Board of Directors’ Report for 2019 . . . . . . . . . . . . . . 3
Changes in the Group Structure . . . . . . . . . . . . . . . . . . . 14
Holdings of the Board and Executive Management . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Calculation of the Key Figures . . . . . . . . . . . . . . . . . . . . . . . 36
Group’s Notes to the Accounts . . . . . . . . . . . . . . . . . . . . 43 Summary of Significant Accounting Policies . . . . . . . . 44
Sampo plc’s Statement of Cash Flows . . . . . . . . . . . . . . . 170
Approval of the Financial Statements and the Board of Directors’ Report . . . . . . . . . . 178
Group’s Notes to the Accounts 2BOARD OF DIRECTORS’ REPORT AND FINANCIAL STATEMENTS 2019
Shares and Share Capital ..22 Authorizations Granted to the Board ......... 24
The Major Risks and Uncertainties to the Group in the Near-Term ..... 31
to EUR 1,541 million (2,094). The profit includes a loss of EUR 155 million incurred when distributing Nordea shares as dividends in the third quarter of 2019. The profit for the for the comparison year contains a positive nonrecurring item of EUR 197 million from the Danske Bank co-operation agreement that Mandatum Life completed in the second quarter of 2018. The total comprehensive income for the period, taking changes in the market value of assets into account, rose to EUR 1,565 million (1,034).
(848). Underwriting performance continues on its excellent track. Insurance technical result amounted to
Board of Directors proposes to the AGM of 2020 a dividend of DKK 17 per share. If approved Sampo plc’s share of the dividend payment is EUR 96 million.
Profit before taxes for the segment Mandatum amounted to EUR 280 million (450). The profit for the comparison year includes a contribution of EUR 197 million from the Danske Bank co-operation agreement in the second quarter of 2018. Return on equity rose to 23.5 per cent
150 million to be paid to Sampo plc in the first quarter of 2020.
Topdanmark’s life insurance assets, on 31 December 2019 amounted to EUR 21.8 billion (21.7), of which 76 per cent was invested in fixed income instruments (79), 16 per cent in equities (14) and 8 per cent in other assets (7). If’s share of assets was 50 per cent (50), Topdanmark’s 13 per cent
Sampo Group’s solvency capital is as of October 2019 calculated according to the Solvency II rules. At the end of 2019 the solvency ratio stood at 167 per cent (140).
Income statement items are compared on a year-on-year basis and comparison figures for balance sheet items are from 31 December 2018 unless otherwise stated.
Exchange Rates used in Reporting 1–12/2019 1–9/2019 1–6/2019 1–3/2019 1–12/2018 EURSEK
Balance sheet (at end of period) 1.3982 1.4326 1.4153 1.3929 1.3733
Balance sheet (at end of period) 7.4715 7.4662 7.4636 7.4652 7.4673
modest pace of 2.8 per cent in 2019, which is slightly less than the previous year’s figure. One of the main reasons for the expected drop has to do with decreased investments among major economies, such as the EU,
USA and China, driven by perceived threats surrounding the fluidity of international trade. Earlier in the year, the
Stockholm and Gothenburg. However, unemployment rose to 6.8 per cent thereby placing a lot of potential consumers without a paycheque and further contributing to a weakish consumption growth figure of 1.0 per cent.
In Norway the economy grew at an expected 2.5 per cent, which was propped up by a stable global demand for oil and new investments into oil production. During the year, oil related investments grew by 14 per cent, which partly off-set the slump in foreign direct investments within the
In Denmark the economy grew at an expected 2.1 per cent, driven by increased exports as well as investments especially into the pharmaceutical industry. In addition, positive developments in real wages buffed by low interest rate payments increased Danish households’ disposable incomes during the year leading to lower demand sided risks. This has also increased aggregate real savings to create a cushy buffer for a rainy day. Overall, Denmark’s economy performed solidly despite slower global growth.
Profit before taxes for 2019 for the If segment was EUR 884 million (848). Combined ratio amounted to 84.5 per cent
Technical result was EUR 685 million (643). Insurance margin (technical result in relation to net premiums earned) rose to 15.9 per cent (15.1).
Large claims for If were EUR 4 million (29) worse than expected for the full-year 2019. In BA Industrial they were EUR 8 million better and in BA Commercial EUR 13 million worse than expected in 2019.
The Swedish discount rate used to discount the annuity reserves was -0.77 per cent (-0.41) at the end of 2019 and had a negative effect on the full-year results of EUR 22 million.
In Finland the discount rate for annuities was lowered from 1.2 per cent to 0.95 during the fourth quarter which had a negative effect of EUR 62 million on the results.
Industrial, at 16.5 per cent. In BA Private the premium growth amounted to 5.1 per cent and in BA Commercial 2.8 per cent. Gross written premiums grew by 5.1 per cent in Sweden, 9.5 per cent in Norway, 2.2 per cent in
Finland and 5.0 per cent in Denmark. Positive customer development continued in all business areas in 2019, the customer base in BA Private increased by 2 per cent.
The cost ratio was 21.8 per cent (21.9) and expense ratio
The following text is based on Topdanmark’s full-year 2019 result release published on 23 January 2020.
Weather-related claims were EUR 13 million below normal level and amounted to EUR 10 million. Large claims were
Sampo’s share of Nordea’s 2019 profit before taxes amounted to EUR 290 million (625).
Change in liabilities for inv. and ins. contracts -971 426 -
1,596 million (1,074). Premiums from unit-linked policies increased to EUR 1,476 million (976). Claims incurred increased to EUR 1,492 million (1,116). Both premium income and claims paid include around EUR 400 million one-off items caused by changes in the tax treatment of life insurance products.
Net investment income, excluding income on unit-linked contracts, increased to EUR 358 million (232). Net income from unit-linked contracts was EUR 908 million (-259).
With-profit reserves decreased as planned during 2019 and amounted to EUR 3.9 billion (4.2) on 31 December 2019. With-profit reserves related to the higher guarantees of 4.5 and 3.5 per cent decreased by EUR 264 million to
reserves with a total of EUR 230 million (232), of which
Discount rate of segregated liabilities was decreased from 0.50 per cent to 0.0 per cent and discount rate reserve of segregated liabilities amounted to EUR 263 million (250).
covering unit-linked liabilities, amounted to EUR 5.7 billion (5.6) at market values.
The assets covering Mandatum Life’s original with profit liabilities at the end of 2019 amounted to EUR 4.7 billion
and average maturity 2.9 years (2.8). The fixed income running yield without taking into account the FX hedging cost was 2.4 per cent (2.7) on 31 December 2019.
Key figures 2019 2018 Change Average number of staff (FTE) 63 61 2
The segment’s profit before taxes excluding the associates for January – December 2019 was EUR -159 million (-3).
Changes in market values of derivative instruments and currency exchange rates can cause volatility in the net investment income and finance cost lines.
Sampo’s share of profits of associated companies Nordea and NDX Intressenter for January – December 2019 amounted to EUR 298 million (621) of which Nordea’s share was EUR 290 million (625) and NDX Intressenter’s
Sampo plc’s holding in Nordea was booked in the consolidated balance sheet at EUR 6.7 billion, i.e. EUR 8.34 per share. The market value of the holding was EUR 5.8 billion, i.e. EUR 7.24 per share, on 31 December 2019.
Sampo’s Group CEO and President Kari Stadigh retired on 31 December 2019. He also stepped down as Chairman of If P&C Insurance as of 7 February 2019 and as Chairman of Mandatum Life Insurance Company 30 June 2019.
On 6 November 2019 Ricard Wennerklint, 50, was appointed Chief of Strategy in Sampo Group as of 1 January 2020. He has held various positions in Sampo
The Annual General Meeting of Sampo plc, held on 9 April 2019, decided to distribute a dividend of EUR 2.85 per share for 2018. The record date for dividend payment was 11 April 2019 and the dividend was paid on 18 April 2019. In addition to the cash dividend, the Annual General
Meeting decided to authorize the Board of Directors to resolve, in its discretion, on the distribution of an extra dividend up to EUR 500,000,000 (EUR 0.9 per share) either in cash and/or in financial instruments.
The Annual General Meeting elected eight members to the Board of Directors. The following members were re-elected to the Board: Christian Clausen, Jannica
Mäkinen and Björn Wahlroos. Fiona Clutterbuck and Johanna Lamminen were elected as new members to the Board. The Members of the Board were elected for a term continuing until the close of the next Annual
Mäkinen and Björn Wahlroos (Chairman) were elected to the Nomination and Compensation Committee and
All the Board members have been determined to be independent of the company under the rules of the Finnish
Corporate Governance Code 2015. Furthermore, all Board members but Antti Mäkinen have been determined to be independent of the major shareholders.
The Annual General Meeting decided to pay the following fees to the members of the Board of Directors until the close of the 2020 Annual General Meeting: the Chairman of the Board will be paid an annual fee of EUR 175,000 and other members of the Board will be paid EUR
90,000 each. Furthermore, the members of the Board and its Committees will be paid the following annual fees: the Vice Chairperson of the Board EUR 25,000, the
Annual General Meeting acquire Sampo plc's A shares at the price paid in public trading for 50 per cent of his/her annual fee excluding taxes and similar payments.
Ernst & Young Oy was elected as Auditor. The Auditor will be paid a fee determined by an invoice approved by
Compact. Sampo also initiated group-level greenhouse gas reporting to support the previously available company-level reporting.
Responsible Investment Management and Operations: During 2019, Sampo strengthened the investment policies of the Group companies by adding further instructions on how to take the environmental, social, and governance
Responsibility in Communities: In 2019, Sampo assessed the UN Sustainable Development Goals (SDGs) and the underlying targets in order to identify group-level SDGs.
During the project, all 17 SDGs and 169 targets were evaluated in relation to the Group companies’ businesses and the Group’s corporate responsibility themes. The assessment showed that Sampo Group can have an impact on all the SDGs, but the positive impact is the strongest on
Corporate Responsibility Report 2019, will be separate from the Board of Directors’ Report and published in
In addition to the group-level report, further information on If and Topdanmark’s corporate responsibility activities can be found in their respective reports.
The reports of If and Topdanmark are available at www.sampo.com/year2019. More information on Mandatum Life’s activities can be found from the company website uusi.mandatumlife.fi/en/company/
Responsibility Report 2019 to be published in May 2020 at www.sampo.com/year2019.
Sampo Group’s remuneration strategy shall be responsible towards employees and shareholders. This means that the long-term financial stability and value creation of Sampo
The value of one incentive unit is calculated as the difference between the trade-weighted average price of the Sampo A share at the time of payment and the dividend-adjusted starting price. In addition to the share price development, the calculation of the value of one incentive unit takes into account the performance of the insurance margin of If P&C and the return on capital at risk as further specified in the terms of the
respective incentive scheme. Both incentive schemes contain a cap for maximum payout. The terms and conditions of the incentive schemes are available at www.sampo.com/incentiveterms.
In 2019 EUR 18 million (23), including social cost, was paid on the basis of the long-term incentive schemes. EUR 40 million (36), including social costs, was paid as short-term incentives during the same period. The result impact of the long-term incentive schemes in force in 2019 was EUR
Thirdly, Sampo prefers low leverage and adequate liquidity buffers to be able to generate liquidity as needed.
As at 31 December 2019, Sampo plc had 555,351,850 shares, which were divided into 554,151,850 A shares and 1,200,000 B shares. The total number of votes attached to the shares is 560,151,850. Each A share entitles the holder to one vote and each B share entitles the holder to five votes at the General Meeting of Shareholders. According to the company’s Articles of Association, A shares must number at least 179,000,000 and no more than 711,200,000. Meanwhile, B shares must number at least zero and no more than 4,800,000. As at 31 December 2019
Sampo plc made no repurchases during 2019 and has not purchased its own shares after the end of the reporting period.
The number of Sampo plc’s shareholders increased during 2019 by 11,309 holders to 127,424 as at 31 December 2019.
Foreign and nominee registered total 358,819,987 64.61 64.06 *)1,472,719 A shares and 1,200,000 B shares
During 2019 Sampo plc received one notification of a change in holding pursuant to Chapter 9, Section 5 of the Securities Markets Act, according to which the total number of Sampo A shares and voting rights owned by
Solidium Oy decreased on 2 April 2019 below ten (10) per cent of Sampo plc's entire stock and voting rights. After the notification Solidium holds 9.95 per cent of Sampo’s shares and 9.87 per cent of the voting right.
Shares Owned by the Board of Directors and the Group Executive Committee Sampo plc, 31 December 2019 and 31 December 2018
Members of the Group Executive Committee and their spouses owned either directly or indirectly 888,544
(842,582) Sampo A shares representing 0.2 per cent (0.2) of the share capital and related votes.
Sampo plc’s Board of Directors announced on 13 June 2019 that it plans to distribute an extra dividend in the form of Nordea Bank Abp shares. The distribution was decided upon on 7 August 2019. Each shareholder received 1 Nordea share for each 10 Sampo shares.
Fractional entitlements to Nordea shares resulting from the distribution ratio were not distributed in the form of shares, but an equivalent amount was compensated to shareholders in cash. The amount of Nordea Bank Abp shares distributed amounted to 55,517,639 shares and the value of the share dividend, based on the volume weighted average price of Nordea on 12 August 2019, was
EUR 5.661. The ex-dividend date was 8 August 2019 and the record date 9 August 2019. The payment date was 12 August 2019 for the share dividend and 16 August 2019 for the cash compensation.
In Finland, a share dividend is taxed similarly as cash dividend. Sampo paid the Finnish transfer tax of 1.6 per cent resulting from the distribution of the share dividend on behalf of shareholders. As a result of the distribution of the extra dividend, Sampo’s ownership in Nordea decreased below 20 per cent. Going forward, the Group’s solvency is only calculated by the Solvency II rules and
Sampo plc, Sampo Group’s parent company, received more than EUR 1.5 billion in dividends from its subsidiaries and associated company Nordea during 2019. The following dividend payments were received: • Mandatum Life; EUR 150 million in March 2019,
• If; SEK 7.5 billion (EUR 710 million) in December 2019
Nordea targets a dividend of EUR 0.40 per share for 2019.
Relevant ratings for Sampo Group companies on 31 December 2019 are presented in the table below.
Sampo’s capital requirement on Nordea holding increased more than EUR 800 million during the first half of 2019 although the underlying risks for Sampo’s holding in
Nordea did not change. Sampo took active measures to counter the negative impact by issuing EUR 500 million of hybrid capital in May 2019. More importantly, the Board received from the AGM in April 2019 an authorization to distribute an extra dividend either in cash and/or in financial instruments held by Sampo plc and announced on 13 June 2019 that it planned to resolve on the distribution of an extra dividend in the form of Nordea shares in its meeting scheduled 7 August 2019.
Moody’s Standard & Poor’s Rated company Rating Outlook Rating Outlook Sampo plc – Issuer Credit Rating A3 Stable A Stable
Sampo Group calculates its group solvency only under the Solvency II rules and Nordea is treated as an equity investment. Sampo Group’s solvency ratio according to the
Solvency II directive amounted to 167 per cent (140) at the end of December 2019. The proposed dividend has been deducted from own funds in the Solvency II calculation.
The S&P A+ rating capital requirement for If Group amounted to EUR 3,083 million (2,949) on 31 December 2019 and the capital base was EUR 3,151 million (3,149).
measures amounted to 176 per cent (176) on 31 December 2019. Own funds were EUR 2,117 million (1,740) and
On 24 May 2019 Sampo plc repaid EUR 500 million senior notes maturing on that date.
On 26 September 2019 Mandatum Life issued 30NC5 Tier 2 notes of EUR 250 million due 4 October 2049.
On 31 December 2019 financial liabilities in Sampo plc’s balance sheet consisted of issued senior bonds and notes of EUR 3,414 million (3,943). In addition Sampo plc has issued subordinated notes of EUR 494 million. No CPs were outstanding (124). The average interest, net of interest rate swaps, on Sampo plc’s debt as of 31 December 2019 was 1.2 per cent (0.8).
Senior Bond 1,300 SEKm Stibor3M + 0.55% Euribor6M + 0.39% 0.05% 23 May 2022
Senior Bond under separate documentation 1,000 NOKm 3.100% Euribor6M + 0.77% 0.34% 7 September 2028
These derivatives are valued at fair value in the profit and loss account although economically they are related the underlying bonds. As a result Sampo plc maintains the arrange financing for strategic projects if needed. Strong liquidity and the ability to acquire financing are essential factors in maintaining Sampo Group’s strategic flexibility.
flexibility to adjust theth derivative position if needed but this comes at the cost of increased volatility in the
The underlying objective of Sampo plc is to maintain a well-diversified debt structure, relatively low leverage and strong liquidity in order for the company to be able to
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.
Currently there are a number of widely identified macroeconomic, political and other sources of uncertainty which can, in various ways, affect the financial services industry negatively. In particular the political risks are at an elevated level at the moment.
The Board proposes to the Annual General Meeting a dividend of EUR 2.20 per share to company’s 555,351,850 shares. The dividends to be paid are EUR 1,221,774,070.00 in total. The remainder of funds are left in the equity capital.
Register of Shareholders held by Euroclear Finland Ltd as at the record date of 27 April 2020. The Board proposes that the dividend be paid on 5 May 2020.
Return on assets (at fair values) % 5.5 3.2 7.6 7.3 7.2
Premiums written before reinsurers' share EURm 4,675 4,502 4,525 4,458 4,559
Premiums written before reinsurers' share, life insurance EURm 1,487 1,357 294 - -
Premiums written before reinsurers' share, P&C insurance EURm 1,272 1,235 210 - -
Return on equity (at fair values) % 23.5 8.7 13.3 15.9 12.7
Earnings per share, incl. items in other comprehensive income EUR 2.63 1.70 3.79 3.14 2.79
Net asset value per share EUR 20.71 20.60 25.37 24.86 23.79
Average adjusted number of shares 1,000 554,152 554,152 554,152 558,800 558,800
Average adjusted number of shares 1,000 1,200 1,200 1,200 1,200 1,200 *) In the comparison year 2017 Topdanmark was consolidated as an associate between January - September 2017. The key figures are from October - December 2017 when the company was first consolidated as a subsidiary.
2) Key figures for P&C insurance are based on activity based costs and cannot, therefore, be calculated directly from the consolidated income statement. 3) The Board of Director's proposal to the Annual General Meeting for the accounting period 2019.
Property & casualty and life insurance + insurance premiums written + net income from investments + other operating income - claims incurred - change in liabilities for investment and insurance contracts - staff costs - other operating expenses - finance costs +/- share of associates’ profit/loss
Holding + net income from investments + other operating income - staff costs - other operating expenses - finance costs +/- share of associates’ profit/loss
- technical provisions relating to unit-linked insurance (average of values on 1 Jan. and 31 Dec.)
Equity per share equity attributable to the parent company ‘s equity holders adjusted number of shares at balance sheet date
Market capitalisation number of shares at balance sheet date x closing share price at balance sheet date
Change in liabilities for insurance and investment contracts 4 -2,919 -85
Total out-going cashflows from leases -34 - *) Investments include investment property, financial assets and investments related to unit-linked insurance contracts.
Partly-Owned Subsidiairies 1 Insurance premiums written...................................... 69 2 Net income from investments .................................. 69 4 Change in liabilities for insurance and investment contracts .......................................... 73 6 Other operating expenses ......................................... 74 7 Result analysis of If ...................................................... 74 8 Earnings per share ........................................................ 74 9 Financial assets and liabilities .................................. 75 10 Property, plant and equipment ............................... 76 13 Investments in associates ......................................... 80 16 Change in fair values of financial assets ............... 85 17 Determination and hierarchy of fair values .......... 86 18 Movements in level 3 financial instruments measured at fair value ................................................ 90 19 Sensitivity analysis of level 3 financial instruments measured at fair value....... 92 20 Investments related to unit-linked insurance contracts ...................................................... 92 21 Deferred tax assets and liabilities ........................... 93 23 Components of other comprehensive income ... 95 24 Tax effects relating to components of other comprehensive income .............................. 96 26 Liabilities from insurance and investment contracts .......................................... 97 27 Liabilities from unit-linked insurance and investment contracts ........................................103 28 Financial liabilities ......................................................104 29 Provisions.......................................................................106 30 Employee benefits ......................................................107 31 Other liabilities .............................................................110 32 Contingent liabilities and commitments .............111 33 Equity and reserves ....................................................112 34 Related party disclosures .........................................113 35 Incentive schemes ......................................................114 36 Auditors’ fees ...............................................................117 37 Legal proceedings ......................................................117 38 Investments in subsidiaries ......................................117 39 Events after the balance sheet date ....................117 40 Risk Management Disclosure 2019 .......................118
In the transition, the modified retrospective approach was applied meaning that the comparison years were not restated. In addition, the Group applied the exemption, allowed by the standard, of not recognising short-term leases and leases of low-value assets in the balance sheet.
The Board of Directors of Sampo plc accepted the financial statements for issue on 6 February 2020.
The acquisition method of accounting is used for the purchase of subsidiaries. The cost of an acquisition is allocated to the identifiable assets, liabilities and contingent liabilities, which are measured at the fair value of the date of the acquisition. Possible non-controlling interest of the acquired entity is measured either at fair value or at proportionate interest in the acquiree’s net assets. The acquisition-specific choice affects both the amount of recognised goodwill and non-controlling interest. The excess of the aggregate of consideration
Associates are entities in which the Group has significant influence, but no control over the financial management and operating policy decisions. Unless otherwise demonstrated, this is generally presumed when the Group holds in excess of 20 per cent, but no more than 50 per cent, of the voting rights of an entity. Investments in associates are treated by the equity method of accounting, in which the investment is initially recorded at cost and increased (or decreased) each year by the Group’s share of the post-acquisition net income (or loss), or other movements reflected directly in the equity of the associate. If the Group’s share of the associate’s loss exceeds the carrying amount of the investment, the investment is carried at zero value, and the loss in excess is consolidated only if the Group is committed to fulfilling the obligations of the associate. Goodwill arising on the acquisition is included in the cost of the investment.
If there is any indication that the value of the investment may be impaired, the carrying amount is tested by comparing it with its recoverable amount. The recoverable amount is the higher of its value in use or its fair value less costs to sell. If the recoverable amount is less than its carrying amount, the carrying amount is reduced to its recoverable amount by recognising an impairment loss in the profit/loss. If the recoverable amount later increases and is greater than the carrying amount, the impairment loss is reversed through profit and loss.
Exchange differences arising from equities classified as available-for-sale financial assets are included directly in the fair value reserve in equity.
The resulting exchange differences are included in equity and their change in other comprehensive income. When a subsidiary is divested entirely or partially, the cumulative exchange differences are included in the income statement under sales gains or losses.
The Group’s segmentation is based on business areas whose risks and performance bases as well as regulatory environment differ from each other. The control and management of business and management reporting is organised in accordance with the business segments.
Investments comprise debt and equity securities. They are mainly classified as financial assets available-for-sale or at fair value through p/l.
For alternative funds the valuation is also conducted by the fund managers. Alternative funds often have complicated structures and the valuation is dependent on the nature of the underlying investments. There are many different valuation methods that can be used, for example, the method based on the cashflows of the underlying investments. The operations and valuation of alternative funds are regulated for example by the
(AIFMD), which determines the principles and documentation requirements of the valuation process.
Also derivative instruments that are not designated as hedges and do not meet the requirements for hedge accounting are classified as financial assets for trading purposes.
Financial assets designated as at fair value through profit or loss Financial assets designated as at fair value through profit or loss are assets which, at inception, are irrevocably designated as such. They are initially recognised at their fair value. They are recognised in the income statement and balance sheet accordingly with above-explained assets held for trading.
The fair value of financial instruments is determined primarily by using quoted prices in active markets.
If derivatives are used for hedging, but they do not qualify for hedge accounting as required by IAS 39, they are treated as held for trading.
During the financial year, the fair value hedging has been applied in Mandatum.
Hedge accounting applies to hedges that are effective in relation to the hedged risk and meet the hedge accounting requirements of IAS 39. The hedging relationship between the hedging instrument and the hedged item, as well as the risk management objective and strategy for undertaking the hedge, are documented at the inception of the hedge. In addition, the effectiveness of a hedge is assessed both at inception and on an ongoing basis, to ensure that it is highly effective throughout the period for which it was designated. Hedges are regarded as highly effective in offsetting changes in fair value or the cash flows attributable to a hedged risk within a range of 80–125 per cent.
Fair value hedging In accordance with the Group’s risk management principles, fair value hedging is used to hedge changes in fair values resulting from changes in price, interest rate or exchange rate levels. The hedging instruments used include foreign exchange forwards, interest rate swaps, interest rate and cross currency swaps and options, approved by the managements of the Group companies.
All lease contracts are primarily recognised in the balance sheet in accordance with the new IFRS 16 Leases. The only optional excemptions include certain short-term or low-value contracts for which the lease payments can be
Intangible assets with finite useful lives are measured at historical cost less accumulated amortisation and impairment losses. Intangible assets are amortised on a straight-line basis over the estimated useful life of the asset. The estimated useful lives by asset class are as follows: IT software 3–10 years
a property when it is probable that the future economic benefits that are attributable to the asset will flow to the entity. Costs for repairs and maintenance are recognised as expenses in the period in which they were incurred.
The valuation takes into account the characteristics of the property with respect to location, condition, lease situation and comparable market information regarding rents, yield requirements and unit prices. During the financial year, the valuations were conducted by the
The risks involved in insurance and investment contracts are widely elaborated in the Group’s note 40.
Classification of insurance contracts In classifying insurance contracts and examining their related risks, embedded contracts are interpreted as one contract.
directly in the balance sheet, without recognising it first in the income statement as premiums written and claims incurred.
The provision for unearned premiums is intended to cover anticipated claims costs and operating expenses during the remaining term of insurance contracts in force. In P&C insurance and reinsurance, the provision for unearned premiums is normally calculated on a strictly proportional basis over time, i.e. on a pro rata temporis basis. If premiums are judged to be insufficient to cover anticipated claims costs and operating expenses, the provision for unearned premiums must be augmented by a provision for unexpired risks. Calculation of the provision for unexpired risks must also take into account instalment premiums not yet due.
IBNR (incurred but not reported) provision. The provision for claims outstanding includes claims payments plus all estimated costs of claim settlements.
Pay-as-you-go system for P&C insurance Pensions and compensation for healthcare or medical rehabilitation paid on the basis of Finland’s statutory P&C
Classification of insurance contracts Policies issued by the life insurance business are classified as either insurance contracts or investment contracts.
Principle of fairness According to Chapter 13, Section 2 of the Finnish
The uncertainty related to the estimates is generally greater when estimating new insurance portfolios or portfolios where clarification of a loss takes a long time because complete claims statistics are not yet available.
These require management estimates on matters such as future cash flows, the discount rate, and general economic growth and inflation.
(effective for annual periods beginning on 1 Jan 2018 or after) supersede IAS 39 Financial Instruments: Recognition and Measurement. Sampo is going to utilise the temporary exception option, outlined in the next chapter, and apply the standard on the annual period beginning on 1 Jan 2022.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.
of the total amount of liabilities. The application is also possible, if the ratio is greater than 80%, and the Group does not engage in a significant activity unconnected with insurance. Another allowed option is to apply IFRS 9
from 1 Jan 2018 on, but to remove some of the accounting mismatches, caused by the different valuation methods of assets and liabilities, from the income statement and transfer them to other comprehensive income.
European Commission had not at the balance sheet date endorsed IFRS 17 standard to be adopted in the EU. In addition, IASB has announced that it might take into consideration some amendments to IFRS 17 standard before its effective date.
Geographical information has been disclosed about income from external customers and non-current assets. The reported areas are Finland, Sweden, Norway,
Share of associates' profit/loss 1 22 0 298 - 321 - Valuation loss on dividend distribution of associate shares - - - -155 - -155
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 836 183 308 222 16 1,565
Change in liabilities for insurance and investment contracts -35 -458 426 - -18 -85
The revenue includes insurance premiums according to the underwriting country, consisting of premiums earned for P&C insurance and premiums written for life insurance, and net investment income and other operating income in the holding segment.
Investments related to unit-linked insurance - 3,735 6,960 - -24 10,671
Skadeförsäkring Holding AB(p) acquired the whole capital stock of a Norwegian Vertikal Helseassistanse AS. The purchase price was EURm 33 and the acquired net assets
The Swedish NDX Intressenter AB became an associate of the Group in March 2018 with an ownership of 36.25%.
The p/l and balance sheet of the company are presented in the Holding segment.
The allocations to the customer relations and other intangible assets are amortised over 8 years. Their total net effect sums to about EUR 43 million. The net effect of annual amortisation is about EUR 5 million.
Group insurance premiums written total, net ¹) 8,749 7,907 1) The change in unearned premiums is presented in note 4, The change in insurance and investment liabilities.
Included in gains/losses from financial assets available-for-sale is a net gain of EURm -236 (-117) transferred from the fair value reserve.
Pension costs - defined contribution plans -85 -88 - defined benefit plans (Note 30) -15 -8
Group other operating expenses, total -653 -627 *) From leases not recognised in the balance sheet
Net carrying amount at 31 December 117 44 162 1) The Group acts as a lessee in various leases of office premises, vehicles and office equipment. Right-of-use assets relate to lease contracts for large office premises.
Expenses arising from investment property - direct operating expenses arising from investment property generating rental income during the period -22 -28 - direct operating expenses arising from investment property not generating rental income during the period -2 0
IAS 36 permits determing the recoverable amount by using the fair value less costs to sell. For Topdanmark, the valuation of goodwill has been tested on the balance sheet date by using that method. Topdanmark's share price at the acquisition date 30 September 2017 was 247.70 Danish crowns and 328.40 Danish crowns on 31 December 2019. The fair value of Topdanmark on the balance sheet date exceeds its carrying amount in the Group.
Associates that have been accounted for by the equity method at 31 December 2019
Changes in the equity of associates -17 -50 -67 -83 50 -33 *) The valuation loss on dividend distribution of associate shares comprises the valuation difference between the consolidated carrying amount and the fair value of the shares EURm -143, on the date of the distribution, and the recycling of Nordea-related other comprehensive income items to the profit or loss EURm -11.
The carrying amount of investments in associates included goodwill EURm 922 (986), including goodwill from the Nordea acquisition EURm 915 (978).
Dividend income from the associate during the financial year 594 585
In August 2019 Sampo distributed an extra dividend in a form of 55,517,639 Nordea shares. As a result, Sampo's ownership of Nordea's shares and voting power decreased from 21.25% to 19.87%. In accordance with IAS 28 Investments in Associates and Joint Ventures, a significant influence needs to be clearly demonstrated, if the investor's ownership of the voting power is less than 20%. Sampo’s management has made a thorough assessment of facts and circumstances, and concluded that despite the decrease in the ownership, the significant influence continues to exist on 31 December 2019.
At the end of the financial year 2019, Nordea's book value per share 8.34 euro exceeded its market value 7.24 euro. As a consequence, Sampo performed an impairment test in accordance with IAS 36 Impairment of Assets where the recoverable amount for Nordea was compared with its carrying amount in the Group.The recoverable amount was defined using a discounted cash flow model, where the cash flows were based on the public information on Nordea and Sampo's estimates of Nordea's future based on this information. Based on the test, the recoverable amount exceeded Nordea's carrying amount and no impairment losses were recognised.
Interest options, bought and sold 503 - 68 - - -
Total financial assets designated as at fair value through p/l 6,522 5,158
Financial assets measured at amortised cost, meeting the SPPI test, by credit risk rating grade: AA+ - AA- A+ - A- Total
The associated company Nordea Bank Abp is applying IFRS 9. More information is available in the Financial Statements of Nordea Bank Abp.
17 Determination and hierarchy of fair values A large majority of Sampo Group's financial assets are valued at fair value. The valuation is based on either published price quatations or valuation techniques based on market observable inputs, where available. For a limited amount of assets the value needs to be determined using other techniques. The financial instruments measured at fair value have been classified into three hierarchy levels in the notes, depending on e.g. if the market for the instrument is active, or if the inputs used in the valuation technique are observable.
For private equity funds the valuation of the underlying investments is conducted by the fund manager who has all the relevant information required in the valuation process. The valuation is usually updated quarterly based on the value of the underlying assets and the amount of debt in the fund. There are several valuation methods, which can be based on, for example, the acquisition value of the investments, the value of publicly traded peer companies, the multiple based valuation or the cashflows of the underlying investments. Most private equity funds follow the International Private Equity and Venture Capital (IPEV) guidelines which give detailed instructions on the valuation of private equity funds.
EURm Level 1 Level 2 Level 3 Total FINANCIAL LIABILITIES AT 31 DECEMBER 2019
Total financial liabilities measured at fair value - 169 11 180
Transfers are based mainly on the changes of trading volume information provided by an external service provider.
The sensitivity of financial assets and liabilites to changes in exchange rates is assessed on business area level due to different base currencies. In If, 10 percentage point depreciation of all other currencies against SEK would result in an increase recognised in profit/loss of EURm 12 (1) and in a decrease recognised directly in equity of EURm -10 (-1). In Topdanmark, 10 percentage depreciation of all other currencies against DKK would result in a decrease recognised in profit/ loss of EURm -5 (0), but would not have an impact on equity. In Mandatum, 10 percentage point depreciation of all other currencies against EUR would result in an increase recognised in profit/loss of EURm 48 (29) and in a decrease recognised directly in equity of EURm -68 (-67). In Holding, 10 percentage point depreciation of all other currencies against EUR would have no impact in profit/loss, but a decrease recognised in equity of EURm -156 (-249).
The sensitivity analysis of the Group's fair values of financial assets and liabilities in differenct market risk scenarios is presented below. The effects represent the instantaneous effects of a one-off change in the underlying market variable on the fair values on 31 December 2019.
Total gains or losses included in profit and loss for assets held at the end of the financial year 16 -33 -18
Total financial assests measured at fair value 1,231 58 -1 1,344 -623 2,009 27
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 -4 (-1) for the debt instruments, and EURm -252 (-246) 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 2.1 per cent (2.0).
In Sampo plc, EURm 26 of deferred tax asset has not been recognised on unused tax losses. The first losses will expire at the end of fiscal year 2019.
In Mandatum, EURm 2 of deferred tax asset has not been recognised on unused tax losses.
Exchange differences 0 -2 24 Tax effects relating to components of other comprehensive income
Provisions for annuities and sickness benefits 3,045 8 3,037 2,619 0 2,619
EURm Gross Reinsurance Net Gross Reinsurance Net Provision for claims outstanding
The tables below show the cost trend for the claims for different years. The upper part of the tables shows how an estimate of the total claims costs per claims year evolves annually. The lower section shows how large a share of this is presented in the balance sheet. More information on insurance liabilities in the risk management note 40.
At the close of the claims year 21,243 2,654 2,735 2,774 2,681 2,661 2,687 2,729 2,766 2,910 3,032
Current estimate of total claims costs 19,178 2,468 2,554 2,505 2,649 2,585 2,600 2,647 2,740 2,939 2,970 45,836
At the close of the claims year 912 964 859 1,010 890 883 866 793 857 874
At the close of the claims year 855 825 807 855 838 828 804 768 805 841
Provision reported in the balance sheet 60 56 69 73 78 102 130 149 214 402 1,333
Group consolidated insurance and investment contracts, total 18,041 18,414 27 Liabilities from unit-linked insurance and investment contracts
Preferred capital note, 2016 (nominal value 1,000 MSEK) perpetual 3 month Stibor +
Preferred capital note, 2015 (nominal value 850 MDKK) 06/2026 3 month Cibor
In 2019 Mandatum Life issued Solvency II Tier 2 loan of EURm 250. The loan matures on 4 October, 2049. The loan has a fixed interest rate until the first possible redemption date on 4 October, 2024, whereafter it becomes subject to variable interest rates.
The subordinated loan of the Holding has a fixed interest rate for the first ten years. After that, the loan becomes subject to variable interest rate but it also includes terms stating the right of redemption at this point in time or at any interest payment date thereafter. The loan is listed on the London Stock Exchange.
EURm 1 Jan 2019 Cash flows Exchange differences Other 31 Dec 2019
Total liabilities from financing activities 3,177 873 18 0 4,067 29 Provisions EURm 2019
EURm 8 (9) of the provision consist of assets reserved for the already implemented or planned development of efficient administrative and claims-adjustment processes and structural changes in distribution channels, resulting in organisational changes that affect all business areas. In addition, the item includes a provision of about EURm 11 (9) for law suits and other uncertain liabilities.
of salary between 7.5 and 20 income base amounts and 32.5% between 20 and 30 income base amounts. In Norway, life-long old-age pension following a complete service period is payable at a rate of 70% of the pensionable salary up to 12 National Insurance base amounts, together with the estimated statutory old-age pension. Paid-up policies and pension payments from the Swedish plans are normally indexed upwards in an amount corresponding to the change in the consumer price index. However, there is no agreement guaranteeing the value and future supplements in addition to the contractual pension benefit could either rise or fall. If is not responsible for indexation of paid-up policies and/or pension payments from the Norwegian insured plans.
The carrying amounts have been stated including special payroll tax in Sweden (24.26%) and a corresponding fee in Norway (14.1%-19.1%).
Average duration of pension liabilities 22 years 21 years 12 years 12 years
Expected contributions to the defined benefit plans during 2020 and 2019 9 9 2 2
Present value of estimated pension liability, including social costs 302 28 330 240 28 268
Net pension liability recognised in the balance sheet 71 28 99 23 28 51
Reconciliation of plan assets: At the beginning of the year 217 211
Short-term employee benefits comprise salaries and other short-terms benefits, including profitsharing bonuses accounted for for the year, and social security costs.
The amount of the performance-related bonus is based on the value performance of Sampo's A share and on the insurance margin (IM) and on Sampo's return on the risk adjusted capital (RoCaR). The value of one calculated incentive unit is the trade-weighted average price of Sampo's A-share at the time period specified in the terms of the scheme, and reduced by the starting price adjusted with the dividends per share distributed up to the payment date. The pre-dividend starting prices vary between eur 38.26–44.10. The maximum value of one incentive unit varies between eur 57.26–63.10, reduced by the dividend-adjusted starting price. In all the schemes, the incentive reward depends on two benchmarks. If the IM is 6 per cent or more, the IM-based reward is paid in full. If the IM is between 4–5.99 per cent, half of the incentive reward is paid. No IM-related reward will be paid out, if the IM stays below these. In addition, the return on the risk adjusted capital is taken into account. If the return is at least risk free return + 4 per cent, the RORAC-based incentive reward is paid out in full. If the return is risk free return + 2 per cent, but less than risk free return + 4 percent, the payout is 50 per cent. If the return stays below these benchmarks, no RORAC-based reward will be paid out.
Each plan has three performance periods and incentive rewards are settled in cash in three installments. The employee shall authorise Sampo plc to buy Sampo's A-shares with 50 per cent (scheme 2017 I) or 60 percent (scheme 2014 I) of the amount of the reward after taxes and other comparable charges. The shares are subject to transfer restrictions for three years from the day of payout. A premature payment of the reward may occur in the event of changes in the group structure or in the case of employment termination on specifically determined bases. The fair value of the incentive schemes is estimated by using the Black-Scholes pricing model.
Total cost for the financial period, EURm (incl. social costs) 12 *) Grant dates vary **) Trade-weighted average for ten trading days from the approval of terms
The tabels below show option holder's standing at the year end.
Executive board Senior executives Resigned Total Average market price on date of exercise 2019 44
The fair value of the granting for the year has been calculated using the Black and Scholes model assuming a share price of EUR 41 (36) . The interest rate corresponds to the zero coupon rate based on the swap curve on 31 December of the previous year. Future volatility is assumed to be 22 per cent and the average life of the options approximately 4 years. The volatility based on previous years' volatility is still the best estimate of the future volatility. The strike prices are adjusted by dividend distribution for outstanding options.
Ernst & Young 0 0 37 Legal proceedings There are a number of legal proceedings against the Group companies outstanding on 31 December 2019, arising in the ordinary course of business. The companies estimate it unlikely that any significant loss will arise from these proceedings.
Sampo Group can be divided into four main areas: Responsible business management and practices are fundamental to Sampo Group companies’ operations.
Sales and marketing practices’ focus is on meeting the demands and needs of the customer and providing the customer with the information necessary for them to make well-informed decisions on their insurance coverage needs.
Responsible corporate culture includes factors relating to the work environment, diversity, equality, employee well-being, employee engagement, professional development, and talent attraction and retention. Sampo
Risks related to these themes are managed for example by having strong internal policies, conducting organizational development programs, and offering employees training, interesting career opportunities and attractive remuneration packages.
ESG strategies to ensure the effective consideration and management of investment risks arising from ESG issues.
The strategies used include for example ESG integration, sector-based screening, norm-based screening, and active ownership. Sampo Group is also a signatory of the United
Environmental issues and climate change are factors affecting Sampo Group’s businesses via investment operations, but effects are also recognized in insurance operations in an increasing manner. Sampo Group companies help customers to manage risks and they provide customers support when accidents occur. By providing customers with guidance on how to prevent losses, the
Group companies help customers to reduce risks and economic costs, and at the same time to protect the environment. Natural catastrophes and extreme weather conditions, on the other hand, are risk factors affecting the financial position and results of non-life insurers.
Interest rate risk Currency risk Spread risk Equity risk Other risks
Some risks, such as counterparty default risks and operational risks presented in the graph Classification of Risks in Sampo Group are indirect repercussions of Sampo’s normal business activities. They are one-sided risks, which in principle have no related earnings potential.
Some risks such as interest rate, currency and liquidity risks are by their nature simultaneously linked to various activities. In order to manage these risks efficiently,
Sampo Group companies have to have a detailed understanding of expected cash flows and their variance within each of the company’s activities. In addition, a thorough understanding of how the market values of assets and liabilities may fluctuate at the total balance sheet level under different scenarios is needed. 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.
• Human capital in the form of skilful and motivated employees.
Underwriting Risks As shown in the following graph Breakdown of Gross
Breakdown of Gross Written Premiums If, 31 December 2019, total EUR 4,675 million
by Sampo Group and If due to differences in foreign exchange rates used in consolidation.
Despite the diversified portfolio, risk concentrations and consequently severe claims may arise through, for example, exposures to natural catastrophes such as storms and floods. The geographical areas most exposed to such events are Denmark, Norway and Sweden. In addition to natural catastrophes, single large claims could have an impact on the result of insurance operations. The negative economic impact of natural catastrophes and single large claims is effectively mitigated by having a well-diversified portfolio and a group-wide reinsurance program in place.
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
The premiums within the Private Business Area and the premiums for smaller risks within the Commercial
Business Area are set through tariffs. The underwriting of risks in the Industrial Business Area and of more complex risks within the Commercial Business Area is to a greater extent based on principles and individual underwriting than on tariffs. In general, pricing is based on statistical analyses of historical claims data and assessments of the future development of claims frequency and claims inflation.
Sensitivity Test of Underwriting Result If, 31 December 2019 and 31 December 2018
Key figure Current level (2019) Change in current level 2019 2018 Combined ratio, business area Private 82.0% +/- 1 percentage point +/- 26 +/- 26
Combined ratio, business area Baltics 87.0% +/- 1 percentage point +/- 1 +/- 1
Net claims incurred (EURm) 3,000 +/- 1 per cent +/- 30 +/- 30
100 million (approximately EUR 9.4 million) and SEK 250 million (approximately EUR 23.6 million) per risk and SEK
Reserve Risk and Its Management and Control The main reserve risks for If are stemming from uncertainty in the claim amounts caused by higher than expected claims inflation, change in the indexing of annuities in Sweden, change in discount rates or an increased retirement age with the consequences that both annuities and lump sum payments would increase.
In the table Technical Provisions by Line of Business and Major Geographical Area, If, 31 December 2019, the technical provisions and durations of If are presented by
Technical Provisions by Line of Business and Major Geographical Area If, 31 December 2019
compensation. The anticipated inflation is based on external assessments of the inflation trend in various areas, such as the consumer price index and payroll index, combined with If’s own estimation of costs for various types of claims. For Lines of Business such as Motor other,
The indexing of Swedish Motor third party liability annuities is one of the factors that affects the value of
The actuaries continuously monitor the level of provisions to ensure that they comply with the established guidelines.
The actuarial estimates are based on historical claims and existing exposures that are available at the balance sheet date. Factors that are monitored include loss development trends, the level of unpaid claims, changes in legislation, case-law and economic conditions. When setting the nonlife and life provisions, established actuarial and statistical methods are used.
Money market securities and cash 454 4% 0.1 370 3% 0.0
11,109 million (11,092). A large part of the fixed income investments was at 31 December 2019 concentrated to financial institutions. The role of real estate, private equity, and other alternative investments is immaterial.
quarterly. In addition, the allocation limits, issuer and counterparty limits, the sensitivity limits for interest rates and credit spreads as well as regulatory capital requirements are regularly monitored.
Exposures by Sector, Asset Class and Rating If, 31 December 2019
If has over the years gradually decreased its combined ratio level to counteract falling interest rates. Interest rate sensitivity in terms of the average duration of fixed income investments was 1.3. The respective duration of insurance liabilities was 6.5. Interest rate risk is managed by changing the duration of assets and interest rate derivatives based on the market view and risk appetite.
IBNR reserves, are discounted using interest rates in accordance with the regulatory rules. Accordingly, from an accounting perspective, If is mainly exposed to changes in inflation and regulatory discount rates.
From an economic perspective, in which the cash flows of insurance liabilities are discounted with prevailing interest rates, If is exposed to changes both in inflation and nominal interest rates. For more information see the table Sensitivities of Technical Provisions, If, 2019 in the section Underwriting Risks.
If writes insurance policies that are mostly denominated in the Scandinavian currencies and in the euro. The currency risk is to a large extent reduced by matching technical provisions with investment assets denominated in the corresponding currencies or by using currency derivatives. The currency exposure in insurance
basis. The currency exposure in investment assets is controlled weekly and hedged when the exposure has reached a specific level, set with respect to cost efficiency and minimum transaction size. An active currency management can be performed within set limits. The transaction risk positions against SEK are shown in the table Transaction Risk Position, If, 31 December 2019.
In addition to transaction risk, If is also exposed to translation risk which at the Group level stems from foreign operations with other base currencies than SEK.
In If, 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 liquidity of financial assets is analysed and reported to the ORSA Committee.
If has a relatively low amount of financial liabilities and thus the refinancing risk is small.
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
reinsurers’ portion of outstanding claims on 31 December 2019 per rating category is presented in the table Reinsurance Recoverables, If, 31 December 2019 and 31 December
If has a Reinsurance Security Policy that sets requirements for the reinsurers’ minimum credit ratings and the maximum exposure to individual reinsurers.
Security Policy. The Chairman is responsible for reporting policy deviations and other issues dealt with by the committee.
In If, the default risk of derivative counterparties is a by-product of managing market risks. The role of long-term interest rate derivatives has been immaterial and counterparty risk stems mainly from short-term
FX-derivatives. The counterparty risk of bilaterally settled derivatives is mitigated by a careful selection of counterparties, by diversification of counterparties to prevent risk concentrations and by using collateral techniques, e.g. ISDA Master Agreements backed by
Business, Topdanmark Non-Life, 2019, Topdanmark’s insurance portfolio is diversified across Business Areas and Lines of Business.
Breakdown of Gross Written Premiums Topdanmark Non-Life, 2019, total EUR 1,272 million
100 million plus reinstatement for each event is on storm events. The maximum retention on fire events is DKK 25 million and in workers' compensation risks are covered up to DKK 1 billion with a retention of DKK 50 million.
With certain restrictions, acts of terrorism are covered by the reinsurance contracts. The national Danish pool for
Under the new scheme the costs from a NBCR attack in
Denmark will initially be borne by the State, but those costs will subsequently be recovered from policyholders.
Based on this reporting, trends in claim levels are carefully assessed and price levels may be adjusted if considered necessary.
The insurance lines of business are divided into short-tail i.e. those lines where the period from notification until settlement is short and long-tail i.e. those lines where the period from notification until settlement is long. The main short-tail lines in Topdanmark are buildings and other property and comprehensive motor insurance. For the short-tail lines the claims are mainly settled within
Combined ratio, business area Commercial 80.3% +/- 1 percentage point +/- 4.6
Net premiums earned (EURm) 1,178 +/- 1 per cent +/- 9.2
Net claims incurred (EURm) 779 +/- 1 per cent +/- 6.0
In addition to the analysis described above, Topdanmark continuously improves its administration systems to achieve more detailed data, which in turn enables the company to identify the claims trends at an earlier point in time and compile information on the constituent parts of the various types of claims.
Due to the longer period of claims settlement, the long-tail lines of business are generally riskier than the short-tail lines. It is not unusual that claims in long-tail lines are settled three to five years after notification and in rare cases up to 10–15 years.
Supreme court decisions can also influence the provisions for former years especially for Workers’ compensation.
The provisioning risk represents mostly the ordinary uncertainty of calculation and claims inflation, i.e. an increase in the level of compensation due to the annual increase in compensation per policy being higher than
Composition of Non-Life Provisions for Outstanding Claims Topdanmark, 31 December 2019 and 31 December 2018
Risk return on shareholders’ equity together with other main components of life business result are shown in the table Result of Life Insurance, Topdanmark 31 December
The regular premiums are growing steadily while the single premiums are fluctuating more from year to year.
Group life insurance is a collective life insurance without savings – that is, a risk insurance – where the sum insured
Premiums, Topdanmark Life Insurance, 31 December 2019 and 31 December 2018.
A low interest rate level with material elements of negative interest rates and, in particular, sustained low interest rates along with prolonged lives represent a significant risk scenario for insurers with guaranteed benefits as there will be a reduction of the collective and individual bonus potentials used for loss absorption by interest and risk groups. When a risk event occurs, the effect on the profit will depend on the size of bonus potentials which are a loss absorbing capacity (“LAC”) within the insurance liabilities. When the loss absorbing capacity is higher than the losses, losses on the insurance liabilities are covered by the bonus potentials. For risk groups where the bonus potentials are fully used, the equity will cover the risk.
Trends in product claim levels are assessed on top of the calculation of the insurance provisions. Profitability models are applied systematically as a follow-up on customer and portfolio levels. This assessment is used to identify price adjustment needs.
Low interest rates mean that the market value of the guarantees granted is high, and hence the related individual bonus potential is low. The lower the individual bonus potential is, the higher is the risk of any losses to be absorbed wholly or partially by shareholder's equity.
In order to protect shareholders' equity, it will, in general, be relevant to reduce market risks in the event of lower interest rates.
• Changes in insurance contract conditions that contribute to risk mitigation for similar claims in the future
EURm after tax 2019 2018 * 35% increase first year, subsequently 25%, coincident with 20% decline in reactivation rates
Committee and via the on-going follow-up of forecasts. If the forecasts are not met, the risk reduction methods may need to be corrected.
To reach the aforementioned general goals, the investment policy sets the company's objectives, strategies, organization and reporting practices on investments.
At the same time, the policy sets the framework for investment of customers' savings, bonus schemes and unit-linked savings (customer funds) in Topdanmark
In addition to the investment policies, the companies have a capital plan and a capital emergency plan if sudden changes occur on the asset or liability side.
Investment Allocations Excluding Unit-Linked Topdanmark, 31 December 2019 and 31 December 2018
Money market securities and cash 127 5% 258 12% 241 5% 329 7%
The exposure in equities outside Denmark and credit bonds has been adjusted by the use of derivatives. Unlisted equities and hedge funds include also private equity and direct holdings in non-listed equities.
The main investment assets are government and mortgage bonds, which comprise primarily Danish mortgage bonds. The assets in this asset class are interest rate sensitive and to a significant extent equivalent to the interest rate sensitivity of the non-life insurance provisions. Consequently, the return on government and mortgage bonds should be assessed in connection with return and revaluation of non-life insurance provisions.
Danish FSA i.e. at market value taking the level of rent and the terms of the tenancy agreements into consideration.
Graph 13 Breakdown of Listed Equity Investments by Geographical Regions Topdanmark
As earlier described, these assets have an interest rate sensitivity that significantly corresponds to the interest rate sensitivity of the technical provisions.
The currency risk is assessed based on SCR. The value of the base currency is shocked by 25 per cent against most of the currencies except against the euro where the largest exposure exists, and the shock is 0.39 per cent, because the Danish krone is pegged to the euro.
Topdanmark uses to calculate its provisions. The general principles regarding the inclusion of an allowance for inflation differs when you look at the Workers' compensation and Illness and Accident insurance. In the former the provisions are calculated based on the expected future indexation of wages and salaries, and in the latter based on the expected development in the net price index.
Interest-bearing Assets by Rating Topdanmark, 31 December 2019 and 31 December 2018
Experience from quite significant and sudden movements in long-term interest rates have confirmed that the liquidity of these assets is not significantly affected by market shocks.
Market Risk Sensitivities, Topdanmark, 31 December 2019 and 31 December 2018
Expected Cash Flows for Provisions and the Bond Portfolio Topdanmark, 31 December 2019 and 31 December 2018
EURm Carrying amount 1 2–6 7–16 17–26 27–36 >36 Provisions for claims
Topdanmark A/S. Topdanmark A/S finances its activities and dividend programme by receiving dividends from its subsidiaries. Further financing requirements are covered by short-term money market loans, typically with a maturity of one month or less.
For reinsurance counterparties, the Board approves security guidelines which determine the maximum size of reinsurance contract cover per a separate reinsurer. This portion is dependent on the reinsurer's rating as well as on Topdanmark’s own assessment of the reinsurer. The largest risk concentrations may occur in case of major catastrophe events, including storms and cloudbursts.
Investments Topdanmark may suffer losses due to their counterparties ’ inability to meet their obligations on bonds, loans and other contracts including derivatives. The majority of Topdanmark’s interest bearing assets comprise of
Danish mortgage bonds. In order to minimize the risk to a single debtor, Topdanmark strives to always have a well- diversified portfolio of bonds not only in regard to a debtor but also geographically.
Analysis of the Change in Provisions Before Reinsurance Mandatum Life, 31 December 2019
With profit and others, excl. Baltic 4,208 125 -457 -33 112 8 -49 3,913 32% Group pension insurance, segregated portfolio 1,008 2 -57 -1 22 8 -17 964 8%
Reserve for decreased discount rate (3.5% -> 0.50%) 250 0 0 0 0 0 13 263 2%
Reserve for decreased discount rate 232 0 0 0 0 0 -2 230 2%
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 2019 technical provision by
possible pandemic is seen as the most significant risk that could adversely affect the mortality risk result.
Claims Ratios After Reinsurance Mandatum Life, 31 December 2019 and 31 December 2018
mortality and disability risks. The Board of Directors annually approves the Reinsurance Policy and determines the maximum amount of risk to be retained on the company’s own account. The highest retention of
In general, biometric risks are managed by careful risk selection, by setting prices to reflect the risks and costs, by setting upper limits for the protection granted and by use of reinsurance. Mandatum Life’s Underwriting Policy sets principles for risk selection and limits for sums insured.
and competitive level. In year 2019, the expense result of Mandatum Life Group was EUR 24 million (35).
Since 2012 the expense result has grown significantly, especially due to increased fee income from unit-linked business, as presented in the graph Expense Result,
The cash flows of Mandatum Life's technical provisions are relatively well predictable because in most of the company’s with profit policies, surrenders and additional investments are not possible.
Mandatum Life’s market risks arise mainly from equity investments and interest rate risk related to fixed income assets and insurance liabilities with a guaranteed interest rate. The most significant interest rate risk in the life insurance business is that fixed income investments will not, over a long period of time, generate a return at least equal to the guaranteed interest rate of technical provisions. The probability of this risk increases when market interest rates fall and stay at a low level. The duration gap between the balance sheet’s technical provisions and fixed income investments is constantly monitored and managed. Control levels based on an internal risk capacity model are used to manage and ensure adequate capital in different market situations.
Mandatum Life has prepared for low interest rates on the liability side by for example reducing the minimum guaranteed interest rate in new contracts and by supplementing the technical provisions with reserve for decreased discount rate. In addition, existing
Fixed income investments and listed equity instruments form a major part of the investment portfolio, but the role of alternative investments – real estate, private equity, biometric and other alternative investments – is also material being 12.3 per cent of total investments.
Investment Allocation Mandatum Life, 31 December 2019 and 31 December 2018
Money market securities and cash 819 14% 0.0 486 9% 0.0
Credit bonds, funds and loans 2,848 50% 3.8 2,988 53% 3.3
Investment grade bonds and loans 1,257 22% 3.5 1,563 28% 2.7
Change from risk exposures relating to reinsurance and derivative transactions in the table Exposures by Sector, Asset Class and Rating, Mandatum Life, 31 December 2019. Counterparty default risks are described in more detail in the section Counterparty Default Risks. Due to differences in the reporting treatment of derivatives, the figures in the table may not be fully comparable with other tables in this annual report.
The role of alternative investments has been significant in Mandatum Life over the years. The current allocation weight is 12 per cent.
The amount of private equity and alternative investments has remained at the same level as in 2018. Since the beginning of 2018, these asset classes have been managed by Sampo plc’s investment operations instead of external asset managers. The real estate portfolio is also managed by Sampo Group’s own real estate management unit. The real estate portfolio includes both direct investments in properties and indirect investments in real estate funds as well as in shares of real estate companies and it has been quite stable.
The Investment Policy for segregated assets defines the risk bearing capacity and the corresponding control levels for the respective portfolio. Since the future bonus reserves of the segregated group pension portfolio is the first buffer against possible investment losses, the risk bearing capacity is also based on the amount of the future
● Far East 151 total EUR 1,308 million total EUR 1,334 million
bonus reserve. Different control levels are based on the fixed stress scenarios of assets.
The Investment Policy for other investment assets defines the company level risk bearing capacity, the control levels for the maximum acceptable risk and respective measures to manage the risk. The control levels are set above the
The cash flows of Mandatum Life’s with profit technical provisions are relatively predictable, because in most of the company’s with profit products, surrenders and premiums are restricted. In addition, the company’s claims costs do not contain a significant inflation risk element.
Mandatum Life has implemented active measures on the liability side to manage the balance sheet level interest rate risk. The company has reduced the minimum guaranteed interest rate in new contracts, supplemented the technical provisions with discount rate reserves and adjusted policy terms and conditions as well as policy administration processes to enable more efficient interest rate risk management.
Mandatum Life is negatively affected when rates are decreasing or staying at low levels, because the duration of liabilities is longer than the duration of assets. A growing part of Mandatum Life’s business, i.e. unit-linked and life and health business, is not interest rate sensitive, which partially mitigates the whole company’s interest rate risk.
The average duration of fixed income investments was 2.8 years including the effect of hedging derivatives. The respective duration of the insurance liabilities was around 12 years. Interest rate risk is managed at the balance sheet level by changing the duration of assets and by using interest rate derivatives.
position in foreign currencies, but instead, the currency risk strategy is based on active management of the currency position. The objective is to achieve a positive return compared to a situation where the currency risk exposure is fully hedged.
Mandatum Life, 31 December 2019. The table shows the net transaction risk exposures and the changes in the value of positions given a 10 per cent decrease in the value of the base currency.
Base currency, EURm EUR USD JPY GBP SEK NOK CHF DKK Other Total, net
In life insurance companies in general, a large change in surrender rates could influence the liquidity position.
Cash Flows According to Contractual Maturity Mandatum Life, 31 December 2019
Cash flows of which interest rate swaps 11 0 11 0 0 2 2 1 7 0 of which interest rate swaps 9 0 9 0 0 -1 -1 -1 -3 -5
Life, 31 December 2019. The average maturity of fixed income investments was 2.9 years in Mandatum Life. The table shows the financing requirements resulting from expected cash inflows and outflows arising from financial assets and liabilities as well as technical provisions.
Counterparty Default Risks In Mandatum Life, the three major sources of counterparty risk are financial derivatives, reinsurance, and other receivables. Counterparty default risk arising from reinsurance or receivables from policyholders and other receivables related to commercial transactions is, however, very limited.
principle, Sampo Group has two principles proactively preventing the Group risks. The amount of intragroup exposures between the Group companies is small and the parent company is the only source of liquidity and the main source of capital within the Group. These principles effectively prevent the contagion risk and hence potential problems of one company will not affect directly the other
If, Topdanmark and Mandatum Life all operate within the Nordic countries, but mostly in different geographical areas and in different lines of business and hence their underwriting risks are different by nature. There are some
Sampo Group’s investment assets presented in the tables and graphs in this section do not include investments in the subsidiaries or in the associated companies (e.g. Nordea).
Sampo plc's figures do not include debt instruments issued by the insurance subsidiaries *Private Equity also includes direct holdings in non-listed equities
Topdanmark’s interest rate scenario figures show the net of financial assets and technical provisions. The company figures do not sum up to the Sampo Group figures due to eliminations and the exclusion of Topdanmark's technical provisions from the Sampo Group figures. The figures in this table do not completely reconcile with the table Market Risk Sensitivities, Topdanmark, 31 December 2019 and 31 December 2018 due to differences in calculation methods.
A summary of Sampo Group’s market risk sensitivities is presented in the following table.
In the next paragraphs concentrations by homogenous risk groups and by single names are presented first and after that balance sheet level risks are discussed shortly.
Exposures by sector, asset class and rating are presented in the following table.
Topdanmark, 31 December 2019. The public sector has had a relatively minor role in Sampo Group’s portfolios and these exposures have been mainly in the Nordic countries. AAA rated mortgage bonds have a material role in Topdanmark’s portfolios.
Fixed Income Investments in the Financial Sector Sampo Group Excluding Topdanmark, 31 December 2019
EUR 3,281 million at the end of year 2019 (2,937). At the end of year 2019, the listed equity exposure of If was EUR
Life, the listed equity exposure was EUR 1,308 million at the end of year 2019 (1,334) and the proportion of listed equities was 23 per cent of the investment portfolio.
Breakdown of Listed Equity Investments by Geographical Regions Sampo Group Excluding Topdanmark
Largest Exposures by Issuer and Asset Class Sampo Group Excluding Topdanmark, 31 December 2019
Topdanmark, 31 December 2019. Furthermore, the largest direct listed equity exposures are presented in the table
Ten Largest Direct High Yield and Non-rated Fixed Income Investments and Direct Listed Equity Investments Sampo Group Excluding Topdanmark, 31 December 2019
Ten largest direct high yield and non-rated fixed income investments Rating
In Topdanmark interest rate risk of the balance sheet is being actively hedged and hence Topdanmark is not increasing interest rate risk materially at the Group level.
As at 31 December 2019 Sampo had long-term strategic holdings of EUR 8,841 million and they were funded mainly by capital of EUR 7,596 million and senior debt of EUR 3,414 million. Average remaining maturity of senior debt was 5.1 years and EUR 1,600 million of it had a maturity longer than 5 years. Senior debt is used to fund other financial assets as well. The average maturity of subordinated loans and fixed income instruments of EUR
405 million was 1.8 years. Funding structure of strategic holdings and other holdings can be considered strong.
EUR 1,320 (1,447) million. Liquidity is mainly affected by received and paid dividends as well as changes in issued debt instruments and changes in investments.
Sampo plc, 31 December 2019 and 31 December 2018 are all issued by If, Mandatum Life, Nordea and Topdanmark.
This is why part of Sampo plc’s debt instruments are issued in the Swedish krona and interest rate duration is maintained relatively short. However, management’s market views are also affecting these decisions and for instance at the moment the Swedish krona denominated dividends paid by If are still in the Swedish krona, and the Swedish krona debt is converted into the euro using cross-currency swaps, due to tactical market view reasons.
The market risk stemming from Nordea holding is a significant part of Sampo plc’s capital requirement, but apart from that the parent company’s contribution to the
Conceptually, the Group’s own funds is the difference between the market value of assets and liabilities plus the subordinated liabilities. This difference has accrued during the lifetime of the Group and it includes the following main components: • Accrued profits that have not been paid as dividends over the years.
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 and Topdanmark are converted from their reporting currencies to the euro.
reported profits, volatility of the balance sheet due to fluctuations in the market value of the equity portfolio and the insurance liabilities, parent company’s capacity to generate liquidity, probability of business risks and arrangements and shareholders’ dividend expectations.
Net change in cash and cash equivalents -127 248 *) Investments include both investment property and financial assets.
Additional information to the statement of cash flows: Interest income received 65 42
Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts 172FINANCIAL STATEMENTS 2019
6 Other shares and participations 2019 Fair value changes 2018 Fair value changes
Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts 173FINANCIAL STATEMENTS 2019
Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts 174FINANCIAL STATEMENTS 2019
11 Share capital Information on share capital is disclosed in Note 33 in the consolidated financial statements.
Note to the Income Taxes 14 14 Deferred tax assets and liabilities
19 Pension contributions to the CEO, deputy CEO and the members of the Board
Note to the Shares Held 20 20 Shares held as of 31 Dec 2019
Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts 177FINANCIAL STATEMENTS 2019
We have audited the financial statements of Sampo plc (business identity code 0142213-3) for the year ended 31 December 2019. The financial statements comprise the consolidated balance sheet, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies, as well as the parent company’s balance sheet, income statement, statement of cash flows and notes
We refer to the Summary of significant accounting policies, Accounting policies regarding management judgment and key sources of estimation uncertainties and Notes 26 and 27.
The estimation of non-life insurance contract liabilities involves significant assumptions to be made in provisions for claims outstanding. Key assumption areas include inflation rate and life expectancy of beneficiaries. The liabilities are based on a best estimate of ultimate cost of all claims incurred but not settled, whether reported or not, together with claims handling costs.
We refer to the Summary of significant accounting policies, Accounting policies regarding management judgment and key sources of estimation uncertainties and Notes 9 and 14-20.
The Group’s investment portfolio excluding investments in associates represents amounts to mEUR 36,418 (2018: mEUR 33,363 which represents 70% of the Group’s total assets. Fair value measurement can be subjective, specifically in areas where fair value is based on a model-based valuation. Valuation techniques for private equity funds, non-listed bonds and non-listed equities involve setting various assumptions regarding pricing factors. The use of different valuation techniques and assumptions could lead to different estimates of fair value. Specific areas of audit focus include the valuation of level 2 and 3 assets according to IFRS where valuation techniques use unobservable inputs. The investment portfolio includes level 2 assets amounting to mEUR 7,458 and level 3 assets amounting to mEUR 2,708 (refer to note 17).
This matter is a significant risk of material misstatement referred to in EU Regulation No 537/241, point (c) of Article 10(2).
Nordea Bank Abp is an associated company of the Group and is accounted for based on equity accounting. The holding in Nordea Bank Abp represents 13% of the Group’s total assets.
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
General Meeting on 10 April 2002, and our appointment represents a total period of uninterrupted engagement of 18 years.
The Board of Directors and the Managing Director are responsible for the other information. The other information comprises the report of the Board of Directors with referred statements and the Corporate Governance Statement,
We support that the financial statements should be adopted. The proposal by the Board of Directors regarding the use of the profit shown in the balance sheet is in compliance with the Limited Liability Companies Act.