Valitor is a leading company in the field of providing payment solutions. Valitor has international operations, collaborating closely with cutting edge FinTech companies, and also has a strong presence in the UK and Scandinavian markets. The company’s international business has grown strongly during the last few years. Revenue generated outside Iceland grew by 50% in 2016 and now represents more than 60% of Valitor’s total income. In Iceland growth was primarily driven by the increase in the number of tourists and the upswing in the economy. The company’s revenue grew by 23% year-on-year despite the appreciation of the króna.
At the end of 2016 Valitor and its subsidiaries had 263 employees in its offices in Iceland, London and Copenhagen. A key component of Valitor's success has been the focus on developing its own software solutions and processing platforms, both in acquiring and issuing services. This has enabled Valitor to differentiate itself in a highly competitive payments market. Valitor is thus one of the top software companies in Iceland, with 60 people working in software development and the number is rising.
Highlights of 2016
In order to support its rapid growth during the year, Valitor took a number of key steps towards strengthening its infrastructure. Scalability was again one of the main priorities and meticulous preparation was key to providing state-of-the-art services when Valitor’s systems were put to the test towards the end of the year, as November and December were record months historically in terms of turnover and the number of transactions. On Black Friday the number of transactions increased by 115% from last year. This major retail weekend has now become Valitor’s biggest annual retail session by far.
November and December were record months historically in terms of turnover and the number of transactions
One of the main tasks during the year was the implementation of lean management, with the aim of helping the company grow and scale efficiently over the next few years. In addition a new organizational structure for Valitor was introduced in September and this is designed to provide a platform for the company’s future growth and profitability. Part of the restructuring effort has been to develop sales and marketing in the Global Partnerships business unit in London, which is responsible for Valitor’s international partners, and to run the unit as a British financial institution. At the end of the year the FCA granted the company an e-money license.
The sale of Visa Europe to Visa Inc. was completed in 2016. The company realized substantial gains from the sale, and much of this can be directly attributed to the company's strong growth in recent years. During the year Valitor continued to implement its strategy, devised in 2012, of expanding in the key markets of the United Kingdom and the Nordic region, particularly in e-commerce.
During the year Valitor continued to implement its strategy, devised in 2012, of expanding in the key markets of the United Kingdom and the Nordic region
In terms of individual business units, the Icelandic operation performed well in 2016. The strong króna negatively affected the profitability of Global Partnerships. Allowing for this, international acquiring services performed well and generated a turnover of $7 billion, compared with $3 billion in 2015. Prepaid card issuing in the international market fell short of expectations although there was a strong recovery in the final quarter. There was a sharp increase in the number of customers of Markadis in the UK market and fourth quarter was particularly strong in this respect, a positive sign for the future. AltaPay in Denmark underperformed but the outlook is considerably brighter for 2017.
In 2016 Valitor focused on developing projects which support growth, efficiency and scalability. This included increased automation in treasury and settlements to international partners and merchants.
New products launched in Iceland including a currency card in Icelandic króna for foreign tourists and a dynamic currency conversion (DCC) for both Visa and MasterCard. These products have proven very popular with tourists. Valitor also took an important step regarding debit cards as part of the overall service offering to domestic banks. In December the online directory “Já.is” teamed up with Valitor to offer a new sales initiative “Yes please, click & collect”. Customers can order a product, pay online and then collect it in the store.
New products and services designed for the international market include Android Pay in the UK, a mobile payment solution, and a solution for corporate loans in collaboration with Capital on Tap. Another new solution combines issuing and acquiring services for insurance companies in partnership with the international company WEX.
Tasks ahead and opportunities in the future
Valitor’s core competences are its ability to develop and operate software solutions in the field of payment services and its capacity to provide outstanding service. This has enabled Valitor to develop a range of products and build up a valuable knowledge base which differentiates the company from its competitors and allows it to consolidate its position in the highly competitive international payment services market.
Stefnir hf. is Iceland’s largest fund management company with assets of approximately ISK 408 billion under active management. The company is wholly owned by Arion Bank and it is based at the Bank’s headquarters. The assets managed by the company are owned by a diverse group of investors, from private individuals to Iceland's largest institutional investors. The fund members’ assets are invested in mutual funds, investment funds or institutional investor funds, and Stefnir has also entered agreements with a number of partnerships limited by shares. Stefnir had 21 employees at the end of 2016.
Stefnir – Liquidity Fund grew 70% during the year
The change in assets under management is chiefly related to an increase in alternative investments and bonds, while equity funds and funds focusing on equities decreased slightly during the year. Stefnir – Liquidity Fund has attracted heavy short-term and long-term investment from individual and corporate investors, and the fund has grown almost 70% over the year. Stefnir has successfully managed to diversify its income by offering a wide range of funds and spreading its assets across different asset classes. This reflects the focuses of the company’s board of director and management.
Excellence in corporate governance since 2012
The employees and board of directors have focused on defining the company’s core competences and focuses over the next few years. The company has a clear strategy and the board has set key performance indicators for the company which are measured on a regular basis. The board of directors of Stefnir is committed to good corporate governance and endeavours to promote responsible behaviour and corporate culture within Stefnir for the benefit of all the company’s stakeholders. The Center for Corporate Governance at the University of Iceland recognized Stefnir for the fourth time as a company which had achieved excellence in corporate governance in 2016. Stefnir first got this award in 2012, the first company in Iceland to be recognized in this way. The company is constantly working on maintaining and developing corporate governance and re-attaining this recognition annually is part of this effort. The company publishes a corporate governance statement on its website once a year, describing its activities and its focuses in the near term. Transparency is paramount and this is reflected by the keen focus on detailed fund information on the company's website. This disclosure of information is far more extensive than legally required.
Transparency is paramount and this is reflected by the keen focus on detailed fund information on the company's website
Since 2012 Stefnir has been recognized by Creditinfo as one of the outstanding companies of the year, and it is satisfying that the company is considered to be one of those contributing to the development of the Icelandic business sector.
Stefnir - Balanced Fund celebrates its 20th year of business
Many of Stefnir’s funds have a long history of generating positive returns for their investors. One of these is the investment fund Stefnir - Balanced Fund which celebrated its 20th year in business during 2016. Despite fluctuations on the financial markets the fund has performed well in the long term and short term. The fund has broad investment authorizations and this gives it the opportunity to invest assets in the most promising asset classes at any given time. The fund has the largest number of fund members in Iceland, now numbering over 4,000. Many of these have been making regular savings in Stefnir funds for years.
Stefnir offers a wide range of funds suited to both individual and institutional investors
Stefnir has pioneered the development of new products. The changeable investment environment requires the company’s experts to be ready to respond to investors’ shifting focuses by offering new investment options and new focuses in fund management.
Stefnir's fixed income funds are a fundamental component of many asset portfolios of individual and institutional investors. As mentioned earlier it is remarkable to see how Stefnir Liquidity Fund, which is primarily made up of deposits from financial institutions, has grown and rapidly added fund members.
Icelandic equities funds have been popular investment options in recent years as Stefnir has contributed to the regeneration of the Icelandic stock market. Private equity funds managed by Stefnir have been a powerful driving force on the Icelandic corporate market. The year ended with a successful stock offering in Skeljungur hf. in which a company managed by Stefnir sold its stake. Mixed funds managed by Stefnir have also benefited from alternative investments and have gained better access to investment options not generally available to smaller investors.
Icelandic equities funds have been popular investment options in recent years as Stefnir has contributed to the regeneration of the Icelandic stock market
Stefnir has been a leader in private equity investments and alternative investments in Iceland for many years. There is an obvious appetite for a diverse range of investment options and Stefnir has met this demand with a variety of products suited to institutional investors' portfolios. Stefnir operates and manages both Icelandic and international venture capital funds and the major owners of the funds are pension funds, insurance companies and other financial institutions.
International markets opening up with more scope to invest overseas
Stefnir occupies a strong position as a manager of international equity funds in Iceland. The company employs an experienced team of experts to monitor economic developments and listed international companies and their approach to fund management has long attracted attention. Now that rules on investing in international financial instruments have been relaxed, individual and corporate investors have the option to spread risk by investing in international financial instruments. International funds managed by Stefnir are an attractive choice for diversifying risk for Icelandic investors and savers.
OKKAR Life Insurance is the oldest life insurance company in Iceland. The company was founded in 1966 by Icelandic investors and a British insurance company under the name Althjóda líftryggingarfélagid hf. The company's main role is to offer its customers financial protection in the event of illness, disability or death, while protecting the interests of the customers and the company’s owners. OKKAR had 16 employees at the end of 2016.
From the very beginning OKKAR has been a pioneer in the development of personal insurance in Iceland. OKKAR has been at the forefront on the Icelandic market in health insurance, children’s insurance, disability insurance and a range of group insurance policies.
From the very beginning OKKAR has been a pioneer in the development of personal insurance in Iceland
The year 2016 was a positive year although returns on financial assets fell short of expectations. Earnings from insurance activities were strong, return on equity was 9% and the combined ratio was 92.6%. Financial income was 6.5% of earned premiums. The company achieved its targets on sales of new insurance policies during the year. Sales of a new pension product, “OKKAR séreign” which was launched in the autumn of 2012 with Arion Bank Asset Management, continued to be excellent and sales of the company’s other products also increased. The ratio of cancelled policies continued to decline, resulting in a steep increase in the total number of policies.
The ratio of cancelled policies continued to decline, resulting in a steep increase in the total number of policies
OKKAR has had a fruitful partnership with the Icelandic Cancer Society in recent years. The company is sponsoring a campaign into screening for bowel cancer in Iceland and a percentage of the proceeds from insurance policies sold was donated to the Icelandic Cancer Society.
In recent years customers of Arion Bank have been given the opportunity to buy life insurance when taking out a mortgage. Towards the end of the year financial advisers at Arion Bank began selling a wider selection of personal insurances following an analysis of the customers' insurance needs which was carried out as they underwent a credit appraisal. The application process is largely digital, which fits in well with the Bank's focus on providing services through digital channels.
As of 1 January 2017 the company’s ownership has been transferred from Arion Bank to Vördur and during the first quarter of 2017 OKKAR and Vördur Life will be merged under the name Vördur Life. The merged company will be Iceland’s oldest and largest life insurance company and will integrate its operations at Vördur’s headquarters at Borgartún 25 in Reykjavík.
Vördur is a universal insurance company offering insurance to individuals, families and corporate customers. The company aims to provide simple and convenient insurance coverage at competitive prices. Vördur has 68 employees and more than 36,000 customers.
Over the past few years Vördur’s employees have strived to enhance services and improve quality. The company has always scored highly in customer satisfaction surveys and in the last two years Vördur has been the top-rated insurance company in Iceland. We are delighted to have been recognized in this way and it tells us that we are on the right track and that our efforts are delivering results.
It is important to us at Vördur that we have a positive work environment and the company has reported the highest level of job satisfaction among Icelandic insurance companies in surveys by the trade union VR. Vördur has a clear vision in equal opportunities and has established a policy to this end which guarantees equal opportunities and terms for employees of both sexes. Any kind of sexual discrimination is contrary to the company’s equal opportunities policy and equal opportunities legislation. In 2013 Vördur became the first financial institution in Iceland to gain equal salary certification from the trade union VR.
In 2013 Vördur became the first financial institution in Iceland to gain equal salary certification from the trade union VR
The company has reported strong earnings in the past few years although the economic upswing presents a challenge to insurance companies and Vördur has felt the effect of this. Claims have increased significantly since 2014 and the company has had to take action to stabilize operations. The year 2016 was positive in many ways and the number of customers grew strongly. Net earnings fell short of targets but the results were nevertheless satisfactory. Return on equity was 14.4% and the combined ratio was 102.6%.
In 2016 Arion Bank acquired Vördur from the Faroese bank BankNordik, which had owned the company since 2009. Following the acquisition Arion Bank began work on the merger of its subsidiary OKKAR with Vördur. This is expected to be completed during the first quarter of 2017. The merger will create a robust life insurance company which will be better placed than ever to serve its customers. The merged company will be run from Vördur’s headquarters in Borgartún in Reykjavík.
The merger of OKKAR Life and Vördur Life and the arrival of a dedicated sales team from Tekjuvernd will be a major boost to Vördur and create numerous opportunities. The partnership with our new owner, Arion Bank, further adds to our potential and gives us greater scope to enhance the services we provide.
The merger of OKKAR Life and Vördur Life and the arrival of a dedicated sales team from Tekjuvernd will be a major boost to Vördur and create numerous opportunities
Key focuses will be human resources, business development, sales and quality, and we will continue to reinforce the company’s infrastructure.
The outlook for 2017 is bright, and while the market is challenging we intend to take advantage of the opportunities presented by being under new ownership and to offer even better services to our customers.