4646GoGovvernancernancee 6464BoarBoard of Dird of Directectors' Rors' Reporteport 100100Risk ManagementRisk Management 182182Financial SFinancial Statattementsements 290290Calendar and CCalendar and Contactsontacts
Many people were taken by surprise in 2016 – including us at Sampo. However, in spite of this, we were able to report very good results.
The New Solvency II regulation that was applied with effect from 1 January 2016 did not affect our business operation as we had been preparing for it for many years. Furthermore, our solvency level clearly exceeds minimum regulatory requirements. Consequently, no changes were needed to our investment allocation following the new regulation coming into effect.
Predictable and stable earnings are important for us at Sampo. However, it is underwriting excellence, in other words risk assessment and fair pricing that is the cornerstone of our property and casualty insurance operations. In addition to this, significant investments in digitalization and the automation of claims handling have improved our efficiency.
During the past year, climate conditions were pleasingly on our side and both the cost ratio and combined ratio reached new record levels. The combined ratio amounted to 86.1 per cent without non-recurring items.
Furthermore, a new legal structure was created for Nordea by merging the subsidiary banks in Denmark,
Finland and Norway into the parent company Nordea Bank AB at the start of 2017. The banking businesses in Denmark, Finland and Norway are now conducted via local branches. This increases agility and reduces bureaucracy – two characteristics that customers appreciate.
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Profit before taxes for our subsidiary Mandatum Life increased to EUR 210 million and this was especially due to its excellent investment results. The life insurance company is now well positioned to generate good profits in the future as well.
In the fall of 2016, Mandatum Life agreed to sell to Danske Bank the insurance portfolio sold through Danske Bank's branch network in Finland. The portfolio almost exclusively consists of unit-linked and loan insurance products. The technical reserves related to the portfolio amounted to EUR 3.2 billion at the end of 2016. Meanwhile, the transfer of the portfolio is estimated to take place during the fourth quarter of 2017 at the earliest.
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Interest rates remain at record lows. Especially in Sweden, current rates are abnormally low considering the relatively good economic growth of the country. Indeed, as I write this review in February 2017, the interest rate gap between the US and Europe is larger than ever before.
Last but not least, I would like to thank our employees for their efforts and dedication. At the same time, I also want to thank our customers – many of whom are also our shareholders – for your continued support and trust. It is very much appreciated.
Sampo plc, the listed parent company of Sampo Group, is a good dividend payer. Sampo aims to pay at least 50 per cent of Group’s net profit as dividend. Share buy-backs can be used to complement the dividend. The Board proposes to the AGM a dividend of EUR 2.30 per share for the year 2016. The proposed dividend corresponds to a pay-out ratio of 78 per cent.
• The PrivPrivaattee business area is If’s largest business area and If is the Nordic market leader with more than three million private individuals as customers.
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Mandatum Life’s goal is to maintain its position as Finland’s largest life and supplementary pension insurer in the corporate customer segment. The company estimates that the need for Finns to secure their income during retirement will increase further with the pension reform that entered into force at the start of 2017. The reform aims at extending careers, which has an impact on employers: they must maintain their employees’ work capacity, competence and enthusiasm for even longer. Companies can complement the statutory pension cover of their employees through group pension insurance. By planning the retirement of personnel in time, companies can make sure that their employees retire at a time that is right for both them and their employer.
Danish insurance company Topdanmark A/S, in which Sampo plc owns more than 40 per cent of the shares, is the second largest P&C insurer in Denmark. It is accounted for as an associated company and in Group reporting included in the P&C insurance segment.
Sampo Group is active in insurance and banking. Sampo plc, the parent company, has two fully owned insurance subsidiaries, If P&C Insurance Holding Ltd (publ) and Mandatum Life Insurance Company Ltd. In addition Sampo has two major associates, Nordea Bank
In 2016, If P&C’s premium growth was flat. Underlying growth was driven by strong new car sales, continuous development of partnerships and internet sales, but was off-set by the loss of a few larger corporate accounts.
If's strategic focus areas during the year remained unchanged, with continued focus on digitalization, customer value, underwriting excellence and operational efficiency.
During the year, If continued to simplify products, developed value-added services and expanded its digital communication with customers. This has contributed to an increase in both customer satisfaction and use of online services, as well as an increase in the number of customers.
Year 2016 was a good year for If P&C Insurance with a strong result. If’s combined ratio for the year was 84.4 per cent (85.4 per cent) and the technical result increased to
EUR 658 million (657) and pre-tax profit amounted to EUR 883 million (960). During the year, If divested its shareholding in Topdanmark to Sampo plc, and hence no longer holds any shares in Topdanmark.
Solvency II regulation came into effect on 1 January 2016. If applies Solvency II principles in the regulatory solvency calculations. During the year, the Swedish Financial Supervisory Authority approved If’s internal capital model for the Swedish legal entity. If has a strong capital base, good systems for reporting and internal control as well as a risk-based management model. In 2016, Standard & Poor's strengthened If's rating to A+ with a stable outlook.
In addition, Nordea has started a significant transformational change agenda, including investments in a new core banking platform, a new legal structure, investments in compliance functions and implementing a new business culture. Two major achievements have been to create a new legal structure and launch a term-deposit product on the new core banking platform.
Under these market conditions, Nordea showed 3 per cent increase in net profit, solid credit quality and a return on equity of 11.5 per cent.
mobile solutions is growing rapidly. The eBranches and remote meetings are key initiatives to improve customer accessibility.
In Wholesale Banking, the successful trends over the last years have continued. In 2016, the leading position in corporate advisory services in the Nordics was confirmed. In terms of deal value, Nordea ranked number two in Europe and the clear number one in the Nordics as global co-ordinator of IPO’s. During the year, Nordea received several number one rankings in customer surveys and leading league table positions.
Nordea’s strategic direction, strong balance sheet and robust business model enable a further transformation of the bank. The focus areas will continue to be to create a fully digital platform, improve customer satisfaction and transform the organisation to be best in class in compliance with a strong ethics and value culture that can fulfil the obligations to the society and deliver value to our customers and shareholders.
In terms of premium income, the year was twofold: As a result of stock market volatility, the early part of the year was weak, but as the year progressed, sales volumes developed very favourably, especially for Mandatum Life’s own sales channels. Mandatum Life’s unit-linked premium income once again reached an alltime high. Mandatum Life’s wealth management achieved by far the highest premium income ever, bolstered especially by alternative investment products, which got off to an excellent start.
More than ten years ago, Mandatum Life set unitlinked insurance and personal risk insurance as its core business areas in terms of new business. Back then, the company’s technical provisions were almost exclusively related to with profit products and the share of the with profit portfolio with particularly high (3.5 per cent and 4.5 per cent) guarantees of the total technical provisions was close to 90 per cent. The with profit portfolio with high guarantees only constitutes less than 30 per cent of the company’s technical provisions. Unit-linked technical provisions rose to EUR 6.4 billion (5.9) – the highest ever in the company’s history.
At the end of the year, Mandatum Life announced that its long-standing distribution co-operation with Danske Bank would come to an end and that the company would exercise its right to sell the insurance portfolio, consisting of private customers’ insurance policies generated through the co-operation, to Danske Bank. The portfolio transfer involves approximately 150,000 policies, unit-linked insurance savings of around EUR 3 billion and with profit
Year 2016 proved to be good for Mandatum Life in many ways, especially thanks to a very strong fourth quarter. Despite the challenging market conditions early in the year,
Mandatum Life’s unit-linked premium income reached a record-high level, as in previous years, largely thanks to successful wealth management during the latter part of the year.
Sampo Group values the competence of its employees and strives to offer possibilities to learn new skills and grow professionally. Sampo Group is a stable and trusted employer and the international career opportunities attract new employees. Future leaders grow from within Sampo Group and are offered challenging positions and projects and supported with mentoring programs.
In 2016 Sampo Group employed on average 6,780 people (6,755). P&C insurance is the Group’s largest business area, If P&C employees comprising 91 per cent of the Group personnel (6,180 employees). 8 per cent of the employees worked in life insurance and 1 per cent in the parent company Sampo plc.
In geographical terms, 32 per cent of the personnel worked in Finland, 27 per cent in Sweden and 20 per cent in Norway. The Baltic countries, Denmark and other countries employed 21 per cent of the personnel.
Value creation in the financial industry rests on operational excellence, continuous renewal and highly skilled employees. The dedicated employees of Sampo Group are building trust through operational excellence and deliver a first class customer experience every day.
Another key factor in ensuring the industry’s most competent employees is recruitment. Recruiting employees with both the right skill set and the right motivation and attitude is essential. During 2016 HR has strengthened the emphasis on attitude, motivation and cultural fit in If P&C’s recruitment processes.
In contemporary business, leadership is multifaceted. Strong skills in traditional management must be complemented by abilities to help highly skilled specialists reach their full potential through nurturing their own motivation. Over the years, If P&C’s leadership model has been developed to better reflect the increased importance of intrinsic motivation, where performance is based on the inner drive, motivation and commitment of the individual employee. In 2016, around 50 leaders attended more extensive Nordic leadership programs. This type of holistic leadership thinking can also be seen in the big drive to develop front line leadership in light of If P&C’s strong focus on a first class customer orientation. During 2016 significant changes to front line leadership were discussed and implemented. The emphasis is on achieving a great holistic customer experience rather than certain sales targets. If Academy has designed development programs for leaders to support a customer focused mindset and offered workshops where leaders have been able to develop crucial skills. Front line leaders are being taught to adopt a more coaching leadership style.
Great leadership is essential, but it is not enough. A modern, complex service organization like If P&C with competent and highly trained staff increasingly requires that individual employees take full responsibility for their own performance and development. At If P&C this is called Employeeship.
• One of the Employeeship themes has been an initiative called Always the Right Age. HR has promoted that employees should not be seen, or see themselves, differently based on their age and that everyone is capable of taking responsibility for their own competence and motivation. All employees should be treated equally regardless of their age and supported throughout their careers. Everyone should be given the opportunity to work with full capacity until the pension age. The company needs to recognize the different phases of the working life and support employees where needed.
During the year If P&C has also focused on Gender Equality. The Equal Opportunites Advisory Board, started in 2015, has been active in hosting workshops in management teams and has proposed strengthening HR processes such as recruitment, succession planning and leader evaluation to further secure gender equality in the company.
If P&C’s number of personnel is virtually unchanged compared to 2015. Underneath the aggregate figure some changes to personnel structure can, however, be seen. As a result of strategic initiatives in Business Area Private, the number of employees in central Flagship Offices is growing and the number of employees in small branch offices is shrinking. Offshoring of support services and IT development to the Baltics is also showing up as increased personnel in the Baltic countries. During previous years the offshoring has mainly concerned back office jobs, but in 2016 customer fronting roles have been added.
The increased focus on digitalization and on how to serve customers better is leading to major change initiatives in the business areas. HR is supporting in reorganizations, the building of Flagship Offices, the set-up of new units, the development of training activities and the design of remuneration systems.
Annual DisAnnual Distribution oftribution of PPersonnel bersonnel by Cy Country (FTE Aountry (FTE Avvererageage)) If P&C, 2012–2016
Employee satisfaction is one of Mandatum Life’s strategic targets. The objective is to build a work culture where having the right people in the right places results in the highest quality of service for the company’s customers. Mandatum Life believes that a positive employee experience leads to a good customer experience.
Gender SGender Structurtructure (Managers and All Emploe (Managers and All Employyeesees)) If P&C, 2016
The company measures its employee satisfaction every year through the Great Place to Work Finland survey. The goal is that 90 per cent of Mandatum Life’s personnel feel they are employed in a very good workplace. The company’s focus on well-being at work has paid off. In 2016, the target was exceeded for the second time in a row and was 92 per cent (92).
Mandatum Life has been selected as one of the best workplaces in Finland for seven consecutive years.
Placing value on and fostering expertise has been recognized as a prerequisite for future success. The competition for top talent is heating up, which is why Mandatum Life is proactive in identifying and fostering the growing potential that lies within the company and in ensuring that the company is a challenging and interesting workplace for new talent. An important part of developing competence is to create a work culture and operating environment that promotes expertise and creativity for the long term. This requires a culture with a low hierarchy, confidencebuilding, engagement and encouraging new ideas. As much as 90 per cent of Mandatum Life’s personnel consider management easy to approach, and 93 per cent believe management has faith in the employees’ ability to perform their work well without the need for monitoring.
Mandatum Life believes in the 70–20–10 model of learning and development. According to the model, 70 per cent of learning takes place at the workplace through interesting and challenging assignments. The goal is for every Mandatum Life employee to be able to develop their personal competence at work. Learning at work is encouraged by opportunities to take part in development projects and working groups that cross unit boundaries. Temporary open positions, e.g. parental leave vacancies, may be filled through internal job rotation.
Feedback and learning from other members of the work community forms the basis for 20 per cent of learning. This area of learning is supported by, for instance, the company’s internal mentoring program, which was arranged in 2016 for the fifth time. The program is open to all Mandatum Life employees, and the mentors are typically members of the company’s management team.
Mandatum Life develops leadership for the long run by focusing on supervisory work and by regularly measuring the development of management and wellbeing. The starting point is that those who hold a managerial position are among the company’s key personnel.
All Mandatum Life supervisors also receive feedback on their interaction skills through 360-degree evaluations every two years. Feedback is given by the employees who work under the supervisor, by colleagues and by the supervisor’s manager. The Great Place to Work Finland study is also an important measure of a supervisor’s success, as it provides not only company-specific results, but also team-level results.
Mandatum Life strives for an effective and agile reward system for its personnel. That also means being prepared to make changes. The company continuously learns from the feedback of its personnel in order to find the best employee reward practices. Tried and tested practices are also made available to customers. Likewise, the company learns from its customers’ successful reward schemes.
At Mandatum Life, the main focus of occupational health is preventive well-being-at-work measures. The sick-leave rate has declined since 2011 and is at a very low level in the company. The sick-leave rate in 2016 was 2.4 per cent (2.3).
Mandatum Life strives to promote gender equality and equality between all employee groups. In terms of gender distribution, equality among the employees is at a very good level, with men (51 per cent) and women (49 per cent) being almost equally represented among personnel. Women are also represented in the company’s management team.
In spring 2016, Mandatum Life adopted a tool to make it easier and more efficient to come up with ideas. The introduction of the tool was business-based: the goal is to increase Mandatum Life’s ability to innovate and to cultivate ideas into business.
Between May and the end of 2016, 45 ideas and 9 inspirations were created, 8 challenges were presented to be solved, and the number of people using the tool increased by more than 200 during the period. The best Refinery ideas were awarded with tickets to the Nordic Business Forum.
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On a Group level Sampo continued to develop the non-financial reporting. The three main focus areas during 2016 were to develop a corporate responsibility organization within the Group, to outline the content of the actual Corporate Responsibility Report and to identify the most relevant corporate responsibility themes for Sampo. The main goal for the future is to publish Sampo Group’s first Corporate Responsibility Report in 2018.
DigitalizaDigitalization and e-insurtion and e-insurancance service services:es: The einsurance services combine environmental thinking with a modern customer communication. If P&C has been using e-invoices since 2001 and sending offers via e-mail to its customers since 2004. Since the fall of 2011, If P&C has been providing online services to its private customers. The number of eCustomers in the Business Area Private increased by 217 per cent during the period 2014–2016.
E-insurance services help to cut down on paper consumption and enable customers to access their documents with their laptops and smartphones. They
As an impact of the increase in digital customers, paper consumption has decreased by 51 per cent from
Since 2016, part of the Business Area Commercial customers have also been able to obtain insurance documents in a digital format. Early indications show that Commercial customers prefer digital communication to communication by paper. If P&C will offer e-documents on a wider scale during 2017 to its Commercial customers.
Claims handling:Claims handling: In 2016, If P&C handled around 950,000 claims for damaged cars and properties. The correct processing of damaged materials is a key environmental issue. The goal is to reuse undamaged parts and increase recycling. As a step towards achieving this, If P&C has implemented stringent environmental standards for its suppliers.
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The number of flights has decreased by 34 per cent between 2007 and 2016. The decrease in air travel is an important factor in If P&C’s significant reduction of CO2 emissions. If P&C operates in all the Nordic countries and in the Baltics and therefore a certain amount of air travel has to be accepted.
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If P&C must take substantial measures to improve the environment on a daily basis: • We always endeavor to find the best possible environmental solution – for our customers, suppliers, partners and our company.
• We must always give our staff the opportunity to act in an environmentally-friendly way through the provision of guidelines and support.
Strictly defined environmental policies and tools are established to support and lead If P&C’s environmental initiatives. Some of the key policies are: • Environmental policy • Procurement policy in line with Nordic Ecolabel procurement guidelines • Supplier assessment principles • Climate impact accounting tool based on Greenhouse Gas Protocol standard • ClimateWise platform for best practice and exchange of ideas • Environmental rules for claims handling
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One of Mandatum Life’s goals is to increase investors’ awareness of the opportunities offered by responsible investing and the risks of ignoring them. In September 2015, Mandatum Life Investment Services Ltd. joined the international Portfolio Decarbonization Coalition in order to reduce the carbon footprint of investments worldwide and to increase investors’ awareness and their opportunities to invest in companies with a smaller carbon footprint. In late 2016, the company joined the UN’s Montréal Pledge and will disclose the carbon footprint of its investments on an annual basis.
Mandatum Life’s responsible investment strategy is to favor, for the long term, the best companies in each sector while taking into account the return expectation. Favoring the most responsible companies in each sector is impactful investing, as it puts responsible companies in a better position to succeed.
Mandatum Life created the Future Climate investment basket to offer its customers an effective means of more strongly cutting the carbon dioxide emissions of investments. The goal of ML Future Climate is to
achieve the global general equity market return with a 50-per-cent smaller carbon footprint. The cuts in the carbon footprint have been made by excluding the largest polluters in each sector.
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Employees that thrive in their jobs create the foundation for the achievement of Mandatum Life’s long-term goals. That is why employee satisfaction is one of Mandatum Life’s strategic targets. In 2015 and 2016, work satisfaction reached the company’s longterm target level: 92 per cent of employees find Mandatum Life a very good workplace.
Companies can improve their competitiveness through fair and effective personnel reward solutions. A successful reward system also helps the company stand out from the competition and attract new employees. Mandatum Life offers companies expert reward services ranging from designing reward systems to implementing and measuring them. Mandatum Life implements reward solutions aimed at the entire personnel and at selected personnel groups and helps companies in preparing for personnel risks.
Mandatum Life offers companies assistance in managing the risks related to the health and work ability of their employees through personal insurance. Risks pertaining to health and work ability can occur throughout the lifecycle of an employment relationship, from recruitment to retirement. The insurance also secures the livelihood of the employee’s family if worse comes to worst.
be sufficient. According to the survey, a long-term illness, accidents, unemployment, temporary lay-offs and responsibility for taking care of a family member are considered to be the largest threats to financial welfare (Insurance Survey, Federation of Finnish Financial Services 2016).
When asked what kind of risks they think about most, 28 per cent of the respondents mentioned their own health. Finns also estimated their own serious illness to pose the biggest risk to their finances (28 per cent of all respondents). This was followed by the serious illness, death, accident or injury of their spouse (21 per cent). Fifteen per cent of all respondents cited a serious accident or injury that might happen to them, and 13 per cent mentioned their own or their spouse’s unemployment. According to Mandatum Life, Finns’ awareness of the risks related to their own finances should be further increased.
Employers should prepare for the ageing and retirement of their personnel. A company can devise a pension strategy which creates models for ensuring the employees’ and management’s ability and willingness to work. At the same time, this provides the company with a foundation for knowledge transfer and for making positive use of senior employees’ experience. A thoughtfully built model improves the company’s business through more productive careers and makes it a more responsible employer.
Mandatum Life’s services for entrepreneurs secure the continuity of their business and supplement the statutory cover of the entrepreneurs and their families.
Entrepreneurs must put more planning into preparing for their retirement and any health and financial problems. They pay their whole pension themselves through YEL insurance. Mandatum Life helps entrepreneurs to identify this security deficit and to solve it using a combination of YEL contributions and voluntary preparations according to their specific needs. The need for entrepreneurs to prepare themselves will further increase as a result of the Finnish pension reform that entered in force as of the beginning of 2017 and the insufficient preparedness for changes in ownership which are estimated to gain momentum in the coming years.
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The well-being of its personnel is one of Mandatum Life’s strategic targets. Mandatum Life has been selected as one of the best workplaces in Finland for six consecutive years. The company’s HR policy is based on the belief that taking care of personnel ensures customer satisfaction and puts the company in an even better position to achieve success. Mandatum Life’s responsibility for its personnel also means providing security for employees and their families in case of financial risks. Mandatum Life also invests in a motivating work environment.
Mandatum Life influences the financial well-being of its employees by supplementing their pension cover and offering them smart ways to save and grow their wealth.
• A personnel fund offers employees the opportunity for long-term saving in a smart way and through professional investment activities. The personnel fund is an open, transparent and fair solution that aims at long-term benefits. The company encourages long-term saving by paying an additional 20 per cent bonus to employees who decide to fund their bonuses. A total of 88 per cent of personnel chose to do so in 2016.
Leading by Example: A Good Corporate Culture Based on Engagement, Trust and Good Leadership
At Mandatum Life, focusing on the corporate culture not only reflects the company’s values, but is also part of its business, as Mandatum Life offers employee reward solutions to its customers as well. The wellbeing of its personnel is one of Mandatum Life’s strategic long-term targets.
Mandatum Life monitors the employees’ perception of the achievement of equality. Eighty-nine per cent (87) of personnel feel that people are treated equally at Mandatum Life, regardless of gender.
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Preventive measures are important. The company offers comprehensive occupational health care services that include, among other things, consultations with a work psychologist, regular ergonomic visits to the workplace, specialist services and examinations related to women’s/men’s illnesses. Among the practices in place are support for returning to work following a long illness, and the preventive early intervention model. Co-operation with the occupational health care service provider is close.
Financial responsibility at Mandatum Life means ensuring the continuity, profitability, earnings power and solvency of operations in all market situations. Ensuring continuity creates the foundation for the sustainable and responsible management of customers’ insurance-related liabilities and customers’
investments and pensions over the decades. That is why risk management is a key component of Mandatum Life’s financial responsibility. The most important goals of the risk management process are to ensure the sufficiency of capital in relation to business risks and to curb variations in financial performance in the long run. Sufficient capitalization and well-functioning risk management processes safeguard the company’s ability to take care of its customers’ pensions and compensations, whatever the situation or economic environment.
Mandatum Life also provides financial support for third-sector activities. In 2014, the company started co-operation with the Tukikummit foundation, whose objective is to prevent marginalization by providing financial support to youth at risk of exclusion. Mandatum Life participates in the foundation’s activities by donating accident insurance policies to children whose families are in need. Since the start of the co-operation, more than 1,600 children have benefited from a donated accident insurance policy.
During 2016 Sampo complied in full with the Finnish Corporate Governance Code issued 1 October 2015 by the Securities Market Association, effective from 1 January 2016.
PPositions of Tositions of Trusrust 12/31/2016t 12/31/2016 Nordea Bank AB (publ), Chairman of the Board; UPM-Kymmene Corporation, Chairman of the Board; Finnish Business and Policy Forum EVA, Board Member; The Research Institute of the Finnish Economy ETLA, Board Member; Hanken School of Economics, Chairman of the Board; The Mannerheim Foundation, Board Member; Several other charitable institutions
Member of the Board of Directors of Sampo plc since on 5 April 2001. Wahlroos holds 11,865,481 Sampo plc shares directly or through a controlled company.
PPositions of Tositions of Trusrust 12/31/2016t 12/31/2016 Sigrid Jusélius Foundation, Deputy Board Member and Member of the Finance Committee; The Finnish Foundation for Share Promotion, Chairman of the Board
Member of the Board of Directors of Sampo plc since 15 April 2008. PalinLehtinen holds 5,075 Sampo plc shares directly or through a controlled company.
Board of Directors Sampo plc's Board of Directors, elected annually by the AGM of Sampo plc, uses the highest decision making power in Sampo Group between the AGMs. Sampo's Board of Directors is responsible for the management of the company in compliance with the law, the regulations of the authorities, Sampo's Articles of Association and the decisions of
Christian Clausen Senior ASenior Advisordvisor, Nor, Nordea Bank AB (publ) until 12/31/2016dea Bank AB (publ) until 12/31/2016 Chairman fChairman for the Noror the Nordics, BlackRdics, BlackRock Inc. 01/01/2017–ock Inc. 01/01/2017– Born 1955Born 1955
PPositions of Tositions of Trusrust 12/31/2016t 12/31/2016 BW Group, Board Member
Member of the Board of Directors of Sampo plc since 21 April 2016. Clausen holds 448 Sampo plc shares directly or through a controlled company.
Adine Grate Axén CEO of ACEO of Adine Grdine Graatte ABe AB Born 1961Born 1961
PPositions of Tositions of Trusrust 12/31/2016t 12/31/2016 3 Scandinavia, Advisor and Executive Board Member; Nasdaq Stockholm, Chairman of the Swedish Listing Committee; Swedavia AB, Board Member; AP 7, Vice Chairman of the Board; Madrague Capital Partners AB, Board Member; Alhanko & Johnson AB (BASE 23), Chairman of the Board; Sky, Board Member
PPositions of Tositions of Trusrust 12/31/2016t 12/31/2016 The Finnish Fair Association, Member of the Supervisory Board; Confederation of Finnish Industries EK, Board Member (Chairman of the Board 01/01/2017–) and Member of Representative Assembly; Service Sector Employers PALTA, Chairman of the Board; The National Emergency Supply Council, Member; FiCom, Chairman of the Board
Per Arthur Sørlie PrPresident & CEOesident & CEO, Borr, Borregaaregaard Ad ASSAA Born 1957Born 1957
When elected, all Board members were independent both of company’s major shareholders and of the company. Information as of 31 December 2016, unless stated otherwise. The CVs of members of the Board of Directors can be viewed at www.sampo.com/board.
The Board of Directors decides, among other things, on Sampo Group's strategy and approves the principles governing the Group's risk management,
The Board elects the Group CEO and President, the members of the Group Executive Committee and the
According to Sampo's Articles of Association, the company's Board of Directors comprises no fewer than three and no more than ten members elected by shareholders at the Annual General Meeting (“AGM”).
Board. The Nomination and Compensation Committee shall take the following factors into consideration, including such other factors as the Board may determine: i. Regulatory requirements for the members of the Board; ii. Overall board composition taking into consideration the appropriate combination of professional experience, skills, knowledge and variety of viewpoints and backgrounds; iii. The past performance of incumbent members (attendance, staying informed about the company and its business, participation in the meetings, proven interest in the company’s business and compliance with applicable company policies and guidelines; iv. Allocation and sufficiency of time; and v. Other criteria (e.g. with respect to new Directors, the integrity, judgment and available time).
The Board convened 9 times in 2016. Christian Clausen was prevented from attending one meeting. Other Board members attended all meetings and,
In 2016, the Chairman of the Audit Committee was Jannica FJannica Fagerholmagerholm (Anne Brunila until 21 April 2016), and the other members were ChrisChristian Clausentian Clausen (as of 21 April 2016), AAdine Grdine Graatte Axe Axénén and PPer Arthurer Arthur SørlieSørlie. Also participating in the meetings were the Auditor's representative, Group CEO, Group CFO, CFO of If P&C Holding Ab, Group Chief Risk Officer and Group Chief Audit Executive.
Nomination and Compensation Committee also prepares for the Board’s decision Sampo Group’s Remuneration Principles and Sampo plc’s Remuneration Policy, Sampo Group’s long-term incentive schemes, maximum pay-outs based on short-term incentive programs and long-term incentive schemes as well as the actual payments to be made.
The Committee prepares a proposal for the Board on the appointment, employment conditions and other compensation of Sampo Group's Chief Audit Executive, and on the principles by which Sampo Group's staff are to be compensated. 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.
In 2016, the Nomination and Compensation Committee comprised the Chairman of the Board (who acted as the Committee's Chairman), the Vice Chairman of the Board and two members elected from among the members of the Board.
The Chairman of the Nomination and Compensation Committee in 2016 was Björn WBjörn Wahlrahlroosoos, and the other members were VVeli-Maeli-Matti Matti Mattilattila, EirEira Pa Palin-Lalin-Lehtinenehtinen and RisRistto Murto Murtoo.
Kari Stadigh GrGroup CEO and Proup CEO and President, MD of Sampo plcesident, MD of Sampo plc Born 1955Born 1955
Member of Sampo Group Executive Committee since 2001. Stadigh holds 274,502 Sampo plc shares directly or through controlled companies or persons closely associated with him.
Knut Arne Alsaker CFCFOO, If P, If P&C Insur&C Insurancancee Born 1973Born 1973
Member of Sampo Group Executive Committee since 2001. Johansson holds 51,815 Sampo plc shares directly or through controlled companies or persons closely associated with him.
PPositions of Tositions of Trusrust 12/31/2016t 12/31/2016 Asiakastieto Group Plc, Chairman of the Board; If P&C Insurance Holding Ltd, Board Member; Mandatum Life Insurance Company Limited, Board Member
Member of Sampo Group Executive Committee since 2001. Lapveteläinen holds 241,111 Sampo plc shares directly or through controlled companies or persons closely associated with him.
Torbjörn Magnusson Head of PHead of P&C Insur&C Insurancance; MD of If Pe; MD of If P&C Insur&C Insurancance Holdinge Holding LLttdd Born 1963Born 1963
PPositions of Tositions of Trusrust 12/31/2016t 12/31/2016 If P&C Insurance Ltd, Chairman of the Board; If P&C Insurance Company Ltd, Chairman of the Board; Topdanmark A/S, Vice President of the Board; Swedish Insurance Federation, Board Member; Swedish Insurance Employer Association, Board Member; Insurance Europe, Vice President
Member of Sampo Group Executive Committee since 2004. Magnusson holds 27,401 Sampo plc shares directly or through controlled companies or persons closely associated with him.
PPositions of Tositions of Trusrust 12/31/2016t 12/31/2016 Finance Norway (Finans Norge, FNO), Board Member
Petri Niemisvirta Head of LifHead of Life Insure Insurancancee, MD of Manda, MD of Mandatum Liftum Life Insure Insurancancee CCompanompany Limity Limiteded Born 1970Born 1970
Timo Vuorinen Head of BusinesHead of Business Ars Area Baltic; Head of Privea Baltic; Head of Privaatte (Finland);e (Finland); MD of If PMD of If P&C Insur&C Insurancance Ce Companompany (Finland)y (Finland) Born 1964Born 1964
Member of Sampo Group Executive Committee since 2009. Vuorinen holds 35,361 Sampo plc shares directly or through controlled companies or persons closely associated with him.
Information as of 31 December 2016, unless stated otherwise. The CVs of members of the Group Executive Committee can be viewed at www.sampo.com/management.
The Group MD Committee comprised KKari Sari Stadightadigh (Chairman), PPeteter Johanser Johansson, Pson, Paatrick Laptrick Lapvveteteläinen,eläinen, TTorbjörn Magnusorbjörn Magnusson, Pson, Petrietri NiemisNiemisvirtavirta and RicarRicardd WWennerklintennerklint.
Remuneration Fair and rewarding remuneration to all employees is an important factor in Sampo Group’s ability to enhance shareholder value in a competitive business environment. Remuneration is an equally important determinant of success in the competition for talent. Sampo's remuneration strategy is responsible both towards the employees and the shareholders and, consequently, long-term financial stability and value creation of the Group guide the design of remuneration systems.
Sampo plc's Board of Directors has established the Sampo Group Remuneration Principles which apply to all companies within Sampo Group.
According to Sampo's Articles of Association, the Annual General Meeting decides on the compensation of the members of the Board of Directors.
Board members employed by the company do not receive separate compensation for Board work during the validity of the employment or service relationship.
The members of the Board of Directors have not received any other benefits, nor do they participate in Sampo's long-term incentive schemes.
The Board of Directors decides on the terms of employment and remuneration of the Group CEO and other executives on the Sampo Group Executive Committee, on the basis of a proposal by the Nomination and Compensation Committee. However, the Nomination and Compensation Committee decides, upon authorization by the Board of Directors, on the fixed remuneration of the members of the Group Executive Committee, excluding the Group CEO.
In 2016, the Group CEO was paid EUR 1,108,336 as fixed salary and benefits and EUR 565,441 as shortterm incentives (including deferred compensation pertaining to the operative year 2012 and excluding compensation deferred in 2016) and EUR 3,262,000 as long-term incentives, together totaling EUR 4,935,777.
During 2016, the members of the Group Executive Committee participated in the long-term incentive schemes 2011 I and 2014 I for Sampo Group's key employees.
More detailed information on remuneration in Sampo Group during 2016 is available in the Remuneration Report published by Sampo at www.sampo.com/ remunerationreport.
Internal Audit Sampo's Internal Audit is a function independent of business operations, which evaluates the sufficiency and effectiveness of the internal control system and the quality with which tasks are performed in Sampo Group. The Internal Audit has been organized to correspond with the business organization.
The total fees paid to the auditor for services rendered and invoiced were EUR 2,673,834. In addition, Ernst & Young Oy were paid fees for non-audit services rendered and invoiced totaling EUR 328,050.
74Life Insurance 77Holding 7878Changes in GrChanges in Group Soup Structurtructuree 78Mandatory Offer on Topdanmark Shares 78Mandatum Life’s Agency Agreement with Danske Bank 7979GoGovvernancernancee 79Annual General Meeting 79Corporate Responsibility 80Personnel 80Remuneration 81Risk Management 8282SharShares, Shares, Share Capital ande Capital and SharShareholderseholders 82Shares and Share Capital 85Shares on the Joint Book-Entry Account 86Authorizations Granted to the Board 86Shareholders 8989Financial SFinancial Standingtanding 89Internal Dividends 89Ratings 89Solvency 91Debt Financing 9292OutlookOutlook 9393Dividend PrDividend Proposaloposal
9696CalculaCalculation of the Ktion of the Keey Figury Figureses 96Group Key Figures 97P&C Insurance Key Figures 98Life Insurance Key Figures 98Per Share Key Figures
approves the Board’s dividend proposal, Sampo plc will receive a dividend of EUR 559 million (551) from Nordea on 27 March 2017.
Sampo Group’s solvency capital calculated according to the Act on the Supervision of Financial and Insurance Conglomerates (2004/699) based on Directive 2002/87/EC of the European Parliament and of the Council exceeded the minimum solvency requirements at the end of 2016 by EUR 3,849 million (3,179) and the conglomerate solvency ratio stood at 154 per cent (145).
Income statement items are compared on a year-on-year basis and comparison figures for balance sheet items are from 31 December 2015 unless otherwise stated.
Balance sheet (at the end of period) 1.2849 1.2912 1.2668 1.2381 1.2314
Growth rates in the Nordic countries are converging, as Swedish GDP growth is slowing, while Norway, Denmark and Finland are slowly picking up speed. The Norwegian economy is supported by higher oil price, whereas the consumer sector has been the main driver in Finland and Denmark. The notable depreciation of the Swedish krona has not given a prominent support for exports, the sector causing challenges for Denmark and Finland as well.
Despite the slowdown in growth figures, the Swedish economy is still on a steady growth path. Interest rates are extremely low, which supports lending. Despite slightly lower GDP growth in 2016, employment continued to grow at a healthy clip. Labour shortages, which act as a drag on growth, have emerged in most sectors. It is a special situation when the sector setting the benchmark for pay rises – the export industry – is the sector struggling the most. Consequently, low inflation continues to be a challenge for the Riksbank.
In recent years the Danish economy has been mocked for its low growth and weak productivity improvements. But suddenly this has changed due to major revisions to foreign trade data, lifting the current account surplus by no less than 40 per cent. That also gave a major boost to GDP growth. Over the past couple of years Danish households have benefited from declining interest expenses, rising employment, higher housing prices and positive real wage growth due to the historically low level of inflation. The biggest risk is foreign trade as protectionism and growing political uncertainty can harm Danish exports.
Recent growth figures from Finland have been encouraging and unemployment rate has continued on a steady downward trend. Consumer confidence is high which is supportive for consumption.
Global growth continued slightly above 3 per cent in 2016, but global trade barely grew at all. Of major economies, the growth in US and Eurozone is expected to have remained clearly below 2 per cent. Chinese growth reached 6.8 per cent and growth in Japan remained below 1 per cent.
However, the year 2016 will be remembered as the year of huge political surprises. First the UK votes to leave the EU. And then Donald Trump is elected to become the next US president. Increasing protectionism continues to be a major theme in the international economy and an important issue for the Nordic countries. The Nordic countries are small open economies, which have been dependent on trade for decades. Globalization and free trade has opened new markets to the Nordics and have been the very basis for increased living standards.
The release from the Swedish MTPL reserves in the first quarter of 2016 affected the full-year 2016 result positively while the comparison figures for the Finnish business are burdened by the change in the Finnish discount rate in the second quarter of 2015. Large claims in BA Industrial were EUR 11 million better than expected in 2016 and the total large claims for If P&C ended up EUR 17 million better than expected for the full-year.
Gross written premiums decreased to EUR 4,458 million (4,559) in 2016. Adjusted for currency, premium growth was flat. Growth was positive in business area Private and negative in business areas Commercial, Industrial and Baltic. Geographically, gross written premiums grew by 4 per cent in Sweden and Denmark, while the growth was negative in Norway and Finland.
Cost ratio was 22.1 per cent (18.8) and expense ratio 16.6 per cent (13.0). The comparison year was impacted by the positive effect of the non-recurring reform of the pension system in If Norway booked in the second quarter of the year. Excluding the nonrecurring item the comparison ratios were 22.3 per cent and 16.6 per cent, respectively.
If P&C Insurance Holding AB (publ) sold all of its shares in the Danish insurance company Topdanmark
A/S to Sampo plc on 7 September 2016 in conjunction with the mandatory public offer Sampo plc was obliged to make to the other shareholders of Topdanmark after its ownership in the company exceeded one third of all the shares. In Sampo Group’s segment reporting Topdanmark holding, 45.7 per cent of all votes in the company, is, however, still included in the P&C insurance segment. In Sampo Group’s 2016 accounts the contribution of Topdanmark’s net profit amounted to EUR 65 million (43). The sales gain If P&C made by selling Topdanmark shares to Sampo plc is eliminated in the Group accounts.
The mandatory offer made to the shareholders of Topdanmark by Sampo plc commencing on 27 September 2016 and expiring on 25 October 2016 is explained in more detail in the section Mandatory Offer on Topdanmark Shares.
On 31 December 2016 Sampo plc held 860,440,497 Nordea shares corresponding to a holding of 21.2 per cent. The average price paid per share amounted to EUR 6.46 and the book value in the Group accounts was EUR 8.78 per share. The closing price as at 31 December 2016 was EUR 10.60.
The following text is based on Nordea’s full-year 2016 result release published on 26 January 2017.
2016 has probably been the most eventful year in the history of Nordea. On top of macro and regulatory challenges for the sector, Nordea has addressed significant media attention and started to implement a profound transformational change agenda. Two major achievement have been the creation of a new legal structure and launching a term deposit product on the new core banking platform. Despite a challenging revenue situation in 2016, Nordea has throughout the year improved its net interest margin; for 2016, the inflow to Assets under Management reached an alltime high, and Nordea has confirmed its leading Nordic position in corporate advisory operations.
Net interest income was down 3 per cent in local currencies (-5 per cent in EUR) from 2015. Average lending and deposit volumes in business areas in local currencies were unchanged from financial year 2015.
Lending margins were up 2 bps and deposit margins were up 6 bps compared to financial year 2015. Net fee and commission income increased 1 per cent in local currencies (unchanged in EUR) from the previous year.
Net result from items at fair value increased 4 per cent in local currencies (4 per cent in EUR) from 2015.
Net profit increased 4 per cent in local currencies (3 per cent in EUR) to EUR 3,766 million.
Currency fluctuations had a reducing effect of 1 per cent on income and expenses and a reducing effect 1 per cent on loan and deposit volumes compared to a year ago.
Profit before taxes for life insurance operations in 2016 amounted to EUR 210 million (181). The total comprehensive income for the period after tax reflecting the changes in market values of assets increased to EUR 232 million (168). Return on equity (RoE) amounted to 15.9 per cent (12.7).
Net investment income, excluding income on unitlinked contracts, amounted to EUR 356 million (391). Net income from unit-linked contracts was EUR 276 million (239). During 2016 fair value reserve increased to EUR 596 million (532).
Total technical reserves of Mandatum Life Group increased to EUR 11.3 billion (10.9). The unit-linked reserves grew to EUR 6.4 billion (5.9) at the end of 2016, which corresponds to 57 per cent (54) of total technical reserves. With profit reserves continued to decrease as planned during 2016 and amounted to EUR 4.8 billion (5.0) on 31 December 2016. With profit reserves related to the higher guarantees of 4.5 and 3.5 per cent decreased EUR 213 million to EUR 2.9 billion at the end of 2016.
Mandatum Life increased its technical reserves with EUR 28 million due to low level of interest rates in 2016 and the total discount rate reserves amounted to EUR 273 million (244) at the end of 2016, of which EUR 225 million is allocated to years 2017–2019. The figure does not take into account the reserves relating to the segregated fund. The discount rates used for 2017, 2018 and 2019 are 0.25 per cent, 0.50 per cent, and 2.25 per cent, respectively.
At the end of 2016 Mandatum Life Group’s investment assets, excluding the assets of EUR 6.5 billion (5.9) covering unit-linked liabilities, amounted to EUR 6.6 billion (6.7) at market values.
Mandatum Life Group comprises Mandatum Life Insurance Co. Ltd., a wholly-owned subsidiary of Sampo plc, operating in Finland, and its five subsidiaries. Parent company, Mandatum Life, is responsible for sales functions and all the functions required by the Insurance Companies Act. The subsidiaries are Mandatum Life Services Ltd, Mandatum Life Investment Services Ltd., Mandatum Life Fund Management S.A., Innova Services
InInvvesestment Allocatment Allocation, etion, exxcl. the Segrcl. the Segregaegatted Ped Portfortfolioolio Mandatum Life, 31 December 2016, Total EUR 5.4 billion
InInvvesestment Allocatment Allocation, the Segrtion, the Segregaegatted Ped Portfortfolioolio Mandatum Life, 31 December 2016, Total EUR 1.2 billion
Risk and expense results remained on a good level. The expense result for life insurance segment amounted to EUR 24 million (25) and risk result to EUR 31 million (33).
Mandatum Life Group’s premium income on own account amounted to EUR 1,116 million (1,144). After a sluggish start to the year fourth quarter premiums rose to a record high of EUR 446 million (306). Premiums from unit-linked policies amounted to EUR 973 million (968). Mandatum Life’s market share in Finland grew to 24.1 per cent (17.7).
More information on the cooperation between Mandatum Life and Danske Bank is available in section Changes in Group Structure.
Holding segment’s profit before taxes amounted to EUR 778 million (749), of which EUR 773 million (751) relates to Sampo’s share of Nordea’s 2016 profit. Segment’s profit excluding Nordea was EUR 6 million (-1).
The currency effects, particularly strengthening of Swedish krona, increased the investment income by
EUR 25 million. The drop in the finance costs is due to lower interest rates and movements in SEK-EUR rates.
Sampo plc announced on 7 September 2016 the obligation to make a mandatory offer to the shareholders of Topdanmark A/S. In the mandatory offer, Sampo offered to acquire all outstanding shares, excluding treasury shares, and other financial instruments, warrants and share options, if applicable, issued by Topdanmark and shares held by Topdanmark shareholders resident in certain restricted jurisdictions. The cash price offered in the mandatory offer was DKK 183 for each share issued by Topdanmark. The offer period commenced on 27 September 2016 and expired on 25 October 2016. As a result of the offer, Sampo plc acquired altogether 7,374,306 Topdanmark shares and held 41.1 per cent of all Topdanmark shares on 26 October 2016.
In connection with the acquisition of Sampo’s banking operations by Danske Bank A/S in early 2007, Sampo Bank plc (now Danske Bank Plc), and Sampo Life Insurance Company Ltd (now Mandatum Life Insurance Company Ltd) signed an agency agreement that guaranteed Sampo Life the exclusive right to sell life and pension insurance products through Sampo Bank’s branch network in Finland.
Mandatum Life decided on 20 October 2016 not to prolong the agency agreement as of 31 December 2016. In relation to the agency agreement Mandatum Life has the right to sell the insurance portfolio sold through Danske Bank's branch network in Finland, to Danske Bank. Mandatum Life decided on 27 October 2016 to use this option.
The portfolio consists of more than 150,000 policies and the technical reserves related to the portfolio amounted to EUR 3,202 million at the end of 2016. The portfolio contains almost exclusively unit linked and loan insurance products. The amount of with profit technical reserves is EUR 210 million. The portfolio is treated as Assets held for sale in the balance sheet for 2016.
The statement is available at www.sampo.com/ statement. The Governance section of this Annual Report also contains a more detailed description of the Group’s governance system.
The Annual General Meeting of Sampo plc, held on 21 April 2016, decided to distribute a dividend of EUR 2.15 per share for 2015. The dividend was paid on 3 May 2016. The Annual General Meeting adopted the financial accounts for 2015 and discharged the Board of Directors and the Group CEO and President from liability for the financial year.
The Annual General Meeting elected eight members to the Board of Directors. The following members were re-elected to the Board: Jannica Fagerholm, Adine Grate Axén, Veli-Matti Mattila, Risto Murto, Eira PalinLehtinen, Per Arthur Sørlie and Björn Wahlroos.
Christian Clausen was elected as a new member to the Board. Of the former members Anne Brunila was not available for re-election. The Members of the Board were elected for a term continuing until the close of the next Annual General Meeting.
• Responsibility with our people • Responsibility with our customers • Responsibility in our investments • Responsibility in our communities
Each of the identified themes needs to be reported and analyzed carefully. Therefore towards the end of the year the focus of the corporate responsibility work started to shift into increasingly technical and detailed matters, such as data gathering, choosing the relevant indicators and updating necessary policies. This work is still ongoing. The main goal for the future is to publish Sampo Group’s first Corporate Responsibility Report in 2018.
Most of Sampo Group’s corporate responsibility work continues to be on the subsidiary level, since that is where the customers and most of the personnel are. Further details on If P&C’s environmental activities can be read from If’s Environmental Reports available at www.sampo.com/environmentalreport. More information on Mandatum Life’s corporate responsibility activities can be found from the company website english.mandatumlife.fi/csr.
Baltic countries. As of 31 December 2016 P&C insurance employed 6,200 persons.
The core of the Remuneration Principles is that all remuneration systems in Sampo Group shall safeguard the long-term financial stability of the Group and comply with regulatory and ethical standards. They shall also be designed to balance the interests of different stakeholder groups such as shareholders, employees, customers and supervisory authorities. Furthermore, all compensation mechanisms shall be designed in parallel with the Risk Management Principles.
The payment of a certain portion of the variable compensation payable to senior executive management and to certain key persons shall be deferred for a defined period of time as required in the regulatory framework applicable to each Group company. After the deferral period, a retrospective risk adjustment review shall be carried out and the Board shall decide whether the deferred variable compensation shall be paid out in full, partly or cancelled in whole. In 2016, altogether EUR 10.4 million (10.6) of short-term and long-term incentives has been deferred.
Sampo Group will also publish a Remuneration Statement in March 2017. The Remuneration Statement has been prepared in accordance with the Corporate Governance Code issued by the Securities Market Association and effective as of 1 January 2016. The Statement will be available at www.sampo.com/ remunerationstatement.
The most important objective of risk management in Sampo Group is to maintain a balance between profits, risks and capital in each of the separate business areas.
As this will be the first time the Annual General Meeting has an option to resolve the issue, the Audit Committee initiated a project to look into the procedure and consequences of such a resolution by the Annual General Meeting with a particular view on the equal treatment of all shareholders.
In its meeting of 8 February 2017, Sampo plc’s Board of Directors has resolved to concur with this proposal.
Another shareholder of the company has proposed to the General Meeting that if a proposal on the forfeiture of shareholder rights within the meaning of Chapter 4, Section 10(2) of the Finnish Companies Act has been submitted to the General Meeting for resolution, the General Meeting would resolve that said decision could be made at the earliest on 1 February 2020 and provided that the company has actively sought to reach out to all shareholders of the company who have not transferred their holdings into the book-entry system.
Given that future General Meetings are not bound by the resolutions of previous General Meetings, the second proposal is, in practice, a motion to dismiss the first mentioned proposal concerning the forfeiture of the shares in the joint book-entry account.
The measures adopted have been successful. The number of shares in the joint book-entry account has decreased between 1 November 2016 and 6 February 2017 by 472,380 shares and on 6 February 2017 there were 6,436,120 shares in the account corresponding to 1.15 per cent of all shares.
The Annual General Meeting of 2016 authorized the Board to repurchase a maximum of 50,000,000 Sampo A shares. Shares will be repurchased in other proportion than the shareholders' proportional shareholdings (directed repurchase). The maximum price to be paid will be highest market price quoted during the authorization period. The authorization will be valid until the close of the next Annual General Meeting, nevertheless not more than 18 months after AGM's decision.
Approximately 1.2 (1.2) per cent of shares had not been transferred to the book-entry system. The holdings of nominee-registered and foreign shareholders amounted to 60.95 per cent (60.96) of the shares and 60.43 per cent of the votes (60.45).
Nominee registered total 330,917,414 59.09 58.59 *) 2,174,181 A shares and 1,200,000 B shares
During 2016 Sampo plc received altogether 25 notifications of change in holding pursuant to Chapter 9, Section 5 of the Securities Markets Act, of which 23 related to the total number of Sampo A shares or related voting rights owned by BlackRock, Inc. (tax ID 32-0174421) and its funds directly or through financial instruments. The notified changes are illustrated in the table below.
DaDatte of the changee of the change SharShareses VVoting rightsoting rights SharShareses VVoting rightsoting rights SharShareses VVoting rightsoting rights
In addition Sampo plc received during 2016 two notifications regarding the total number of Sampo A
shares and related voting rights owned by Capital Income Builder (CIB), a 100 per cent owned subsidiary
NotificaNotifications btions by BlackRy BlackRock, Inc. in 2016ock, Inc. in 2016
of the Capital Group Companies, Inc., directly or through financial instruments.
Holdings of the BoarHoldings of the Board andd and ExExecutivecutive Managemente Management
The following table presents the Board’s and Group Executive Committee’s holdings of Sampo A shares.
At the end of 2016, members of Sampo plc’s Board of Directors and their close family members owned either directly or indirectly 11,887,408 (11,891,850) Sampo A shares. Their combined holdings constituted 2.1 per cent (2.1) of the share capital and related votes.
Members of the Group Executive Committee and their close family members owned either directly or indirectly 842,105 (771,156) Sampo A shares representing 0.2 per cent (0.1) of the share capital and related votes.
GrGroup Exoup Executivecutive Ce Committommitteeee 31 Dec 201631 Dec 2016 31 Dec 201531 Dec 2015
Group Executive Committee's share of votes, % 0.2 0.1 *) member of the Board until 21 April 2016 **) member of the Board since 21 April 2016
On 26 January 2017 Nordea Bank AB’s Board of Directors proposed to the Annual General meeting to be held on 16 March 2017, a dividend of EUR 0.65 per share. With its current holding Sampo plc’s share amounts to EUR 559 million. The dividend is proposed to be paid on 27 March 2017.
A dividend of EUR 125 million is planned to be paid by Mandatum Life during the first quarter of 2017. If P&C normally pays its dividend towards the end of the calendar year.
Sampo Group’s business model is based on four separately managed independent business areas each managing their own risks and reserving the sufficient capital to cover these risks.
Sampo plc, the parent company – with no business activities of its own – is structurally subordinate to the business areas. Therefore it is dependent on their financial performance and their obligations. The parent company prefers to maintain in its business areas a balance between profits, risks and capital
For If P&C the standard formula has roughly a EUR 350 million higher capital requirement than the model used for internal purposes. However, If P&C Group has an A rating from S&P which will continue to require significantly more capital and therefore the use of standard formula has no practical implications on If P&C Group’s capital position. On 31 December 2016 If P&C Group’s Solvency II capital requirement under standard formula amounted to EUR 1,942 million (2,073) and own funds to EUR 3,822 million (3,202). Solvency ratio amounted to 197 per cent (154). S&P A rating requirement for If P&C Group amounted to EUR 2,967 million (3,058) at the end of 2016.
The Swedish Financial Supervisory Authority has in November 2016 approved a partial internal model for calculating the solvency capital requirement for If P&C Insurance Company Ltd (Sweden).
The change would be in line with If’s business model as the Swedish company already consists of If’s Swedish, Norwegian and Danish businesses through a branch structure and further enhances If Group’s capital situation and its risk management structure.
II rules for the insurance subsidiaries was 154 per cent (145) as at 31 December 2016.
More information on Sampo Group’s capital policy is available at the Risk Management section of the Annual Report 2016.
Sampo plc’s debt financing on 31 December 2016 amounted to EUR 3,548 million (2,302) and interest bearing assets to EUR 2,104 million (1,343). Interest bearing assets include bank accounts, EUR 637 million (579) of hybrid capital and subordinated debt instruments issued by the subsidiaries and associates and EUR 28 million of other fixed income instruments (25). On 31 December 2016 the interest bearing net debt amounted to EUR 1,443 million (959).
Gross debt to Sampo plc’s equity was 47 per cent (32) and financial leverage 32 per cent (24). Increase in leverage has two explanations. Firstly when purchasing Topdanmark shares, Sampo increased its debt by EUR 400 million. Secondly Sampo refinanced its EUR 500 million bond maturing February 2017 already in November 2016 by issuing a seven-year senior bond of EUR 750 million without simultaneously redeeming maturing 2017 bond. Leverage ratio is expected to normalize below 30 per cent during first quarter of 2017.
On 17 November 2016 Sampo plc issued under its EMTN Programme senior unsecured floating rate notes of EUR 750 million maturing on 18 September 2023.
As at 31 December 2016 financial liabilities in Sampo plc’s balance sheet consisted of issued senior bonds and notes of EUR 2,877 million (1,997) and EUR 671 million (305) of CPs issued. The average interest, net of interest rate swaps, on Sampo plc’s debt as of 31 December 2016 was 1.37 per cent (1.45). The increase in the average interest rate is temporary and due to closing of swap positions related to the February 2017 bond.
Senior Bond 2,000 SEKm Stibor3M + 0.77% Euribor3M + 0.586125% 0.2721% 28 May 2020
In its current day-to-day business activities Sampo Group is exposed to various risks and uncertainties mainly through its separately managed major business units. Parent Company Sampo’s contribution to risks is minor one.
The parent company’s distributable capital and reserves totaled EUR 7,423,628,273.90 of which profit for the financial year was EUR 1,565,149,328.44.
Key Figures GrGroup koup keey figury figureses 20162016 20152015 20142014 20132013 20122012
Return on equity (at fair values) % 15.0 14.0 10.9 13.8 19.9
Return on assets (at fair values) % 7.3 7.2 5.6 7.0 9.3
Premiums written before reinsurers' share EURm 4,458 4,559 4,634 4,768 4,698
Return on equity (at fair values) % 25.3 21.5 18.1 24.4 36.9
Combined ratio excl. unwinding of discount % 84.4 85.4 87.7 88.1 88.9
Capital and reserves per share EUR 21.31 20.38 19.51 19.01 17.89
Net asset value per share EUR 24.86 23.79 22.63 22.15 17.38
Share trading volume during the financial year 1.000 203,996 182,762 194,492 188,402 252,821
³) The Board of Director's proposal to the Annual General Meeting for the accounting period 2016.
technical provisions relating to unit-linked insurance (average of values on 1 Jan. and 31 Dec.)
+ sectoral items - intangibles and foreseeable dividends and distributions group's own funds - minimum requirements for own funds, total
Group solvency ratio, % group's own funds minimum requirements for own funds x 100%
Return on equity (at fair values), % Formula shown above in connection with the Group key figures.
Loss ratio excl. unwinding of discount, % claims incurred before unwinding of discount premiums earned x 100%
Relative share trading volume, % number of shares traded through the Helsinki Exchanges adjusted average number of shares x 100%
154Mandatum Life 155155AppendicAppendiceses 155Appendix 1: Sampo Group Steering Framework and Risk
Non-life insurance and life insurance activities are conducted by the subsidiaries If P&C Insurance Holding Ltd (publ) (“If P&C”) and Mandatum Life Insurance Company Ltd (“Mandatum Life”) which are wholly owned by the Group’s parent company, Sampo plc (“parent company” or “Sampo”), which is a listed holding company and has no insurance or banking activities of its own. Sampo also has a 41.7 percent holding in a Danish insurance company Topdanmark A/S (“Topdanmark”). In addition to the insurance subsidiaries and the associated company, as at 31 December 2016 the Group’s parent company held an equity stake of 21.2 per cent in Nordea Bank AB (publ) (“Nordea”) through which Sampo Group is engaged in banking business. The legal structure of Sampo Group is shown below.
Sampo Group’s legal structure and business model are both straightforward and simple. In addition there are only a limited amount of intragroup exposures, of which the most material are as follows: (i) Sampo’s holdings of hybrid loans of If P&C and Mandatum Life (ii) internal dividends and (iii) service charges. Service charges are related to intragroup outsourcing agreements. If P&C and Mandatum have outsourced part of their investment management processes to Sampo. Sampo has outsourced its IT platform services to If P&C and its financial accounting to Mandatum Life.
Underwriting activities are arranged intentionally in such a way that there is virtually no overlap between the subsidiaries’ underwriting risks except with regards to Finnish longevity risk and hence only limited group-wide coordination is needed in relation to underwriting activities and their respective risks. Subsidiaries also take care of operative actuarial activities; Sampo does not have its own actuarial function.
For both subsidiaries, the insurance liabilities and the company specific risk appetite are the starting points for their investment activities. However, unlike underwriting activities, the subsidiaries’ investment activities are coordinated closely 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.
As dividends are the parent company’s major source of income, Sampo’s primary target for every subgroup is to maintain a healthy balance between profits, risks and capital, in order to facilitate a steady stream of dividend payments in the long run. The secondary target is ensuring stable profitability over its business portfolio. Hence the correlation of reported profits is monitored closely in addition to potential risk concentrations. Thirdly, as a general rule Sampo prefers to have low leverage and adequate liquidity buffers to be able to generate liquidity as needed. The size of assessed diversification benefit of the Group companies’ profits is reflected in Sampo’s decisions on own capital structure and liquidity position.
Sampo has a diversified shareholder base and the major shareholders have owned their holdings for many years. Sampo Group’s main supervisor is the Finnish Financial Supervisory Authority. Due to Sampo Group’s activities in Nordics and Baltics other Nordic supervisors have supervisory responsibilities as well. Sampo Group’s auditor is EY.
Due to the predominantly external nature of the drivers and development in the competitive environment, managing strategic risks is the responsibility of the executive level senior management. Proactive strategic decision-making is the central tool in managing strategic risks relating to competitive advantage. The maintenance of internal operational flexibility, in order to be able to adjust the business model and cost structure when needed is also an efficient tool in managing strategic risks. Although strategic risks are not covered by the capitalization process in Sampo Group they may have an effect on the amount and structure of the actual capital base, if this is deemed to be prudent in the existing business environment.
Some risks, such as counterparty default risks and operational risks presented in the figure Classification of Risks in Sampo Group are indirect repercussions of Sampo’s normal business activities. They are onesided risks, which in principle have no related earnings potential. Accordingly, the risk management objective is to mitigate these risks efficiently rather than actively manage them. Mitigation of cconsequential riskonsequential riskss is the responsibility of the business areas and the investment unit. The capital need for these risks is measured by independent risk management functions. It has to be noted that the categorization of risks between earnings and consequential risks varies depending on the industry. For Sampo Group’s clients, for instance, the events that are subject to insurance policies are consequential risks and for Sampo Group these same risks are earnings risks.
how the market values of assets and liabilities may fluctuate at the total balance sheet level under different scenarios. These balance sheet level risks are commonly defined as Asset and Liability Management (“ALM”) risks. In addition to interest rate, currency and liquidity risk, inflation risk and risks relating to GDP growth rates are central ALM risks in Sampo Group. The ALM risks are one of the focus areas of senior management because of their relevance to risks and earnings in the long run.
In general, cconconcentrentraation risktion risk arises when the company’s risk exposures are not diversified enough. When this is the case, an individual extremely unfavourable claim or financial market event, for instance, could threaten the solvency of the company.
AAt the grt the group leoup levvelel, the risk management focus is on group-wide capitalization and liquidity. It is also essential to identify potential risk concentrations and to have a thorough understanding of how reported profits of companies would develop under different scenarios. These concentrations and correlations may have an effect on group level capitalization and
Profitability, Risks and Capital Sampo Group operates under a holding company structure and the parent company does not have any business activities of its own. Sampo Group’s business activities are conducted in four separately managed independent business areas, with each business area managing their own risks and reserving sufficient capital to cover their risks.
Hence, from Sampo Group’s perspective, the main objectivobjectiveses are: • Independent business areas generate a stable and growing stream of profits and have adequate solvency to ensure the continuity of normal business activities.
• The portfolio of separate business areas is stable. From the Group’s perspective, a weak correlation of business areas’ profits increasing the benefits of diversification on a portfolio level is preferred.
Over the years Sampo Group has disclosed its financial information by segments and relevant risk and solvency reporting by insurance sub-groups. Associated companies have disclosed their respective reports independently. Sampo Group has disclosed its group solvency (FICO solvency) according to the Act on the Supervision of Financial and Insurance Conglomerates (699/2004), i.e. conglomerate rules.
Since Solvency II (“SII”) entered into force on 1 January 2016, group solvency calculated by Solvency II rules must be disclosed as well. Differences between these methods will be described later in the chapter Capitalization at Group Level. In Solvency II Sampo plc is defined as the ultimate parent of the Solvency II group and thus the operative insurance companies each report separate figures to their local supervisors while If P&C group Solvency II figures are not required to be disclosed separately, but as part of Sampo Group SII figures.
In addition to the disclosures described above, which are in line with management structure of the Group, Sampo Group’s solvency based on Solvency II rules is disclosed as well.
The figure Sampo Group Companies’ Capitalization Framework illustrates Sampo’s approach to sub-group and company-level capitalization.
The Solvency Capital Requirement (“SCR”) sets the minimum level of capital at which a company is able to conduct its business without regulatory intervention. Regardless of whether the regulatory capital requirement is calculated using the internal model or the standard formula (“SF”), it reflects a 99.5 per cent confidence level, i.e. the same probability of default as a Triple-B rating from major rating agencies. If the company’s clients and counterparties prefer a higher than Triple-B creditworthiness from their insurance company, the level of capital must always be higher than the SCR, to ensure the company’s ability to serve its client base.
To serve its current clients, If P&C is maintaining a Single-A rating which effectively implies that If P&C’s capital floor – the level to which it compares its actual capital – is higher than the SCR. Mandatum Life considers the SCR to be an adequate capital floor.
There is a need to have a certain buffbufferer between the actual amount of capital and the capital floor defined by the company, because risk exposures and profits evolve continuously over time and capital can sometimes erode rapidly due to stressed situations. An adequate buffer gives time for the company to adjust its risks and capital in times of stress and to maintain the balance between risks and capital. An adequate buffer also gives confidence to supervisors and counterparties (this being the other motivation for the buffer).
In Sampo Group the management steers the balance between SCRs/rating agency capital target and OF
• If businesbusiness is grs is groowingwing, the buffer is larger than in the case of a run-off -business. For instance in Mandatum Life, capital consuming with profit business has already been in a virtual run-off mode for years.
On a sub-grOn a sub-group and coup and companompany ley levvel,el, a target can also be set for the capital scapital structurtructuree. In general, Sampo Group is in favor of strong capital structures and as a result Sampo Group companies currently have, according to SII rules, room for new hybrid capital and subordinated debt instruments in their balance sheets.
• The main differences between the SF SCR and the internal model capital need are related to underwriting risk and market risk. In regards to underwriting risk the standard formula does not take into account the geographical diversification between countries and hence its estimate of underwriting risk capital requirement is higher than the internal estimation. On the other hand, If P&C’s internal estimate of market risk is currently higher than the respective figure in the standard formula.
In If P&C, own funds at the end of 2016 were EUR 3,822 million (3,202) while the SF SCR applying transitional measures on equity holdings was EUR 1,942 million (2,073). Hence, the solvency ratio was 197 per cent (154) and the buffer was EUR
In the figure If P&C’s Solvency, 31 December 2016, SCR is divided into risk contributions. The diversification benefit between risks is also presented in the figure.
EUR 420 million (200) i.e. 11.0 per cent (6.2) of OF consisted of subordinated debt at the end of 2016. In December 2016 the parent company of If P&C – If P&C Holding Ltd (publ) – issued two SEK denominated, Solvency II Compliant Tier 2 instruments. In both instruments the final maturity is 30 years and first call date is in 5 years. If P&C still has capacity to issue Tier 1 and Tier 2 instruments. As of 31.12.2016 Sampo plc holds If P&C subordinated liabilities with a nominal value of EUR 189 million according to IFRS, as presented in the table Solvency II Compliant Subordinated Liabilities of If P&C, 31 December 2016.
If P&C Insurance Ltd (publ) (Sweden) 30NC10 EUR 110,000,000 109,378,306 12/8/2021 Tier 2 98,935,000
SolvSolvencency II Cy II Compliant Suborompliant Subordinadinatted Liabilities of If Ped Liabilities of If P&C&C
The solvency position without the transitional measures is expected to develop favorably during the transitional period. The amount of with profit liabilities is decreasing (see figure Forecast of With Profit Liabilities, 31 December 2016–31 December 2031 within chapter Underwriting Risks) and liabilities with the highest guarantees are expected to fall most, from EUR 2,861 million to around EUR 1,000 million during the transitional period. Hence, the most capital consuming with profit liabilities will decrease during the period and their duration will shorten as well. This creates a decreasing trend to the SCR and simultaneously a positive trend to own funds without transitional measures. Internally Mandatum Life is forecasting solvency ratios with and without the transitional measures; both forecasts affect the company’s business decisions.
Mandatum Life’s structure of OF as presented in the table Mandatum Life’s Own Funds, 31 December 2016 is good. In regards to the capital structure, EUR 100 million (i.e. 5.3 per cent of OF) consisted of subordinated debt at the end of 2016. This subordinated debt is classified as a restricted Tier 1 item due to Grandfathering principles. Transitional measures on technical provisions contribute EUR 451.7 million to OF at the end of 2016.
TTopdanmarkopdanmark’s group solvency is calculated according to Solvency II rules. Topdanmark uses a partial internal model to calculate the non-life insurance risk and the volatility-adjustment when calculating technical provisions, which are both approved by the Danish FSA.
The sub-group level balance of profits, risks and capital is the primary focus of Sampo Group. When all sub-groups are well capitalized as a result the Group should be adequately capitalized as well.
However, at Sampo Group level there are more factors affecting capitalization than at the sub-group level. These factors are illustrated in the figure Sampo
Group’s Capitalization Framework. Based on the figure the basic components of Group capitalization will be introduced before describing different regulatory rules to calculate solvency measures and disclosing their results as of 31.12.2016. The adequacy of solvency is assessed at the end of this section.
Diversification benefit exists at two levels, within the companies and between the companies. The former is included in the companies’ SCRs; for the latter there are different estimation methods as described later in the document.
At the Group level, the capital requirement and own funds are both exposed to foreign currency translation risk. Translation risk may realize when the actual capital and the capital needs of If P&C and Topdanmark are converted from their reporting currencies to euros. When the reporting currencies of If P&C and Topdanmark depreciate, the actual amount of Group’s capital in euros decreases and the capital requirements of If P&C and Topdanmark will be lower in euro terms. Translation currency risk is monitored internally and its effect on Sampo Group’s solvency on a going concern basis is analyzed regularly. However, internally no capital need is set for translation risk, because it realizes only when a sub-group is divested.
RRegulaegulattory Solvory Solvencency Calculay Calculationtion Methods and GrMethods and Group Solvoup Solvencencyy PPositionosition
Sampo Group’s capital requirement and amount of group’s own funds are calculated either by the conglomerate rules or the Solvency II directive as follows: Sampo Group’s capital requirement acacccorording tding to theo the cconglomeronglomeraatte rules,e rules, is called the GrGroup’oup’s ts totalotal minimum rminimum requirequirement fement for oor own fundswn funds and it is the sum of the separate sub-group’s requirements (sectoral rules) and the parent company’s requirement based on the Capital Requirements Directive/Capital Requirements Regulation (“CRD IV/CRR”). The conglomerate’s capital requirement does not take into account any diversification between the business areas. Hence it is a quite conservative measure of capital requirement and easy to interpret.
The starting point for the calculation of Group’s own funds is Group’s consolidated equity. Sectoral items, which include among others the subordinated liabilities held by the external investors, are added to the Group’s consolidated equity. In addition, intangible assets and foreseeable dividends as well as other deductible items are subtracted from the Group’s own funds.
The Group SCR calculated by Solvency II rules takes into account diversification only within the consolidated group thus excluding the diversification benefit related to the holding of Nordea.
GrGroup’oup’s Own Funds and Solvs Own Funds and Solvencencyy PPosition Aosition Accccorording tding too CConglomeronglomeraatte Rules 31.12.2016e Rules 31.12.2016
Sampo Group’s FICO solvency is presented in the figure Sampo Group’s FICO solvency, 31 December 2016. The Group solvency ratio increased from 145 per cent to 154 per cent in 2016.
Group’s own funds consist of Group consolidated equity and sectoral items of financial institutions and insurance companies, minus intangible assets, foreseeable dividends and other adjustments. Group consolidated equity, EUR 11,934 million as of 31.12.2016, accounts for most of the own funds and is considered as Tier 1 capital for solvency purposes. Sectoral items, most of which come from Nordea’s additional Tier 1 and Tier 2 capital and from the valuation adjustments of If P&C and Mandatum Life, accounted for EUR 2,254 million (2,254). The deductions in total were EUR 3,251 million (3,371).
Group’s own funds consists of ordinary share capital, reconciliation reserve as well as subordinated liabilities and net deferred tax assets (“DTA”), which are eligible at the Group level. As of 31.12 2016 the Group’s own funds were EUR 10,955 million; in comparison IFRS consolidated group equity as of 31.12.2016 was EUR 11,934 million (Appendix 4 Valuation for Solvency II purposes).
The entire ordinary share capital of EUR 98 million and reconciliation reserve of EUR 10,520 million fully meet with the requirements for inclusion in Tier1 unrestricted items. All in all the structure of own funds is very solid, because Tier1 items are 98 per cent of all own funds and the reconciliation reserve is a major contributor.
The reconciliation reserve consists of retained earnings, net income for the financial year and other
Sampo GrSampo Group Solvoup Solvencency by by Solvy Solvencency II Rulesy II Rules
reserves deducted by foreseeable dividend and other distributions. In addition it is also adjusted by Solvency II valuation differences and net deferred tax assets. The composition of the reconciliation reserve is presented in the table Composition of the Reconciliation Reserve, 31 December 2016 and 31 December 2015.
Net deferred tax assets shown separately in Tier 3 -4 -18
As of 31.12.2016 subordinated debt of EUR 100 million issued by Mandatum Life was completely in Sampo’s investment portfolio and almost half of If P&C’s subordinated debt of EUR 407 million was held by Sampo plc as well. The details of subordinated debt instruments issued by If P&C are shown in the table Solvency II Compliant Subordinated Liabilities of If P&C, 31 December 2016. Full instrument details are available on Sampo’s web-page www.sampo.com/ publicdebt.
On 1 December 2016, If P&C issued two tranches of Tier2 subordinated debt altogether SEK 2,000 million (nominal amount).
Sampo’s regulatory group solvency ratios, 154 per cent (FICO) and 155 per cent (Solvency II), are relatively low compared to many other insurance groups. Conglomerate rules do not take into account any diversification benefits between Group’s business areas. Solvency II rules take into account only the diversification within the consolidated group. Therefore, the diversification benefit from associated companies is not taken into account. Because over half of the capital consumption and almost half of the profits come from the associated companies, the lack of diversification benefit has a material effect on reported Solvency ratios.
In order to include the diversification benefit between business areas into Group’s capital need estimate, Sampo is using correlations of quarterly reported profits between business areas when assessing the diversification benefit in the context of Conglomerate Rules. With this adjustment the resulting diversified Sampo Group capital requirement would be EUR 5,571 million (5,496) and the Group solvency ratio would be 196 per cent (187).
This internal Solvency Ratio estimate is more in line with reported figures of insurance groups,of which most do not have holdings in financial institutions to the level of Sampo Group’s holdings. Based on this internally adjusted group solvency ratio, the Group solvency would be strong.
• The companies also have capacity tcapacity to iso issue morsue moree insinstruments eligible ftruments eligible for their oor their own fundswn funds and hence extra buffers at Group level are not required.
DivDiversificaersification Benefit and Grtion Benefit and Group's Intoup's Internal Capital Aernal Capital Adequacdequacy Asy Assessessmentsment
In regards to liquidityliquidity, the liquid funds of Sampo plc were EUR 1,439 million (739). After all dividends have been received and paid and the debt portfolio adjusted to normal levels, the estimated liquidity will be approximately EUR 100 million. The need of liquid funds for normal cash management purposes is below EUR 50 million and thus there is additional liquidity to be used for other purposes. Furthermore, a remarkable portion of subordinated loans issued by associated companies (637) and other investment assets (179) can be sold in case liquidity is needed.
In addition to the quantifiable factors above there are qualitative factors affecting the size of buffer. If the probability for strategic arrangements within the industry increases, the Board of Directors and the management of Sampo plc may favor maintaining a higher buffer than would otherwise be needed. Also the shareholders’ expectations on dividends over time has an effect. When the majority of the shareholders expect a steadily increasing stream of dividends, a higher buffer than risk based one may be justified.
As a universal non-life company If P&C underwrites various risks for both individuals and corporations mostly in Nordics and Baltic countries. The Insurance operation in the Nordic region is organizationally divided into Business Areas by customer segment Private, Commercial (small and medium sized companies) and Industrial (large corporates). Insurance operations in the Baltic countries are organized in one Business Area, Baltic.
The Nordic P&C (property and casualty) insurance market is relatively concentrated. The four largest players account for approximately 70 to 90 per cent of the markets in Norway, Finland and Sweden (by market share) and are often established in more than one Nordic country. However, If P&C is the only company with a remarkable market share in all Nordic countries. In Denmark the market is less concentrated. Among the six leading P&C insurance companies in the Nordic market, two are mutually owned and the other insurance companies are publicly traded.
Business Area Industrial delivered an improved technical result compared with the previous year, largely driven by lower large claim costs more-thanoffsetting the effect of internal portfolio transfers and a challenging macroeconomic environment.
Business Area Baltic delivered a lower technical result than the year before, largely due to competitive market and decreasing share of broker sales due to the Net Pricing strategy that provides transparency on broker fees.
Annuities stemming from non-life insurance contracts and relating to health insurance obligations
As shown in the below figure Breakdown of Gross Written Premiums by Business Area, Country and Line of Business, If P&C, 2016, the If P&C insurance portfolio is well diversified across Business Areas, Countries and Lines of Business. The six Lines of Business are segmented in accordance with insurance class segmentation used in IFRS.
Marine, aviation, transport 119119 * The following adjustments from IFRS Line of Business to Solvency II Line of Business are made: • IFRS Line of Business Motor other and motor third party liability (1,920) includes Solvency II Line of Businesses Motor vehicle liability insurance (617)
• IFRS Line of Business Accident (546) includes Solvency II Line of Businesses Income protection insurance (370), Other life (35), Medical expense insurance (126) and Assistance (15).
Private and Commercial business areas (which are by nature diversified) dominate new sales. From the geographical angle gross written premiums are highly diversified as well. In regards to Line of Business the three major lines are Motor other and motor third party liability, Property and Accident.
The sensitivity of the underwriting result and hence underwriting risk is presented by changes in certain key figures in the table Sensitivity Test of Underwriting Result, If P&C, 31 December 2016 and 31 December 2015.
Combined ratio, business area Commercial 86.3% +/- 1 percentage point +/- 12 +/- 12
Combined ratio, business area Baltics 89.8% +/- 1 percentage point +/- 1 +/- 1
Net premiums earned (EURm) 4,286 +/- 1 per cent +/- 43 +/- 44
Ceded written premiums (EURm) 168 +/- 10 per cent +/- 17 +/- 18
Sensitivity TSensitivity Tesest of Underwriting Rt of Underwriting Result, If Pesult, If P&C&C
The Underwriting Committee (“UWC”) shall give its opinion on and propose actions in respect of various issues related to underwriting risk. The committee also considers and proposes changes to the Underwriting Policy (“UW Policy”), which is the principal document for underwriting, and sets general principles, restrictions and directions for the underwriting activities. The Boards of Directors of If P&C approve the UW Policy at least once a year.
The UW Policy is supplemented with guidelines outlining in greater detail how to conduct underwriting within each Business Area. These guidelines cover areas such as tariff and rating models for pricing, guidelines in respect of standard conditions and manuscript wordings, as well as authorities and limits. In accordance with the Instructions for the Underwriting Committee, the Committee monitors compliance with the established underwriting principles.
A group-wide reinsurance program has been in place in If P&C since 2003. In 2016, retention levels were between SEK 100 million (approximately EUR 10.5 million) and SEK 250 million (approximately EUR 26.2 million) per risk and SEK 250 million (approximately EUR 26.2 million) per event.
TTechnical Prechnical Proovisions bvisions by Line of Businesy Line of Business and Major Geogrs and Major Geographical Araphical Areaea If P&C, 31 December 2016
If P&C’s technical provisions are further analyzed by claims years. The output from this analysis is illustrated both before and after reinsurance in the claims cost trend tables. These are disclosed in the Note 27 to the Financial Statements.
In contrast to the unit-linked trend, the trend of withprofit technical provisions has been downward since 2005 (with the exception of year 2014 when group pension portfolio from Suomi Mutual was transferred to Mandatum Life). In particular, the parts of technical provisions with the highest guarantees (4.5 per cent and 3.5 per cent) have decreased. The development of with-profit and unit-linked portfolios is presented in the figure Development of With-Profit and Unit-Linked Technical Provisions, Mandatum Life, 2007–2016.
During the year 2016 insurance liabilities developed as planned. Unit-linked business increased and with profit liabilities with the highest guarantees decreased. The technical provisions with the highest guarantees fell by EUR 214 million. In total the with profit technical provisions decreased less (EUR 193 million) due to increased discount rate reserves.
The development of insurance liabilities during 2016 is shown in the table Analysis of the Change in Provisions before Reinsurance, Mandatum Life, 2016.
Unit-linkUnit-linked ted totalotal 5,7035,703 946946 -553-553 -61-61 00 00 244244 6,2796,279 56%56%
WWith prith profit and others tofit and others totalotal 4,9964,996 146146 -468-468 -37-37 138138 55 2424 4,8044,804 43%43%
Individual lifIndividual life insure insurancancee 197197 3232 -29-29 -10-10 66 00 -16-16 180180 2%2%
MandaMandatum Liftum Life pare parent cent companompany ty totalotal 10,69910,699 1,0921,092 -1,021-1,021 -98-98 138138 55 268268 11,08311,083 98%98%
MandaMandatum Liftum Life gre group toup totalotal 10,87310,873 1,1221,122 -1,048-1,048 -101-101 138138 55 272272 11,26111,261 100%100%
In general the long duration of policies and restriction of Mandatum Life’s right to change policy terms and conditions and tariffs increases biometric risks. If the premiums turn out to be inadequate and cannot be increased, technical provisions have to be supplemented by an amount corresponding to the increase in expected losses.
The annual longevity risk result and longevity trend is analyzed regularly. For the segregated group pension portfolio, the assumed life expectancy related to the technical provisions was revised in 2014 and for the other group pension portfolios in 2002 and 2007. In total, these changes increased the 2016 technical provision by EUR 105 million (106) including a EUR 87 million longevity reserve for the segregated group pension portfolio. The cumulative longevity risk result has been positive since these revisions. The longevity risk result of group pension for the year 2016 was EUR
The Insurance Risk Committee is responsible for maintaining the Underwriting Policy and monitoring the functioning of the risk selection and claims
Policy terms and tariffs cannot usually be changed materially during the lifetime of the insurance, which increases the expense risk. The main challenge is to keep the expenses related to insurance administrative processes and complex IT infrastructure at a competitive level. In year 2016, the expense result of Mandatum Life Group was EUR 26 million (27). Mandatum Life does not defer insurance acquisition costs. Since 2012 the expense result has grown significantly due to increased fee income from unitlinked liabilities and cost efficiency program, as presented in the table Expense result, Mandatum Life Group, years 2007-2016.
In addition, there are reserves for years 2017-2019 to lower interest rates of with profit liabilities as follows: • EUR 98 million has been reserved to lower the interest rate to 0.25 per cent for year 2017; • EUR 90 million for the year 2018 to lower the interest rate to 0.50 per cent; and
In Sampo Group, performance and market risks related to investment portfolios are mostly straightforward to analyze and manage, because Group applies mark-tomarket procedures to most of its investments and only seldom are there instruments that require mark-tomodel procedures.
In addition to investment portfolio market risks, the companies’ balance sheets are also exposed to market and liquidity risks. These balance sheet level risks are defined as ALM risks and they are covered later in the section ALM risks. The ALM risks at the balance sheet level are taken into account when investment portfolio allocations are designed and related limits and restrictions are defined.
DeDevvelopment of Inelopment of Invvesestment Ptment Portfortfolios, If Polios, If P&C, Manda&C, Mandatum Liftum Life and Sampo plce and Sampo plc
High-yield bonds and loans 1,461 3.0 884 3.7 109 2.4 2,454 12% 3.2
LisListted equity ted equity totalotal 1,5271,527 -- 1,7371,737 -- 8888 -- 3,3523,352 16%16% --
CConsolidaonsolidatted Ined Invvesestment Allocatment Allocationtion If P&C, Mandatum Life, Sampo plc and Sampo Group, 31 December 2016
Annual InAnnual Invvesestment Rtment Returns aeturns at Ft Fair Vair Valuesalues If P&C, 2007–2016
If P&C writes insurance policies that are mostly denominated in the Scandinavian currencies and in euro. In If P&C, the transaction risk is reduced by matching technical provisions with investment assets in the corresponding currencies or by using currency derivatives. Hence there is no structural FX risk. On the other hand, If P&C can open short or long FX positions (active FX risk) within its FX risk limits.
In Mandatum Life, transaction risk arises mainly from investments in currencies other than euro as the company’s technical provisions are almost completely denominated in euro. Mandatum Life does not automatically close its FX position in foreign currencies, but the currency risk strategy is based on active management of the currency position. The objective is to achieve a positive return relative to a situation where the currency risk exposure is fully hedged.
In addition to transaction risk, Sampo Group and its insurance subsidiaries are also exposed to translation risk. At group level it stems from If P&C; within If P&C it stems mainly from its Finnish subsidiary. Translation risk, and its management in Sampo Group, were described in the Profitability, Risks and Capital section.
TTrransaction Risk Pansaction Risk Positionosition If P&C and Mandatum Life, 31 December 2016
Exposures in fixed income and equity instruments are shown in the tables Exposures by Sectors, Asset Classes and Rating, If P&C, Mandatum Life and Sampo Group, 31 December 2016. The tables also include counterparty risk exposures relating to reinsurance and derivative transactions. 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 are not fully comparable with other tables in this annual report.
EURmEURm AAAAAA AAA+A+ -- AAAA-A +A+ - A- A-BBB +BBB+ - BBB-- BBBBB +BB+ - C- C DD
The public sector exposure includes government bonds, government guaranteed bonds and other public sector investments as shown in the table Fixed Income Investments in Public Sector, Sampo Group, 31
The exposures in non-investment grade fixed income instruments are significant, because a relatively small number of Nordic companies are rated; further, of rated companies many have a rating lower than tripleB (high yield). The largest high-yield and non-rated fixed income investment exposures are presented in the table Ten Largest Direct High Yield and Non-rated Fixed Income Investments, Sampo Group, 31 December 2016.
FixFixed Inced Income Inome Invvesestments in Financial Secttments in Financial Sectoror Sampo Group, 31 December 2016
The listed equity investments of Sampo Group totaled EUR 3,352 million (3,431) at the end of year 2016. At the end of year 2016, the listed equity exposure of If P&C was EUR 1,527 million (1,498). The proportion of listed equities in If P&C’s investment portfolio was 12.5 per cent. In Mandatum Life, the listed equity exposure was EUR 1,737 million (1,732) at the end of year 2016 and the proportion of listed equities was 26.4 per cent of the investment portfolio.
A breakdown of the listed equity exposures of Sampo Group by geographical regions is shown in the figure Breakdown of Listed Equity Investments by Geographical Regions, Sampo Group, If P&C and Mandatum Life, 31 December 2016.
TTen Laren Largesgest Dirt Direct High Yect High Yield and Non-Raield and Non-Ratted Fixed Fixed Inced Income Inome Invvesestmentstments Sampo Group, 31 December 2016
BrBreakeakdodown of Liswn of Listted Eed Equity Inquity Invvesestments btments by Geogry Geographical Raphical Regionsegions If P&C, 31 December 2016, total EUR 1,527 million
The geographical core of Sampo Group’s equity investments is in the Nordic companies. The proportion of Nordic companies’ equities corresponds to 55 per cent of the total equity portfolio. This is in line with Sampo Group’s investment strategy of focusing on Nordic companies. Moreover, Group’s insurance liabilities are mostly denominated in euro or the Nordic currencies. 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.
TTop 10 lisop 10 listted equity ined equity invvesestmentstments TTotal fotal fair vair valuealue, EURm, EURm % of t% of total dirotal direct equity inect equity invvesestmentstments
TTen Laren Largesgest Dirt Direct Lisect Listted Eed Equity Inquity Invvesestmentstments Sampo Group, 31 December 2016
In addition, Sampo Group’s largest listed equity holdings are disclosed in the Notes to the Financial Statements (Note 41).
TTotal Total Top 10 Exposurop 10 Exposureses 8,1108,110 39%39% 3,0853,085 5,0025,002 00 2,3482,348 1,9301,930 724724 00 2323
LarLargesgest Exposurt Exposures bes by Isy Issuer and Assuer and Asset Classet Classs Sampo Group, 31 December 2016
Counterparty default risk arising from receivables from policyholders and other receivables related to commercial transactions is very limited, because nonpayment of premiums generally results in cancellation of the insurance policies. Also, the risk exposures arising from other receivables related to commercial transactions are minor in Sampo Group.
In If P&C reinsurance is used regularly and If P&C have many 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.
Because the recoverables and pooled solutions reported above are not covered by collaterals the whole amount is exposed to counterparty risk. Hence, the reinsurance counterparties are selected carefully and their default risks are monitored continuously.
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
The cost of risk transfer related to the reinsurance recoverables and pooled solutions amounted to EUR 55.5 million. Of this amount, 100 per cent was related to reinsurance counterparties with a credit rating of Aor higher.
In Sampo Group, the default risk of derivative counterparties is a by-product of managing market risks. This is the case especially in Sampo plc and Mandatum Life which are frequent users of long-term interest rate derivatives in addition to FX-forwards and options. In If P&C the role of long term interest rate derivatives has been immaterial and counterparty risk stems mainly from short-term FX-derivatives.
ALM Risks At the total balance sheet level, ALM risks contribute considerably to economic values of insurance liabilities, market value of assets, risks and capital need. ALM risks and exposures are analyzed actively and the risks are taken into account when making capitalization decisions, managing investments and developing insurance products. According to Sampo’s definition ALM risks also include liquidity risk and other risks that may cumulate at the balance sheet level.
The ALM risk in If P&C is managed in accordance with Sampo Group’s principles. ALM is taken into account through the risk appetite framework and is governed by If P&C’s Investment Policies.
The Board of Directors of Mandatum Life annually approves the Investment Policies for both segregated assets and other assets regarding the company’s investment risks. These policies set principles and limits for investment portfolio activities.
The Investment Policy for other investment assets defines the control levels for the maximum acceptable risk and respective measures to manage the risk. The control levels are set above the Solvency II SCR and are based on predetermined capital stress tests. The general objective of these control levels and respective guidelines is to maintain the required solvency.
When the above mentioned control levels are breached, the ALCO reports to the Board which then
Sampo Group is negatively affected when rates are decreasing or staying at low levels, because the duration of liabilities in Sampo Group companies is longer than the duration of assets. If P&C has successfully decreased its combined ratio over the years to counteract falling interest rates. Mandatum
Liquidity risk is relatively immaterial in Sampo Group’s businesses because liability cash flows in most lines of business are fairly stable and predictable and an adequate share of the investment assets are in shortterm money market instruments and liquid government bonds. Sampo Group companies manage the liquidity risk on a daily basis. In addition both the parent company’s and the subsidiaries’ creditworthiness and reputation are proactively managed.
In If P&C, liquidity risk is limited, since premiums are collected in advance and large claims payments are usually known a long time before they fall due. Liquidity risks are managed by cash management functions which are responsible for liquidity planning. Liquidity risk is reduced by having investments that are readily tradable in liquid markets. The available liquid financial assets, being that part of the assets which can be converted into cash at a specific point in time, are analyzed and reported to the ORSA (Own Risk Solvency Assessment) Committee.
The maturities of technical provisions and financial assets and liabilities are presented in the table Cash Flows According to Contractual Maturity, If P&C, Mandatum Life and Sampo plc, 31 December 2016. The table shows the financing requirements resulting from expected cash inflows and outflows arising from financial assets and liabilities as well as technical provisions.
Sampo plcSampo plc of which interest rate swaps 12 0 12 1 10 1 4 0 0 0 of which interest rate swaps 0 0 0 0 0 0 0 0 0 0
Cash FloCash Flowws As Accccorording tding to Co Controntractual Maactual Maturityturity If P&C, Mandatum Life and Sampo plc, 31 December 2016
A number of internal governing documents form the basis for steering compliance activities, including compliance risk: Sampo Group Compliance Principles, Compliance Policy, Policy on Conflicts of Interest, Internal Control Policy, Risk Management Policy, Compliance Plan, Working Routines for the Compliance Function and the Instruction for Compliance coordinators. The documents are reviewed and updated annually or as necessary.
The Operational Risk Committee analyzes and handles operational risks, e.g. in relation to new products and services, changes in processes and risks as well as realized operational risk incidents. Significant observations are reported to the Risk Management Committee and to the Board of Directors quarterly. The ORC is also responsible for maintaining and updating the continuity and preparedness plans as well as the Internal Control Policy.
The central prerequisites for facilitating successful risk management include the following: • Risk management governance structure and authorizations (see Risk Governance section) and clear division of responsibilities between business lines and independent functions
• Internal reporting on Capital need and actual available Capital at least on a quarterly basis
Both the business lines and the financial and risk management functions are active in supporting the business with continuous analysis and assessment of opportunities. This can be seen as a separate phase in the risk management process as the insurance and investment business units assess different business opportunities, especially their risk return ratios, on a daily basis. In the financial and risk management functions, on the other hand, a considerable amount of time is spent on risk assessment and capital planning. This assessment of opportunities generates, for example, the following outputs: • Identification of business opportunities (e.g. product and service development and investment opportunities) and analysis of respective earnings potential and capital consumption
High quality execution of the above tasks contributes to the achievement of the three central targets of the risk management process: Balance Between Risks, Capital and Earnings
available material and is therefore less detailed. Reporting on the subsidiaries’ performance to the Board of Directors and Audit Committee (“AC”) of Sampo is based mainly on the reporting produced by the subsidiaries. The reporting concentrates on the balance between risks, capitalization and profitability. The parent company is responsible for reporting on its own activities.
The main risk steering mechanism used by the Boards of Directors is the policy framework. As part of their responsibilities, the Boards of Directors approve the Risk Management Policy and the other risk steering documents; receive risk reports from the Chief Risk Officer and the Chief Executive Officers (“CEOs”); take an active part in the forward looking risk and solvency assessment process; and ensure that the management and follow-up of risks is satisfactory and effective. The reporting lines of different governing bodies in If P&C are described in the figure Risk Governance in If P&C.
The responsibility to identify, evaluate, control and manage risks lies within the line organization. There are separate committees in place for key risk areas which have the responsibility of monitoring the management and control risks to ensure compliance with the instructions of the Boards of Directors. The risk committees in If P&C do not have a decision mandate.
In addition to the risk specific committees, the duties related to compliance and risk management of the Baltic subsidiary have been organized as follows: • The Legal and Compliance Unit takes care of compliance matters with the Head of the Unit being a member of the Risk Management Committee.
Technical provisions and the economic value of insurance liabilities always include a degree of uncertainty as they are based on estimates of the size, timing and the frequency of future claim payments. The uncertainty is normally greater for new portfolios for which comprehensive run off statistics are not yet available, and for portfolios which include claims that take a long time to settle. Workers’ compensation, motor other and motor third party liability, personal accident and liability insurance are examples of nonlife products with the latter characteristics. In principle most of the life products have the latter characteristics embedded within them also. Life insurance policies are also exposed to the behavior of policyholders, because policyholders can change their premium payment intensity or cancel the existing policy.
Premium risk relates to future claims resulting from expected insured events which have not occurred by the balance sheet date. The frequency, severity and timing of insured events and hence future claims may differ from those expected. As a result, the claims cost for future claims exceeds the expected level and there is a loss or adverse changes in the value of the insurance liabilities.
Reserve risk includes rreevisionvision risk, which is defined as the risk of loss, or of adverse change in the value of insurance and reinsurance liabilities, resulting from fluctuations in the level, trend, or volatility of revision rates applied to annuities, due to changes in the legal environment or in the state of health of the person insured.
The value of life insurance liabilities is sensitive to underwriting risks and interest rates. Underwriting risk includes biometric, policyholder behavior and expense risks as presented in the figure Life Insurance Underwriting Risks below.
Furthermore, market risks also include the risk of worsening market liquidity in terms of widening bidask spreads and the risk of unexpected changes in the repayment schedules of assets. In both cases the market values of financial instruments in investment portfolios may change.
Credit risk by definition comprises default, spread and settlement risks. Default risk refers to losses arising from occurred defaults of contractual counterparties (counterparty risk) or debtors (issuer risk).
Settlement risk realizes when one party fails to deliver the terms of a contract with another party at the time of settlement. Settlement risk can be the loss associated with default at settlement and any timing differences in settlement between the two parties. Settlement risks are effectively mitigated by using centralized settlement and clearing systems by Sampo Group companies.
When changes in different market risk variables (interest rates, inflation, foreign exchange rates) cause a change in the fair values of investment assets and derivatives that is of a different size than the respective change in the economic value of the insurance liabilities, the company is exposed to ALM risk. It has to be noted that the cash flows of insurance liabilities are modelled estimates and are therefore uncertain in relation to both their timing and amount. This uncertainty is a central component of ALM risk.
Interest rate risk was defined earlier in the connection of market risks and hence in this section only liquidity risk is defined.
or in the case of reputational issues. If these risks, caused by internal reasons, are realized together with general market turmoil, which makes the selling of investment assets and the refinancing of debt difficult, maintaining adequate liquidity can be a challenge.
In financial accounting the investment portfolios are reported on a fair value basis. These fair values are determined either on the basis of direct market quotes or by using various valuation models. More information on the valuation methods of the investment assets is presented in Note 17 of Sampo Group Financial Statements. In regards to Solvency II valuation methods, there are some minor differences compared to IFRS rules. See Appendix 4 for Solvency II Valuation Methods.
Sampo Group has a thorough understanding of the Nordic markets and issuers and consequently Group’s direct investments are mainly made in Nordic securities although lately direct investments outside non-Nordic countries have increased. Mandatum Life’s direct investments are mainly denominated in euro and in companies geographically located in Finland and selectively in other countries. If P&C has the major part of its direct investments denominated in the Scandinavian currencies and their respective countries. Through effective differentiation in asset selection between companies, concentration risk is proactively managed at Group level. Concentration risk is also managed by limit structures.
Management of EManagement of Equity and Sprquity and Spreadead RiskRisks of Dirs of Direct Inect Invvesestmentstments
2. Investment transactions shall be executable on short notice when an opportunity appears. This puts pressure on authorizations and credit limit structures and procedures which must be simultaneously (i) carried out flexibly enough to facilitate fast decision making regardless of instrument type, (ii) well-structured to ensure that investment opportunities are assessed prudently, taking into account the specific features and risks of all investment types and (iii) able to restrict the maximum exposure of a single name risk to a level that is within the company’s risk appetite.
3. Accumulated credit exposures over single names and products are monitored regularly at the subsidiary level and at Group level to identify unwanted concentrations. Credit exposures are reported, for instance, by sectors and asset classes and within fixed income by ratings.
The external asset managers and funds managed by them are selected for both companies by the same members of Sampo Group’s Investment Unit. The funds are mostly allocated to areas outside of the Nordic countries. Consequently, the risk of
Market risks and limits are also controlled by the Investment Control Committee (ICC) in If P&C and the Asset and Liability Committees (ALCOs) in Mandatum Life on a monthly basis at a minimum. These committees are responsible for the control of investment activities within the respective legal entity.
Mandatum Life has two ALCOs, of which one controls the segregated assets and liabilities and the other controls the rest of Mandatum Life’s with profit assets and liabilities. The ALCOs ensure that the investment activities are conducted within the limits defined in the Investment Policy as approved by the Board and monitors the adequacy of liquidity, profitability and solvency capital in relation to the risks in the balance sheet. The ALCOs prepare proposals of Investment Policy to the Board of Directors and report to the Board.
There are no major adjustments to the IFRS numbers necessary for Solvency II purposes. A large majority of Sampo Group’s assets are valued at fair value on the IFRS balance sheet based on market values. No significant alternative valuation methods are used. The fair values of financial liabilities and properties are given in the notes to the IFRS accounts.
The determination of the fair values are presented in Sampo Group’s Annual Report in the section "Summary of significant accounting policies/ Fair value and Investment property” and also in the notes “Fair values” and “Determination and hierarchy of fair values”.
ExExccesess of ass of assets osets ovver liabilitieser liabilities 11,93411,934 11,91011,910 -24-24 * In IFRS Sampo’s financial assets consist of equity and debt instruments available for sale and fair value through profit/loss, derivatives and loans and receivables. Financial liabilities in IFRS consist of derivatives and other liabilities eg. subordinated liabilities and other debt securities in issue.
For the year ended 2016 in its consolidated accounts Sampo recognized deferred tax assets of EUR 34 million and deferred tax liabilities (DTL) of EUR 532 million. Subsequent to Solvency II valuation adjustments, DTA decreases by EUR 24 million (leaving a SII DTA position of EUR 10 million) and DTL amount is decreased by EUR 57 million (leaving a SII DTL position of EUR 475 million).
There are no anticipated effects on the carrying amounts of Sampo’s investment assets except for properties. In solvency II balance sheet investment properties are valued at fair value according to SII valuation rules. This increases the value of investment properties by EUR 48 million.
Under Solvency II the technical provisions should fully take into account all cash inflows and outflows. Therefore, in regard to the policies in force, the future premiums expected but not yet due are not recognized as receivables. Instead they are included in the premium provision based on a best estimate, which differs from the treatment under the IFRS, where premium receivables are recognized in the balance sheet. Thus receivables of EUR 889 million were reclassified from premium receivables to insurance liabilities. Receivables in Solvency II relate only to the amounts due for payments by policyholders, insurers, and others linked to insurance business.
The best estimate corresponds to the probabilityweighted average of future cash flows, taking into account the time value of money using the risk-free interest rate term structure as published by the European Insurance and Occupational Pensions Authority (“EIOPA”). The best estimate is calculated on a gross basis, without deduction of the amounts recoverable from reinsurance contracts, and on a net basis by calculating separately the ceded amount representing amounts recoverable from reinsurance contracts.
Technical provisions are calculated within clearly defined homogeneous risk groups and lines of business. All assumptions are reviewed quarterly and recorded. The methodology is documented in “Guiding Technical Principles Policy” and “General Reserving Policy”.
The basic risk-free rates are derived for the currencies DKK, EUR, GBP, NOK, SEK and USD and these currencies cover more than 99 per cent of technical provisions. For technical provisions in other currencies than these, either EUR or USD risk-free interest rate term structure is used. For each material currency, the basic risk-free interest rates are derived on the basis of the relevant swap rates of that currency, adjusted by credit risk and volatility adjustment where applicable.
The risk margin is intended to represent technical provisions corresponding to the cost of capital for holding the insurance liabilities to full run-off.
In the calculation of the risk margin, it is assumed that the assets are selected in such way that the SCR for market risk that the reference undertaking is exposed to is zero, i.e. there is no residual market risk. In short, to calculate the risk margin, cash flows are recalculated to best estimates, which in turn are used to calculate a Basic SCR. The Basic SCR together with operational risk is discounted and a cost of capital is introduced to arrive at the final risk margin per legal entity.
TTechnical prechnical proovisions – lifvisions – life (e (eexxcluding indecluding indexx-link-linked and unit-linked and unit-linked)ed) 2,1672,167 2,2212,221 5454
Valuation Used for Solvency Purposes Compared to Valuation in the Financial Statements
• Some minor valuation differences, which also arise due to the counterparty default calculation in relation to reinsurer’s share of technical provisions.
• The requirement to hold an unearned premium provision using an accounting recognition basis is replaced by a Solvency II premium provision valued on a best estimate basis. This also includes a requirement to take into account future premium cash inflows when calculating the best estimate provisions and reinsurance recoverables. In the financial statements, the unearned premium provision is equal to the part of the written premium that is yet to be accrued to premiums earned. In Solvency II the premium provision is cash flow based and, in line with a best estimate, the premium provision only includes the part of written premiums which is dedicated to cover future claims and other expenses stemming from present insurance policies. In addition to this, premiums
TTechnical Prechnical Proovisions in IFRS and Solvvisions in IFRS and Solvencency IIy II
expected to be received in future date and related to the future risk periods are included in the premium provision.
• Introduction of the principle of a market consistent basis and calculation of a Solvency II defined risk margin, in addition to the best estimate provisions.
In the IFRS consolidated accounts, recognition of a liability as an insurance contract would be dependent on the existence of significant insurance (underwriting) risk (refer IFRS 4). Based on If P&C’s assessment that there is no material degree of insurance risk prevalent, the Medical Malpractice Pool public sector is not recognized as an insurance contract in the consolidated accounts, but treated as a service contract with its components recognized in other assets and other liabilities. Accordingly, a difference occurs with the Solvency II treatment where the liability should be recognized within the insurance obligations. Therefore under Solvency II treatment all receivables and liabilities related to the MMP public sector are reclassified as forming 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.
Technical provisions according to Solvency II are equal to the sum of the best estimate and the risk margin.
The best estimate is calculated as an expected value (probability weighted average) of discounted future net cash flows. The discount curve used is the relevant risk-free interest rate term structure of Solvency II regulation which is based on market rates, credit risk adjustment and the Ultimate Forward Rate (“UFR”). Mandatum Life also applies the volatility adjustment when defining the Solvency II discount curve.
TTechnical prechnical proovisions – lifvisions – life (e (eexxcludingcluding unit-linkunit-linked)ed) 4,8014,801 4,7324,732 6969
Technical provisions on financial statements are calculated using the parameters defined in the technical basis of the products, i.e., the applied discount rate equals the guaranteed rate of the policy and parameters related to insurance risk are the same as those used in the premium calculation. Technical provisions on financial statements for unit-linked policies are materially the same as the amount of the savings in these policies.
• Generally the level of assumptions (prudent assumptions vs. best estimate assumptions and explicit risk margin).
Mandatum Life has got an approval from Financial Supervisory Authority to apply transitional measure on technical provisions for pension policies with guaranteed interest of 3.5 or 4.5 per cent.
The effects on Sampo’s liabilities other than technical provisions are fairly limited, consisting mainly of the valuation impact on financial liabilities (Other financial liabilities than debt owned to credit institutions and Subordinated debt) and payables balances related to the technical provisions.
The reclassification of Medical Malpractice Pool public sector from a service contract to an insurance contract also has an effect on payables balances. Payables of EUR 118 million are reclassified from trade payables to the insurance obligations.
Change in liabilities for insurance and investment contracts 4 -448 -502
TTotal itotal items not rems not reclaseclassifiable tsifiable to pro profit or losofit or loss, net of taxs, net of tax -5-5 1111
TTOOTTAL CAL COMPREHENSIVE INCOMPREHENSIVE INCOME FOME FOR THE FINANCIAL YEAROR THE FINANCIAL YEAR 1,7601,760 1,5641,564
EEquity aquity at 1 January 2015t 1 January 2015 9898 44 1,5271,527 8,6558,655 -400-400 1,0391,039 10,92410,924
EEquity aquity at 31 Dect 31 December 2015ember 2015 9898 44 1,5271,527 9,3259,325 -472-472 929929 11,41111,411
EEquity aquity at 31 Dect 31 December 2016ember 2016 9898 44 1,5271,527 9,7009,700 -518-518 1,1241,124 11,93411,934 1) IAS 19 Pension benefits had a net effect of EURm -38 (90) on retained earnings.
3) The amount recognised in equity from available-for-sale financial assets for the period totalled EURm 216 (244). The amount transferred to p/l amounted to EURm -29 (-318). EURm -11 (-10) was transferred to the Segregated Suomi portfolio.
Net cash frNet cash from financing activitiesom financing activities 7878 -999-999
Dividend income received 122 93 *) Investments include investment property, financial assets and investments related to unit-linked insurance contracts.
The Board of Directors of Sampo plc accepted the financial statements for issue on 8 February 2017.
The share of associates’ profit or loss, equivalent to the Group’s holding, is presented as a separate line in
P&C insurance contracts are primarily of short duration, so that premiums written are recognised as earned on a pro rata basis, adjusting them by a change in the provision for unearned premiums i.e. by the proportion of the insurance premium income that, based on the period covered by the insurance contract, belongs to the following financial year,.
According to the Group’s risk management policy, investments are managed at fair value in order to have the most realistic and real-time picture of investments, and they are reported to the Group key management at fair value. Investments comprise debt and equity securities. They are mainly classified as financial assets available-for-sale.
As there are no quoted prices available in active markets for unquoted equities and participations, the aim is to determine their fair value with the help of generally accepted valuation techniques available in the markets. The most significant share of unquoted equities and participations comprise the private equity and venture capital investments. They are measured in accordance with the generally accepted common practice, International Private Equity and Venture Capital Guidelines (IPEV).
Derivative financial instruments are classified as those held for trading and those held for hedging, including interest rate derivatives, credit risk derivatives, foreign exchange derivatives, equity derivatives and commodity derivatives. Derivative instruments are measured initially at fair value. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. During the financial year, the fair value hedging has been applied in the life insurance business.
Impairment of intangible asImpairment of intangible assets andsets and prpropertyoperty, plant and equipment, plant and equipment
Investment property is held to earn rentals and for capital appreciation. The Group applies the cost model to investment property in the same way as it applies to property, plant and equipment. The depreciation periods and methods and the impairment principles are also the same as those applied to corresponding property occupied for own activities. The investment property of the associate Nordea in the Holding segment and that of Topdanmark in the P& insurance segment are measured at fair value in item Investments in associates.
A reinsurance contract is a contract which meets the IFRS 4 requirements for insurance contracts and on the basis of which Sampo Group (the cedant) may receive compensation from another insurer (the reinsurer), if it becomes liable for paying compensation based on other insurance contracts it has issued. Such compensation received on the basis of reinsurance contracts is included in the balance sheet under 'Reinsurers’ share of insurance liabilities' and 'Other assets'. The former item includes the reinsurers’ share of the provisions for unearned premiums and claims outstanding in the Group’s reinsured insurance contracts, while the latter includes short-term receivables from reinsurers.
Other than insurance contracts, i.e. contracts where the risk is not transferred, include Captive contracts in which an insurance company underwrites a company’s direct business and reinsures the same risk in an insurance company in the same group as the policyholder. There are also contracts in P&C insurance (Reverse Flow Fronting contracts) in which the insurance company grants insurance and then transfers the insurance risk to the final insurer. For both the above types of contract, only the net effect of the contract relationship is recognised in the income statement and balance sheet (instead of the gross treatment, as previously). The prerequisite for net treatment is that the net retention recognised on the contract is zero.
Premiums written for P&C insurance and reinsurance are recognised in the income statement when the annual insurance premium is due for payment.
Due to the difference in the discount rate of liabilities and the guaranteed interest of 4.5 % and 3.5 %, supplementary provisions for guaranteed interest have been added to technical provisions. In the subsidiary, Mandatum Life Insurance Baltic, the discount rate varies by country between 2.0 - 4.0 per cent and the average guaranteed interest rate between 2.0 – 4.0 per cent.
A liability adequacy test is applied to all portfolios, company by company, and the need for augmentation is checked, company by company, on the basis of the adequacy of the whole technical provisions. The test includes all the expected contractual cash flows for non-unit-linked liabilities. The expected contractual cash flows include expected premiums, claims, bonuses and expenses. The claims have been estimated including surrenders and other insurance transactions based on historical data. The amounts of claims include the guaranteed interest and an estimation of future bonuses. The present values of the cash flows have been discounted to the balance sheet date by using a swap rate curve.
For the unit-linked business, the present values of the insurance risk and expense results are calculated correspondingly. If the aggregate amount of the liability for the unit-linked and other business presumes an augmentation, the liability is increased by the amount shown by the test and recognised in profit or loss.
Sampo has defined benefit plans in Sweden and Norway, and defined contribution plans in other countries. The most significant defined contribution plan is that arranged through the Employees’ Pensions Act (TyEL) in Finland.
An obligation based on termination of employment is recognised as a liability when the Group is verifiably committed to terminate the employment of one or more persons before the normal retirement date or to grant benefits payable upon termination as a result of an offer to promote voluntary redundancy. As no economic benefit is expected to flow to the employer from these benefits in the future, they are recognised immediately as an expense. Obligations maturing more than 12 months later than the balance sheet date are discounted. The benefits payable upon termination at Sampo are the monetary and pension packages related to redundancy.
During the financial year, Sampo had four valid sharebased incentive schemes settled in cash (the longterm incentive schemes 2011 I, 2011 II, 2014 I and 2014 II for the management and key employees). The schemes have been measured at fair value at the grant date and at every reporting date thereafter.
The incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are included in equity as a deduction, net of tax, from the proceeds.
The amendments to IFRS 9 Financial Instruments (estimated effective for annual periods beginning on 1 Jan 2021 or after) supersede IAS 39 Financial Instruments: Recognition and Measurement. The new standard changes the classification and measurement of financial assets and includes a new impairment model based on expected credit losses. The hedge accounting will continue to have three different hedging relationships. The adoption of the new standard will have an impact on the Group’s financial statements; the effects are under valuation in the Group.
TTotal itotal items rems reclaseclassifiable tsifiable to pro profit or losofit or loss, nets, net
TTotal itotal items not rems not reclaseclassifiable tsifiable to pro profit or losofit or loss,s, net of taxnet of tax 1111 -- -- -- 1111
Liabilities related to assets held for sale - 3,202 - - 3,202
Premium revenue ceded to reinsurers on insurance contracts issued -6 -5
InsurInsurancance and ine and invvesestment ctment controntracts, tacts, totalotal 1,1221,122 1,1491,149
The changes in the fair value reserve are disclosed in the Statement of changes in equity. Other income and expenses comprise rental income, maintenance expenses and depreciation of investment property. All the income and expenses arising from investments are included in Net income from investments. Gains/losses include realised gains/losses on sales, unrealised and realised changes in fair values and exchange differences. Unrealised fair value changes for financial assets available-for-sale are recorded in other comprehensive income and presented in the fair value reserve in equity. The effect of discounting annuities in P&C insurance is disclosed separately. The provision for annuities is calculated in accordance with actuarial principles taking anticipated inflation and mortality into consideration, and discounted to take the anticipated future return on investments into account. To cover the costs for upward adjustment of annuity provisions required for the gradual reversal of such discounting, an anticipated return on investments is added to annuity results.
Change in provision for claims outstanding (incurred but not reported losses, IBNR)
InsurInsurancance ce controntracts tacts total, grotal, grososss -692-692 -644-644 7777 -25-25 -615-615 -668-668
InsurInsurancance ce controntracts tacts total, netotal, net -689-689 -641-641 7777 -25-25 -612-612 -666-666
2) Includes other technical income EURm 26 (28) and other technical expenses EURm 33 (28).
Earnings per share (EUR per share) 2.95 2.96 10 Financial assets and liabilities
Financial asFinancial assets, grsets, group toup totalotal 20,46320,463 290290 169169 -47-47 175175
Financial liabilities, grFinancial liabilities, group toup totalotal 2,3752,375 -59-59 -8-8 11 Property, plant and equipment
Net carrying amount aNet carrying amount at 1t 1 Jan.Jan. 1919 1616
Net carrying amount aNet carrying amount at 31t 31 Dec.Dec. 1919 1919
Net carrying amount aNet carrying amount at 31 Dec.t 31 Dec. 1414 1515
FFair vair value of inalue of invvesestment prtment property aoperty at 31 Dec.t 31 Dec. 2222 2222
Non-cancNon-cancellable minimum rellable minimum rentalental - not later than one year 9 9 - later than one year and not later than five years 13 6 - later than five years 3 0
Net carrying amount aNet carrying amount at 31 Dec.t 31 Dec. 526526 1616 541541
Net carrying amount aNet carrying amount at 31 Dec.t 31 Dec. 6464 66 7070
In Mandatum Life, the recoverable amount exceeds its carrying amount by some EURm 410. With the calculation method used, e.g. an increase of about 2% in the weighted average cost of capital could lead to a situation where the recoverable amount of the entity would equal its carrying amount.
Changes in the equity of associates 27 -86 -59 23 -51 -28
AAt end of yt end of yearear 7,5547,554 553553 8,1078,107 7,3057,305 374374 7,6797,679
TTotal fotal fororeign eeign exxchange derivchange derivaativtiveses 3,1783,178 1313 6363 2,8782,878 2121 1515
Equity and equity index options 0 1 - - - -
TTotal derivotal derivaativtives held fes held for tror tradingading 3,2453,245 1414 6767 4,9484,948 2121 1717
Financial assets available-for-sale for P&C insurance include impairment losses EURm 227 (197).
PP&C insur&C insurancancee, t, total financial asotal financial assetssets 11,66711,667 10,56610,566
TTotal fotal fororeign eeign exxchange derivchange derivaativtiveses 1,7541,754 1010 1111 1,7891,789 99 2222
TTotal derivotal derivaativtives held fes held for tror tradingading 1,8981,898 1010 1111 7,0507,050 99 2424
Financial asFinancial assets designasets designatted as aed as at ft fair vair value thralue throughough p/lp/l
Financial asFinancial assets asets avvailable failable for sale / sharor sale / shares and participaes and participations:tions: Listed equity securities include EURm 913 (831) listed equities. Unlisted equity securities include EURm 727 (768) investments in capital trusts.
Equity and euqity index options 9 2 3 60 10 10
The fair value of the derivative instruments is assessed using quoted market prices in active markets, discounting method or option pricing models.
The figures include the financial assets classified as Assets held for sale.
FINANCIAL LIABILITIES AFINANCIAL LIABILITIES AT 31 DEC. 2016T 31 DEC. 2016
EURmEURm TTaso 1aso 1 TTaso 2aso 2 TTaso 3aso 3 TTotalotal
TTrransfansfersers betwbetweeneen lelevvels 1els 1 and 2and 2 AAt 31t 31 Dec.Dec.
GGains/ains/ loslossesses includedincluded in p/lin p/l fforor financialfinancial asassetssets 31 Dec.31 Dec.
FINANCIAL AFINANCIAL ASSSETSETS AS AT 31 DEC. 2016T 31 DEC. 2016
FINANCIAL AFINANCIAL ASSSETSETS AS AT 31 DEC. 2015T 31 DEC. 2015
Financial asFinancial assets rsets relaelatted ted to unit-o unitlinklinked insured insurancancee
EffEffect ofect of rreasonablyeasonably pospossiblesible altalternaernativtivee asassumptionssumptions (+ / -)(+ / -)
The value of financial assets regarding the debt security instruments has been tested by assuming a rise of 1 per cent unit in interest rate level in all maturities. For other financial assets, the prices were assumed to go down by 20 per cent. Sampo Group bears no investment risks related to unit-linked insurance, so a change in assumptions regarding these assets does not affect profit or loss. On the basis of the these alternative assumptions, a possible change in interest levels would cause a descend of EURm 2 (2) for the debt instruments, and EURm 162 (169) valuation loss for other instruments in the Group's other comprehensive income. The reasonably possible effect, proportionate to the Group's equity, would thus be 1.4 per cent (1.5).
InInvvesestment rtment relaelatted ted to unit-linko unit-linked ced controntracts, tacts, totalotal 3,4683,468 5,8655,865
The historical cost of the equity securities related to unit-linked contracts was EURm 3,813 (3,645) and that of the debt securities 21 Deferred tax assets and liabilities
TTotal defotal deferrerred tax liabilities in the balanced tax liabilities in the balance sheete sheet 527527
In Sampo plc, EURm 24 of deferred tax asset has not been recognised on unused tax losses. The first losses will expire in 2019.
TTotal itotal items not rems not reclaseclassifiable tsifiable to pro profit or losofit or loss, net of taxs, net of tax -5-5 1111 24 Tax effects relating to components of other comprehensive income
As the P&C insurance is exposed to various exchange rates, comparing the balance sheet data from year to year can be misleading.
PrProovision rvision reporteported in theed in the of which established vested annuities
Change in liabilities arising from other than unit-linked insurance and investment contracts
TTotal aotal at 31 Dec. 2016t 31 Dec. 2016 4,7944,794 2828 4,8214,821
The segment financial liabilities include derivatives, debt securities and other financial liabilities.
DerivDerivaativtive financial inse financial instruments (nottruments (note 15)e 15) 67 17
Preferred capital note, 2013 (nominal value EURm 90) perpetual 4.70% 92 90
PP&C insur&C insurancancee, t, total financial liabilitiesotal financial liabilities 474474 216216
The loan of 1 500 MSEK issued in 2016 is issued with variable interest rate terms. After ten years the margin is increased by one percentage point. It includes terms stating the right of redemption after five years and at any interest payment date thereafter.
The loan issued in 2011 and both loans issued in 2016 are all listed on the Luxembourg Exchange.
DerivDerivaativtive financial inse financial instruments (nottruments (note 15)e 15) 11 33
Holding, tHolding, totalotal 3,5513,551 2,3142,314 *) The determination and hierarchy of financial assets and liabilities at fair value is disclosed in note 17. Based on the principles of this determination, the bonds of the Holding Company fall under level 2.
Since January 1, 2008, the main Swedish pension plan has been closed to new employees born in 1972 or later and the corresponding Norwegian pension plan has been closed to new employees since January 1, 2006 regardless of age. In May 2015, If decided that all employees born in 1958 or later that were covered by the Norwegian defined-benefit pension plan would be switched to a defined-contribution plan as of January 2016. As of the same date, it was also decided that existing retirees would no longer be covered by the plan, and that future retirees would cease being covered by the plan when they are no longer employed by If. Accordingly, the Norwegian pension plan now consists solely of active people employed prior to 2006 and born no later than 1957.
The insurers and If are jointly responsible for monitoring the pension plans, including investment decisions and contributions. The pension plans are essentially exposed to similar material risks regarding the final amount of the benefits, the investment risk associated with the plan assets and the fact that the choice of discount interest rate affects their valuation in the financial statements.
When applying IAS 19, the pension obligations are calculated, as is the pension cost attributable to the fiscal period, using actuarial methods. Pension rights are considered to have been vested straight line during the service period. The calculation of pension obligations is based on future anticipated pension payments and includes assumptions regarding mortality, employee turnover and salary growth. The nominally calculated obligation is discounted to the present value using interest rates based on the extrapolated yield-curves in Sweden and in Norway for AAA and AA corporate bonds, including mortgage-backed bonds, as at 30 November, approximately updated to reflect market conditions mid-December. The discount rate chosen takes into account the duration of the company’s pension obligations. After a deduction for the plan assets, a net asset or net liability is recognized in the balance sheet.
The following tables contain a number of material assumptions, specifications of pension costs, assets and liabilities and a sensitivity analysis showing the potential effect on the obligations of reasonable changes in those assumptions as at the end of the fiscal year. As apparent from the tables, the said amendments to the insured plan in Norway have been taken into account when preparing the annual accounts for 2015 and had a material impact on both recognized costs and assets and obligations.
The carrying amounts have been stated including special payroll tax in Sweden (24.26%) and a corresponding fee in Norway (19.1%).
Interest expense on net pension liability 1 1 2 1 3 4
Net liability rNet liability rececognised in balancognised in balance sheete sheet 4141 3939 7979 4040 4949 9090
Average duration of pension liabilities 22 years 21 years 13 years 14 years
Fair value of plan assets 214 - 214214 213 - 213213
Analysis of the change in net liability recognised in the balance sheet
PPension liabilities:ension liabilities: At the beginning of the year 303 664
Plan asPlan assets asets at 31 Dec.t 31 Dec. 214214 213213
Lease and sublease payments recognised as an expense in the period - minimum lease payments -4 -4
The Group had at the end of 2015 premises a total of 159,160 m2 (171,254) taken as a lessee. The contracts have been made mainly for 3 to 10 years.
The key management does not have any loans from the Group companies.
The Board of Directors of Sampo plc has decided on the long-term incentive schemes 2011 I - 2014 I for the management and key employees of Sampo Group. The Board has authorised the CEO to decide who will be included in the scheme, as well as the number of calculated incentive units granted for each individual used in determining the amount of the incentive reward. In the schemes, the number of calculated incentive units granted for the members of the Group Executive Committee is decided by the Board of Directors. Some 120 persons were included in the schemes at the end of year 2016.
End of performance period I 30 % Q2-2014 Q2-2015 Q2-2017 Q2-2018
End of performance period II 35 % Q2-2015 Q2-2016 Q2-2018 Q2-2019
End of performance period III 35 % Q2-2016 Q2-2017 Q2-2019 Q2-2020
Dividend-adjusted starting price at 31 Dec. 2016 10.07 16.97 34.16 41.23
The table does not include life insurance's investments related to unit-linked insurance contracts.
Broad Street Real Estate Credit Partners II Treaty Fund, L.P. Cayman Islands 10
LUX Mandatum Life Finland Equity Fund SICAV-SIF G EUR Share Class Luxembourg 0.0% 11
In the meeting of 8 Feb. 2017, the Board of Directors decided to propose at the Annual General Meeting on 27 April 2017 a dividend distribution of EUR 2.30 per share, or total EUR 1.288.000.000, for 2016. The dividends to be paid will be accounted for in the equity in 2017 as a deduction of retained earnings.
Change (+/-) in liabilities of operChange (+/-) in liabilities of operaating activitiesting activities
Net cash used in inNet cash used in invvesesting activitiesting activities -422-422 533533
Net change in cash and cash equivNet change in cash and cash equivalentsalents 699699 -28-28 *) Investments include both investment property and financial assets.
The presentation of Sampo Plc's financial statements together with the notes has been prepared in accordance with the Finnish Accounting Act and Ordinance. The accounting principles applied to the separate financial statements of Sampo plc do not materially differ from those of the Group, prepared in accordance with the International Financial Reporting Standards (IFRSs). The financial assets are measured at fair value derived from the markets
Notes to the income statement 1–4 ......................................................................................................... 278 Notes to the assets 5–9 ............................................................................................................................... 279 Notes to the liabilities 10–13 ...................................................................................................................... 280 Notes to the income taxes 14 .................................................................................................................... 281 Notes to the liabilities and commitments 15–16 ................................................................................... 282 Notes to the staff and management 17–19 ............................................................................................ 282 Notes to the shares held 20........................................................................................................................ 284
ANNUANNUAL REPORT 2016AL REPORT 2016 Notes to Sampo plc’s Financial Statements
Income from property occupied for own activities 0 0 2 Other operating expenses
Item Other includes e.g. administration and IT expenses and fees for external services.
CCosost at at beginning of yt beginning of yearear 296 325
Carrying amount aCarrying amount at end of yt end of yearear 298298 296296
6 Other shares and participations 20162016 FFair vair value changesalue changes 20152015 FFair vair value changesalue changes
Avalaible-for-sale equity securities 148 -27 9 248 12 -12 7 Other investment receivables 20162016 FFair vair value changesalue changes 20152015 FFair vair value changesalue changes
RRececognisedognised in fin fair vair valuealue rreserveservee FFairair vvaluealue RRececognisedognised in p/lin p/l
Notes on the income taxes 14 14 Deferred tax assets and liabilities
Over one year but not more than five years 4 0
In addition to the above, the company has in accordance with the decision of the Annual General Meeting in 2016 compensated transfer tax of in total EUR 5,311.02 related to the acquisition of the company shares (EUR 1,277.3 pertaining to the Chairman, EUR 809.53 pertaining to the Vice Chairman and EUR 3,224.19 pertaining to the other members of the Board).
The Group CEO is entitled to a defined contribution pension in accordance with the pension contract in force. The annual pension premium is fixed at EUR 400,000.
Harri Hollmen 1) The Group CEO is entitled to a defined contribution pension in accordance with the pension contract in force. The annual pension premium is fixed at EUR 400,000. The supplementary pension premiums for 2016 included payments to a supplementary TEL-L group pension plan, which based on changes in legislation was removed as of 31 December 2016 and forms a paid-up policy.
RReport on the Aeport on the Audit of Financialudit of Financial SStatattementsements
Refer to the Summary of significant accounting policies, Accounting policies regarding management judgment and key sources of estimation uncertainties and Notes 27 and 28.
The Group has insurance contract liabilities representing 79% of the Group’s total liabilities and it is thus the single largest liability for the Group. The insurance contract liabilities comprise life and non-life insurance contract liabilities.
based on a best estimate of ultimate cost of all claims incurred but not settled, whether reported or not, together with claims handling costs.
Our audit procedures included evaluation of the governance around the overall Group reserving process, and included testing the operating effectiveness of key controls over the identification, measurement and management of the Group’s calculation of insurance liabilities. We evaluated the appropriateness of methodologies and assumptions used, and independently reprojected the reserve balances for certain classes of business. We involved our own internal actuarial specialists to assist us in assessing the appropriateness of assumptions used. We assessed the adequacy of disclosures relating to insurance contracts liabilities.
Refer to the Summary of significant accounting policies and note 14.
The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Our objectives are to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company’s or the Group’s internal control.
• Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company’s or the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
The Board of Directors and the Managing Director are responsible for the other information. The other information comprises information included in the report of the Board of Directors and in the Annual Report, but does not include the financial statements and our report thereon. We obtained the report of the Board of Directors prior to the date of the auditor’s
Our opinion on the financial statements does not cover the other information.
Shareholder who is registered on the record date for the Annual General Meeting in the company’s Shareholder Register kept by Euroclear Finland Ltd has the right to participate in the General Meeting. Shareholders whose shares are registered on their personal Finnish book-entry accounts are registered in the company’s Shareholder Register.
• By fax to +358 10 516 0719 or • By mail to the address Sampo plc, Shareholder services,
The right to the dividend is held by the shareholder who is marked in the Shareholders Register on the dividend record date.
The Board of Directors proposes that the dividend will be paid to shareholders on 9 May 2017.
ANNUANNUAL REPORT 2016AL REPORT 2016 Calendar and Contacts mailto:jarmo.salonen@sampo.fi tel:+358105160010 mailto:peter.johansson@sampo.fi tel:+358105160066 mailto:essi.nikitin@sampo.fi tel:+358105160068 mailto:pirkko.rantanen@sampo.fi tel:+358105160030 mailto:jarmo.salonen@sampo.fi tel:+358105160031 mailto:maria.silander@sampo.fi tel:+358105160049 mailto:paivi.wallden@sampo.fi tel:+358105160065 mailto:carolina.oradd@sampo.fi tel:+358105160067 mailto:johanna.tynkkynen@sampo.fi