Sampo’s share of Nordea’s net profit for 2012 was EUR 653 million. According to Nordea’s dividend proposal, in spring 2013,
Mandatum Life – an Expert in Money and Life Mandatum Life is the leading provider of cover against life and health risks and a well respected manager of customer assets in
BUSINESSES Sampo Group is engaged in P&C insurance and life insurance through its fully owned subsidiaries If P&C Insurance Holding Ltd (publ) and Mandatum Life Insurance Company, respectively. The parent company Sampo plc is also the biggest shareholder in Nordea Bank AB, the largest bank in the Nordic region, with its 21.2 per cent holding on 31 December 2012. Nordea is accounted for as an associated company.
Obviously, If also takes action to influence politicians and other policy-makers to make prudent, long-term decisions. One example of this is Sweden where If works to get community planning officers to take into consideration the risks of raised water levels when making decisions about requests for water-side homes. Along with the other three major Nordic insurance companies, If supports a research project on climate change in the Nordic region, headed by the Nordforsk research funding organisation, an organ of the Nordic Council of Ministers.
As authorized by the Board of Directors, the Committee also decides on the fixed salaries of the members of the Group
◦ Vuorinen holds 12,161 Sampo plc shares directly or through controlled companies or persons closely associated with the
If P&C Insurance Company Ltd, Finland, Board Member; If P&C Insurance AS, Estonia, Board Member; CJSC If Insurance, Russia, Board Member; ◦ Member of Sampo Group Executive Committee since 2005.
Board of Directors for their Board and committee work up to the close of the Annual General Meeting in 2013: EUR 160,000 to the
Mr. Kari Stadigh is the CEO of Sampo Group. For year 2012 the
Net asset value per share on 31 December 2012 was EUR 17.55
Premiums grew 15 per cent to EUR 977 million (849). Fair value reserve increased to EUR 391 million (214) as at 31 December 2012. Return on equity increased to 28.5 per cent (-11.7).
Insurance margin (technical result in relation to net premiums earned) improved to 12.8 per cent (11.1).
Return on equity (RoE) increased to 36.2 per cent (12.4). Fair value reserve for If P&C increased from the previous year to EUR 364 million (139) at the end of December 2012.
(457), of which EUR 653 million (534) relates to Sampo’s share of
Head of Business Area Industrial in If P&C since 2005. He continues as a member of the Group Executive Committee in
SHARES, SHARE CAPITAL AND SHAREHOLDERS Shares and Share Capital As at 31 December 2012, Sampo plc had 560,000,000 shares, which were divided into 558,800,000 A shares and 1,200,000 B
Sampo plc made no repurchases during 2012 and has not purchased its own shares after the end of the reporting period.
Return on equity (at fair values) % 36.2 12.4 39.8 53.2 -0.8
Average adjusted number of shares 1,000 1,200 1,200 1,200 1,200 1,200
SAMPO GROUP'S STEERING MODEL Sampo Group’s steering model is straightforward and simple. The
Investment Policies which are approved by the Board of Directors of respective subsidiaries. Furthermore, the financial and risk management activities are coordinated by the parent company although most of the operational activities are carried out by the subsidiaries. Investor relations are managed centrally by the parent company Sampo plc.
Committee of Sampo plc is based mainly on the reporting produced by the subsidiaries and the supplementary company specific analyses prepared by the parent company.
The parent company is also projecting and analyzing the Group companies’ profitability, risks and capitalization with uniform scenarios to have company level forecasts that are additive at business portfolio level. To facilitate the Group level analysis, the parent company gives feedback to the subsidiaries regarding their reporting processes if needed.
Nordea Bank AB (publ) through which Sampo Group is engaged in banking business and exposed to respective risks. Nordea is
As a Nordic insurance group If P&C underwrites policies that cover various risks of individuals and corporations on a geographically diverse area. If P&C mainly underwrites insurance risks in the Nordic and Baltic countries, as well as policies for
• Balance between expected returns and risks in investment portfolios and the balance sheet are optimized, taking into account the features of insurance liabilities, solvency, regulatory asset coverage rules and rating requirements
RISK MANAGEMENT PROCESS IN SAMPO GROUP COMPANIES Sampo Group’s business activities and therefore also risk management activities are mainly performed by the subsidiaries.
• Independent measurement and control includes the statutory profitability, risk and capitalization calculations and independent monitoring of operations. Independent financial and risk management functions are explicitly responsible for this phase.
Sampo Group’s risks and risk concentrations as well as control the quality and scope of risk management in the Group
The Group Chief Risk Officer (CRO) is responsible for the appropriateness of risk management on Sampo Group level. The
Board and monitors the adequacy of liquidity, profitability and solvency capital in relation to the risks in the balance sheet.
ALCO prepares a proposal of Investment Policy to the Board of Directors. ALCO reports to the Board and meets at a minimum on a monthly basis.
• The Baltic subsidiary has its own risk management procedures. All major incidents are also reported to
The assessment of capital needed includes the following illustrative phases: 1. Economic capital methodology is used to define the capital needed for current activities; 2. Less quantifiable risks (e.g. low probability and high impact events, risks arising from general business environment) and potential model risks are taken into account in the buffer set over the economic capital; 3. Earnings are seen as the first buffer against potential losses, therefore expected profitability is also taken into account when considering the capital need.
The insurance portfolio is well diversified, given the large number of customers and the fact that business is underwritten in different geographical areas and across several lines of businesses.
Longevity risk is the most critical biometric risk in Mandatum Life.
Most of the longevity risk arises from the with-profit group pension portfolio. With-profit group pension policies have mostly been closed for new members for years and due to this the average age of members is around 68 years. In the unit-linked group pension and individual pension portfolio the longevity risk is less significant because most of these policies are fixed term annuities including death cover compensating the longevity risk.
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 on the company’s own account, which for Mandatum Life is EUR 1.5 million per insured.
To mitigate the effects of possible catastrophes, Mandatum Life participates in the catastrophe reinsurance bought jointly by
Investment Policies. The most significant risks are equity, interest rate, credit and currency risks. Market risks also arise from private equity, real estate and alternative investments.
Group has gradually increased its investments in illiquid loan instruments and, accordingly, Sampo Group has increased its resources to analyze and manage default risks.
The largest individual reinsurer is Munich Re (AA-), which accounts for 22 per cent of the total recoverables.
Liquidity risk is relatively immaterial in Sampo Group’s businesses because a substantial share of the investment assets are in shortterm money market instruments.
Sampo Group is not be able to enter into reinsurance or derivative transactions when needed.
In Sampo Group, liquidity risks are managed by the legal entities, which are responsible for liquidity planning. Liquidity risk is monitored based on the expected cash flows resulting from assets, liabilities and other business. At the end of 2012, the liquidity position in each legal entity was in accordance with internal requirements.
Operational risks can realize as an immediate negative impact on financial results arising from additional costs or loss of earnings. In a longer term, operational risks can materialize for instance as a loss of reputation and customers which endangers the company’s ability to conduct business activities in accordance with the strategy. These immediate and longer term effects of operational risk have their general causes in external and internal drivers. The
Control Committee (IRCC) as well as to report the current operational risk status. The status assessment is based on the self-assessments performed by the organization, reported incidents and other additional risk information. A trend analysis is being performed annually, where the most severe external operational risks are being identified.
(EUR 1,460 million at the end of 2011), while in Mandatum Life, economic capital increased to EUR 1,110 million (EUR 1,046 million at the end of 2011). Market risk is still the most significant risk for both If P&C and Mandatum Life and it has increased in both companies compared to the year 2011. Underwriting risk decreased in If P&C during the year to EUR 620 million
If P&C Insurance Holding AB sold the Russian insurance company SOAO Region on 30 Nov, 2012. The net net consideration paid was
The pricing is based on the Code of conduct on Transfer Pricing
Financial derivatives held for trading are initially recognised at fair value. Derivative instruments are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
Impairment of financial assets Sampo assesses at the end of each reporting period whether there is any objective evidence that a financial asset, other than those at fair value through p/l, may be impaired. A financial asset is impaired and impairment losses are incurred, if there is objective evidence of impairment as a result of one or more loss events that occurred after the initial recognition of the asset, and if that event has an impact, that can be reliably estimated, on the estimated future cash flows of the financial asset.
Act) index in order to maintain the real value of the pensions. The index raises are not the responsibility of the insurance companies, but are funded by the so-called pay-as-you-go principle, i.e. each year premiums written include index raises to the same amount that is paid out in that year. In practice, the P&C insurance companies collect a so-called expense loading along with their premiums written, which is then forwarded to the central organisation for the particular insurance line. The central organisation distributes the pay-as-you-go contributions collected so that the company undertaking the type of insurance in question receives an amount equal to the compensation falling under the pay-as-you-go system it has paid that year. The insurer’s participation in the payment is proportional to the insurer’s market share in the insurance line in question.
Mortality assumptions have an essential effect on the amount of liability, particularly in group pension insurance, the liability of which accounts for about 36 per cent of the technical provisions of the Finnish life company. A so-called cohort mortality model is used in calculating the group pension insurance liability since 2002, incorporating the insured person’s birth year in addition to his or her age and sex. The cohort mortality model assumes that life expectancy increases by one year over a ten-year period.
Defined benefit plans as intended in IAS 19 are also estimated in accordance with actuarial principles. As the calculation of a pension plan reserve is based on expected future pensions, assumptions must be made not only of discount rates, but also of matters such as mortality, employee turnover, price inflation and future salaries.
(effective for annual periods beginning on 1 Jan 2013 or after, latest application for annual period beginning on 1 Jan 2014)
Revised IAS 28 Investments in Associates (effective for annual periods beginning on 1 Jan 2013 or after, latest application for annual period beginning on 1 Jan 2014) includes the requirements for using the equity method accounting for investments in associates and joint ventures. The adoption of the revised standard will have no material impact on the Group’s financial statements reporting.
Liabilities for insurance and investment contracts 9,547 4,249 - - 13,796
Change in provision for claims outstanding (incurred but not reported losses,
The provision for annuities is valued in accordance with normal actuarial principles taking anticipated inflation and mortality into consideration, and discounted to take the anticipated future investment return into account. To cover costs for the costs for the upward adjustment of annuity provisions required for the gradual reversal of such discounting, an anticipated return is added to the annuity results. Provisions for incurred but not reported losses pertaining to annuities in Finland are discounted. The provisions in 2012 amounted to EURm 289 (274).
Associates that have been accounted for by the equity method at 31 Dec. 2011
Total financial assets designated as at fair value through p/l 22 155
At 31 Dec. 2012, the total amount of gains recognised in equity from the changes in the fair values of hedging instruments was EURm 0
The loans are issued with fixed interest rates for the first ten years, after which they become subject to variable interest rates. At that point, there is the possibility of redemption. All loans and their terms are approved by supervisory authorities and the loans are utilised for solvency purposes.
The Group had at the end of 2012 premises a total of 178,971 m2 (182,570) taken as a lessee. The contracts have been made mainly for 3 to 10 years.
The number of Sampo plc’s shares at 31 Dec. 2012 was 560,000,000, of which 558,000,000 were A-shares and 1,200,000 B-shares.
Our responsibility is to express an opinion on the financial statements, on the consolidated financial statements and on the report of the Board of Directors based on our audit. The Auditing
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and the report of the Board of Directors. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement, whether due to fraud or error.