The name of the Group and the parent company is abbreviated to Sampo. The company’s A share is split so that each old share equals five new shares. Sampo pays its shareholders a record dividend of EUR 1.60 per share.
corporate governance legal structure organisation board of directors group executive committee
Board of Directors BOARD OF DIRECTORS' DUTIES Sampo’s Board of Directors is responsible for the management of the company in compliance with the law, the regulations of the authorities, Sampo’s Articles of Association and the decisions of Shareholders’ Meetings. The operating procedures and main duties of the Board of Directors have been defined in the Board’s Charter.
Sampo plc – Board of Directors' Report for 2008 .... 26
Sampo Bank Group’s January 2007 profit of EUR 29 million (pre-tax).
LIFE INSURANCE Mandatum Life Group consists of Mandatum Life, a wholly-owned subsidiary of Sampo plc, operating in Finland, and of its subsidiary
The assets on Sampo plc’s balance sheet on 31 December 2008 comprise investment assets of EUR 2.8 billion (4.9), of which fixed income instruments covered 39 per cent (44) and equities 61 per cent (56).
STAFF The number of full-time equivalent staff increased in 2008 to 7,458 employees on 31 December 2008 from 6,974 employees a year earlier. In P&C insurance the number of staff increased mostly in the Baltic and Russian operations. In life insurance the number of staff increased in Finland.
MANAGEMENT INCENTIVE SCHEMES The management incentive schemes in Sampo Group are of two types; long-term management incentive schemes and a share-based incentive scheme.
The ‘Sampo 2006’ share-based incentive scheme increased staff costs by EUR 3 million in 2008 (5) and on 31 December 2008 the provision for the scheme was EUR 5 million (5).
At the end of the financial year, Sampo plc did not hold any of its own A shares and the other Group companies held no shares in the parent company.
At the end of 2008, the members of Sampo plc’s Board of Directors, including the Chief Executive Officer, owned directly or indirectly 11,912,719 Sampo A shares. Their combined holdings constituted 2.1 per cent of the share capital and of the related votes.
RATINGS In November 2008 Moody’s changed If P&C’s and Sampo plc’s outlooks from positive to stable. All the other main ratings for Sampo Group companies remained unchanged in 2008.
Sampo plc Baa1 Stable Not rated If P&C Insurance (Sweden) A2 Stable A Stable If P&C Insurance Co. (Finland) A2 Stable A Stable
The Group’s solvency ratio (own funds in relation to minimum requirements for own funds) on 31 December 2008 was 433.6 per cent (774.6).
{ Calculation of the Key Figures } The key figures for the insurance business have been calculated in accordance with the decree issued by the Ministry of Finance and the specifying regulations and instructions of the Insurance
+ other operating income - claims incurred - change in liabilities for investment and insurance contracts - staff costs - other operating expenses - finance costs ± share of associates' profit/loss
SOLVENCY CAPITAL (IFRS) + equity after proposed profit distribution ± valuation differences on investment - intangible assets + subordinated loans - deferred tax liability probably realised in near future (incl. deferred tax from fair value reserve and profit) ± other required items (Ministry of Finance decree)
Risk Management still at an unusually high level. The values of our investment portfolios have decreased due to the fall in equity prices and widened credit spreads in the fixed income portfolios. At year end, the relative weight of equities in the investment portfolios of Sampo
2 Overview of Sampo Group's Risk Management Risk is an essential and inherent element of Sampo Group’s business activities and operating environment. Clearly defined policies and responsibilities, together with a strong commitment to the risk management process, are Sampo Group’s tools to manage and mitigate the risks.
Minimum requirement for solvency capital, solvency capital, economic capital and adjusted solvency capital on 31 December 2008
Allocation of capital to the various lines of business in order to achieve consistent profit targets throughout the organization.
To analyze the exposure to natural catastrophes, the probability of major losses and the need for reinsurance, If P&C
The Board of Directors of If P&C approves guidelines governing the calculation of technical provisions. If P&C’s Chief
is a less significant risk in Mandatum Life. In pension liabilities surrender risk is insignificant, because in pension insurance surrender is possible only in exceptional cases. In life insurance and capital redemption policy operations surrender risk is present. However, this risk is reduced by the relatively short maturity of such contracts and by ensuring that the values of liabilities recognized in the balance sheet are always at least equal to the surrender values. The surrender risk is analyzed regularly. The supplements to liabilities are not paid out at surrender.
EUR 439 million (EUR 1,008 million in 2007). The proportion of equities in If P&C’s investment portfolio was 5 per cent at year-end. The maximum proportion of equity investment is defined in If P&C’s Investment Policy as 20 per cent. The equity portfolio consists of Nordic small cap stocks as well as a global fund portfolio. Mandates for investments are given in the Investment Policy and according to the governance structure.
The sector allocations exclude investments made through mutual equity funds. Mutual equity funds in Sampo Group were EUR 385 million, in If P&C EUR 213 million and in Mandatum Life EUR 172 million.
Policies set limits for maximum allocations into these markets and products. On 31 December 2008 the share of the above mentioned investments was 3.4 per cent of the total investment portfolio. In If P&C the proportion was 0.6 per cent and in Mandatum Life it was 10 per cent. Mandatum Life’s investment portfolio was increased with hedge funds, whereas investments in commodities were sold during 2008.
Moody’s and Fitch, are used to judge the creditworthiness of issuers and counterparties. The portfolio development and the counterparties credit standing is followed up continuously.
Claims Handling Policy and other policies related to different aspects of the business. The different policies are reviewed regularly and updated as needed. In addition, If P&C has thorough processes and guidelines to handle external and internal fraud cases should they arise. Furthermore, much effort is put into internal education regarding ethics.
(shareholders, customers, staff, business partners or the general public) and may arise through realized risks in other risk categories. Reputational risks may arise also through external distribution channels, the risks of which are difficult to control.
Earning per share (eur) 9 Basic, continuing operations 1.18 1.25 Basic, discontinued operations - 4.94
The Board of Directors of Sampo plc accepted the financial statements for issue on 11 February 2009.
In the life insurance business, liabilities arising from insurance and investment contracts count as long-term liabilities.
IAS 39 has been applied in the earlier years. The remaining assets acquired before the year 2008 are still measured at fair value through p/l. Furthermore, the fair value option is applied in some minor P&C companies.
If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss shall be reversed by recognising the amount in profit or loss. Impairment losses recognised in profit or loss for an equity instrument shall not be reversed through profit or loss.
The provision for claims outstanding in direct P&C insurance and reinsurance may be calculated by statistical methods or
Sampo’s perspective, accounting policies concerning these areas are most complicated and require most significant use of estimates and assumptions.
Total change in provision for claims outstanding -127 -5 -132 -272 -15 -287
Pension insurance Contracts with discretionary participation feature (DPF) 88 50 Other contracts 0 -1 Unit-linked contracts 171 -128
Claims-adjustment expenses (Claims paid) -242 -247 Acquisition expenses (Operating expenses) -434 -436 Joint administrative expenses for insurance business (Operating expenses) -259 -243 Administrative expenses pertaining to other technical operations (Operating expenses) -22 -25 Asset management costs (Investment expenses) -12 -10
FINANCIAL LIABILITIES Financial liabilities at fair value through p/l Derivative financial instruments 255 -
Opening net carrying amount at 1 January 1 4 6 13 5 18
Closing net carrying amount at 31 December 1 4 5 1 4 6
Closing net carrying amount at 31 December 479 13 4 495
The intangible asset allocated to customer relations arose from acquisition of If in 2004, when a part of the acquisition cost was allocated to insurance contracts of If Group. The item is amortised on a straight-line basis over 6 years.
In other intangible assets for 2007, the disposal of EURm 9 is the scrappage of IT software used in If P&C Insurance Company Ltd. The scrappage will reduce amortisation expense over the next four years about EURm 1–2 per year.
Opening net carrying amount at 1 January 153 11 164 153 6 159
Financial assets available for sale / shares and participations: Listed equity securities include EURm 370 quoted shares. Unlisted equity securities include EURm 318 investments in capital trusts.
Provision for unearned premiums 2,629 2,843 Provision for claims outstanding 1,777 1,664
In 2008 Sampo plc acquired total 12,836,500 treasury shares. These and the 4,322,000 shares held by Sampo plc at 31 Dec.2007 were cancelled during the financial year 2008. The cancellation decreased the number of A-shares with an equal amount, but did not effect the share capital.
Each plan has three performance periods and bonuses are settled in cash in three installments. In the schemes 2008 I and 2008 II, when the bonus is paid, the employee shall buy Sampo's A-shares at the first possible opportunity, taking into account the provisions on insiders, with 30 per cent of the amount of the bonus after taxes and other comparable charges, and to keep the shares in his/her possession for one year. In other schemes, when the bonus is paid, the employee shall buy Sampo's A-shares at the first possible opportunity, taking into account the provisions on insiders, with 20 per cent of the amount of the bonus after taxes and other comparable charges, and to keep the shares in his/her possession for two years. A premature payment of the bonuses may occur in the event of changes in the group structure or in the case of employment termination on specifically determined bases. The fair value of the incentive schemes 2008 I and 2008 II is estimated by using the Black-Scholes princing model.
50 per cent of the amount of the reward eventually payable is based on the price performance of Sampo's A-share, and the other 50 per cent is based on the development of insurance margin (IM). The programme has three performance periods that cover the years 2006–2010. Each installment corresponds, at the maximum, to one third of the total amount of shares. The terms of the programme include a limitation according to which the amount of the reward payable will be decreased, if Sampo's share price increases by more than 160 per cent during an individual performance period.
The reward was paid in cash so that the employee was obliged to buy Sampo's A-shares at Helsinki Stock Exchange at the least with 50 percent of the amount of the bonus after taxes and other comparable charges.
Varma Mutual Pension Insurance Company Finland 57 80.28 10 Other Finland 6
Short-term receivables Receivables from Group companies 5 6 Deferred tax assets 20 6 5
Ordinance. The accounting principles applied to the separate financial statements of Sampo plc do not materially differ from those of the Group, prepared in accordance with the International Financial Reporting Standards (IFRS). The financial assets are measured at fair value derived from the markets. The accounting principles for the Group are described starting from p. 80.
Accumulated amortisation at beginning of year -3 -1 -12 -7 of which related to disposals - - 9 7 Amortisation according to plan during the financial year 0 0 0 -1
Sampo plc’s Annual General Meeting will be held on Tuesday, 7 April 2009 at 2 pm, at the Helsinki Fair Centre Congress wing, address Messuaukio 1, Helsinki. The listing of persons who have registered for the meeting will commence at 12.30 pm.