72017 in Figures 9Strategy 9- Dividend Policy 10- If – Safety and Stability 11- Topdanmark – Profitable Insurance Business in Denmark 12- Mandatum Life – An Expert in Money and Life 13Group Structure 14Organization 15Businesses 16- If in 2017 17- Topdanmark in 2017 20- Nordea in 2017 20- Mandatum Life in 2017 22Personnel 24- Personnel at If 29- Personnel at Topdanmark 32- Personnel at Mandatum Life 37Corporate Responsibility 37- Corporate Responsibility at If 39- Corporate Responsibility at Topdanmark 40- Corporate Responsibility at Mandatum Life 42Shares on the Joint Book-Entry Account 2017
Nordea’s AGM will also decide the issue of re-domiciling the head office from Stockholm to Helsinki, which would mean it being under the jurisdiction of the European banking union. Nordea estimates that the transfer of domicile into the banking union would bring savings of some EUR 0.9 –1.2 billion, valued on a net present value basis. The financial benefits are so significant that I believe the shareholders will be voting in favor of the move.
Negotiations concerning the price of the insurance portfolio to be sold to Danske Bank were concluded in June 2017, which resulted a valuation of EUR 334 million. The sale of the portfolio improves Mandatum Life’s solvency and its ability to pay dividends over the coming years. The transfer is estimated to take place in late 2018.
If is the leading property and casualty insurer in the Nordic region, with 3.7 million customers in the Nordic and Baltic countries. If offers a full range of P&C insurance solutions and services to a broad customer base, from private individuals to large corporate customers.
In order to fulfil the vision of being the preferred insurance partner, If has adopted a strategy based on three strategic goals: • Most satisfied customers through strong focus on customer value To achieve this If must have the best in-depth understanding of the customers’ insurance needs and, correspondingly, the best underwriting skills. If strives to be the most service-oriented company in the industry and continues to develop its digital communication.
In non-life insurance, Topdanmark holds a 17 per cent market share in Denmark. Topdanmark focuses on the private, agricultural and SME market, market segments with high frequency but low average claims. Topdanmark has approximately 600,000 non-life insurance customers and the company offers a full range of insurance services.
• A combined ratio of 91 per cent excluding run-off result ◦ The goal for combined ratio is adjusted on the basis of a 10 per cent profit ratio • Growth in gross premiums earned is in line with the market level
Managers (male 68%, female 32%) All employees (male 51%, female 49%)
Within six months, Sampo attempted to reach as many as possible of those persons who had not transferred their paper share certificates to a book-entry account. Another aim was to activate those persons in good time before the AGM date, 27 April 2017, which was the last possible day to request conversion after the conversion period, based on the assumption that the AGM would decide on the forfeiture of shareholder rights.
Information as of 31 December 2017, unless stated otherwise. The CVs of members of the Board of Directors can be viewed at www.sampo.com/board.
In addition, the Committee is responsible for preparing proposals for the Board on issues relating to the development of corporate governance and confirming the criteria and processes used for the Board's self-evaluation.
The Committee also regularly evaluates its own practices and co-operation with the executive management.
Patrick Lapveteläinen GrGroup CIOoup CIO, Sampo Gr, Sampo Groupoup Born 1966Born 1966
Torbjörn Magnusson CEOCEO, If P, If P&C Insur&C Insurancance Holding Le Holding Lttd (publ)d (publ) Born 1963Born 1963
Topdanmark A/S, Chairman of the Board; If P&C Insurance Ltd (publ), Chairman of the Board; If P&C Insurance Holding Ltd (publ), Board Member; Swedish Insurance Federation, Board Member; Swedish Insurance Employer Association, Board Member; Insurance Europe, Vice President
According to Sampo's Articles of Association, the Annual General Meeting decides on the remuneration of the members of the Board of Directors.
In addition to regulatory supervision, compliance with the obligations under Sampo Group’s Guidelines for Insiders and the underlying legislation is supervised by Insider Administration, which is a group function centralized in Sampo plc and led by the person in charge of insider matters.
Sweden enjoyed good economic growth, albeit falling short of the growth rate achieved in 2016. Domestic demand continues to grow and high confidence supports private consumption. In addition, the economy was boosted by growing exports and higher employment. The Swedish labor market continued its strong performance, as unemployment fell despite the simultaneous entry of new labor into the market. In the autumn, the markets turned their attention to falling housing prices, leading to a degree of uncertainty over the economy. The housing market’s woes were also reflected in the krona, which weakened in the autumn. This, however, helps the Swedish export sector. Inflation began to rise in 2017, and the Riksbank will gradually prepare to normalize its monetary policy.
Average number of staff (FTE) 6,367 6,180 187 * Excluding the non-recurring items combined ratio for 2016 would have been 86.1 per cent.
On 31 December 2017, the total investment assets of If P&C amounted to EUR 11.5 billion (12.2), of which fixed income investments constituted 84 per cent (79), money market 3 per cent (8) and equity 13 per cent (13). Net income from investments amounted to EUR 216 million (173). Investment return marked-to-market for the full-year 2017 amounted to 2.6 per cent (2.9). Duration for interest bearing assets was 1.4 years (1.4) and average maturity 2.7 years (2.8). Fixed income running yield without taking into account the FX hedging cost as at 31 December 2017 was 1.5 per cent (1.7).
Net investment income, excluding income on unit-linked contracts, amounted to EUR 376 million (356). Net income from unit-linked contracts was EUR 405 million (276). During 2017 fair value reserve remained stable at EUR 599 million (596).
Sampo Group consolidates Topdanmark as a subsidiary as of 30 September 2017 in its financial reporting in accordance with IFRS. Earlier as of May 2011 Topdanmark was consolidated as an associate in the P&C insurance segment.
Board will be paid an annual fee of EUR 175,000, the Vice Chairperson of the Board and the Chairperson of the Audit Committee will be paid EUR 115,000, the members of the Audit Committee will be paid EUR 96,000 and the other members of the Board of Directors will be paid EUR 90,000 each. A Board member shall in accordance with the resolution of the Annual General Meeting acquire Sampo plc’s A shares at the price paid in public trading for 50 per cent of his/her annual fee excluding taxes and similar payments.
BlackRock, Inc. (tax ID 32-0174421) and its funds directly or through financial instruments. The notified changes are illustrated in the table below.
A dividend of EUR 150 million is planned to be paid by Mandatum Life during the first quarter of 2018. If P&C normally pays its dividend towards the end of the calendar year.
The Swedish Financial Supervisory Authority approved in November 2016 a partial intern model for calculating the solvency capital requirement for If P&C Insurance Company Ltd (Sweden). After the Finnish operation was transformed into a branch in late 2017, If applied for the extension of the partial internal model to also cover the Finnish business.
Nordea’s capital requirement in Sampo Group’s solvency changes with effect from 1 January 2018 due to the expiration of the Basel I floor in Sweden. Until 31 December 2017 Sampo's share of Nordea's capital requirement was based on the minimum requirement including Basel I floor but as of 1 January 2018 Sampo starts to use Minimum requirement for Own funds (as defined in Nordea's quarterly Factbook) as the capital requirement in Sampo Group’s solvency. At the end of 2017 this change would have increased Sampo Group’s minimum requirement for own funds by ca. EUR 380 million and decreased solvency capital by the same amount. The Group solvency ratio would have on 31 December 2017 been 146 per cent.
Return on equity (at fair values) % 13.3 15.9 12.7 11.4 18.3
Adjusted number of shares at 31 Dec. 1.000 555,352 560,000 560,000 560,000 560,000
Rules 162- Group's Own Funds and Solvency According to Solvency II
184- Principles of Investment Portfolio Management 186- Principles of Operational Risks Management 187Appendix 4: Profitability, Risks and Capital 187- Capitalization at the Sub-Group Level 189- Capitalization at Group Level 192Appendix 5: Valuation for Solvency Purposes
• IFRS Line of Business Accident (581) includes Solvency II Line of Businesses Income protection insurance (397), Other Life (38), Medical expense insurance (131) and Assistance (14).
In If P&C reinsurance is used regularly and If P&C have number of programs in place. If P&C is using reinsurance to (i) utilize its own capital base efficiently and reduce cost of capital, (ii) limit large fluctuations of underwriting results and (iii) have access to reinsurers’ competence base. The Reinsurance Committee (“RC”) is a collaboration forum for reinsurance related issues in general and shall give its opinion on and propose actions in respect of such issues. The committee shall consider and propose changes to the Reinsurance Policy and the Internal Reinsurance Policy. The Chairman is responsible for reporting policy deviations and other issues dealt with by the committee.
In If P&C, the default risk of derivative counterparties is a byproduct of managing market risks. In If P&C the role of long term interest rate derivatives has been immaterial and counterparty risk stems mainly from short-term FXderivatives. The counterparty risk of bilaterally settled derivatives is mitigated by careful selection of counterparties; by diversification of counterparties to prevent risk concentrations and by using collateral techniques, e.g. ISDA Master Agreements backed by Credit Support Annexes. During 2016 If P&C started to settle interest rate swaps in central clearing houses, which while further mitigating bilateral counterparty risk also exposes If P&C to the systemic risk related to centralised clearing parties.
BrBreakeakdodown of Grwn of Grososs Ws Writtritten Pren Premiums bemiums by Cy Countryountry Topdanmark, 2017, total EUR 1,216 million
Currency Risk SCR was DKK 31 million on 31 December 2017.
To limit the counterparty risk of financial contracts, the choice of counterparties is restrictive, and collateral is required when the value of the financial contracts exceeds the predetermined limits. The size of the limits depends on the counterparty's credit rating and the terms of the contract.
These organizational functions include business areas and other functions that have ongoing responsibility for managing and limiting operational risks and thus minimizing the risk of errors or offenses which have economic and reputational loss consequences for the company. Full organizational independence is not required if it is not possible to organize it or if it is considered appropriate not to have full independence. In case there is no established full organizational independence, there is a requirement for compensatory checks.
The purpose of the capital plan is - based on Topdanmark's strategy and risk appetite - to estimate future capital base, or own funds and solvency capital requirements, assuming that companies continue their operations in line with their own expectations. The future capital base is affected by earnings, capital expansion, changes in subordinated loan instruments or risk transfers using for example reinsurance. The capital base estimate is updated with the latest forecast at the time for the next 5 years.
The insurance risk result of other biometric risks has been profitable overall, although the different risk results vary considerably. In the longer term, disability and morbidity risks are mitigated by the company’s right to raise insurance premiums for existing policies in case the claims experience deteriorates.
Counterparty default risks are described in more detail in section Counterparty Default Risks. Due to differences in the reporting treatment of derivatives, the figures in the table may not be fully comparable with other tables in this annual report.
The geographical core of Sampo Group’s equity investments is in the Nordic companies. The proportion of Nordic companies’ equities corresponds to 46 per cent of the total equity portfolio. This is in line with Sampo Group’s investment strategy of focusing on Nordic companies. However, these Nordic companies are mainly competing in global markets: only a few are purely domestic companies. Hence, the ultimate risk is not highly dependent on the Nordic economies. In the long run the proportion of investments outside of the Nordic countries has gradually increased, because the amount of companies issuing securities in the Nordic countries is limited and from a strategic point of view other geographical areas have recently provided interesting investment opportunities. A breakdown of the listed equity exposures of Sampo Group is shown in the figure Breakdown of Listed Equity Investments by Geographical Regions, Sampo Group 31.12.2017.
• The Baltic branches has its own risk management procedures. All major incidents are also reported to Mandatum Life’s Risk Management Committee.
The risk management function implements an annual ORSA process identifying risks in the business, quantifying these risks and collecting them in a risk register. Additionally, the principles of solvency calculation are reviewed, and the risk management process is updated. An ORSA report has been prepared, which, together with the risk register and risk management process, was considered at a Board seminar in the autumn of 2017.
In general, market risks refer to fluctuations in the financial results and capital base caused by changes in market values of financial assets and liabilities, as well as by changes in the economic value of insurance liabilities. The changes in market values and economic values are caused by movements in underlying market variables such as interest rates, inflation, foreign exchange rates, credit spreads and share prices.
Appendix 3: Selected Management Principles These principles are followed as such in wholly-owned subsidiaries and this description does not cover current principles followed in Topdanmark.
ALM risk profiles are thoroughly analysed and taken into account for instance when investment policies are designed, insurance products are developed and internal capitalization targets are set.
Investments (excluding Mandatum Life’s investments covering unit-linked policies) are managed according to the subsidiaries’ Investment Policies which are based on insurance liabilities and solvency as described in previous section. In Sampo Group direct investments and managers of collective investment assets are carefully studied before entering into new investments or making new commitments. This prudent person principle is reflected in many different ways in companies´ investment policies and specifically in requirements set for new kind of investments or any nonroutine investments by their nature.
• At the moment Sampo Group companies do not have ESG investment guidelines that would exclude some business areas and companies outside the scope of investment opportunities. Sampo Group does not have earmarked funds for sustainable investments like green bonds either.
The main steps in decision making, limit and monitoring process are as follows: ANNUAL REPORT 2017 Risk Management
1. Potential investments are analyzed thoroughly. The creditworthiness and future prospects of the issuer are assessed together with collaterals and structural details of the instruments. Although external credit ratings by rating agencies and the opinions of analysts are used to support the internal assessment, Sampo Group’s own internal assessment is always the most important factor in decision making.
The aggregated market risks and concentrations at Group level are controlled by Group’s Audit Committee quarterly at a minimum. Unlike underwriting activities, the subsidiaries’ investment activities are coordinated closely many ways at group level as follows: • Their investment portfolios’ risk profiles are designed and decided separately from each other, but their risk profiles are coordinated to proactively prevent potential concentrations. This principle is relevant for Topdanmark as well.
The determination of the fair values are presented in Sampo Group’s Annual Report “Financial Statement/Notes to the accounts/Summary of significant accounting policies/Fair value and Investment property” and also in the notes “Fair values” and “Determination and hierarchy of fair values”.
4. A risk margin over the Best Estimate is included in the Solvency II Technical provisions.
Health similar tHealth similar to lifo lifee 1,0361,036 3232 1,0681,068 00 1,0681,068 1,0801,080 00 1,0801,080 99%99%
TTechnical Prechnical Proovisions in IFRS and Solvvisions in IFRS and Solvencency IIy II If P&C, 31 December 2017
• The introduction of the risk margin increases the technical provisions by EUR 324 million.
Therefore, under Solvency II treatment, all receivables and liabilities related to the MMP public sector are reclassified as forming a part of the Solvency II best estimate technical provisions. Under this treatment the receivables balances are netted against the liabilities in the technical provisions, as they are considered to be premium cash in-flows and thus included in the technical provisions.
Other liabilities than technical provisions are valued by discounting future cash flows with the government yield plus calculated spread at inception. This increased the amount of financial liabilities in SII balance sheet by EUR 83 million.
Deferred tax liabilities are discussed above in connection with deferred tax assets.
OvOvererall Pall Position, Tosition, Technical Prechnical Proovisionsvisions Topdanmark, 31 December 2017
The financial statements have for the most part been prepared under the historical cost convention. Exceptions are i.e. financial assets and liabilities at fair value through p/l, financial assets available-for-sale, hedged items in fair value hedges and share-based payments settled in equity instruments measured at fair value.
Financial assets designated as at fair value through profit or loss are assets which, at inception, are irrevocably designated as such. They are initially recognised at their fair value. They are recognised in the income statement and balance sheet accordingly with above-explained assets held for trading.
Available-for-sale financial assets are initially recognised fair value, including direct and incremental transaction costs. They are subsequently remeasured at fair value, and the changes in fair value are recorded in other comprehensive income and presented in the fair value reserve, taking the tax effect into account. Interest income and dividends are recognised in profit or loss. When the available-for-sale assets are sold, the cumulative change in the fair value is transferred from equity and recognised together with realised gains or losses in profit or loss. The cumulative change in the fair value is also transferred to profit or loss when the assets are impaired and the impairment loss is recognised. Exchange differences due to available-for-sale monetary balance sheet items are always recognised directly in profit or loss.
When there is objective evidence of impairment of a financial asset carried at amortised cost, the amount of the loss is measured as the difference between the receivable’s carrying
The total return consists of the guaranteed interest rate and bonuses determined annually. Continuity is pursued in the level of bonuses.
As the upcoming and IFRS 4 superseding new standard IFRS 17 Insurance Contracts (effective for annual periods beginning on 1 Jan 2021 or after) will have an impact on the insurance liabilities valuation, the insurance companies have been given additional options regarding the adoption of IFRS 9. If certain preconditions regarding the insurance liabilities are met, the company may apply the so-called temporary exception option and defer the implementation until the adoption of IFRS 17, at the latest on annual period beginning on 1 Jan 2021. The temporary exemption may be applied, if the Group’s amount of insurance liabilities is greater than 90% of the total amount of liabilities. The application is also possible, if the ratio is greater than 80%, and the Group does not engage in a significant activity unconnected with insurance. Another allowed option is to apply IFRS 9 from 1 Jan 2018 on, but to remove from the income statement some of the accounting mismatches caused by the different valuation methods of assets and liabilities.
GrGroup financial asoup financial assets, tsets, totalotal 20,46320,463 290290 169169 -47-47 175175
The recoverable amounts for If and Mandatum have been determined by using a discounted cash flow model. The model is based on Sampo’s management’s best estimates of both historical evidence and economic conditions such as volumes, interest rates, margins, capital structure and income and cost development. The value in use model for Mandatum is greatly influenced by the long-term development of insurance liabilities, affecting e.g. the required solvency capital and thus the recoverable amount. That is why the forecast period is longer for Mandatum, 10 years. The derived cash flows were discounted at the pre-tax rates of the cost of equity which for If was 8.7% and for Mandatum Life 9.5%. The cost of equity is used as the cost of capital as neither company has principal outstanding.
Associates that have been accounted for by the equity method at 31 December 2016
FINANCIAL AFINANCIAL ASSSETSETS AS AT 31 DECEMBER 2017T 31 DECEMBER 2017
TTotal financial asotal financial assessests measurts measured aed at ft fairair *) Purhcases of debt securities include additions from business acquisitions EURm 57 in assets held for trading and EURm 21 in financial assets related to unit-linked insurance.
PP&C insur&C insurancance te totalotal 11,28111,281 294294 10,98710,987 9,3799,379 236236 9,1439,143
TTotal aotal at 31 Dect 31 December 2017ember 2017 7,7917,791 -- 7,7917,791
Fair value of plan assets 177 35 211 166 49 214
AsAssets pledged as security fsets pledged as security for derivor derivaativtive ce controntracts, carryingacts, carrying vvaluealue
As shown in the below figure Breakdown of Gross Written Premiums by Business Area, Country and Line of Business, If
Because the recoverables and pooled solutions reported above are not covered by collaterals the whole amount is exposed to counterparty risk.
The Reinsurance Security Committee (“RSC”) shall give input and suggestions to decisions in respect of various issues regarding reinsurance default risk and risk exposure, as well as proposed deviations from the Reinsurance Security Policy. The Chairman is responsible for reporting policy deviations and other issues dealt with by the committee. If P&C has a Reinsurance Security Policy that sets requirements for the reinsurers’ minimum credit ratings and the maximum exposure to individual reinsurers. Also, the own creditanalysis plays a central role when counterparties are selected.
CComposition of Tomposition of Topdanmark's Non-Lifopdanmark's Non-Life Ove Overerall Prall Proovisions fvisions for Outsor Outstanding Claimstanding Claims
In general Topdanmark Livsforsikring has continuous focus on the solvency position, the changes in the individual risks and the development of the loss-absorbing buffers. The latter is important because over time it can level out the market and insurance risks within the individual risk groups. Hence, the loss-absorbing buffers are a crucial part of the with profit concept in leveling of yields and claims over time.
In addition to Investment Policies, companies have a capital plan and a capital emergency plan if sudden changes occur in the asset or liability side.
AsAssets rsets relaelatted ted to I/Ao I/A 327327 11%11% 310310 12%12%
The asset allocation covering life insurance liabilities over all contribution groups is presented in the below table.
Unit-linkUnit-linked, eed, exxcl. Balticcl. Baltic 6,2796,279 827827 -544-544 -70-70 00 22 407407 6,9016,901 59%59%
In the table, financial assets and liabilities are divided into contracts that have an exact contractual maturity profile, and other contracts. Only the carrying amount is shown for the other contracts. In addition, the table shows expected cash flows for net technical provisions, which by their nature, are associated with a certain degree of uncertainty.
In the next paragraphs concentrations by homogenous risk groups and by single names are presented first and then balance sheet level risks are discussed shortly.
TTop 10 lisop 10 listted equity ined equity invvesestmentstments TTotal fotal fair vair valuealue, EURm, EURm % of t% of total dirotal direct equityect equity ininvvesestmentstments
Net cash used in financing activitiesNet cash used in financing activities -1,639-1,639 7878