Safety at work for 90 percent of all Swedish employees INSURANCE

AFA Insurance meets employees financial security needs at an affordable cost. Our insurance policies are determined in collective agreements between the parties in the labour market. They provide financial support in the event of illness, work injury, shortage of work, death and parental leave. We provide insurance cover for more than 4.5 million employees in the private sector, local authorities, county councils and regional government (90 percent of Swedish workers) and have approximately SEK 200 billion under management. We support research and projects that actively promote health and safety at work in Sweden. AFA Insurance has approximately 650 employees and is owned by the Swedish Trade Union Confederation, the Confederation of Swedish Enterprise and the Council for Negotiation and Co-operation. 2

The bigger picture The Swedish labour market has a long tradition of independence from the state. Strong and credible social partners, unusually high levels of organisation and a steadfast determination to reach a consensus have made the Swedish model wellknown throughout the world. No less than 90 percent of all employees are covered by the Swedish collective bargaining agreements. As an insurance company at the service of the Swedish collective bargaining agreement, we provide security for all these people, their families and relatives. We are proud to be able to say that we make a difference to so many people. But we have a greater mission. To bring significant and long-term benefits to Swedish working life. That s why we think and act differently to many of our peers. Our story is part of the story of Sweden. 3

The Swedish model Let s turn the clock back almost one century to the early 1920s. Sweden has a population of about 5.5 million and has managed to avoid direct involvement in the First World War. Yet there is no lack of conflicts within its own borders. FROM BATTLE TO PEACE The Swedish labour market is now one of the most turbulent in Europe, with a wave of strikes and lockouts arising from bitter clashes between employers and unions. In 1928, the Swedish Parliament passes an act for the peaceful resolution of industrial disputes through collective bargaining. This allows the parties to deal with conditions and conflicts themselves through negotiations without state intervention a basic principle that still applies in Sweden today. AN HISTORIC AGREEMENT Ten years later, in 1938, the names of a group of visionaries go down in Swedish history. They successfully conclude the first signed basic agreement between the labour market parties. This Swedish spirit of consensus and willingness to co-operate is still known as the Saltsjöbaden spirit, named after the fashionable Stockholm suburb where the agreement was signed. These events serve as a framework for what comes to be known as the Swedish model. However, another 25 years must pass before insurance comes onto the scene. The Saltsjöbaden Agreement defines rules for negotiation procedures, dismissal of workers, industrial action and strikes in the labour market. Directives on minimum wages, working hours and holiday entitlement were later added. 5

Helping the widows In 1962, a new landmark resolution is adopted in negotiations between the parties in the labour market. This time, it is an insurance policy for the benefit of a particularly vulnerable group of people. NOTHING IS IMPOSSIBLE This is an age of unlimited worldwide confidence in the future. The Beatles take the world by storm with their first single Love Me Do. People start to travel in space with their sight set on the moon. It seems that anything is possible. Even the standard of living attains new heights. Sweden moves towards the top of the list of Europe s wealthiest countries. Under the Swedish model, no legislation on collectively agreed insurance terms is required. The parties in the labour market are large, knowledgeable and equal and are considered best able to manage the terms. NO SAFETY NET At the same time, there are more than 1.1 million housewives in Sweden women who toil away but are still dependent on incomes from their working husbands. An entire family s income can vanish overnight with the tragic news that the husband has died at work. Amidst all the confidence in the future, widows and their children are forced to leave their homes. AN INSURANCE COMPANY IS BORN Within the framework of the collective agreement, a decision is taken to create a life insurance policy that will help widows to cope financially. No sooner said than done. AFA (the Labour Market Insurance Limited Liability Company) is formed. The first collectively agreed insurance policy becomes effective on 1 January 1963. 6

The Swedish labour market today Few other countries in the world have such a high degree of organisation as Sweden. No less than 70 percent of employees and employers on average belong to an organised body of labour. CLEAR SET OF RULES By tradition, this makes the social partners strong and credible. In practice, this counters short-term political fluctuations. A clear set of rules, predictability and stability are distinguishing characteristics of the Swedish labour market from an international point of view. Strong social partners also help to achieve good standards of health and safety at work. In concrete terms, this means there are health and safety representatives in our workplaces. This would not have been possible without agreements between strong social partners. SOLIDARITY PRINCIPLE In the Swedish labour market, premiums are based on the principle of solidarity in the collectively agreed insurance schemes. The insurance premium is the same for everyone, lawyers and miners alike. You might find that surprising. But you have to take into account that the large volumes make it possible to keep premiums at a level that is sometimes close to zero. I M C S Insurance in the Swedish labour market from bottom to top. S) Statutory social insurance, C) additional collectively agreed insurance, M) insurance for members in certain unions and I) individual insurance schemes. INSURANCE AT WORK 90 percent of all employees in Sweden are automatically covered by collectively agreed insurance policies through their employment contracts. Collectively agreed insurance is additional protection on top of the statutory social insurance which all workers in Sweden have. 9

Advantages of collectively agreed insurance Collectively agreed insurance entitles you to financial support while working when you are employed, and after work when you have retired. We manage the insurance policies that provide support to working employees. OUR FIVE INSURANCE POLICIES The life insurance policy that was introduced in 1963 is still here today. It provides financial protection to relatives of workers who lose their lives while doing their job. Over the years, four more insurance policies have been introduced. These provide financial protection in the event of longterm illness, and accident or injury at work or on the way to and from work. They also provide financial assistance if the employee is dismissed due to labour shortage, and cover for payment of premiums to pensions for employees who are pregnant or on parental leave. Equal treatment means that no employee at a company with a collective agreement may be refused insurance cover regardless of background or state of health. DIVERSIFICATION OF RISKS One of the chief advantages of collectively bargained insurance is risk diversification. The insurance policies cover practically the entire Swedish labour market and virtually all sectors and industries. This results in attractive insurance policies with low premiums. NO MEDICAL REQUIRED Further advantages are that the policies are simple and fair for employers and employees alike. Simple because they come into force as soon as the contract of employment has been signed. The terms have already been agreed in the collective agreement, so there is no additional paperwork. Fair because the principle of equal treatment applies. Everyone is entitled to insurance without having to undergo a medical examination. 10

Everyone should get the money they are entitled to Ours is the largest employment insurance company in Sweden. At any one time, we may be dealing with as many as half a million cases. We pay out somewhere in the region of SEK 40 million a day, which amounts to SEK 10 billion a year. WORKING THE OTHER WAY ROUND But how can such a large company deliver world-class quality of service? Our vision is to see and help every policy holder to ensure their lives are more secure. This enables us to think the other way round and go out looking for people to give them their rightful compensation. DIGITAL PRESENCE As you may know, Sweden is right at the forefront of broadband and digital developments. We also benefit from this. We have simplified administrative procedures, reduced processing times, improved service quality levels and made ourselves more accessible and understandable to the general public by creating an innovative website and using social media. In 2012, we were presented with the international Quality Innovation of the Year award for our use of social media. On the Internet we find employees who are on sick leave, parental leave or have suffered a work-related injury, to inform them of their right to insurance benefits. INSURANCE, MANAGEMENT AND PREVENTION Our core business is collectively agreed insurance. However, our commitment extends beyond that. Our business is built on three pillars. We are also committed to wise management of funds and prevention of injuries in the workplace by supporting research and development. 13

Major mission behind the figures AFA Insurance is one of Sweden s largest asset managers with an asset portfolio worth around SEK 200 billion. We are an active, global manager. However, as an insurance company, we may appear rather unusual at first glance. LONG-TERM LIABILITIES A look at our key performance indicators will reveal a combined ratio well above the 85-95 percent that is normal for an insurance company. Firstly, this is because we have much longer-term liabilities. The liability period for our insurance obligations, most of which are long-term illness and work-related injury, is six to ten years. This means that we can earn interest on the premiums over a longer period of time and can offer lower annual premiums. NO DIVIDENDS A second reason is that we are not allowed to pay dividends. Instead, profits are used to reduce premiums. We occasionally refund premiums to an employer that paid them at some point in the past. AFA Insurance has an unusually long investment horizon for an insurance company. But then, ours is an unusual mission. Our investment philosophy is based on a matching approach. The assets are principally invested in index-linked bonds, nominal bonds and real estate whose returns match the cost of the liabilities over time. 14

Quality of working life is close to our heart AFA Insurance is also one of the largest funders of research into health and safety in the workplace in Sweden. Every year, we earmark about SEK 150 million for research and development. To date, around SEK 1.8 billion has been channelled into R&D. EXCEPTIONAL KNOWLEDGE OF INJURIES Thanks to the collectively agreed insurance policies, we possess unique knowledge of the causes and consequences of ill-health at work. We receive no less than 350,000 insurance claims each year. Every single one of these is carefully entered into our claims database, which now contains more than 13 million claims cases. The database is a vital source of knowledge. It provides information for making decisions in the practically oriented research and development activities that we choose to support. All workplaces should be so safe that there is no reason for anyone to be injured or become ill at work. That is why we are working with local authorities, county councils and regional government to improve health and safety in their organisations. SUSTAINABLE IMPROVEMENTS We disseminate the research findings so that the information can be used to achieve sustainable improvements in as many workplaces as possible. In this way, collectively agreed insurance forms the foundation for a healthier work life for everyone. Furthermore, the database is a source of information for the Work Injury Report. Each year, we publish this report which contains in-depth studies and analyses of serious work-related injuries in Sweden. In the long term, more workplaces will have fewer hazardous operations. Now that s not bad, is it? 17

www.afaforsakring.se Feel free to examine our business in detail. An English summary of our most recent annual report is available for viewing on our website. Or call us during office hours, Monday to Friday, 8 to 5, and we ll put you through to the right person. 18

INSURANCE Safety at work for 90 percent of all Swedish employees POSTAL ADDRESS AFA Insurance, 106 27 Stockholm VISITING ADDRESS Klara Södra Kyrkogata 18 CUSTOMER CENTER 0771-88 00 99 TEL 08-696 40 00 FAX 08-696 45 45 WEBSITE www.afaforsakring.se F6284 16.09 Illustration: Maria Raymondsdotter