BOARD OF DIRECTORS' REPORT
Helsinki 18th February 2021
Juhani Elomaa
Chairman of the Board of Directors
Elina Björklund
Member of the Board of Directors
Juhu Laaksonen
Vice Chairman of the Board of Directors
Petri Castrén
Member of the Board of Directors
Tuomas Syrjänen
Member of the Board of Directors
The Auditor's note
Our auditor's report has been issued today.
Helsinki 18th February 2021
Ernst & Young Oy
Authorized audit firm
Ulla Nykky
Authorised Public Accountant
Robin Lindahl
Chief Executive Officer
Key figures
CEO's review
Board of Directors' report
Group financial statements
Parent company financial statements
Signatures
Auditor's report
TAALERI | 97
AUDITOR'S REPORT
(Translation of the Finnish original)
To the Annual General Meeting of Taaleri Plc
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
OPINION
We have audited the financial statements of Taaleri Plc (business identity code 2234823-5) for the year ended 31 December, 2020. The financial statements comprise the consolidated balance sheet, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies, as well as the parent company's balance sheet, income statement, statement of cash flows and notes.
In our opinion
- the consolidated financial statements give a true and fair view of the group's financial position as well as its financial performance and its cash flows in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
- the financial statements give a true and fair view of the parent company's financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements.
Our opinion is consistent with the additional report submitted to the Audit Committee.
BASIS FOR OPINION
We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report.
We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies are in compliance with laws and regulations applicable in Finland regarding these services, and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we have provided have been disclosed in note 14 to the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.
We have also addressed the risk of management override of internal controls. This includes consideration of whether there was evidence of management bias that represented a risk of material misstatement due to fraud.
| Key Audit Matter | How our audit addressed the Key Audit Matter |
|---|---|
| Revenue recognition of fee and commission income | |
| We refer to the point 2.15 in Summary of key accounting policies on the financial statements and the note 3. |
Fee and commission income in the consolidated group accounts amounted to 49,2 million euros. Fee and commission income is based, for example, on fund units, asset management, securities brokerage and the issuance of securities. Some of the fees and commissions are performance based.
Revenue recognition was determined to be a key audit matter and a significant risk of material misstatement referred to in EU Regulation No 537/2014 point (c) of Article 10(2). | To address the risk of material misstatement in respect of revenue recognition our audit procedures included, among other things, assessing the compliance of the Group's accounting policies over revenue recognition of the fees and commissions with applicable accounting standards. We also identified and tested the key controls relating to revenue recognition.
We tested the sales cutoff with analytical procedures. We supplemented our procedures with test of details on a transaction level in order to assure that the fees and commissions have been recognized in a right accounting period and they are in compliance with the corresponding agreements. In addition, we also assessed the adequacy of disclosures relating to the fee and commission income of the group. |
| Valuation of technical provisions
We refer to the point 2.8 in Summary of key accounting policies on the financial statements and note 24.
At the balance sheet date 31.12.2020 the value of technical provisions amounted to 34,7 million euros.
The amount comprises mostly provisions from unearned premiums and claims outstanding relating to the guaranty services of the group.
The assessment of technical provisions includes management assumptions and estimates relating to future amounts to be paid and still unknown claims. | Our audit procedures included, among other things, the assessment of the process relating to the identification and evaluation of the provisions as well as identification of key controls. In connection with the audit, we also assessed the methodologies and assumptions used.
We involved our own internal actuarial specialist to assist us in assessing the estimates and assumptions used.
We also assessed the adequacy of disclosures relating to insurance liabilities. |
Key figures
CEO's review
Board of Directors' report
Group financial statements
Parent company financial statements
Signatures
Auditor's report
TAALERI | 98
| Key Audit Matter | How our audit addressed the Key Audit Matter |
|---|---|
| Valuation of goodwill | |
| We refer to the point 2.3 in Summary of key accounting policies on the financial statements and note 27. |
At the balance sheet date December 31, 2020, the value of goodwill amounted to 5,1 million euros.
Valuation of goodwill was significant to our audit because the annual impairment test is judgmental and is based on the assumptions relating to markets and economic conditions.
The recoverable amount of a cash generating unit is based on value-in-use calculations. There are a number of assumptions used to determine the value in use, including the revenue growth, the operating margin and the discount rate applied. Changes in the above-mentioned assumptions may result in an impairment of goodwill. | In connection with our audit our internal valuation experts assisted us in evaluating the assumptions and methodologies used by the management.
Our audit procedures included, among others, assessing estimated growth and profitability as well as the discount rate. We compared the used estimations to market data.
We reviewed the sensitivity in the available headroom by cash generating unit and focused on whether any reasonably possible change in assumptions could cause the carrying amount to exceed its recoverable amount.
We assessed the disclosures in respect of goodwill impairment testing. |
RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND THE MANAGING DIRECTOR FOR THE FINANCIAL STATEMENTS
The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company's and the group's ability to continue as going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
-
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company's or the group's internal control.
-
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of the Board of Directors' and the Managing Director's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company's or the group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
Key figures
CEO's review
Board of Directors' report
Group financial statements
Parent company financial statements
Signatures
Auditor's report
TAALERI | 99
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
OTHER REPORTING REQUIREMENTS
INFORMATION ON OUR AUDIT ENGAGEMENT
We were first appointed as auditors in 2007, and our appointment represents a total period of uninterrupted engagement of 14 years. Taaleri Plc has been a Public Interest Entity since April 1st 2016.
OTHER INFORMATION
The Board of Directors and the Managing Director are responsible for the other information. The other information comprises the report of the Board of Directors.
Our opinion on the financial statements does not cover the other information.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to report of the Board of Directors, our responsibility also includes considering whether
the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.
In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements and the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Helsinki 18 February 2021
Ernst & Young Oy
Authorized Public Accountant Firm
Ulla Nykky
Authorized Public Accountant
TAALERI
Taaleri Plc.
Kasarmikatu 21 B
00130 Helsinki
Business ID 2234823-5
[email protected]
+358 46 714 7100
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