CEO’s Review 4 Key Figures 7 Strategy 8 Sampo in the 21st Century 10 Personnel 12
Compared to the premium growth of its Nordic competitors this was a very good achievement. Even If P&C’s Baltic operations remained profitable with the help of determined cost cutting and reorganizations. These factors and successful risk selection made it possible for If P&C to reach its combined ratio target once again; the target was reached for the 23rd successive quarter.
Earnings per share, EUR 1.14 1.18 -0.04 EPS (incl. change in FVR), EUR 5.88 -3.52 9.40 Dividend per share, EUR* 1.00 0.80 0.20 NAV per share, EUR 14.63 8.28 6.35 Average number of staff (FTE) 7,311 7,145 166 * Year 2009 figure is the Board of Directors’ dividend proposal.
Sampo Bank’s network is Mandatum Life’s main channel in private segment. The company will place more of its own corporate sales specialists into the bank channel, which is expected to lead to a notable increase in the sales of life insurance products to corporations. Due to the changes in legislation related to the individual pension accounts and private pensions Sampo Bank and Mandatum Life have agreed not to continue sales of Mandatum Life's private pension insurances for private individuals.
Sampo Group divests Sampo Bank Group to Danske Bank A/S. After the divestment, Sampo’s main business areas are P&C insurance and life insurance. Sampo plc, the parent company of the group, manages a significant investment port folio following the divestment of Sampo Bank Group.
Mandatum Life’s business has changed significantly and today combines the knowledge and know-how of life insurance and wealth management. Enabling and leading this change as well as developing the competencies vital in the new business have been focus areas in 2009.
the number of full-time equivalent staff decreased to 7,087 employees on 31 december 2009 from 7,458 employees a year earlier. in P&C
The following persons served on the Group Executive Committee in 2009: Björn Wahlroos, • Group CEO and President (until 7 April 2009) Kari Stadigh, • Group CEO and President (from 8 April 2009) Ilona Ervasti-Vaintola, • Group Chief Counsel, Principal Attorney Line Hestvik, • Group Executive Vice President, Head of BA Private, If P&C Peter Johansson, • Group CFO Patrick Lapveteläinen, • Group CIO Torbjörn Magnusson, • President & CEO of If P&C Insurance Holding Ltd (publ) Ivar Martinsen, • Group Executive Vice President, Head of BA Commercial, If P&C Petri Niemisvirta, • Managing Director, Mandatum Life Insurance Company Limited Morten Thorsrud, • Group Executive Vice President, Head of BA Industrial, If P&C Timo Vuorinen, • Group Executive Vice President, Baltic and Russian operations, If P&C (from 1 September 2009) Ricard Wennerklint, Group • Executive Vice President, If Skadeförsäkring Holding AB (publ.)
Sampo’s Board of Directors has approved Sampo Group’s Guidelines for Insiders. These comply with NASDAQ OMX Helsinki Ltd’s Guidelines for Insiders and the Standards of the Financial Supervisory Authority. Sampo Group’s Guidelines for Insiders are stricter than the above-mentioned norms on matters that concern the Group Executive Committee, other corporate executives and other specifically-named persons, as these persons must ask for separate written permission in advance for each share-related securities transaction they make.
we must always give our staff the possibilities to act •
Personal information as on 31 December 2009. The CVs of the members of Sampo Group Executive Committee can be viewed on the Internet at www.sampo.com/management.
Return on equity (RoE) was high at 53.2 per cent (-0.8) while the fair value reserve increased to EUR 105 million (-414).
Geographically the development was mixed as the combined ratios for the Swedish and Danish operations increased to 95.2 per cent (92.0) and to 93.7 per cent (91.3), respectively, but improved for the Finnish and Norwegian operations, to 88.5 per cent (89.3) and to 92.0 per cent (93.3), respectively.
The cost ratio increased by 0.4 percentage points to 24.1 per cent compared to a year earlier. The increase was mainly due to the premium volume development. The consolidation of the Russian SOAO Region since June 2008 increased the cost ratio by 0.2 percentage points. The total costs decreased to EUR 939 million (962) largely because of the weakening of Swedish krona.
shareholders As at 31 December 2009, Sampo plc had 78,855 shareholders, representing an increase of more than 17 per cent from the previous year. 1.3 per cent of shares had not been transferred to the book-entry system. The holdings of nominee-registered and foreign shareholders decreased to 49.0 per cent (53.3) of the shares and 48.6 per cent of the votes (52.9).
Risks and the respective capital requirements in Sampo Group are assessed internally, as well as according to the methods defined by the regulators and rating agencies. All of the methods include the assessment of capital required to cover different risks and the amount of capital available.
Mandatum Life, EURm 9,0001,4003,500 8,0001,2003,000 31 dec 30 sep 30 jun 31 mar 31 dec 31 dec 30 sep 30 jun 31 mar 31 dec 31 dec 30 sep 30 jun 31 mar 31 dec
Table 4 each business unit. These guidelines cover, among other things, tariff and rating models for pricing, guidelines in respect of standard conditions and manuscript wordings, as well as underwriting authorities, underwriting limits such as sums insured and lists risks that are not acceptable to undertake.
Table 9 shows the expected maturity and duration of insurance and investment contracts of Mandatum Life. The sensitivity of technical provisions to changes in discount rates can be assessed on the basis of the durations shown in the table.
Reinsurance is used to limit the amount of individual mortality and disability risks. The Board of Directors annually determines the maximum amount of risk to be retained for the company’s own account, which for Mandatum Life is EUR 0.5 million per insured. To mitigate the effects of possible catastrophes, Mandatum Life participates in the catastrophe reinsurance taken jointly by Finnish life insurance companies. Possible pandemics are not covered by the reinsurance.
Governance Risk selection is part of the day-to-day business routines in Mandatum Life. Mandatum Life’s Underwriting Policy sets principles for risk selection and limits for insured sums. Compliance with the principles and limits set in the Underwriting Policy is monitored continuously.
The basis for market risk management is that the subsidiaries analyse their respective ALM risks. These are then taken into account together with capitalisation when managing the companies’ investment portfolios.
Market risks related to the investments in sampo Group The amount of investment assets excluding Nordea holding was EUR 16,593 million (16,502 million in 2008 including Nordea). The investment allocations of Sampo Group are shown in Figure 12.
unless otherwise indicated. Mandatum Life’s reported investment assets include fixed income investments issued by If P&C of EUR 43.5 million.
If P&C’s equity portfolio is invested with a long term investment horizon. At year end the exposure was EUR 1,136 million (439 million in 2008). The proportion of equities in If P&C’s investment portfolio was 10.7 per cent at year-end. The equity portfolio consists of listed shares of Nordic companies as well as a global fund portfolio. Mandates for investments are given in the Investment Policy.
The breakdown of the equity exposures of Sampo Group by geographical regions is shown in Figure 14.
The derivatives, financial assets designated as at fair value through p/l and financial liabilities may not be reclassified.
Other Financial Liabilities Other financial liabilities comprise debt securities in issue and other financial liabilities.
The significance and prolongation of the impairment in the last-mentioned cases is assessed case by case, taking into consideration special factors and circumstances related to the investment. Sampo invests in private equity and venture capital in order to keep them to the end of their life cycle, so the typical lifetime is 10 – 12 years. In general, a justifiable assessment of a potential impairment may only be done towards the end of the life cycle. However, if additionally there is a well-founded reason to believe that an amount equivalent to the acquisition cost will not be recovered when selling the investment, an impairment loss is recognised.
At each reporting date the Group assesses whether there is any indication that an intangible asset or an item of property, plant or equipment may be impaired. If any such indication exists, the Group will estimate the recoverable amount of the asset. In addition, goodwill, intangible assets not yet available for use and intangible assets with an indefinite useful life will be tested for impairment annually, independent of any indication of impairment. For impairment testing the goodwill is allocated to the cash-generating units of the Group from the date of acquisition. In the test the carrying amount of the cashgenerating unit, including the goodwill, is compared with its recoverable amount.
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.
Impairment Tests Goodwill, intangible assets not yet available for use, and intangible assets with an indefinite useful life are tested for impairment at least annually. The recoverable amounts from cash-generating units have mainly been determined using calculations based on value in use. These require management estimates on matters such as future cash flows, the discount rate, and general economic growth and inflation.
Depreciation and amortisation by segment are disclosed in notes 11 – 13 and investments in associates in note 14.
Interest income 366 374 Impairment losses 1 -81 Gains/losses 44 52
Net income from investments includes exchange differences Arising from insurance business 13 20 Arising from investments -16 2
Included in gains/losses from financial assets available-for-sale is a net gain of EURm 23 (-2) transferred from the fair value reserve.
Staff costs Wages and salaries -7 -7 Cash-settled share-based payments -1 -2 Pension costs – defined contribution plans -2 -2 Other social security costs -1 -1
Life insurance Land and Land and EURm buildings Equipment Total buildings Equipment Total At 1 Jan.
At beginning of year 5 9 Share of loss/profit 0 1
Derivative financial instruments 66 108 Financial assets designated as at fair value through p/l 50 41 Investments held-to-maturity - 1 Loans and receivables 26 5 Financial assets available-for-sale 5,074 4,348
Financial assets available-for-sale for P&C insurance include impairment losses EURm 170 (85).
Investments held-to-maturity Debt securities Debt securities issued by other than public bodies - 1
Financial assets available-for-sale Equity securities 74 -15 Debt securities 93 -3 Mutual funds 501 -90
Current estimate of total claims costs 5,296 2,247 2,219 2,346 2,480 2,553 2,681 2,733
More information on P&C Insurance’s insurance liabilities in the Risk Management section of the Annual acounts.
Life insurance Change in liabilities arising from other than unit-linked insurance and investment contracts
Liabilities for insurance and investment contracts total Provision for unearned premiums 2,585 2,707 Provision for claims outstanding 1,846 1,779
If P&C Insurance Company Ltd issued in 2002 EURm 65 preferred capital note. The loan was wholly subscribed by If Group’s owners of that moment. The loan has a maturity of 20 years. It pays fixed interest rate for the first 10 years and the last 10 years floating rate interest. The loan is not listed.
Short-term employee benefits comprise salaries and other short-terms benefits, including profit-sharing bonuses accounted for for the year, and social security costs.
Payout between the minimum and the maximum increases linearly. The fair value of the programme at grant date has been measured by using Black-Scholes -pricing model. When measuring the fair value of the part of the reward that is based on market conditions (share price), the estimated amount of shares to vest has been taken into account. Non-market conditions (IM and ROE) have not been taken into account in the fair value calculations, but instead these conditions have been taken into account when estimating the amount of shares to vest by the end of the vesting period. In this respect, the Group updates the assumptions of non-market conditions for each interim and annual accounts. The volatility used in the pricing-model, 38.0 per cent, was two and half years’ weekly historical volatility. Other inputs used in the model were risk free interest rates 0.40 – 2.80 per cent and 5 per cent dividend per share.
The employment of Björn Wahlroos continued until 30 June 2009. 267 -
The audit was performed in accordance with good auditing practice in Finland. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
IR Information 5 May Interim Report for 1 January – 31 March 2010 11 August Interim Report for 1 January – 30 June 2010 3 November Interim Report for 1 January – 30 September 2010