Sampo’s P&C operations broke many of our own earlier records in 2013: Profit before taxes amounted
Following the Swedish government’s sale of its stake in Nordea in 2013, the uncertainty lingering over the bank’s ownership structure disappeared. Our current investment (21.2 per cent holding) in Nordea amounts to approximately EUR 5.6 billion; however, by the end of 2013, the book value of our holding stood at EUR 6.9 billion. The market value of our holding exceeded the book value by more than EUR 1.5 billion. In addition, we have received EUR 1.2 billion in dividends from Nordea during our period as a shareholder.
In addition to its life insurance business, Mandatum Life’s activities in recent years have expanded to include pension services focusing on corporate pension funds and foundations. The company has also supplemented various services related to personnel rewards and incentives through, for example, personnel fund services. The need for business outside the life insurance sector grew when the company discontinued its granting of individual corporate pension policies as a result of changes related to the retirement age applied to new insurance policies. Going forward, Mandatum Life will continue to look into new opportunities to support its current business activities.
• CCompetompetencence dee devvelopment:elopment: Throughout the year, If continued its major drive to develop the skills and capabilities of its employees to meet current and future business needs. If’s employees attended more than 32,000 e-learning courses and over 8,600 seminars during the year. Various new methods were implemented, such as Learning Design and Action Reflection Learning. A number of mentor programs and other specific initiatives have been undertaken to support the parts of the organization that are facing a generational shift. Competence development schemes also included activities with If’s main partners, for example the launch of the new Nordea agreement in Sweden and Finland.
◦ If’s office in Turku, Finland, is certified as a WWF Green Office.
Matti Vuoria Vice Chairman of the Board; CEO, President of Varma Mutual Pension Insurance Company (2004–2013) Born 1951
• Member of the Board of Directors of Sampo plc since 9 April 2003. • Brunila holds 9,059 Sampo plc shares directly or through a controlled company.
• Member of Sampo Group Executive Committee since 2009. • Vuorinen holds 16,085 Sampo plc shares directly or through controlled companies or persons closely associated with him.
Internal Audit Sampo's Internal Audit is a function independent of business operations, which evaluates the sufficiency and effectiveness of the internal control system and the quality with which tasks are performed in Sampo Group. The Internal Audit reports to the Group CEO. The Internal Audit has been organized to correspond with the business organization.
Profit before taxes in the P&C insurance segment amounted to EUR 929 million (864). Combined ratio for the full year 2013 was 88.1 per cent (88.9). This is the best ever combined ratio in If P&C’s history. Return on equity amounted to 24.4 per cent (36.9). Premiums, excluding currency effects, grew by 2.9 per cent (3.5). Share of associate Topdanmark’s profit amounted to EUR 52 million (50).
Mandatum Life Group’s investment assets, excluding the assets of EUR 4.6 billion (3.8) covering unit-linked liabilities, amounted to EUR 5.5 billion (5.5) at market values as at 31 December 2013.
GrGroup Exoup Executivecutive Ce Committommitteeee 31 Dec 201331 Dec 2013 31 Dec 201231 Dec 2012
Combined ratio excl. unwinding of discount, % Loss ratio before unwinding of discount + expense ratio
Reputational risk refers to the risk that adverse publicity regarding the company’s business practices or associations, whether accurate or not, causes a loss of confidence in the integrity of the institution. Reputational risk is often a consequence of a materialized operational or compliance risk and realizes often as a deterioration of reputation amongst customers and other stakeholders.
Sensitivity Test of Underwriting Result If P&C, 31 December 2013 and 31 December 2012
Combined ratio, business area Baltics 88.4% +/- 1 percentage point +/- 1 +/- 1
Analysis of the Change in Provisions before Reinsurance Mandatum Life, 2013
Assumptions related to technical provisions are reviewed annually. Adequacy of technical provisions is tested quarterly. Tariffs for new policies are set and the Underwriting Policy and assumptions used in calculating technical provisions are updated based on adequacy tests and risk result analysis. Tariffs and prices, as well as the reinsurance principles and reserving principles are reviewed and approved annually by the Board of Directors of Mandatum Life.
Sampo Group considers that it has a thorough understanding of the Nordic markets and issuers and consequently Sampo Group’s direct investments are mainly made in Nordic securities. When investing in non-Nordic securities, funds or other assets, third party managed investments are mainly used. These investments are primarily used as a tool in tactical asset allocation when seeking return and secondarily in order to increase diversification.
GoGovvernmentsernments GoGovvernment guarernment guarantanteedeed Public sectPublic sectoror, other, other TTotal markotal market vet valuealue, EURm, EURm
TTop 10 equity inop 10 equity invvesestmentstments TTotal fotal fair vair valuealue, EURm, EURm % of t% of total dirotal direct equity inect equity invvesestmentstments
Largest Individual Exposures by Issuer and by Asset Class Sampo Group, 31 December 2013
The ten largest individual reinsurance recoverables amounted to EUR 281 million, representing 65 per cent of the total reinsurance recoverables. If P&C’s largest individual reinsurer is Munich Re (AA-). They account for 22 per cent of the total reinsurance recoverables.
In Sampo Group, insurance liabilities are the starting point for investment management. Insurance liabilities are modeled and analyzed to form an understanding of their expected future cash flows and their sensitivities to changes in factors such as inflation, interest rates and foreign exchange rates.
To maintain the ALM risk within the overall risk appetite, the cash flows of insurance liabilities (technical provisions) are matched to a certain degree by investing in fixed income instruments and by using currency derivatives. The degree is dependent on the solvency position and market view.
The sensitivity of capital base is shown in the table Sensitivity Analysis of Capitalization to Market Risks, If P&C, Mandatum Life and Sampo plc, 31 December 2013.
• AnalyAnalysis of incidents:sis of incidents: Realized operational risks and near misses reported by the business units are collected and analyzed by ORC. Each business unit is responsible for ensuring that the occurred incidents and near misses are reported to the ORC.
• EC accounts for market, credit, insurance and operational risks, as well as the diversification effect between them. EC is calculated using a set of calculation methods seen suitable for the specific needs of each business area.
In the regulatory capitalization assessment, the regulatory solvency capital is compared to the regulatory capital requirement. In rating agency based capitalization assessment, the objective is to balance the available capital measured by respective rating agency criteria with the capital amount needed to achieve the internally set rating target.
Minimum rMinimum requirequirements fements for solvor solvencency capital, ty capital, totalotal 4,6634,663 4,7674,767
If P&C’s share of Topdanmark’s regulatory solvency requirement of EUR 114 million as at the end of year 2013 is included in the economic capital. For If P&C the figure for credit risk includes also non-credit risk related risk calculated in accordance with the Solvency II standard formula.
Topdanmark. In both companies adjusted solvency capital includes regulatory solvency capital. It amounted to EUR 3,372 million in If P&C
Other comprehensive income for the period 31 74 406 -30 480
Net incrNet increase in cash and cash equivease in cash and cash equivalentsalents -249-249 462462
If P&C Insurance Ltd. acquired the business of Tryg Finland on 1 May 2013. The purchase price was EURm 15. The cash and cash equivalents transferred amounted to EURm 93. The transferred net assets totalled about EURm 15. The liabilities consisted mainly of insurance liabilities.
According to Chapter 13, Section 2 of the Finnish Insurance Companies’ Act, the Principle of Fairness must be observed in life insurance and investment contracts with a discretionary participation feature. If the solvency requirements do not prevent it, a reasonable part of the surplus has to be returned to these policies as bonuses.
Sampo has defined benefit plans in Sweden and Norway, and defined contribution plans in other countries. The most significant defined contribution
Included in gains/losses from financial assets available-for-sale is a net gain of EURm 4 (2) transferred from the fair value reserve.
TTotal claims paidotal claims paid -3,120-3,120 186186 -2,935-2,935 -3,163-3,163 168168 -2,995-2,995
Closing net carrying amountClosing net carrying amount 11 33 44 11 33 44
Fair values for the Group's investment property are entirely determined by the Group, based on the market evidence. The determination and hierarchy of financial assets and liabilities at fair value are disclosed in note 17. Based on the principles of this determination, the investment property falls under level 2.
In level 3, the measurement is based on other inputs rather than observable market data.
DerivDerivaativtive financial inse financial instruments (nottruments (note 15)e 15) 11 5
Net liability rNet liability rececognised in balancognised in balance sheete sheet 3030 165165 195195 5656 147147 203203
Average duration of pension liabilities 20 years 16 years 20 years 15 years
Fair value of plan assets 385 - 385 392 - 392392
The subsidiaries If P&C Insurance Ltd and If P&C Insurance Company Ltd provide insurance with mutual undertakings within the Nordic Nuclear Insurance Pool and If P&C Insurance Ltd within the Norwegian Natural Perils’ Pool and the Dutch Terror Pool.
PrProfit fofit for the financial yor the financial yearear 829829 737737
Carrying amount aCarrying amount at end of yt end of yearear 321321 225225
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