The year wasn’t easy, however. It was necessary for us to reduce staff, particularly in the retail customer network. In the dismal market conditions of the last two years cost cutting has been the main route for us to succeed. Staff reductions have, however, been implemented in the softest way possible. For those left without work, we have offered the chance to retrain, help in seeking new jobs, the possibility to retire and fi nancial support measures. Thus we have striven, on our part, to fulfi l our social obligations. A more detailed review of corporate social responsibility can be found in our separate report.
IN FEBRUARY 2004, SAMPO ANNOUNCED A RISE IN ITS OWNERSHIP OF IF P&C INSURANCE COMPANY TO 89.94 PER CENT. AS A RESULT, IF WILL BECOME PART OF SAMPO GROUP, AND PROPERTY AND CASUALTY INSURANCE WILL BECOME AN INDEPENDENT BUSINESS AREA IN SAMPO ALONGSIDE BANKING AND LONG-TERM SAVINGS. THE P&C INSURANCE BUSINESS STRATEGY CAN BE READ IN IF’S ANNUAL REPORT FOR 2003.
Sampo’s bank statements were improved to help customers plan and control their fi nances. The new statements group transactions by type and provide more information than conventional statements, which list trans actions in date order. Income/deposits, savings and investments, credit, automatic payments, invoices paid/ account transfers, card purchases and cash withdrawals are all shown separately in the new statements. At the end of the year Sampo announced that it was reforming its retail customer accounts with effect from February 2004, and it also published a new schedule of service charges. The main aim was to make the previously complicated system of service charges easier to understand, and the number of price categories has been reduced. Customers can clearly see how much they will have to pay for the services they use and can select the most suitable, lowestcost option for managing their everyday banking transactions and building up their savings.
In 2003 the public sector put a major part of its fi nancial and banking services out to tender. Sampo maintains its central role as a provider of banking services for the state and its unincorporated enterprises, especially in payments, investments and electronic transactions. Sampo is also a strong partner for local authorities, providing payments, investments and local authority paper programmes for tailored short-term fi nance. The most signifi cant development in payments was e-billing, for which local authorities now have good capabilities. Sampo launched local authority paper programmes with 178 customers and has a market share of about 75 per cent. Sampo’s position was also strengthened in mutual fund services, where it supplies 127 local authority customers. Moreover, Sampo is the market leader in staff pension savings services. 53 employers in the local authority sector have negotiated voluntary pension insurance schemes as additional benefi ts for their employees. Sampo Group also has a strong position in providing asset management services for public institutions.
Due to over-capacity in the sector, competition is expected to remain tight.
Corporate Governance Sampo complies with the Corporate Governance Recommendation for Listed Companies issued by HEX Plc, the Central Chamber of Commerce of Finland and the Confederation of Finnish Industry and Employers and which will enter into effect on 1 July 2004. However, in deviation from the recommendations, Paavo Pitkänen, a member of the Board of Directors’ Audit Committee, is not independent of the company, because he was elected as a member of the Audit Committee in spring 2003. Sampo’s Board of Directors has also approved internal rules concerning corporate governance, internal control and reporting in Sampo Group.
tees in 2003. The members of the Board did not receive any other benefi ts and did not participate in Sampo’s option programmes.
The retirement age of the members of the Group Executive Committee is 60 years, and the pension paid corresponds to the full amount permitted under the Employees’ Pensions Act (TEL).
Chairman of the Boards of Assa Abloy AB (publ) and Varma Mutual Pension Insurance Company, Vice Chairman of the Board of Rautaruukki Corporation, and member of the Boards of Nokia Corporation, Karl Fazer Oy Ab and Sandvik AB
Member of the Boards of If P&C Insurance Holding Ltd, Meridea Financial Software Oy and the Deposit Insurance Fund of the Commercial Banks and Postipankki Oy
Salaries based on systematic task diffi culty evaluation systems The salaries of clerical bank staff are determined according to a Sampo classifi cation based on a comprehensive evaluation of the diffi culty of tasks. The salaries of the retail customer network’s customer acquisition staff are largely based on sales commissions. The salaries of Sampo Life’s clerical staff are determined on the basis of the salary system for clerical staff in insurance offi ces.
Staff representatives participate in the meetings of the Board of Management of Sampo Bank and the Board of Directors of Sampo Life. The staff representatives have the right to be present and to express opinions.
The CR steering group met fi ve times in the year, and their work continued in project work groups. Discussion took place on ways to practically implement Sampo’s values and improve environmental and CR reporting. The content of the sustainable development policy was refi ned.
Shares and shareholders back by Sampo plc. This resulted in a corresponding decrease in the number of A shares. The decrease in share capital did not result in a decrease in Sampo’s capital and reserves. The decrease in share capital was entered in the Trade Register on 11 April, 2003.
In previous years, dividends have been paid as follows (the fi gures have been split-corrected, converted to EUR and rounded out)
Provisions for bad and doubtful debts 0 - - - -
Effi ciency improvements lowered costs signifi cantly. The cost to income ratio (including the net amount of fees and commissions receivable and payable) remained at the previous year’s level at about 64 per cent (64).
Housing loans, which form more than 3/4 of all loans to households, continued to grow faster than market growth at above 17 per cent. Sampo’s market share of all housing loans granted by fi nancial institutions grew slightly and was over 14 per cent. Housing loan spreads have decreased from last year, but the narrowing of spreads for new loans stopped in the autumn. Sampo Card Ltd’s Balanssi and MasterCard credits increased altogether at 71 per cent per year, rising to EUR 192 million. Total deposits increased in one year by approximately 2 per cent, rising to EUR 9,392 million. The volume of deposits in current accounts and corporate giro accounts increased, while time deposits decreased. Sampo’s market share of deposits by the public was above 13 per cent.
The group’s capital adequacy has been calculated in accordance with the provisions of the Act on Credit Institutions, 9:72-81§.
The net investment income of Sampo Group’s life insurance companies increased to EUR 387 million (193). The return on investment assets at current values for the year under review was 9.5 per cent. The revival of the capital markets was strongly refl ected in the result of life insurance investment activity since, due to its high solvency ratio, the company was able to maintain a considerable weighting in equity investments even in diffi cult circumstances.
Sampo Life is forecast to maintain its strong market position, although sales of individual pension insurance in the fi rst half of the year will be slowed down by uncertainties concerning coming tax legislation. Due to its multi-channel distribution and wide product range, the company will survive the changes in the environment better than many of its competitors. The premiums written by life insurance companies operating in the Baltic and Polish markets is likely to continue to grow strongly. It is expected that the life insurance result will remain good and that solvency will remain high.
Debt securities in issue 4,099 24.31% 4,183 bonds and notes 1,821 10.80% 2,015
Liquidity position of Sampo Bank 31 Dec. 2003 2002 EUR m 0–1 m 1–12 m 1–2 y 2–5 y >5 y Total Total
Technical risk of the insurance business The majority of the technical risks related to Sampo’s life insurance business arise from Sampo Life’s insurance portfolio. Thus, the fi gures, risks and principles presented in this section refer to Sampo Life in Finland. The technical risks in Sampo’s Polish and Baltic life insurance companies are managed using similar principles to those applied in Sampo Life.
associated undertaking If and income from it are included in the consolidated accounts using fair values, according to the Swedish accounting practice applied in If.
Sampo Life aims at giving a total return before charges and taxes on policyholders’ with-profi t insurance savings, which is at least the yield of a Finnish government long-term bond. The total return consists of the guaranteed interest rate and bonuses determined annually on the basis of the company’s performance. As for the level of the total return, continuity is pursued.
Appropriations In accordance with the Finnish regulations on accounting and taxation, companies are allowed to include in the accounts certain untaxed reserves and depreciation in excess of plan, which impact on the taxation of the companies. Companies use them in planning their accounts and taxation. The amount of those appropriations or changes in them do not refl ect the risks of the companies.
Calculated using the formula shown above for banking and investment services operating profi t.
Return on equity (at fair values) % 13.8 1.4 -15.3 3.5 37.5 67.1
Life insurance liabilities 75 Technical provisions 76 Long-term liabilities (5 years or longer) 77 Deferred tax 78 Contingent liabilities, pledged assets and derivatives
Provisions pooled by customer group included in the specifi c provisions for the year - 2003 Average 2002 Average EUR m Income staff number Income staff number 6 Segmental information on income and staff By class of business
Interest and other expenses on liabilities to Group undertakings -5 0
Amounts include due from Group undertakings - due from associated undertakings - 31 Lease assets
Trigon Central and Eastern European Fund Estonia 673,504 - 5 5
Parent Parent Parent Group Group Group Company Company Company Book Capital Current Book Capital Current EUR m value employed value*) value employed value*)
MB Mezzanine Fund II Ky 1, 7 Helsinki Finland 62.50 - 23
To the Shareholders of Sampo plc We have audited the accounting records and the fi nancial statements, as well as the administration by the Board of Directors and the Managing Director of Sampo plc for the fi nancial year 2003. The fi nancial statements, which include the report of the Board of Directors, consolidated and parent company income statements, balance sheets and notes to the fi nancial statements, have been prepared by the Board of Directors and the Managing Director. Based on our audit we express an opinion on these fi nancial statements and on the company’s administration.
The contact information of Sampo Bank´s subsidiaries can be viewed on the Internet address www.sampo.fi /group