Shares, Share Capital and Shareholders . . . . . . . . . . . . . . . . .28
Authorizations Granted to the Board . . . . . . . . . . . . . . .30
The Major Risks and Uncertainties for the Group in the Near-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Statement of Profit and Other Comprehensive Income, IFRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Sampo plc’s Statement of Cash Flows . . . . . . . . . . . . . . . . 188
Approval of the Financial Statements and the Board of Directors' Report . . . . . . . . . . . 196
This Board of Directors’ report and Financial Statements in pdf format is not an xHTML document compliant with the ESEF (European Single Electronic Format) regulation. Sampo’s ESEF Financial Statements is available at www.sampo.com/year2020.
Solvency Position in the Subsidiaries . . . . . . . . . . . . . . . . . . . . .34
Calculation of the Key Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
strong year 2020 in all respects. The combined ratio for the full-year 2020 was 82.1 per cent (84.5). This is the strongest combined ratio If has ever reported. Because of the impairment loss of EUR 899 million and the sales loss of EUR 262 million on Nordea shares, Group’s reported profit before taxes for 2020 decreased to EUR 380 million
The earnings per share were EUR 0.07 (2.04) and markedto -market earnings per share were EUR 0.65 (2.63).
Sampo plc’s Board of Directors has today, after applying management judgement, decided to impair the book value of Nordea to EUR 7.50 per share from EUR 8.90 per share in Sampo Group’s consolidated accounts at the end of December 2020.
Annual General Meeting to be held on 19 May 2021 a dividend of EUR 1.70 per share (1.50). The proposed dividend payment amounts in total to EUR 944 million
811 million (685). The return on equity remained at a high level at 33.3 per cent (34.5). Premiums grew in all business areas in the Nordics amounting to almost 5 per cent with fixed currencies. If paid a dividend of SEK 6.3 billion (approximately EUR 600 million) to Sampo plc in
Sampo announced on 5 August 2020 that the company and Rand Merchant Investment Holdings (RMI) had made a recommended cash offer, through a jointly owned company, to acquire all issued and to be issued shares in Hastings Group Holdings Plc not already owned by
General Meeting authorize it to pay out the remaining part of the 2019 dividend (EUR 0.33 per share) and the 2020 dividend (EUR 0.39 per share) – a total of EUR
European Central Bank recommendation. Sampo plc’s share of the proposed dividend payments is EUR 508 million.
Board proposes a dividend of EUR 200 million to Sampo plc in February 2021.
Sampo Group’s Solvency II capital ratio at the end of 2020 was 176 per cent (174) and the Group solvency amounted to EUR 4,308 million (4,513).
Sampo Group will issue a report on non-financial information in accordance with Chapter 3a, Section 5 of the Accounting Act. A separate report, Corporate
Balance sheet (at end of period) 10.0343 10.5713 10.4948 11.0613 10.4468 10.6958
Balance sheet (at end of period) 0.9584 0.9523 0.9618 0.9610 1.0591 1.0809
In Finland, the economy is expected to have contracted by 3.0 per cent in 2020, although the 2021 growth forecast of 3.0 per cent will put the economy on track to pare most of the losses towards the end of the year. As is the case with the other Nordic countries, the developments in the economy will largely depend on the pace of reopening sectors affected by COVID-19 restrictions. As long as the service sector is able to reopen, Finland’s economic recovery this year will be robust. Private consumption, boosted by recovering employment, will act as a driver for growth. Exports and investments will benefit from the global economic recovery, while the increased levels of public debt present budgetary challenges moving forward.
COVID-19 infection rates and tighter restrictions. However, the growth rate is expected to pick up towards the end of the year driven by pent-up demand, revitalisation of export markets and positive spill over effects stemming from fiscal policy measures taken across the globe. The
When the COVID-19 pandemic hit the Nordic countries in the first quarter of 2020, priority in Sampo Group was given to maintaining service level and to supporting customers in the best possible way in the changed working conditions. The safety of customers and personnel has been ensured through following the instructions and recommendations given by the local authorities and by utilizing digital technology.
October and November, Sampo’s subsidiaries adapted to the tighter restrictions and the share of employees working from home increased further. At the end of the fourth quarter 80–95 per cent of If employees and the vast majority of the employees of Sampo’s other subsidiaries worked remotely as well.
COVID-19 crisis than before the crisis. During 2020 If’s sick leave figures improved from 3.3 per cent to 3.0 per cent and personnel turnover fell from 11.6 per cent to 10.1 per cent. In Mandatum, the turnover decreased from 11.3 per cent to 8.1 per cent.
The Group is prepared for an extended period of remote work and an eventual return to normality will be slow and gradual and even long term we expect the share of remote and digital work to be substantially higher than before the pandemic. We are working very actively to prepare for the new situation.
Claims cost for 2020 was negatively impacted from travel insurance policies primarily following imposed travel restrictions from governments due to COVID-19. At the end of the reporting period, the total number of reported claims amounted to approximately 50,000 claims corresponding to a gross claims cost of EUR 35 million, mostly in BA Private and Norway. For this event, If had a reinsurance cover with a net retention of approximately
During the fourth quarter premium volume was slightly impacted by the COVID-19 situation, primarily by travel insurance in Private business and with continued negative impact related to decommissioning of vehicles and lower sums insured in the Commercial segment, but as a whole the effects were not very significant. There is still some uncertainty with regard to possible lagging effects to premiums through, for example, lower insurable sums and lower turnover in the corporate segments.
Significant actions have been taken to support customers, colleagues and the community throughout the pandemic, including premium reductions, the waiving of fees and charitable donations. The Group has continued to employ all colleagues on full salaries during the pandemic.
The COVID-19 virus created a short-term shock in capital markets in March 2020. The unusual situation caused
The volatility of claims costs did not differ from the normal level. All in all, looking at the entire year of 2020, the COVID-19 related impacts on the company’s business remained small.
A strong sell-off took place in the capital markets after the outbreak of the pandemic crisis in March and resulted in negative returns across asset classes. Listed equities and high yield credit were the worst hit asset classes. However, swift monetary responses by central banks and governments helped to stabilize the financial markets during the second quarter. Leading equity indices rebounded strongly and credit spreads on bonds narrowed.
The profit before taxes for 2020 for the If segment amounted to EUR 901 million (884). The total comprehensive income for the period after tax was EUR 866 million
In 2020 EUR 186 million (190) was released from the technical reserves relating to prior year claims. The return on equity was 33.3 per cent (33.4) and the fair value reserve on 31 December 2020 amounted to EUR 557 million (457).
Large claims were EUR 88 million worse than expected in 2020. In BA Commercial, they were EUR 3 million worse and in BA Industrial EUR 85 million worse than expected.
The Swedish discount rate for the annuity reserves was -0.72 per cent (-0.77) at the end of 2020 and had a positive effect of EUR 5 million on the full-year results. The discount rate used in Finland, was lowered to 0.75 per cent in the third quarter and had a negative impact of EUR 51 million.
(4,675) in 2020. Excluding the currency effects, premiums grew 4.7 per cent (5.7) in January – December 2020.
hedging cost as at 31 December 2020 was 1.5 per cent (1.8).
Topdanmark is Denmark’s second largest non-life insurance company and it is also one of the country’s major life insurance companies. Topdanmark has a 16 per cent market share in non-life insurance and a 11 per cent market share in life insurance in Denmark. Topdanmark focuses on the private, agricultural, and SME markets.
The market value of the holding was EUR 1,491 million on
The following text is based on Topdanmark’s full-year 2020 result release published on 22 January 2021.
On 1 October, Sydbank terminated the distribution agreement with Topdanmark. The termination of the agreement became effective by the end of 2020. As
Sydbank only has a marginal negative impact on the premium growth in 2021.
Sampo plc owns 70 per cent of the shares of Hastings and the Group started to consolidate the UK insurance group as a subsidiary as of 16 November 2020. In Sampo Group’s consolidated accounts Hastings is reported as a separate segment. Hastings profit and loss items are recognized line-by-line in the Group’s consolidated financial statements.
Hastings’ agility and digital capability has enabled operations to continue with minimal interruption despite the unprecedented disruption to UK society and the economy as a result of COVID-19. Progress continues on its strategic initiatives, delivering profitable growth, with the total number of customer policies growing 8 per cent to 3.1 million. The growth in customer policies has been supported by continued strong retention rates throughout 2020. Home insurance customer policies also continue to grow, up 28 per cent to 0.3 million.
Nordea is a leading Nordic universal bank. Nordea shares are listed on the Nasdaq exchanges in Stockholm,
On 31 December 2020 Sampo plc held 642,924,782 Nordea shares corresponding to a holding of 15.87 per cent.
Sampo successfully sold 162 million Nordea shares in an accelerated book-build offering to institutional investors
Change in liabilities for inv. and ins. contracts -272 -971 -72
Average number of staff (FTE) 576 563 13 the impairment, EUR 7.50 per share. As disclosed on 11
Sampo’s share of Nordea’s 2020 profit before taxes, excluding the accounting impacts of the sale of Nordea shares on 10 November 2020 and the impairment of the holding in Sampo Group’s consolidated accounts 2020, amounted to EUR 429 million (290).
The profit before taxes for Mandatum Life in 2020 amounted to EUR 154 million (280). The total comprehensive income for the period after tax reflecting the changes in market value of assets, was EUR 213 million (308). The return on equity amounted to 14.4 per cent (23.5).
The expense result increased to EUR 27 million (24). The risk result increased to EUR 38 million (35).
The net income from unit-linked contracts was EUR 397 million (908). During 2020 the fair value reserve increased to EUR 534 million (438).
The total technical reserves of Mandatum Life Group increased to EUR 12.3 billion (12.0). The unit-linked reserves increased to highest ever EUR 8.8 billion (8.1) at the end of 2020. The unit-linked reserves corresponded to 72 per cent (67) of total technical reserves.
Mandatum Life has overall supplemented its technical reserves with a total of EUR 218 million (230). The figure does not take into account the reserves relating to the segregated fund. The discount rate used for 2021 - 2023 is 0.25 per cent. The new discount rates for years 2022 and 2023 had a negative impact of EUR 77 million on the result.
The discount rate of segregated liabilities is 0.0 per cent and the discount rate reserve of the segregated liabilities amounted to EUR 232 million (263).
(4.7) at market values. 49 per cent (46) of the assets were in fixed income instruments, 9 per cent (15) in money market, 28 per cent (25) in equities and 14 per cent (14) in alternative investments. The investment return markedto -market for 2020 was 6.5 per cent (9.2). The duration of fixed income assets at the end of 2020 was 2.7 years
EUR 0.9 billion (1.0), of which 80 per cent (68) was in fixed income, 9 per cent (13) in money market, 6 per cent (13)
Key figures 2020 2019 Change Average number of staff (FTE) 67 63 4
P&C and life insurance. In addition, Sampo plc held on 31
December 2020 approximately 15.9 per cent of the share capital of Nordea, the largest bank in the Nordic countries.
(formerly NDX Intressenter AB), of which Sampo plc owns 36.25 per cent, as an associate.
December 2020 decreased to EUR -826 million (139), including two Nordea-related one-off items of EUR
-155 million valuation loss incurred in connection with distribution of Nordea shares as dividends to Sampo shareholders in the third quarter of 2019.
After the transaction, Sampo held 642,924,782 Nordea shares, corresponding to 15.9 per cent of all shares and voting rights in Nordea.
Sampo incurred a reported loss of EUR 262 million from the transaction for the last quarter of 2020. Nordea’s status as an associated company of Sampo remained unchanged.
announced on 5 August 2020 that they had made a recommended cash offer, through a jointly owned company, to acquire all issued and to be issued shares in Hastings Group Holdings Plc not already owned by
1.66 billion or approximately EUR 1.84 billion. The offer price represents a premium of approximately 37.5 per cent to the volume-weighted average price of GBp 182 per
The governance of the company reflects the relative shareholdings of Sampo and RMI, recognizing Sampo’s controlling position, but protecting RMI’s interest with customary minority protections. The shareholders agreement includes customary exit arrangements for joint investments of this type.
The size of Sampo’s investment, based on its 70 per cent stake, was GBP 1.16 billion or EUR 1.29 billion valued at the offer price. Sampo funded the acquisition costs with EUR 1 billion of hybrid Tier 2 capital issued on 3
September 2020 with the residual amount coming from existing cash resources.
In this context, the acquisition of Hastings represents an attractive opportunity for Sampo to advance its strategy and accelerate its repositioning towards retail P&C
and has recently been diversifying into other non-life insurance products including home insurance. Both motor and home insurance represent large markets in the
Both S&P and Moody’s have maintained Sampo’s credit ratings with stable outlook. The Sampo Board does not expect the acquisition to impact Sampo’s dividend policy in the short-term but is expected to enhance the dividend potential in the long-term.
The offer was recommended by Hastings’ independent directors. The offer was being implemented by way of a court-sanctioned scheme of arrangement under English law, which was approved by the requisite majorities at the
All of the conditions relating to regulatory and antitrust approvals were satisfied by 27 October 2020 and the scheme was effective following completion of the Court
The jointly-owned company of Sampo and RMI, currently known as Hastings Group (Consolidated) Limited, became
Sampo plc’s subsidiary and formed a separate segment in the Group’s financial reporting as of 16 November 2020.
Statement on its website in fulfillment of the requirement referred to in the Finnish Securities Markets Act
The Board of Directors of Sampo plc decided on 25 March 2020 to postpone the Annual General Meeting that was scheduled to be held on 23 April 2020. The postponement was made in order to ensure the safety and well-being of Sampo’s shareholders, Sampo’s employees, and other stakeholders, in light of the COVID-19 outbreak and the related health threat.
The Annual General Meeting elected eight members to the Board of Directors. The following members were re-elected to the Board: Christian Clausen, Fiona
Vice Chair. Christian Clausen, Risto Murto, Antti Mäkinen and Björn Wahlroos (Chair) were elected to the Nomination and Remuneration Committee. Fiona Clutterbuck,
All the proposed Board members have been determined to be independent of the company and its major shareholders under the rules of the Finnish Corporate Governance
Code 2020. The curriculum vitaes of the Board Members are available at www.sampo.com/board.
The minutes of the Annual General Meeting are available for viewing at www.sampo.com and at Sampo plc's head office at Fabianinkatu 27, Helsinki, Finland.
Sampo plc and its subsidiaries are committed to integrating corporate responsibility into Group’s governance and business operations. Simultaneously, the aim is to develop related performance measurement and reporting. This is in the interests of, and expected, by the Group’s various internal and external stakeholders.
Business Management and Practices: During 2020, a group-wide project regarding further integration of environmental, social, and governance (ESG) considerations in insurance underwriting and product development was initiated. Individual Group companies work towards a common group-level goal of establishing more systematic processes and improved disclosure in terms of sustainable products and services. The work continues in 2021.
In addition, a group-wide climate risk project was started during the year. The project aims to analyze how climate-related risks are incorporated in Sampo Group companies’ governance structures, strategy, risk management, and overall business operations. The aim is to understand the current state of climate risk management, identify gaps and development areas, create an action plan based on the findings, and improve the disclosure and prepare to report according to possible future regulatory requirements and the recommendations of the Task Force on Climate Related Financial Disclosures
(TCFD). The current state analysis and gap analysis were conducted during 2020. The work will continue during 2021 according to plan.
Corporate Culture: In 2020, Sampo focused on developing group-level key performance indicators to improve grouplevel reporting, for example, in terms of employment, diversity and equality, and competence development.
This is to better measure and report group-level performance in these areas. The results of this work will be available later in the Sampo Group Corporate Responsibility Report, where a number of new group-level indicators are reported.
Sampo Group companies strengthened their investment policies by adding further instructions on how to take the
UN Sustainable Development Goals (SDGs) further into the Group companies’ operations and improve the reporting on the underlying targets. In addition, Sampo Group developed its community engagement work by creating a group-level community engagement framework. The framework has three themes: Climate and Environment,
Health and Well-being, and Safety and Education. The themes guide the Group’s stakeholder engagement and dialogue, donations and other humanitarian efforts, and the related reporting. Benefits of the framework include, among other things, better allocation of efforts to the most important themes from the Group’s perspective, and better measurement and reporting on a group-level.
Towards the end of the year, Sampo started the integration of Hastings into the Group’s corporate responsibility work. The integration continues during 2021.
In addition to the group-level report, further information on If, Topdanmark, Hastings, and Mandatum Life’s corporate responsibility activities can be found in their respective reports. All the reports are available at www.sampo.com/year2020.
If is Sampo Group’s largest business area and employed on average 54 per cent of the personnel. Topdanmark employed 18 per cent, Hastings employed 22 and Mandatum Life approximately 4 per cent of the personnel.
In geographical terms Denmark had 23 per cent of the personnel, United Kingdom 22 per cent, Finland 17 per cent, Sweden 17 per cent and Norway 12 per cent. The share of other countries was 8 per cent.
The total number of staff in If increased 4 per cent. As of 31 December 2020, If employed 7,120 persons.
Topdanmark employed 2,456 persons at the end of the year and the total number of staff increased 4 per cent.
The total number of staff in Mandatum Life decreased 1 per cent. As of 31 December 2020 Mandatum Life employed 568 persons.
The total number of staff in Sampo plc increased 8 per cent and it employed 69 persons at the end of 2020.
More detailed information on personnel in Sampo Group is available in Sampo Group Corporate Responsibility
and successful performance. At the same time, however, in order to safeguard the interest of other stakeholders, compensation mechanisms shall not generate conflicts of interest and shall not entice or encourage employees to excessive or unwanted risk taking. Thus, compensation mechanisms cannot be separated from risk management objectives and practices.
The Board of Directors decides on the launch of long-term incentive schemes based on financial instruments of
Board members are not included in the scheme. The total number of participants in the long-term incentive scheme is 113 and a total of 3,876,500 units out of a maximum of 4,500,00 were allocated in August to September 2020.
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/or 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/
Remuneration Report for Governing Bodies provides information on the remuneration paid to the Board of Directors and the Group CEO during the previous financial period and has been prepared in accordance
Securities Market Association, effective as of 1 January 2020. The Corporate Governance Code 2020 can be viewed in full on the website of the Securities Market
In addition to monitoring capitalization in the subgroups, Sampo manages key financial strength metrics for the consolidated group and the parent company.
As at 31 December 2020, 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 2020
Shareholders by the Number of Shares Held Sampo plc, 31 December 2020
Number of shares Shareholders, number Shareholders, % Shares, number Shares, %
The price paid for the shares repurchased under the authorization shall be based on the current market price of Sampo A shares on the securities market. The authorization will be valid until the close of the next Annual
Sampo plc made no repurchases during 2020 and has not purchased its own shares after the end of the reporting period.
The holdings of nominee-registered and foreign shareholders decreased to 63.0 per cent (64.6) of the shares and 62.5 per cent of the votes (64.1).
Seligson & Co OMX Helsinki 25 UCITS ETF 921,515 0.17 0.16
Shareholders by Sector Sampo plc (A and B shares), 31 December 2020
A shares. Their combined holdings constituted 0.9 per cent (1.2) of the share capital and related votes.
• If; SEK 6.3 billion (EUR 600 million) in December 2020.
On 4 February 2021, Nordea’s Board proposed a dividend of EUR 0.39 per share for 2020. In addition, the Board will decide on 18 February to distribute EUR 0.07 per share as the first instalment of the delayed 2019 dividend of EUR
approval, the total dividend distributed in connection with the AGM will be DKK 1,800 million or DKK 20 per share. If the AGM approves the proposals, Sampo plc’s share of the dividends amounts to EUR 113 million.
Mandatum Life’s Board proposes a dividend of EUR 200 million to Sampo plc in February 2021.
If P&C Insurance Ltd – Insurance Financial Strength Rating A1 Stable A+ Stable
Solvency II rules. In this calculation Nordea is treated as an equity investment. According to the Solvency II directive,
Hastings is fully consolidated into the Sampo Group’s own funds and SCR. As a stand-alone entity AICL, Hastings'
December 2020 If Group’s Solvency II capital requirement under standard formula amounted to EUR 1,916 million
The S&P A+ rating capital requirement for If Group amounted to EUR 3,083 million (3,083) on 31 December 2020 and the capital base was EUR 3,234 million (3,151).
Mandatum Life’s solvency ratio after transitional measures amounted to 188 per cent (194) on 31 December 2020. Own funds were EUR 2,308 million (2,290) and the Solvency
Without transitional measures, own funds would have amounted to EUR 1,977 million (1,929) and the solvency capital requirement would have amounted to EUR 1,245 million (1,212), leading to a solvency ratio of 159 per cent
Sampo plc’s debt financing on 31 December 2020 amounted to EUR 3,934 million (3,908) and interest bearing assets to EUR 1,529 million (1,725). Interest bearing assets include bank accounts, fixed income instruments and EUR 324 million (359) of hybrid capital and subordinated debt instruments issued by the subsidiaries and associated companies.
At the end of 2020 the interest bearing net debt of Sampo plc amounted to EUR 2,405 million (2,183). The net debt calculation takes into account interest bearing assets and liabilities. Gross debt to Sampo plc’s equity was 53 per cent (51) and financial leverage 34 per cent (34).
On 3 September 2020 Sampo plc issued 32-nc-12 Tier 2 notes of EUR 1,000 million maturing on 3 September 2032.
The amount of subordinated notes increased due to the financing of the acquisition of Hastings. No CPs were outstanding (0). The average interest, net of interest rate swaps, on Sampo plc’s debt as of 31 December 2020 was 1.6 per cent (1.2).
These derivatives are valued at fair value in the profit and loss account although economically they are related to the underlying bonds. As a result Sampo plc maintains the flexibility to adjust the derivative position if needed but this comes at the cost of increased volatility in the
Senior Bond 250 SEKm Stibor 3M + 0.55% Euribor 6M + 0.39% -0.12% 23 May 2022
Senior Bond 373 EURm 1.250% Euribor 6M + 0.74% 0.23% 20 May 2025
Hybrid Tier2 Bond under separate documentation 500 EURm 3.375% --- 3.48% 23 May 2029
Hybrid Tier2 Bond 1,000 EURm 2.50% --- 2.55% 3 September 2032
With regard to Topdanmark, reference is made to the profit forecast model that the company publishes on a quarterly basis.
Nordea continues to focus on creating great customer experiences, growing income and improving operational efficiency. The results are progressing well towards 2022 targets.
The Major Risks and Uncertainties for the Group in the Near-term
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.
Major risks affecting the Group companies’ profitability and its variation are market, credit, insurance and operational risks that are quantified independently by the major business units. At the group level, sources of risks are the same, although they are not directly additive due to the effects of diversification.
Sampo Group’s business will be conducted. Examples of identified trends are technological developments in areas such as artificial intelligence and digitalization, demographic changes, and sustainability issues that may also have profound effects on companies within the financial sector.
The parent company’s distributable capital and reserves totaled EUR 7,250,153,463.79 of which profit for the financial year 2020 was EUR 699,633,592.61.
The Board proposes to the Annual General Meeting a dividend of EUR 1.70 per share to the company’s 555,351,850 shares. The dividends to be paid are EUR 944,098,145.00 in total. The remainder of the funds are left in the equity.
The dividend will be paid to the shareholders registered in the Register of Shareholders held by Euroclear Finland
Ltd as the record date of 21 May 2021. The Board proposes that the dividend be paid on 28 May 2021.
No significant changes have taken place in the company's financial position since the end of the financial year. The impairment of Nordea shares had no impact on Sampo plc’s distributable capital and reserves. The company's liquidity position is good and in the view of the Board, the proposed distribution does not jeopardize the company's ability to fulfill its obligations.
Return on equity (at fair values) % 3.1 12.0 7.5 17.1 15.0
Return on assets (at fair values) % 2.3 5.5 3.2 7.6 7.3
Premiums written before reinsurers' share EURm 4,823 4,675 4,502 4,525 4,458
Return on equity (at fair values) % 33.3 34.5 11.2 21.3 25.3
Premiums written before reinsurers' share, P&C insurance EURm 1,315 1,272 1,235 210 -
Premiums written before reinsurers' share EURm 1,059 1,603 1,082 967 1,122
Return on equity (at fair values) % 14.4 23.5 8.7 13.3 15.9
Earnings per share without extraordinary items related to associate Nordea 3) EUR 2.16 2.31 - - -
Average adjusted number of shares 1,000 555,352 555,352 555,352 559,873 560,000
Adjusted number of shares at 31 Dec. 1,000 554,152 554,152 554,152 554,152 558,800
Share trading volume during the financial year 1,000 376,964 250,282 239,051 179,568 203,996
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. 1) From 2016 on, the group solvency for Sampo has been calculated according to the consolidation method defined in the Solvency II Directive (2009/138/EC) and the Finnish Insurance Companies Act (521/2008).
In calculating the key figures the tax corresponding to the result for the accounting period has been taken into account. The valuation differences, adjusted with the deferred tax liability, on the investment property have been taken into account in return on assets, return on equity, equity/assets ratio and net asset value per share. Additionally, the items in the other comprehensive income have been taken into account in return on assets and return on equity. In the net asset value per share, the Group valuation difference on associate Nordea and listed subsidiary Topdanmark have also been taken into account.
Additional information on the Group’s alternative performance measures on the Group’s website.
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
± valuation differences on investments (average of values on 1 Jan. and 31 Dec.)
Equity/assets ratio (at fair values), % + total equity (attributable to parent company’s equity holders)
Risk ratio, % + claims incurred - claims settlement expenses X 100%
Expense ratio, % + operating expenses before change in deferred acquisition costs
Relative share trading volume, % number of shares traded through the stock exchange X 100% adjusted average number of shares
Net asset value per share + equity attributable to the parent company’s equity holders
Total items not reclassifiable to profit or loss, net of tax 0 -45
Other comprehensive income for the period -75 -37 440 328 328
3) The amount recognised in equity from available-for-sale financial assets for the period totalled EURm 263 (718). The amount transferred to p/l amounted to EURm -49 (-255). EURm 1 (-21) was transferred to the Segregated Suomi portfolio. EURm 6 from business acquisitions has been recognised directly in the opening balance of the fair value reserve.
The amounts included in the translation and available-for-sale reserves represent other comprehensive income for each component, net of tax.
Additional information to the cash flow statement: 2020 2019 Interest income received 464 543
Business acquisitions 2020 On 5 August 2020, Sampo and Rand Merchant Investment Holdings Limited (RMI) announced a recommended cash offer to acquire all issued and to be issued shares in Hastings not currently owned or controlled by Sampo and RMI. The transaction was completed in November 2020 and Sampo became the majority share holder with 70% ownership. The net cash flow arising from the acquisition was EUR - 1,126 million, including cash and cash equivalents EUR 193 million of the acquired company at the acquisition date.
Financial Reporting Standards (IFRSs). In preparing the financial statements, Sampo has applied all the standards and interpretations relating to its business, adopted by the commission of the EU and effective at 31 December, 2020.
The annual improvements or other amendments to the standards, adopted at the beginning of 2020, had no material impact on the Group’s financial statements reporting.
The Board of Directors of Sampo plc accepted the financial statements for issue on 11 February 2021.
Entities qualify as subsidiaries if the Group has the controlling power. The Group exercises control if its shareholding is more than 50 per cent of the voting rights or it otherwise has the power to exercise control over the financial and operating policies of the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group, and cease to be consolidated from the date that control ceases.
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 consolidated 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 translation of transactions and monetary balance sheet items denominated in foreign currencies into functional currency are recognised as translation gains and losses in profit or loss.
Geographical information has been given on income from external customers and non-current assets. The reported segments are Finland, Sweden, Norway, Denmark, Great
The costs of acquiring new and renewed insurance business are treated as deferred acquisition costs in the P&C
insurance. In the life insurance business, the acquisition costs are treated as fee and commission expense under
P&C insurance contracts are primarily of short duration, so that premiums written are recognised at the inception of risk coverage in line with the insurance contract. When the premium for the insurance period is divided into several instalments, the entire premium amount is still recognised at the beginning of the period. As an exception, Hastings recognises insurance premiums proportionally over the period of cover provided.
The subsidiary Hastings has revenue from broker activities in accordance with IFRS 15 Revenue from Contracts with Customers. The revenue consists principally of fees
Revenue from insurance brokerage activities is recognised at the point of sale to the customer and revenue from other retail income is recognised when the ad hoc service has been completed. Revenue arising from insurance broking activities is measured on an agency basis, net of cost, at the fair value of the income receivable after adjusting for any allowance for expected future cancellation refunds. Hastings may also provide contracts for the provision of other ad hoc, point in time services to customers. Such income is recognised when the performance obligation has been satisfied at the expected value of consideration.
In the consolidated financial statements, the fees and commissions from broker activities are included in ‘Other income’ or ‘Other operating expenses’.
A large majority of Sampo Group's financial assets are valued at fair value. The valuation is based on either published price quotations 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.
Sampo Group’s level 3 assets are private equity and alternative funds.
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.
In the life insurance business, IFRS 4 Insurance Contracts provides that insurance contracts with a discretionary participation feature are measured in accordance with national valuation principles rather than at fair value. These contracts and investments made to cover shareholders’ equity are managed in their entirety and are classified mainly as available-for-sale financial assets. An exception to the rule are investments related to unit-linked insurance, valued at fair value thru p/l and shown as a separate line item in the balance sheet. The corresponding liability is also shown as a separate line item.
Loans and receivables comprise non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and that the Group does not intend to sell immediately or in the short term. The category also comprises cash and balances with banks.
to the Group. Objective evidence is first assessed for financial assets that are individually significant, and individually and collectively for financial assets not individually significant.
If, in a subsequent period, the amount of the impairment loss decreases, and the decrease can objectively be related to an event occurring after the impairment was recognised (e.g. the default status is removed), the previously recognised impairment loss shall be reversed through profit or loss.
The assessment is done case by case and with consideration paid not only to qualitative criteria but also historical changes in the value of an equity as well as time period during which the fair value of an equity instrument has been lower than the acquisition cost. In Sampo Group, the impairment is normally assessed to be significant, if the fair value of a listed equity or participation decreases below the average acquisition cost by 20 per cent and prolonged, when the fair value has been lower than the acquisition cost for over 12 months.
An impairment on equity funds is recognised in line with the principles above when the starting year of the fund is at least 10 years old and both the carrying amount and fair value of the fund is maximum EUR 500,000. In these cases both the fair value and the carrying amount are booked to zero. An impairment is only performed to those funds for which the benchmarks are met in all Sampo
If the value keeps decreasing below the book value, an impairment loss is recognised through profit or loss, even if the decline is less than 20 per cent.
Derivative instruments which are designated as hedges and are effective as such are measured at fair value. The effective part of the change in fair value is recognised in other comprehensive income. The remaining ineffective part is recognised in profit or loss.
All lease contracts are primarily recognised in the balance sheet in accordance with IFRS 16 Leases. The only optional exemptions include certain short-term or low-value contracts for which the lease payments can be recognised as an expense on a straight-line basis over the lease term.
Depreciations on right-of-use assets and interests on the lease liabilities are recognised in the p/l.
Goodwill is measured at historical cost less accumulated impairment losses. Goodwill is not amortised. Instead, it is tested at least annually for impairment.
IT software and other intangible assets, whether procured externally or internally generated, are recognised in the balance sheet as intangible assets with finite useful lives, if it is probable that the expected future economic benefits that are attributable to the assets will flow to the Group and the cost of the assets can be measured reliably. The cost of internally generated intangible assets is determined as the sum of all costs directly attributable to the assets. Research costs are recognised as expenses in profit or loss as they are incurred. Costs arising from
Items of property, plant and equipment are depreciated on a straight-line basis over their estimated useful life. In most cases, the residual value is estimated at zero. Land is not depreciated. Estimates of useful life are reviewed at financial year-ends and the useful life is adjusted if the estimates change significantly. The estimated useful lives by asset class are as follows: Buildings 20–50 years
exceeds the carrying amount, the impairment loss is reversed, but no more than to the carrying amount which it would have been without recognition of the impairment loss. Impairment losses recognised for goodwill are not reversed.
A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the Group can reliably estimate the amount of the obligation. If it is expected that some or all of the expenditure required to settle the provision will be reimbursed by another party, the reimbursement will be treated as a separate asset only when it is virtually certain that the
Sampo treats the liabilities arising from contracts in the first phase of the standard according to the national accounting standards.
Insurance liabilities, consisting of the liability for unearned premiums and unexpired risks and for claims outstanding, correspond to the obligations under insurance contracts.
The liability 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 liability 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 liability for unearned premiums must be augmented by a provision for unexpired risks. Calculation of the liability for unexpired risks must also take into account instalment premiums not yet due.
The liability for claims outstanding is intended to cover the anticipated future payments of all claims incurred, including claims not yet reported to the company; i.e. the
IBNR (incurred but not reported) provision. The liability for claims outstanding includes claims payments plus all estimated costs of claim settlements.
In If, the liability for claims outstanding is not discounted to present value, with the exception of provisions for vested annuities. Topdanmark discounts the whole liability. In Hastings, the liability is not discounted, except for claims that have to do with certain large bodily injury. Mandatum does not discount anything.
The provision for unearned premiums is, for the most part, calculated on a strictly proportional basis over time
All contracts, except unit-linked contracts and the assumed reinsurance, include DPF. In those unit-linked contracts which are not insurance contracts, the policyholder has the possibility to transfer the return on savings from unit-linked schemes to guaranteed interest with DPF.
Insurance Companies’ Act, the Principle of Fairness must be observed in life insurance and investment contracts with a discretionary participation feature. If the solvency requirements do not prevent it, a reasonable part of the surplus has to be returned to these policies as bonuses.
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
During the financial year, Sampo had four valid sharebased incentive schemes settled in cash (the long-term incentive schemes 2014 II, 2017 I, 2017 II and 2020 I for the management and key employees). Topdanmark had one mainly share-settled incentive scheme for the executive board and senior executives during the financial year. At the time of joining the Group, Hastings had equity-settled share-based incentive schemes that were offered to be replaced by cash-settled schemes upon the acquisition.
More information on the different incentive schemes of the Group companies in note 35 Incentive schemes.
Deferred tax is calculated by using the enacted tax rates prior to the balance sheet date. A deferred tax asset is recognised to the extent that it is probable that future taxable income will be available against which a temporary difference can be utilised.
Cash and cash equivalents comprise cash and short-term deposits (3 months).
the key uncertainties related to balance sheet estimates are related, for example, to assumptions used in actuarial calculations, determination of fair values of non-quoted financial assets and liabilities and investment property and determination of the impairment of financial assets and intangible assets. From Sampo’s perspective, accounting policies concerning these areas require most significant use of estimates and assumptions.
Goodwill, intangible assets not yet available for use, and intangible assets with an indefinite useful life are tested for impairment at least annually. The recoverable amounts from cash-generating units have mainly been determined using calculations based on the value in use.
(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 2023. 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.
IFRS 17 Insurance Contracts (effective for annual periods beginning on 1 Jan 2023 or after) superseding IFRS 4, will have an impact on the insurance liabilities valuation, and as a result, the insurance companies have been given additional options regarding the adoption of IFRS 9. If certain preconditions regarding the insurance liabilities are met, the company may apply the so-called temporary exception option and defer the implementation until the adoption of IFRS 17 standard, at the latest on annual period beginning on 1 Jan 2023. The temporary exemption may be applied, if the Group’s amount of insurance liabilities is greater than 90 per cent of the total amount of liabilities. The application is also possible, if the ratio is greater than 80 per cent, and the Group does not engage in a significant activity unconnected with insurance.
IFRS 9 standard at the same time with the upcoming IFRS
The Group’s associate Nordea has applied IFRS 9 standard in its financial statements from 1 January 2018 on.
The reported areas are Finland, Sweden, Norway, Denmark, UK and the Baltic countries.
EURm If Topdanmark Hastings 16 Nov–31 Dec Mandatum Holding Elimination Group
Total items not reclassifiable to profit or loss, net of tax 0 - - - - - 0
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 866 134 -13 213 -766 - 434
Change in liabilities for insurance and investment contracts -87 -1,864 -971 - 3 -2,919
Consolidated Income Statement by Business Segment for year ended 31 December 2019
Consolidated Balance Sheet by Business Segment at 31 December 2020 EURm If Topdanmark Hastings Mandatum Holding Elimination Group Assets
Investments related to unit-linked insurance contracts - 6,047 - 8,805 - -16 14,837
Liabilities for unit-linked insurance and investment contracts - 7,536 - 8,765 - -16 16,285
Investments related to unit-linked insurance - 4,832 8,170 - -27 12,975
Reinsurers' share of insurance liabilities 210 78 1 - - 289
Material Partly-Owned Subsidiaries Equity interest held by non-controlling interests Name Country 2020 2019 Topdanmark A/S Denmark 52.0 51.8
The acquisition related costs of approximately EUR -21 million were recognised in other operating expenses, of which EUR -13 in the Holding segment and EUR -8 million in Hastings' segment.
Hastings, founded in 1996, is one of the leading property and casualty insurance providers to the UK market, with approximately 3 million live customer policies and employing over 3,500 people. Hastings provides products and services to UK car, bike, van and home insurance customer with around 90 percent of policies directly underwritten by Hasting' Gibraltar-based underwriting business, Advantage Insurance Company Limited.
Sampo has a strategic ambition to expand further into non-life insurance, a segment where it has extensive experience and expertise. Sampo has leading market positions in the Nordic markets and geographical expansion is a part of the strategy. Sampo believes that the UK offers an attractive opportunity for this. In addition, the acquisition of Hastings offers an interesting platform in one of the most digitally advanced markets globally.
The preliminary fair values of consolidated assets and liabilities as of 16 November 2020 are disclosed below.
The acquired company has been consolidated in the Group as of 1 January, 2020. The company's revenue amounted to
In December 2019, the Group's subsidiary If Insurance Holding Ltd (publ) acquired the whole capital stock of a Norwegian
Group insurance premiums written total, net 1) 8,375 8,749 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 -12 (84) transferred from the fair value reserve.
Included in gains/losses from financial assets available-for-sale is a net gain of EURm 94 (236) transferred from the fair value reserve.
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 and unrealised and realised changes in fair values. Unrealised fair value changes for financial assets availablefor -sale are recorded in other comprehensive income and presented in the fair value reserve in equity. The changes in the fair value reserve are disclosed in the Statement of changes 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.
Group claims incurred, total -5,443 -5,466 4 Change in liabilities for insurance and investment contracts
Group other operating expenses, total -754 -653 *) From leases not recognised in the balance sheet
Asset management costs (investment expenses) -17 -18 8 Earnings per share
Weighted average number of shares outstanding during the period 555 555
9 Financial assets and liabilities Financial assets and liabilities have been categorised in accordance with IAS 39.9. In the table are also included interest income and expenses, realised and unrealised gains and losses recognised in P/L, impairment losses and dividend income arising from those assets and liabilities. The financial assets in the table include balance sheet items Financial assets and Cash and cash equivalents.
Net carrying amount at 31 December 141 115 46 302 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.
More information on leases in note 31 Other liabilities. 2) Equipment in different segments comprise IT equipment and furniture.
Expenses arising from investment property - direct operating expenses arising from investment property generating rental income during the period -17 -22 - direct operating expenses arising from investment property not generating rental income during the period -3 -2
Fair values for the Group's investment property are entirely determined by the Group based on the market evidence. The determination and hierarchy of financial assets and liabilities at fair value are disclosed in note 17. Based on the principles of this determination, the investment property falls under levels 2 and 3.
Forecasts for If, approved by the management, cover years 2021–2023. The cash flows beyond that have been extrapolated using a 2 per cent growth rate. A 2 per cent growth rate for years beyond 2030 has been used for the for Mandatum Life as well, as it is believed to be close to the anticipated inflation in both cases.
In Mandatum Life, the recoverable amount exceeds its carrying amount by some EUR 320 million. With the calculation method used, e.g. an increase of about 1 per cent point in the cost of equity combined with a long term 0 per cent growth rate could lead to a situation where the recoverable amount of the entity would equal its carrying amount.
Associates that have been accounted for by the equity method at 31 December 2020
Komplementarselskabet Ottilia København ApS Denmark 0 50.00 *) Published price quatation
Impairment loss on Nordea shares -899 - -899 - - -
The carrying amount of investments in associates included goodwill EUR 6 million (922), including goodwill from the Nordea acquisition EUR - million (915).
Dividend income from the associate during the financial year - 594
The Group uses derivative instruments for trading and for hedging purposes. The derivatives used are foreign exchange, interest rate and equity derivatives. During the financial year, fair value hedging has been applied in Mandatum and cash flow hedges in Hastings.
Currency options, bought and sold 147 3 1 154 2 0
Total derivatives held for hedging 346 13 - 364 3 -
The table has been prepared based on current preliminary analysis on business models. The final classification may change before the implementation on 1 January 2023, when the Group finanalises its more detailed analysis.
In level 3, the measurement is based on other inputs rather than observable market data. The majority of Sampo Group’s level 3 assets are private equity and alternative funds.
EURm Level 1 Level 2 Level 3 Total FINANCIAL ASSETS AT 31 DECEMBER 2020
Total financial assets measured at fair value 27,802 6,997 3,947 38,747
EURm Level 1 Level 2 Level 3 Total FINANCIAL LIABILITIES AT 31 DECEMBER 2020
EURm Level 1 Level 2 Level 3 Total FINANCIAL ASSETS AT 31 DECEMBER 2019
Total financial liabilities measured at fair value - 168 9 178
Total gains or losses included in profit and loss for assets held at the end of the financial year -74 61 -13
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 EUR -3 million (-4) for the debt instruments, and EUR -259 million (-252) 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 2.3 per cent (2.1).
Depreciation differences and untaxed reserves 183 - 0 - 0 183
In Sampo plc, EUR 43 million of deferred tax asset has not been recognised on unused tax losses. The first losses will expire at the end of fiscal year 2020.
Exchange differences -2 0 24 Tax effects relating to components of other comprehensive income
Provisions for annuities and sickness benefits 3,098 8 3,090 3,045 8 3,037
Current estimate of total claims costs 22,678 2,729 2,652 2,668 2,612 2,624 2,699 2,792 3,033 3,066 3,175 50,727
Current estimate of total claims costs 21,404 2,517 2,481 2,620 2,548 2,580 2,626 2,733 2,956 2,992 2,987 48,443
Provision reported in the balance sheet 2,552 145 158 202 201 222 242 299 380 494 1,257 6,152 of which established vested annuities 1,658 74 79 82 81 74 63 61 77 31 6 2,285
At the close of the claims year 968 862 1,015 894 887 869 797 860 877 916 8,855
At the close of the claims year 828 810 858 841 831 807 771 809 844 877 8,174
Current estimate of total claims costs 802 790 826 793 813 770 799 841 863 877 8,174
At the close of the claims year 1,035 267 350 422 532 674 780 868 951 908 6,788
Gross outstanding claims liabilities, net of salvage and subrogation recoveries 23 14 24 14 50 104 191 270 396 626 1,712
Net outstanding claims liabilities, net of salvage and subrogation recoveries 816 -1 0 4 7 25 45 82 121 252 536
Life insurance liabilities from investment contracts at 31 December 2020, total 26
The liabilities at 1 January and at 31 December include the future bonus reserves and the effect of the reserve for the decreased discount rate. The calculation is based on items before reinsurers' share. More details on the insurance liabilities are presented in the risk management note 40.
Group consolidated insurance and investment contracts, total 19,956 18,041 27 Liabilities from unit-linked insurance and investment contracts
28 Financial liabilities The segment financial liabilities include subordinated debts, derivatives, debt securities in issue and other financial liabilities.
Mandatum Life issued in 2002 EURm 100 Capital Notes. The loan is perpetual and pays floating rate interest. The interest is payable only from distributable capital. The loan is repayable only with the consent of the Insurance Supervisory Authority and at the earliest on 2012 or any interest payment date after that. The loan is wholly subscribed by Sampo Plc.
Subordinated loan, 2019 (nominal value EURm 500) 30 years 3.38% 495 494
EURm 1 January 2020 Cash flows Exchange differences Other 31 December 2020
EURm 7 (8) 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 12 (11) for law suits and other uncertain liabilities.
Present value of estimated pension obligation, including social costs 337 330
Interest expense on net pension liability 1 1 2 0 1 1
Remeasurement of the net pension liability -8 8 0 54 3 57
Total in comprehensive income statement 0 10 10 59 6 65
Present value of estimated pension liability, including social costs 283 54 337 275 55 330
Average duration of pension liabilities 21 years 22 years 13 years 12 years
Fair value of plan assets 239 - 239 231 - 231
Reconciliation of plan assets: At the beginning of the year 231 217
Item Other includes e.g. withholding taxes, social expenses related to Workers Compensation insurance policies and employee benefits and unpaid premium taxes.
The non-current share of other liabilities is EUR 219 million (172).
*) The total effect of leases on the statement of cashflows was EUR -39 million (-25). Non-cash flow additions from IFRS 16 leases to the balance sheet items were EUR 42 million (27).
The Group applied the modified retrospective approach allowed by the standard from 1 January 2019. The comparison year is not disclosed and the right-of-use asset equals the lease liability at the time of the transition.
The lease liabilities are discounted at a company level. The applied discount rates vary between -0.04 - 2.2%.
Expenses from short-term and low-value lease liabilities -10 -10 32 Contingent liabilities and commitments
In connection with implementation of a new customer and core system, Topdanmark Forsikring A/S has undertaken to give support towards specific suppliers to fulfill Topdanmark EDB IV ApS' obligations in accordance with the contracts.
Entities within Hastings Group are subject to review by tax authorities in the UK and Gibraltar. In 2016, HMRC commenced an on-going discussions regarding aspects of Hastings' business model and the allocation of certain elements of its profit between different group entities. If the authorities do not accept the filed tax position, it is possible that the group will have an additional tax liability. The ongoing nature of the enquiry means that it is difficult to predict the potential outcome. Based on the information received from HMRC to date, management does not believe that it is probable that any additional amount will ultimately become payable. Further quantification has therefore not been considered practicable in accordance with IAS 37 Provisions, contingent liabilities and contingent assets.
The Board of Directors of Sampo plc has decided on the long-term incentive schemes 2014 I - 2020 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 140 persons were included in the schemes at the end of year 2020.
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 and 2020 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 BlackScholes pricing model.
Price of Sampo A at terms approval date *) 37.22 44.02 44.02 30.30
Total cost for the financial period, EURm (incl. social costs) 2 *) Grant dates vary **) Trade-weighted average for ten trading days from the approval of terms
Executive board Senior executives Resigned Total Average market price on date of exercise 2020 40
Restricted Stock Awards Upon acquisition of HGH, certain key management personnel were granted HGC administered replacement cash awards conditional upon continued employment with the Group. No awards were granted during the period. The expected life is the contractual life of the award adjusted to reflect management’s best estimate of holder behaviour. There were cash awards with a value of EUR 4 million outstanding at 31 December 2020.
Ernst & Young -3 0 37 Legal proceedings There are a number of legal proceedings against the Group companies outstanding on 31 December 2020, arising in the ordinary course of business. The companies estimate it unlikely that any significant loss will arise from these proceedings.
Name Group holding % Carrying amount Topdanmark Livsforsikring A/S 100 498
39 Events after the balance sheet date In the meeting of 11 Feb 2021, the Board of Directors decided to propose at the Annual General Meeting on 19 May 2021 a dividend distribution of EUR 1.70 per share, or total EUR 944,098,145.00, for 2020. The dividends to be paid will be accounted for in the equity in 2021 as a deduction of retained earnings.
Due to the predominantly external nature of the drivers and development in the competitive environment, managing business risks is the responsibility of the executive level senior management. Proactive strategic decision making is the central tool in managing business risks, which relate to the competitive advantage. The maintenance of internal operational flexibility – i.e. the ability to adjust the business model and cost structure when needed – is also an efficient tool in managing business risks.
Business risks do not have the regulatory capital charge, although they may be a material source of earnings volatility. Because of this, business risks may have an effect on the amount and structure of the actual capital base, if deemed prudent in the existing business environment.
Group companies. Investors and authorities are increasing their focus on corporate responsibility, but also consumers and employees are emphasizing these topics when choosing a brand or an employer.
Group’s Risks In Sampo Group, the risks associated with business activities fall into three main categories as shown in the picture Classification of Risks in Sampo Group: business risks, reputational risk and risks inherent in the business operations. The first two risk classes are only briefly described in this Risk Management Disclosure as the focus is on the third risk class.
Group companies, which are committed to providing a diverse, non-discriminatory, open and agreeable working environment where everyone is treated fairly and equally.
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.
Responsible investment management and operations are important in managing investment risks and in mitigating potential adverse impacts on the Group’s reputation.
(chronic risks) and extreme weather events such as storms, floods, wildfires, or droughts (acute risks). Transition risks refer to risks arising from the shift to a low carbon economy, for example changes in technology, legislation, and consumer sentiment. The strength of the risks depends on the trajectory of global warming. A scenario in line with the Paris Agreement limiting the temperature rise to 1.5°C would have moderate consequences, whereas >3°C and 5°C scenarios would have severe consequences for industry, infrastructure and public health. Especially in geographically vulnerable regions, abandonment of low-lying coastal areas due to rising sea levels and food and water shortages, can lead to large-scale migration and outbreaks of diseases.
Investments are particularly exposed to climate-related risks in the form of losses incurred from extreme weather events and possible revaluation of assets as operating models in carbon intense sectors change. Sampo Group companies analyze the carbon footprint of their investments and their alignment with international climate goals annually.
The Sampo Group companies also help their customers to manage climate-related risks. Extreme weather conditions can, for example, damage properties, lead to crop failure and business interruption. Loss prevention is an essential
Reputational risk refers to the risk that adverse publicity regarding the company’s business practices or associations, whether accurate or not, causes a loss of confidence in the integrity of the institution. Reputational risk is often a consequence of a materialized operational or compliance risk and often manifests as a deterioration of reputation amongst customers and other stakeholders.
Group is consciously taking certain risks in order to generate earnings. These earnings risks are carefully selected and actively managed. Underwriting risks are priced to reflect their inherent risk levels and the expected return of investments is compared to the related risks. Furthermore, earnings related risk exposures are adjusted continuously and their impact on the capital need is assessed regularly.
Successful management of underwriting risks and investment portfolio market risks is the main source of earnings for Sampo Group companies. Day-to-day management of these risks, i.e. maintaining them within given limits and authorizations is the responsibility of the business areas and the investment unit.
– large single name or industry specific insurance or investment exposures – or across activities when a single name or an industry is contributing widely to the profitability and risks of the company through both insurance and investment activities.
Concentration risk may also materialize indirectly when profitability and the capital position react similarly to general economic developments or to structural changes in the institutional environment in different areas of business.
• Intellectual capital in the form of comprehensive proprietary actuarial data and analytical tools to convert this data into information.
• Risk return ratios and sustainability issues of separate investments opportunities are carefully analyzed.
At the Group level, the risk management focus is on the 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 the
When the above-mentioned core activities are successfully implemented, a balance between profits, risks and capitalization can be achieved both at company and the Group level and shareholder value can be created.
Business, If, 31 December 2020, the If insurance portfolio is well diversified across Business Areas, Countries and
Breakdown of Gross Written Premiums If, 31 December 2020, total EUR 4,823 million
● Private 2,750 ● Commercial 1,220 ● Industrial 700 ● Baltic 152
● Norway 1,453 ● Sweden 1,727 ● Finland 999 ● Denmark 492 ● Baltic 152 ● United Kingdom 0
● Liability 308 ● Accident 647 ● Property 1,606 ● Marine, aviation, transport 128
The Business Areas manage the underwriting risk on a day-to-day basis. A crucial factor affecting the profitability and risk of non-life insurance operations is the ability to accurately estimate future claims and expenses and thereby correctly price insurance contracts. The premiums within the Business Area Private and the premiums for smaller risks within the Business Area Commercial are set through tariffs. The underwriting of risks in the
Business Area Industrial and of more complex risks within the Business Area Commercial 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.
If’s Reinsurance Policy stipulates guidelines for the purchase of reinsurance. The need and optimal choice of reinsurance is evaluated by considering the expected cost versus the benefit of the reinsurance, the impact on result volatility and capital requirements. The main tool for this evaluation is If’s internal model in which frequency claims, large claims and natural catastrophes are modelled.
100 million (approximately EUR 9.5 million) and SEK 250 million (approximately EUR 23.8 million) per risk and SEK
Sensitivity Test of Underwriting Result If, 31 December 2020 and 31 December 2019
Change in current level 2020 2019 Combined ratio, business area Private 76.0% +/- 1 percentage point +/- 27 +/- 26
Combined ratio, business area Baltics 86.6% +/- 1 percentage point +/- 1 +/- 1
Net claims incurred (EURm) 2,975 +/- 1 per cent +/- 30 +/- 30
Ceded written premiums (EURm) 234 +/- 10 per cent +/- 2 +/- 20
The Actuarial Committee is a preparatory and advisory board for If Chief Actuary. The Committee secures a comprehensive view over reserve risk, discusses and gives recommendations on policies and guidelines for calculating technical provisions.
Major Geographical Area, If, 31 December 2020, the size and duration of If’s technical provisions are presented by
Lines of Business, which increases the amount of technical provisions. The duration of the provisions, and thus the sensitivity to changes in interest rates, varies with each product portfolio. The weighted average duration for 2020 across the product portfolios was 6.5 years.
affect the annual amount and duration of annuities. An increased retirement age, through for instance a political decision, will increase the present value of annuities as those decrease or expire at retirement. An increase in life expectancy will increase the duration and present value of annuities. The present value of annuities is also sensitive to changes in the discount rates used to discount the nominal cash flows. The most material annuity balances in If with significant sensitivity to discount rates refer to the business in Finland and Sweden.
The 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 26 in the
The anticipated inflation trend is considered when calculating all provisions and is of the utmost importance for claims settled over a long period of time, such as Motor other and MTPL, as well as Workers’ 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 and MTPL as well as Workers’
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 non-life and life provisions, established actuarial and statistical methods are used.
Money market securities and cash 516 5% 0.0 454 4% 0.1
11,251 million (11,109). A large part of the fixed income investments was at 31 December 2020 concentrated to financial institutions. The role of real estate, private equity, and other alternative investments is immaterial.
If’s investment management strategy is conservative, with a low equity share and low fixed-income duration.
Spread risk and equity risk are derived only from the asset side of the balance sheet. Exposures in fixed income and
Exposures by Sector, Asset Class and Rating If, 31 December 2020
In the equity portfolio, most of the equity investments are selectively chosen direct investments in the Nordic markets. When investing in non-Nordic equities, funds or other assets, third party managed investments are mainly used. The changes in equity positions during the year can be seen in the graph Breakdown of Listed Equity
The ALM risk is considered through the risk appetite framework and its management and governance are based on If’s Investment Policies. In general, to maintain the ALM risk within the overall risk appetite, the cash flows of insurance liabilities are matched by investing in fixed income instruments denominated in the same currencies as the liabilities. Derivatives can be used to manage the ALM risk.
● Denmark 0 ● Norway 117 ● Sweden 748 ● Finland 0 ● Western Europe 139
● Eastern Europe 0 ● North America 83 ● Latin America 48 ● Asia 146
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 operations is hedged to the base currency on a regular 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 the Swedish krona are shown in the table Transaction Risk Position, If, 31 December 2020.
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.
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 analyzed and reported to the ORSA Committee.
Counterparty Default Risks In If, the three major sources of counterparty risk are reinsurance, financial derivatives and other receivables.
Cash flows of which interest rate swaps 0 0 0 0 0 0 0 0 0 0 of which interest rate swaps 44 0 44 -44 0 0 0 0 0 0
Internal Reinsurance Policy. The Chairman shall decide on the contents of reporting from the Committee. At least three times per year, and as needed in case of adverse development, the reinsurance credit risk exposure
The distribution of reinsurance receivables and reinsurers ’ portion of outstanding claims on 31 December 2020 per rating category is presented in the table Reinsurance
Reinsurance Security Committee shall decide on the contents of reporting from the Committee. At least three times per year, and as needed in case of adverse development, the reinsurance credit risk exposure (estimated and materialized) as well as deviations from the Reinsurance
A-. The ten largest individual reinsurance recoverables amounted to EUR 171 million, representing 54 per cent of the total reinsurance recoverables including captives and statutory pooled solutions.
Because the recoverables reported above are typically not covered by collaterals the whole amount is exposed to counterparty risk.
If’s Reinsurance Policy sets requirements for the reinsurers ’ minimum credit ratings and the maximum exposure to individual reinsurers. Also, the own credit-analysis plays a central role when counterparties are selected.
Non-Life Underwriting Risks As shown in the graph Breakdown of Gross Written Premiums by Business Area, Country and Line of Business,
Topdanmark Non-Life, 2020, Topdanmark’s insurance portfolio is diversified across Business Areas and Lines of
Breakdown of Gross Written Premiums Topdanmark Non-Life, 2020, total EUR 1,315 million
The historical profitability of major SME customers with individual insurance schemes is monitored using customer assessment systems. These assessment systems enable Topdanmark to achieve accurate information about income, claims expenses, combined ratio etc. for each customer.
Combined ratio, business area Commercial 82.7% +/- 1 percentage point +/- 4.8 +/-4.6
Net claims incurred (EURm) 846 +/- 1 per cent +/- 6.6 +/-6.0
Ceded written premiums (EURm) 79 +/- 10 per cent +/- 6.2 +/-6.3 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.
Composition of Non-Life Provisions for Outstanding Claims Topdanmark, 31 December 2020 and 31 December 2019
Due to the longer period of claims settlement, the risk profile of the long-tail lines of business are generally more uncertain 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 ten to fifteen years.
The reserve 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 the general development in prices or due to a change in judicial practice or legislation. The sufficiency of the provisions is tested in key lines by calculating the provisions using alternative models as well, and then comparing the compensation with information from external sources, primarily statistical material from the Danish Labour
The risk inherent in the life business is firstly related to the with profit technical provisions. As the majority of new contracts are written as unit-linked contracts, the risk will not increase as much as the volume of premiums and total provisions.
The loss-absorbing buffers are a crucial part of the with profit concept in leveling of yields and claims over time.
Declines in the collective bonus potential are most frequent, due to the investment return being lower than the annual addition of interest to deposits.
Disability risk is the risk of increased disability intensity or declines in the rates of resumption of work. Losses may incur due to an increase in disability frequency or due to inadequate health evaluation when the policy is written.
Extra costs, due to longer lifetimes, will be partially covered by individual and collective bonus potential. The remainder affects the result for the year and consequently shareholders' equity.
The monitoring of whether the risk reduction methods are still effective is i.a. via continuous follow-up of the
EURm after tax 2020 2019 * 35% increase first year, subsequently 25%, coincident with 20% decline in reactivation rates.
Livsforsikring, so that the company can continue to offer attractive savings products to its clients with competitive returns in relation to the investment risks accepted by the clients.
As described earlier, in life insurance different contribution groups have their own investment strategies and their loss absorbing buffers and hence it is relevant to assess allocations and returns of these assets only in relation to their respective contribution groups. However, the company bears some market risk and thus the non-life and life investment allocations are shown in the table Investment Allocations Excluding Unit-Linked, Topdanmark, 31 December 2020 and 31 December 2019 without assets covering unit-linked liabilities.
Investment Allocations Excluding Unit-Linked Topdanmark, 31 December 2020 and 31 December 2019
Money market securities and cash 192 8% 127 5% 444 8% 241 5%
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 total 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.
When assessing the value and sensitivity of insurance provisions Topdanmark uses the Solvency II discount curve that has its basis on market yield curve with volatility adjustment (“VA”). The VA component of DKK yield curve comprises a corrective element based on the spreads of
Generally, the interest rate risk is limited and controlled by investing in interest-bearing assets in order to reduce the overall interest rate exposure of the assets and liabilities to the desired level. Therefore, the Danish mortgage bonds and government bonds have a central role in the asset portfolios. To further reduce the interest rate sensitivity of the balance sheet, interest rate swaps have been used for hedging purposes.
The real estates are all located in Denmark, with the material part in the areas of Copenhagen and Aarhus.
● Eastern Europe 0 ● North America 232 ● Latin America 0 ● Far East 2
and it was DKK 2,169.4 million (in EUR 291.6 million) on 31
In practice, the investment assets are the only source of currency risk while the insurance liabilities are in Danish kroner. The currency risk is mitigated by derivatives and net exposures in different currencies are minor except in the euro.
An expected higher future inflation rate would generally be included in the provisions with a certain time delay, while at the same time the result would be impacted by higher future indexation of premiums. To reduce the risk of inflation within Workers' compensation and Illness and Accident insurance, Topdanmark uses index-linked bonds and derivatives to hedge a significant proportion of the expected cash flows sensitive to future inflation.
The following table is a summary of selected market risk sensitivities. For example, it can be seen from the table that the net effect of 1 percentage point parallel change in interest rates would be a less than 10 per cent drop in equity or property prices.
Market Risk Sensitivities Topdanmark, 31 December 2020 and 31 December 2019
Life insurance provisions for unit-linked products are covered by corresponding investment assets and therefore are not stated in the table.
Counterparty Default Risks Topdanmark is exposed to counterparty risk in both its insurance and investment activities. The default risk related to fixed income and equity investments is covered by spread-risk and equity-risk models in SCR calculations and hence they are not discussed in this context.
The main sources of counterparty risk are deposits made to individual banks, derivative contracts with banks and current receivables from reinsurance companies with the addition of potential receivables that will arise in case of a 1-in-200-year catastrophe event. Topdanmark's counterparty risk is assessed by the SCR standard formula.
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.
Underwriting Risks Advantage is Hastings’ Gibraltar-based general insurance underwriting company providing motor and home insurance products to the United Kingdom (UK) market.
For Solvency II reporting purposes the lines of business are: • Motor vehicle liability insurance (Motor liability)
Breakdown of Gross Written Premiums Hastings, 31 December 2020, total EUR 103 million
Reserve Risk Advantage does not take significant reserve risk and holds an internal risk margin to a 75% confidence level versus internal best estimate. Since reserving is subject to expert judgment the Chief Actuary calculates the best estimate, the Senior Actuary verifies the data, appropriateness of techniques utilized and assumptions used to create the best estimate and an additional best estimate is created by a fully independent third party. Advantage has a series of monthly, quarterly and semi-annual controls to ensure reserve adequacy.
The Gross Written Premiums (GWP) for the last 6 weeks of 2020 amounted to EUR 103 million.
EURm 2020 Nominal provisions Inflation increase Increase by 1 percentage point 22.7
Periodic Payment Orders (PPOs) Decrease in mortality Life expectancy increase by 1 year 0.1
Market Risks Investment performance in late Q1 and Q2 2020 was impacted only modestly as a result of the pandemic, reflecting the very low risk portfolio structure.
Advantage Board works with the investment managers and investment consultants to maximize return whilst minimizing risk and preserving capital. The criteria for the portfolio structure, classes of holdings and individual limits are consistent with a very low risk appetite. These investment rules are monitored on a quarterly basis internally and using an external consultancy. The monitoring outputs are provided to the Investment Committee and
Investment Funds in which Advantage has a share, both for hedging purposes and to generate additional return.
Exposures by Sector, Asset Class and Rating Hastings, 31 December 2020
Underwriting Risks The development of insurance liabilities during 2020 is shown in the table Analysis of the Change in Provisions
To better protect itself, and where possible, Advantage aims to: • place with parent entities within reinsurance groups to mitigate counterparty risk in accepting reinsurance from small regional branches; • introduce collateralization or cut through terms and/or parental guarantees to mitigate counterparty risk; • ensure special termination clauses are in place in the event of rating downgrade or reorganization of reinsurance groups to which Advantage is exposed.
Cash flows of which interest rate swaps 0 0 0 0 0 0 0 0 0 of which interest rate swaps 0 0 0 0 0 0 0 0 0
Reinsurance Recoverables Hastings, 31 December 2020 Rating Total, EURm % of total
Analysis of the Change in Provisions Before Reinsurance Mandatum Life, 31 December 2020
Biometric Risks Mandatum Life’s main biometric risks are longevity, mortality and disability. In general, the long duration of policies and Mandatum Life’s restricted right to change policy terms and conditions and tariffs increase 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 2020 technical provision by EUR 78 million (86) including a EUR 65 million longevity reserve for the segregated group pension portfolio. The cumulative longevity risk result has been positive since these revisions.
possible pandemic is seen as the most significant risk that could adversely affect the mortality risk result. However, during the year 2020 COVID-19 did not have any significant effect on mortality risk result. The reason for this is that
COVID-19 has the most significant incremental effect of mortality for elder people and in general, persons who have insured their life are younger.
Claims Ratios After Reinsurance Mandatum Life, 31 December 2020 and 31 December 2019
maintaining the Underwriting Policy and monitoring the functioning of the risk selection and claims processes.
Life’s with profit business i.e. that part of the business where Mandatum Life carries the investment risk. As mentioned earlier, the behavior of financial markets has also an influence on unit-linked business since normally the company’s fee income is linked to policy reserves in unit-linked policies. This risk is taken into account as part of expense risk.
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 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 contracts have been changed to accommodate improved management of reinvestment risk.
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 12.4 per cent of total investments.
Investment Allocation Mandatum Life, 31 December 2020 and 31 December 2019
Investment grade bonds and loans 1,300 23% 3.6 1,257 22% 3.5
High-yield bonds and loans 1,311 24% 3.2 1,170 21% 3.7 * Private equity also includes direct holdings in non-listed equities.
Exposures by Sector, Asset Class and Rating Mandatum Life, 31 December 2020
Mandatum Life, 31 December 2020. Counterparty default risks are described in more detail in the section
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 bonus reserve. Different control levels are based on the fixed stress scenarios of assets.
● Denmark 0 ● Norway 0 ● Sweden 0 ● Finland 517 ● Western Europe 358
● Eastern Europe 21 ● North America 192 ● Latin America 0 ● Far East 246
● Denmark 0 ● Norway 0 ● Sweden 1 ● Finland 387 ● Western Europe 430
● Eastern Europe 24 ● North America 251 ● Latin America 0 ● Far East 215
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
Solvency II SCR and are based on predetermined market 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 crossed, the Asset and Liability Committee reports to the
Board which then takes responsibility for the decisions related to the capitalization and the market risks in the balance sheet.
In Mandatum Life, transaction risk arises mainly from investments in other currencies than the euro as the company’s technical provisions are denominated in the euro. Open FX exposures are managed within given limits.
The transaction risk positions of Mandatum Life against the euro are shown in the table Transaction Risk Position,
Mandatum Life, 31 December 2020. 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.
Cash Flows According to Contractual Maturity Mandatum Life, 31 December 2020
Cash flows of which interest rate swaps 0 0 0 0 0 0 0 0 0 0 of which interest rate swaps 0 0 0 0 0 0 0 0 0 0
In Mandatum Life, the default risk of derivative counterparties is a by-product of managing market risks.
The counterparty risk of bilaterally settled derivatives is mitigated by careful selection of counterparties, by diversification of counterparties to prevent risk concentrations and by using collateral arrangements, e.g. ISDA Master
Group proactively prevents concentrations to the extent possible by segregating the duties of separate business areas. As a result, separate companies have very few overlapping areas in their underwriting and investments activities. Despite proactive strategic decisions on segregation of duties, concentrations in underwriting and investments may appear and hence liabilities and assets are monitored at the Group level to identify potential concentrations at a single company or risk factor level.
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, however, some common risk factors such as the life expectancy
The total amount of Sampo Group’s investment assets as at 31 December 2020 was EUR 27,531 million (26,820) as presented in the following graph. Mandatum Life’s and
Sampo plc's figures do not include debt instruments issued by the insurance subsidiaries. * Private Equity also includes direct holdings in non-listed equities.
If Mandatum Life Sampo plc Topdanmark 31 December 2020 Total EUR 27,531 million 31 December 2019 Total EUR 26,820 million
EURm Scenario If Topdanmark Hastings Mandatum Life Sampo plc Sampo Group
Investment activities and market risk taking are arranged pro-actively in such a way that there is no significant overlap between the whollyowned subsidiaries’ singlename risks except with regards to Nordic banks where companies have their extra funds in short-term money market assets and cash. From the asset side’s diversification perspective Topdanmark is a positive factor because the role of Danish assets is dominant in portfolios and especially the role of Danish covered bonds is central. In
Exposures by Sector, Asset Class and Rating Sampo Group, 31 December 2020
Fixed Income Investments in the Financial Sector Sampo Group Excluding Topdanmark, 31 December 2020
Topdanmark totaled EUR 3,115 million at the end of year 2020 (3,281). At the end of year 2020, the listed equity exposure of If was EUR 1,301 million (1,281). The proportion of listed equities in If’s investment portfolio was 12 per cent. In Mandatum Life, the listed equity exposure was EUR 1,335 million at the end of year 2020 (1,308) and the proportion of listed equities was 24 per cent of the investment portfolio. In Topdanmark Group, the listed equity exposure was EUR 445 million at the end of year 2020 (483). Within Topdanmark Group, the allocation to listed equity is higher in the life company. At the end of year 2020 Hastings didn’t have listed equity investments.
Nordic companies’ equities corresponds to 57 per cent of the total equity portfolio. This is in line with Sampo
Group’s investment strategy of focusing on Nordic companies. However, these Nordic companies are mainly competing in global markets, only a few are operationally purely domestic companies. Hence, the ultimate risk is not highly dependent on the Nordic economies. A
● Eastern Europe 21 ● North America 275 ● Latin America 40 ● Far East 402
● Denmark 284 ● Norway 231 ● Sweden 932 ● Finland 484 ● Western Europe 582
● Eastern Europe 24 ● North America 334 ● Latin America 48 ● Far East 362
Largest Holdings by Single Name The largest exposures by individual issuers and counterparties are presented in the table Largest Exposures by Issuer and Asset Class, Sampo Group Exluding
Ten Largest Direct High Yield and Non-rated Fixed Income Investments and Direct Listed Equity Investments Sampo Group Excluding Topdanmark, 31 December 2020
* Although Saxo Bank is not a listed company, it is a major equity investment in Sampo plc’s portfolio and is therefore included in the table.
Topdanmark and Hastings interest rate risk of the balance sheet is being actively hedged and hence Topdanmark or
Hastings are not increasing interest rate risk materially at the Group level.
Sampo Group would benefit materially in case interest rates would rise, because economic value of insurance liabilities would decrease more than value of assets backing them. At the same time the net interest income of
Balance Sheet Structure Sampo plc, 31 December 2020 and 31 December 2019
EURm 31 Dec 2020 31 Dec 2019* Assets total 11,515 11,625
Other liabilities 109 121 * Hastings is not included in the 2019 figures.
according to for example these measures: • The financial leverage measured as the portion of debt within all liabilities was 34 (34) per cent.
Group companies (324) and a part of other investment assets (824) can be sold in case liquidity is needed. Shortterm liquidity can be considered to be adequate.
Currently Sampo Group has a capital buffer in excess of the Solvency Capital Requirement. The subordinated loans presented in the table Balance Sheet Structure,
Apart from Nordea, they are eliminated from Group’s own funds. In case these assets would be sold, in addition to liquidity in Sampo plc, also own funds and Sampo Group solvency ratio would increase.
When Sampo plc is managing its funding, capital structure and liquidity, it takes into account that some of its operative companies have other base currencies
than the euro, and that all its operative business areas are exposed to low interest rates. These risks may affect
Nordea’s market value effect the level of capitalization in Sampo Group, and investment in subordinated loans issued by the Group companies are eliminated from own funds, decreasing solvency.
However, internally no capital need is set for translation risk, because it is realized only when a sub-group is divested.
– expected profits and their volatility, business growth prospects and ability to issue Solvency II compliant capital instruments – there are Group level factors that are also relevant when considering the size of the Group level buffer. The most material Group level factors affecting the size of the buffer are correlation of sub-groups’ 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 -200 -127 *) Investments include both investment property and financial assets.
Notes to the Liabilities 10–13 10 Movements in the parent company's equity ............... 192 13 Accruals and deferred income .......................................... 193
Note to the Income Taxes 14 14 Deferred tax assets and liabilities .................................... 193
Note to the Shares Held 20 20 Shares held as of 31 Dec, 2020 ........................................ 195
Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts 189FINANCIAL STATEMENTS 2020
6 Other shares and participations 2020 Fair value changes 2019 Fair value changes
Avalaible-for-sale equity securities 786 -15 -9 973 0 -131 7 Other investment receivables 2020 Fair value changes 2019 Fair value changes
EURm Share capital Fair value reserve Invested unrestricted capital Other reserves Retained earnings Total
Guarantees for derivate contracts 29 20 13 Accruals and deferred income
Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts 193FINANCIAL STATEMENTS 2020
Over one year but not more than five years 3 4
Note to the Shares Held 20 20 Shares held as of 31 Dec, 2020
Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts 195FINANCIAL STATEMENTS 2020
Responsibilities for the Audit of Financial Statements section of our report.
In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies are in compliance with laws and regulations applicable in Finland regarding these services, and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014.
At 31.12.2020 the Group has insurance contract liabilities amounting to mEUR 36,241
The life insurance contract liabilities are based on estimate of future claims payments.
The estimate is based on assumptions which include uncertainty. Changes in assumptions can result in material impacts to the valuation of the liabilities. Key assumption areas include interest rate and life expectancy of policy holders.
The Group’s investment portfolio excluding investments in associates amounts to mEUR 39,257 (2019: mEUR 36,418 which represents 69% 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 7,342 and level 3 assets amounting to mEUR 4,113 (refer to note 17).
This matter is a significant risk of material misstatement referred to in EU Regulation No 537/2014, point (c) of Article 10(2).
The value of the Nordea shares in the consolidated balance sheet amounts to mEUR 4,822
Our audit procedures included, among others, involving our valuation specialists to assist us in evaluating the assumptions and methodologies used by the Group in preparing the impairment test and evaluating the analysis prepared by the Group, which concludes that the Group still exercises significant influence, as defined in IAS
Assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at acquisition date fair value. Management judgement relates specifically to determining the fair value of acquired assets and liabilities, in particular determining the fair values of separately identifiable intangible assets such as customer contracts, technology and trademarks.
The significant business combination is a key audit matter as it involves valuation processes and methods, and judgments made by management.
Our audit procedures included, among others, assessing together with our valuation specialists the valuation processes and methodologies to identify acquired assets and liabilities and to determine the fair value of these.
Directors and the Managing Director are responsible for assessing the parent company’s and the group’s ability to continue as going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so.
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.
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. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern.
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, Remuneration Report for Governing Bodies and the Group CEO’s review, but does not include the financial statements and our auditor’s report thereon. We have obtained the report of the Board of Directors prior to the date of this auditor’s report, and the other reports and statements mentioned above are expected to be made available to us after that date.