Our associated company Nordea once again proved its ability to generate capital. The Group Common Equity Tier 1 ratio (CET1) was higher than ever before at 18.4 per cent at the end of the fourth quarter of 2016. Nordea was also able to slightly increase its dividend proposal. Being the largest shareholder in Nordea, we value this greatly.
Nordea’s new CEO appointed his team during his first full year in office. The next step is to move from planning into the execution phase. In regard to the bank’s transformational change agenda, the new IT platform project is proceeding on schedule and the first product was already launched on the new core banking platform. We can expect significant gains from IT investments during the coming years.
LisListt OMXH Large Caps Number of SharNumber of Shareses (unlis(unlistted)ed) 1,200,000
During 2016 a large number of strategic people development processes were initiated and HR was highly involved in supporting the business areas. Leaders were trained in driving change processes. Furthermore training programs for presentation techniques and sales coaching were delivered. In a development program aimed at customer centers, participants created a toolbox to support team leaders in creating a purpose-driven culture. Nearly 140 leaders have participated in change processes where leadership development has been a central part.
MandaMandatum Liftum Life’e’s Objectivs Objective in thee in the LLong Runong Run
AAge Sge Structurtructure of Pe of Personnel in Finlandersonnel in Finland Mandatum Life, 2016
DeDevvelopment of Carbon Dioelopment of Carbon Dioxide Emisxide Emissionssions If P&C, 2008–2016
Since inception, ML Future Climate has exceeded The MSCI World by 0.6 percentage points (31 August 2015 – 31 December 2016). The MSCI World Low Carbon Leaders index, which the product tracks, has outperformed the general equity market (MSCI World) return by as much as 4 percentage points since November 2010. Although this is no guarantee for the upcoming years, it does suggest that responsible investment is not just about fighting for a good cause, but also about profitable investment operations.
A good reward solution supports the company’s strategy and business goals while at the same time motivating employees. It all starts with job grading, the determination of basic salary and the other components of pay in relation to roles and competitors, and with the setting of performance indicators. It also includes transparency and highquality communication to personnel, which is paramount in order for the system to be perceived as fair. If rewards are not managed effectively they become nothing more than a significant cost item to the company. Efficient indicators are at the heart of an effective reward system. They guide employees to do the right things and increase the bottom line.
In 2016, Mandatum Life paid out a total of EUR 418 million in pensions to 68,000 pensioners, as well as other indemnities for death, accidents, serious illness and disability, totaling some EUR 88 million. Responsibility towards shareholders is reflected in the company’s goal of ensuring a steady dividend stream.
PPositions of Tositions of Trusrust 12/31/2016t 12/31/2016 Kesko Corporation, Board Member; Teleste Corporation, Board Member; Kelonia (Private Equity holding company), Board Member; Veritas Pension Company, Member of the Supervisory Board; Hanken School of Economics, Board Member and Chairman of the Investment Committee; Swedish Society of Literature in Finland, Board Member
The AGM of 2016 decided that the Board would consist of eight members until the close of the AGM to be held in 2017. The term of office of the Board members ends at the close of the AGM that first follows their election. The members of the Board elect a Chairman and Vice Chairman from among their members at their first meeting following the AGM.
Group MD Committee to the Group Executive Committee, which supports the Group CEO in preparing matters to be handled by the Group Executive Committee.
Member of Sampo Group Executive Committee since 2005. Wennerklint holds 26,838 Sampo plc shares directly or through controlled companies or persons closely associated with him.
61 million mainly explained by the lowering of the interest rate used in discounting annuities in Finland. Return on equity increased to 25.3 per cent (21.5) and the fair value reserve on 31 December 2016 increased to EUR 484 million (391).
Swedish discount rate used to discount the annuity reserves decreased to -0.03 per cent by the end of December 2016 and had a negative effect of EUR 29 million in the full-year results. The discount rate was 0.41 per cent at the end of 2015. In the fourth quarter of 2016 the effect was EUR 19 million positive. In Finland the discount rate for annuities remained unchanged at 1.5 per cent.
There were 3,226 shareholders represented at the meeting holding altogether 366,334,768 shares and 371,134,768 votes in the company.
During the year, Sampo carried out a stakeholder survey and worked on a materiality analysis based on the survey. This work helped in identifying, which corporate responsibility topics are important on a Group-level, and which should be chosen as the main priorities. The survey and analysis gave rise to Sampo Group’s corporate responsibility themes, which further make up the content draft for the Report.
The five themes are: • Responsibility in our governance and business operations
The average number of Sampo Group’s employees (FTE) in 2016 amounted to 6,780 (6,755). P&C insurance is Sampo Group’s largest business area and employed 91 per cent of the personnel. Life insurance had approximately 8 per cent of the work force and the parent company Sampo plc 1 per cent.
Sampo plc, Sampo Group’s parent company, received EUR 1,555 million in dividends from its subsidiaries and associated company Nordea Bank AB during 2016. The following dividend payments were received: • Mandatum Life; EUR 125 million in March 2016, • Nordea Bank AB; EUR 551 million in March 2016 and • If P&C; SEK 5.8 billion (EUR 586 million) in
On 20 April 2016 S&P strengthened If P&C’s ratings to A+ with a stable outlook. At the same time S&P initiated Sampo plc’s rating with A- and a stable outlook.
which supports their ability to pay stable dividends after servicing their own obligations.
Sampo Group is regarded as a financial and insurance conglomerate according to the Act on the Supervision of Financial and Insurance Conglomerates (2004/699). The Act is based on Directive 2002/87/EC of the European Parliament and of the Council on the supplementary supervision of credit institutions, insurance undertakings and investment firms. The Act was amended as of 1 January 2016 to correspond to Solvency II and Basel III rules.
The Board proposes to the Annual General Meeting a dividend of EUR 2.30 per share to company’s 560,000,000 shares. The dividends to be paid are EUR 1,288,000,000.00 in total. Rest of funds are left in the equity capital.
The legal sub-groups Mandatum Life and If P&C Insurance Holding Ltd (publ) and the associated companies Nordea and Topdanmark conduct their businesses independently from each other. The independent sub-groups have their own infrastructures and management as well as operative processes in place. In instances where the subsidiaries and associated companies cooperate in some business areas, cooperation is conducted similarly as with any third-party.
The following factors are the most material when the size of buffer is considered in Sampo Group companies: • The higher the lethe levvel of eel of expectxpected pred profitsofits and the lower the vthe volaolatility of prtility of profits and markofits and market vet value ofalue of balancbalance sheete sheet, the less is the volatility of own funds and thus the smaller is the buffer.
• For If P&C the SCR, corresponding to what would be the regulatory requirement if Solvency II group rules were enforced at the level of the If P&C, and respective OF using the SF, are calculated. The SF results are also inputs to Sampo Group Solvency figures and hence are disclosed later in this report. If P&C applies the full Solvency II standard formula with transitional equity measures for its SCR calculation, but does not apply any undertakingspecific parameters in the underwriting risk modules or apply simplified calculations for any of the risk modules of the standard formula.
EURmEURm PrPremiumsemiums writtwrittenen PrPremiumsemiums earnedearned ClaimsClaims incurrincurreded OperOperaatingting eexpensexpense RReinsureinsurersers sharshare per Le per LoBoB
TTechnical prechnical proovision itvision itemem Risk fRisk factactoror Change in risk parChange in risk parametameterer CCountryountry
As can be seen from the table Analysis of the Change in Provisions before Reinsurance, Mandatum Life, 2016 presented earlier, in most of the original with profit policies the guaranteed interest rate is 3.5 per cent. In individual policies sold in Finland before 1999, the guaranteed interest rate is 4.5 per cent, which is also the statutory maximum discount rate of these policies. Mandatum Life has sold policies with lower guaranteed rates as well but their share is small.
Risk definitions related to investment portfolio market risks may be found in Appendix 2 (Risk Definitions). Principles of Investment Portfolio Management can be found in Appendix 3 (Principles of Investment Portfolio Management).
The largest holdings are in financial institutions and covered bonds. Most of these investments are in the Nordic countries as can be seen in the table Fixed Income Investments in Financial Sector, Sampo Group, 31 December 2016. These exposures increased by EUR 965 million during 2016.
BrBreakeakdodown of Liswn of Listted Eed Equity Inquity Invvesestments btments by Geogry Geographical Raphical Regionsegions Sampo Group, 31 December 2016, total EUR 3,352 million
of which interest rate swaps 0 0 0 0 0 0 0 0 0 0 of which interest rate swaps 4 0 4 -1 -1 -1 0 0 0 0
• External risk drivers and potential strategic risks are identified and the company is in a good position, in terms of capital structure and management skills, to react to changes in the business environment.
If P&C has also a Compliance Committee (CC), which is an advisory body for the Chief Compliance Officer regarding compliance issues. The task of the committee is to secure a comprehensive view of compliance risk and activities in If P&C.
The sources of liquidity risk in Sampo Group are either internal or external by their nature. If the company’s rating declines or if the company’s solvency otherwise appears jeopardized, its ability to raise funding, buy reinsurance cover or enter into financial derivatives at a reasonable price is endangered. Moreover, policyholders may also not be willing to renew their policies because of the company’s financial challenges
For comparison purposes the values derived from Sampo’s consolidated IFRS financial statements are mapped in accordance with the Solvency II balance sheet presentation in the below table Solvency II adjustments, 31 December 2016. Only main rows are presented. The currency used is the group’s reporting currency, the euro.
According to the Solvency II balance sheet the excess of assets over liabilities for the Group per 31.12.2016 was EUR 24 million less than the respective IFRS figure. On the asset side the main differences are due to the different treatment of intangible assets and inclusion of future undue premium receivables in technical provisions instead of assets. On the liability side there are material differences related to technical provisions due to different classification of some items and valuation principles. These differences are discussed in the next sections.
While recognition of deferred taxes is consistent with the IFRS accounts, SII adjustments affect the carrying values in the SII balance sheet and thus give rise to additional deferred tax effects. Differences in deferred tax treatment are mainly due to elimination of certain assets (intangible assets, etc) and differences in the calculation of technical provisions.
TTechnical Prechnical Proovisions Avisions Accccorording tding too SolvSolvencency II in If Py II in If P&C&C
The differences between IFRS and Solvency II technical provisions are summarised in the below table Technical Provisions in IFRS and Solvency II, 31 December 2016.
Material Differences in the Valuation for Solvency Purposes Compared to Valuation in Financial Statements
Net incrNet increase in cash and cash equivease in cash and cash equivalentsalents 616616 -93-93
recognised in other comprehensive income is transferred from equity and recognised in profit or loss as an impairment loss.
property in Sampo’s use is no more than 10 per cent, the property is classified as an investment property.
Receivables and liabilities related to reinsurance are measured uniformly with the cedant's receivables and liabilities. Reinsurance receivables are tested annually for impairment. Impairment losses are recognised through profit or loss, if there is objective evidence indicating that the Group (as the cedant) will not receive all amounts of money it is entitled to on a contractual basis.
The interest rate used in discounting liabilities is, at most, the maximum rate accepted by the authorities in each country. The guaranteed interest used in the direct insurance premium basis varies on the basis of the starting date of the insurance from zero to 4.5 per cent. The interest rate used in discounting liabilities is the same or lower than that used in premium calculation. Most of the liabilities of the accrued benefits of pension business with DPF are discounted by an interest rate of 3.5 per cent, also being the highest discount rate used. In addition, Mandatum Life has for the year 2017 lowered the maximum rate to 0.25%, for the year 2018 to 0.5% and for the year 2019 to 2.25%. The segregated liabilities of the accrued benefits of group pension portfolio, transferred from Suomi Mutual to Mandatum Life on 30 December 2014, have been discounted by 0.5%.
TTotal change in protal change in proovision fvision for claims outsor claims outstandingtanding 8787 -2-2 8585 -195-195 -10-10 -205-205
Net carrying amount aNet carrying amount at 1 Jan.t 1 Jan. 535535 2020 554554
TTotal financial liabilities measurotal financial liabilities measured aed at ft fair vair valuealue -- 6363 -- 6363
EURm 11 of the provision consist of assets reserved for the development of efficient administrative and claims-adjustment processes and structural changes in distribution channels result in organisational changes that affect all business areas. In addition, the item includes a provision of about EURm 21 for law suits and other uncertain liabilities.
Fair value of plan assets 166 49 214 156 57 213
We are independent of the parent company and of the Group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
3. AsAssociasociatted ced companompany Nory Nordea (2016: EURm 7,554;dea (2016: EURm 7,554; 2015: EURm 7,305)2015: EURm 7,305)
The Group’s ownership in Nordea Bank Abp is 21.25%. Nordea Bank Abp is an associated company of the Group, and is accounted for based on equity accounting. The holding in Nordea Bank Abp represents 20% of the Group’s total assets.
report, and the Annual Report is expected to be made available to us after the date of the auditor’s report.