Sampo Life 8 | Sampo plc 10 | Year 2007 in Brief 12
The business area showed good growth during 2007, both by way of more new customers and also due to the existing customers purchasing more risk solutions. One explanation for this is a broadened range of services, particularly within the personal risk fi eld. At the same time, Industrial was hit by more large claims than would normally have been seen in a year, particularly in Denmark, and that weakened profi ts. The technical result dropped somewhat to eur 62 million and the combined ratio was 94.1 per cent.
The long-term trend in the industrial insurance market is that the customers are becoming more and more professional.
The divestment of Sampo Bank from Sampo Group caused a substantial amount of extra work, as Sampo Life’s administrative services, previously acquired from or through the bank, had to be reorganized. The most important – and expensive – project in
Group Executive Committee are also participants in the longterm incentive systems (2005 i, 2005 ii, 2006 i and 2006 ii) for
–Ehrnrooth holds 23,366 Sampo plc shares directly or through a controlled company.
– Vuoria holds 27,664 Sampo plc shares directly or through a controlled company.
Positions of Trust: If P&C Insurance Holding Ltd, Chairman of the Board
–Magnusson holds 7,992 Sampo plc shares directly or through controlled companies.
The employees were divided as follows: 56 worked in the holding company Sampo plc, 6,405 in If P&C and its subsidiaries and 375 in Sampo Life and its subsidiaries.
Insurance technical result for P&C insurance remained sound and the combined ratio amounted to 90.6 per cent for the full year 2007 (89.9). Net investment income decreased to eur 211 million (390) because of the weak investment markets and the profi t before taxes amounted to eur 534 million (730). RoE exceeded the target of 17.5 per cent and was 19.2 per cent (22.0).
Sampo Life’s expense ratio remained competitive at 101.0 per cent (101.9). The expense ratio was somewhat burdened by costs caused by the separation of Sampo Bank’s and Sampo Life’s administration and back-up operations. The ratio does not, however, take into account all fees intended to cover the operating expenses. If all fees are taken into account, the ratio decreases to 80.6 per cent (81.3). A new computerized insurance system will enhance the cost eff ectiveness in 2008.
Pure risk premiums grew in volume both in private and in corporate segments and Sampo Life’s volume growth targets were reached. Corporate pension policies developed particularly well.
The greatest event for Sampo Life in 2007 was the sale of its most important distribution channel Sampo Bank. In connection with the sale of Sampo Bank to Danske Bank in February 2007, Sampo Life signed a co-operation agreement with Sampo Bank. The agreement secures the sales of life and pension insurance products through Sampo Bank’s branch network.
The most signifi cant changes were the deletion of provisions concerning the amount of share capital and the number of shares and the addition of a new provision that the company shall have one Auditor, which must be a fi rm of Authorised Public Accountants. The complete lists of proposals approved by the Annual General Meeting can be found on www.sampo.com.
Approximately 94 per cent of the staff worked in P&C insurance, 6 per cent in life insurance and 1 per cent in the holding company. Geographically, 30 per cent worked in Finland, 28 per cent in Sweden, 23 per cent in Norway and 19 per cent in the Baltic countries, Denmark and other countries. The staff increased in both P&C insurance and life insurance and decreased somewhat in the holding company. The average number of employees during 2007 was 6,846 compared with 11,657 during 2006.
If P&C Insurance Co. (Finland) A2 Positive A Stable group solvency As a result of the disposal of Sampo Bank plc and other banking and investment service companies, the Group solvency for 2007 is based on adjusted solvency calculations for insurance groups according to the Decree of the Ministry of Social Aff airs and Health (1106/2000), Chapter 7.1 §.
6) The Board of Director’s proposal to the Annual General Meeting for the accounting period 2007. 7) The 4,322,000 treasury shares acquired by Sampo plc have been deducted from the numbers of shares. In the average number of shares, the 4,827,500 treasury shares cancelled at 13 Feb. 2007 have also been taken into account.
Equity related to non-current assets classifi ed as held for sale 0 0 3 -3 -1 -22 -22
Assets Classifi ed as Held for Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 38 Investments in Shares and Participations
The introduction of the above ifric interpretation has not had any material eff ect on the
held-to-maturity investments Held-to-maturity investments are non-derivative fi nancial assets with fi xed or determinable payments and fi xed maturity that the Group has the positive intention and ability to hold until maturity. Held-to-maturity investments are initially recorded at cost which is the fair value of the consideration given plus any directly attributable transaction costs, and are subsequently measured at amortised cost using the eff ective interest rate method.
Sale and repurchase agreements and securities lending Securities lent to counterparties are retained in the balance sheet. Conversely, securities borrowed are not recognised in the balance sheet, unless these are sold to third parties, in which case the purchase is recorded as a trading asset and the obligation to return the securities as a trading liability at fair value through profi t or loss
Assets that meet the criteria to be classifi ed as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Once classifi ed, depreciation on such assets ceases.
The provision for claims outstanding is intended to cover the anticipated future payments of all claims incurred, including claims not yet reported to the company; i.e. the ibnr (incurred but not reported) provision. The provision for claims outstanding includes claims payments plus all estimated costs of claim settlements.
The revenue for Banking and investment services includes the total operating income of the segment in the comparison year and for the fi rst month of 2007.
Operational Risk Management and Control . . . . . . . . . . . . . . . . . . . . 85
Calculations of economic capital requirements in Sampo Life are based on a total balance sheet approach, meaning that values and risks of assets and liabilities are recognized market consistently. Market consistent value of liabilities is estimated by using stochastic simulation. The approach as well as the basis for the calculation of the most crucial risk factors is similar to what was used in the Quantitative Impact Study 3 (’qis 3’) in Solvency ii. The outcome is calibrated to the confi dence level equalling the historic bond defaults of aa-rated issuers.
The minimum capital adequacy requirements decreased by eur 1,493 million (63 per cent).
Amounts owed to credit institutions - 0 6 - 6 6
Figure 3 fixed income investments, sampo group, sampo life, if p&c, 31 december 2007
Sampo Group’s real estate management unit manages the real estate portfolio. The portfolio includes direct investments in properties and investments in indirect vehicles within decided allocations. The main risks are changes in property values and changes in rental income. These risks are limited by diversifying holdings both geographically and by type of property. In rental activities, the benefi ts of diversifi cation are pursued by the length of the tenancy relationships and the industry of the lessee.
ard conditions and manuscript wordings, as well as underwriting authorities and underwriting limits such as sums insured and acceptable risks.
The Underwriting policy (‘uw policy’) is the principal document for underwriting activities and sets general principles, restrictions, limits and directions for the organisation of underwriting activities. The Underwriting Committee is responsible for the administration and monitoring of the uw policy. The Board of Directors of If approves the uw policy at least annually.
IFRS Financial Statements: Risk Management | sampo group annual report 2007 81 rest of the portfolio, therefore, valuation basis of these policies was changed and the provision was supplemented in year 2004. Since the change of the liability valuation, the mortality result within individual pension policies has been close to zero.
Reserve for decreased discount rate 6.1 30 25 40 23 13 7 7
Sampo Life conducts an annual self-assessment of its operational risks. Sampo Life has established a management committee for follow-up and control of operational risks. The committee discusses and coordinates risk management issues regarding operational risks, such as policies and recommendations concerning operational risk management. The committee also discusses deviations from policies regarding operational risks and monitoring of operational risks identifi ed in the self-assessments as well as occurred incidents. The committee meets at least four times a year. Reports on operational risks are submitted to the management and Board of Directors on a quarterly basis.
88 sampo group annual report 2007 | IFRS Financial Statements: Other Notes life insurance EURm 2007 2006 Financial assets
The Group uses derivative instruments for trading and for hedging purposes. The derivatives used are foreign exchange, interest rate, equity and commodity derivatives. Derivatives held for trading relate primarily to customer business and, to a lesser degree to proprietary trading. In insurance business derivatives are used for hedging interest rate risk and foreign exchange risk, but hedge accounting is not applied. During the fi nancial year, the Holding has applied fair value hedging against the interest rate risk.
Equity and equity index options 39 2 0 - - -
In the table above are presented fair values and carrying amounts of fi nancial assets and liabilities, including values of those fi nancial assets and liabilities which are carried at fair value. The detailed measurement bases of fi nancial assets and liabilities are disclosed in Group Accounting policies.
Current estimate of total claims costs 4,790 2,247 2,284 2,359 2,495 2,597
28 Employee Benefi ts employee benefits Sampo has defi ned benefi t plans in P&C insurance business in Sweden and Norway.
IAS 19 Employee benefi ts is applied in the accounting for the defi ned benefi t plans from the beginning of the fi nancial year 2005.
End of performance period II 35% Q1-2006 Q4-2006 Q4-2006 Q3-2007 Q4-2007 Q4-2008 Q1-2009
37 Investments in Subsidiaries Name group carrying EURm holding % amount
Other 3 carrying Unit trusts amount/ EURm country no. of shares holding % fair value
Capital trusts amount/ EURm country no. of shares holding % fair value
Parent Company Statement of Cash Flows additional information to the statement of cash flows: Interest income received 147 2
Depreciation according to plan during the fi nancial year 0 -1 0 -1