Folksam Liv, Sweden’s biggest life insurer by market share, saw a sharp decline in premium income in the first half of this year after it pushed through major changes in its with-profits life products last year.

The life and pensions arm of Swedish mutual Folksam reported a 42% slide in premiums written to SEK5.18bn (€543m) from SEK8.94bn in the same period to June last year.

In 2015, Folksam made changes to its traditional life-insurance product by separating old and new capital with a mid-year cut-off point and applying different bonus rates for each.

It did this to reduce one-off deposits aimed only at sharing in its bonus interest programme; new capital pays out only half the percentage bonus rate applied to old capital.

The move has had the desired effect of decreasing one-off premiums and increasing monthly instalment payments, Folksam said in the report.

“As a result, we are ensuring our customers will continue to experience long-term, secure retirement savings,” it said.

Private savings into traditional pensions dropped to SEK2.6bn from SEK3.8bn.

Chief executive Jens Henriksson said the company’s biggest challenge was to achieve a return on assets under management amid negative interest rates and stock-market turbulence.

He said the Brexit vote, while heightening uncertainty, could also provide opportunities for long-term investors.

“Even though it is difficult to foresee the long-term economic consequences of this, Folksam and its subsidiaries can, as a well-capitalised investor, withstand downturns in its investments,” Henriksson said.

Folksam Liv’s solvency ratio dipped to 155% at the end of June from 162% at the same point in 2015.

The decline was due to lower market interest rates, which increased the technical provisions.

The total return for the period amounted to 2.6%, down from 3.7%.

“Equity assets in the portfolio,” the company said, “developed slightly negatively during the period, while fixed interest securities and, above all, real estate contributed positively.”

AUM rose to SEK168bn at the end of June from SEK164bn at the end of December.

Solvency levels at Folksam subsidiary KPA Pension, the local government sector pension fund, fell to 154% at the end of June from 166% at the end of December 2015. 

As with Folksam Liv, this weakening was due to low market interest rates that had increased technical provisions.

KPA’s overall return fell to 1.9% in the first half from 4% in the first half of 2015. 

Premium income increased during the six-month period to KPA Pension by just over 3% to SEK10.6bn from SEK10.3bn.

KPA’s assets under management grew to SEK144bn at the end of June from SEK132bn at the end of December.