The Major Risks and Uncertainties to the Group in the Near-Term . . . . . . . . . . . . . . . . . . . . . . . 31
Statement of Profit and Other Comprehensive Income, IFRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Group’s Other Notes to the Accounts . . . . . . . . . . . . . . . . . 69
Sampo plc’s Notes to the Accounts . . . . . . . . . . 171 Summary of Significant Account Policies. . . . . . . . . . .172 Notes to the Income Statement 1–4 . . . . . . . . . . . . . . . . . .172
Note to the Income Taxes 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 Notes to the Liabilities and Commitments 15–16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Notes to the Staff and Management 17–19 . . . . . . . . 176 Note to the Shares Held 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .177
Changes in the Group Structure .................... 14 Changes in Group Management .......................... 16
Extra Dividend in the Form of Nordea Shares ...... 27 Internal Dividends ................ 27
Earnings per share was EUR 2.04 (3.04) and marked-tomarket earnings per share was EUR 2.63 (1.70). Markedto -market earnings were boosted by strong equity market development. Return on equity for the Group amounted to 12.0 per cent (7.5) for 2019. Net asset value per share on
General Meeting to be held on 23 April 2020 a dividend of EUR 2.20 per share (2.85). The proposed dividend payment amounts in total to EUR 1,222 million (1,583). The
EUR 685 million (643) and combined ratio for full-year 2019 was 84.5 per cent (85.2). Return on equity amounted to 34.5 per cent (11.2). Premiums grew strongly in all business areas in the Nordics amounting to 5.7 per cent with fixed currencies. If lowered the discount rate applied in Finland from 1.2 per cent to 0.95 per cent. This had a negative impact of EUR 62 million on the results. If paid a dividend of SEK 7.5 billion (EUR 710 million) to Sampo plc in December 2019.
Topdanmark had another strong year and segment’s profit before taxes rose to EUR 238 million (199). The combined ratio amounted to 82.1 per cent (82.3). Topdanmark’s
Sampo’s share of Nordea’s net profit for 2019 amounted to EUR 290 million (625). Nordea made encouraging progress in the fourth quarter of 2019 towards achieving its financial targets. In segment reporting the share of
Nordea’s profit is included in the segment ‘Holding’. For 2019 Nordea targets a dividend of EUR 0.40 per share
(0.69). If the AGM approves this, Sampo plc will receive a dividend of EUR 322 million (594).
(13), Mandatum Life’s 26 per cent (26) and Sampo plc’s 11 per cent (11).
Sampo Group will issue a report on non-financial information in accordance with Chapter 3a, Section 5 of the Accounting Act. The report, Corporate Responsibility
Average number of staff (FTE) 9,813 9,509 304 *) the comparison year includes the contribution of EUR 197 million from the Danske Bank co-operation agreement in the second quarter of 2018. **) of which non-controlling interests are EUR 107 million (91) for 2019.
Balance sheet (at end of period) 1.0591 1.0809 1.0897 1.0765 1.0308
While some of the major politico-economic hurdles were overcome as of late 2019, concrete solutions to other issues, such as climate change, still remained to be found.
The Nordic economies experienced somewhat of a slowdown from the previous year, although Norway did post a slight uptick in its growth figures. As the exportdriven Nordic cluster is naturally sensitive to global economic shocks, the global slowdown due to escalated trade tensions markedly decreased intraregional investments. While Denmark and Norway weathered the downward growth pressures somewhat better due to greater utilisation of their respective labour forces, structural issues in both Sweden and Finland hindered overall growth potential.
In Finland expected growth dropped to 1.5 per cent, with investments falling by 0.7 per cent and private consumption stalling, 2019 was a generally challenging year for the Finnish economy. Investments were depressed particularly due to decreased construction starts and private consumption only saw somewhat of a rebound in the latter half of the year. Despite a global economic slowdown, Finland did experience a moderately strong pickup in exports compared to imports balancing out the current account. The unemployment rate has been falling since 2016 although the trend did not continue into 2019, as the unemployment has been flat at 6.7 per cent since April.
In Sweden growth figures were slightly gloomier at an expected 1.1 per cent, driven internally by weak consumption growth and decreased levels of investment particularly in the housing sector. Housing prices saw a recovery from a drop in 2017, and towards the end of the year a lot of the past housing starts came into fruition. One big driver for price increases has been the urban sprawl driving up demand in major cities, such as
If is the leading property and casualty insurance company in the Nordic region, with insurance operations that also encompass the Baltic countries. The P&C insurance group’s parent company, If P&C Insurance Holding Ltd, is located in Sweden, and the If subsidiaries and branches provide insurance solutions and services in Finland,
Sweden, Norway, Denmark and the Baltic countries. If’s operations are divided into four business areas: Private,
On 31 December 2019, the total investment assets of If amounted to EUR 10.8 billion (10.9), of which fixed income investments constituted 86 per cent (88), money market 2 per cent (2) and equity 12 per cent (10). Net income from investments amounted to EUR 229 million (229). Investment return marked-to-market for the full-year 2019 was 5.0 per cent (-0.8). Duration for interest bearing assets was 1.3 years (1.4) and average maturity 2.8 years (2.7). Fixed income running yield without taking into account the FX
hedging cost as at 31 December 2019 was 1.8 per cent (1.7).
Topdanmark is the second largest non-life insurance company and a major life insurance company in
In non-life insurance, Topdanmark has a 17 per cent market share. Topdanmark focuses on the private, agricultural and SME market. The company has around 620,000 customers and handles around 300,000 claims a year. In life insurance, Topdanmark has a 10 per cent market share in Denmark.
At the end of 2019 Sampo plc held 41,997,070 Topdanmark shares, corresponding to 46.7 per cent of all shares and 48.2 per cent of related voting rights in the company. The market value of the holding was EUR 1,846 million on
The Board of Directors recommends to the AGM of 2020 a dividend of DKK 1,530 million (EUR 205 million), i.e. DKK
17 per share. If the AGM approves the proposal, Sampo plc’s share of the dividend payment is EUR 96 million.
In non-life insurance, result was positively impacted by higher run-off profit and an improved claims trend in the
SME and the agricultural business. On the other hand, the result from illness and accident and lower yield curve had a negative impact on results. In the life insurance, the result was impacted positively by improved investment returns.
Topdanmark’s premium income increased by 2.9 per cent in non-life insurance and by 9.8 per cent in life insurance.
In non-life insurance, the run-off profit of EUR 58 was primarily generated in motor third-party liability,
Further information on Topdanmark A/S and its January-December 2019 result is available at www.topdanmark.com.
Stockholm, Helsinki and Copenhagen. In Sampo Group’s reporting Nordea is treated as an associated company and is included in the segment Holding.
Nordea targets a dividend of EUR 0.40 per share (0.69) for 2019. Sampo plc’s share amounts to EUR 322 million (594)
Insurance Company Ltd., a wholly-owned subsidiary of Sampo plc, operating in Finland, Estonia, Latvia and
Mandatum Life, is responsible for sales functions and all the functions required by the Insurance Companies Act.
Profit before taxes for Mandatum Life in 2019 amounted to EUR 280 million (450). The comparison figure includes the contribution of EUR 197 million from the Danske
Bank co-operation agreement in the second quarter of 2018. The total comprehensive income for the period after tax reflecting the changes in market values of assets, increased to EUR 308 million (112). Return on equity amounted to 23.5 per cent (8.7).
During 2019 the fair value reserve increased to EUR 438 million (352).
The expense result decreased to EUR 24 million (35). The risk result increased to EUR 35 million (33).
EUR 8 billion for the first time and were EUR 8.1 billion
(7.0) at the end of 2019. Unit-linked reserves corresponded to 67 per cent (62) of total technical reserves.
EUR 189 million is allocated to years 2020 – 2022. The figure does not take into account the reserves relating to the segregated fund. The discount rate used for 2020 and 2021 is 0.25 per cent. In the fourth quarter of 2019, the rate used for 2022 was lowered from 2.50 per cent to 1.25 per cent.
At the end of 2019 Mandatum Life Group’s investment assets, excluding the assets of EUR 8.2 billion (7.0)
(4.6) at market values. 46 per cent (49) of the assets are in fixed income instruments, 15 per cent (9) in money market, 25 per cent (27) in equities and 14 per cent (15) in alternative investments. The investment return markedto -market for 2019 was 9.2 per cent (-2.4). The duration of fixed income assets at the end of 2019 was 2.8 years (2.5)
EUR 1.0 billion (1.0), of which 68 per cent (77) was in fixed income, 13 per cent (5) in money market, 13 per cent (11)
Segregated fund’s investment return marked-to-market was 6.4 per cent (-1.9). On 31 December 2019 the duration of fixed income assets was 2.8 years (2.5) and average maturity 3.2 years (3.1). Fixed income running yield without taking into account the FX hedging cost was 1.9 per cent (2.4).
P&C and life insurance. In addition, Sampo plc held on 31 December 2019 approximately 19.9 per cent of the share capital of Nordea, the largest bank in the Nordic countries.
AB, of which Sampo plc owns 36.25 per cent, as an associate. The company was established for the takeover of
December 2019 amounted to EUR 139 million (618), which includes EUR 155 million loss incurred when distributing
EUR 8 million (-4). Nordea’s result was impacted by one-off items amounting to EUR 1.3 billion.
If P&C Insurance Holding Ltd (publ) signed on 28 November 2019 an agreement to buy Viking
Redningstjeneste TOPCO A/S. The acquisition price for 100 per cent ownership was EUR 32 million (NOK 325 million) which was paid in cash. The enterprise value amounted to EUR 114 million.
Viking is a Nordic roadside assistance company headquartered in Norway. It serves its customers through an extensive nationwide network of stations in Norway,
Viking will strengthen If’s offering towards its partners and further improve If’s position as the leading Nordic insurance and service provider within the mobility area.
With this strategic acquisition If strengthens its position in the Nordics by providing more comprehensive service for its insurance customers and partners such as carmakers. The financial effect of the acquisition on
The transaction was subject to approval by competition authorities in Norway and Sweden which were received in early January 2020 and the transaction was completed.
CFO as of 1 of January 2019. He was earlier CFO of If P&C
Torbjörn Magnusson, the CEO of If, to succeed Stadigh as Group CEO and President of Sampo Group, effective 1 January 2020. Magnusson took immediately over as
Holthe as Head of If BA Private. She was also nominated a member of the Group Executive Committee of Sampo
Topdanmark Peter Hermann *Until 31 December 2019, Jussi Karppinen as of 1 January 2020
Chairperson of the Audit Committee EUR 25,000 and the member of the Audit Committee EUR 6,000. A Board member shall in accordance with the resolution of the
There were 1,052 shareholders represented at the beginning of the meeting holding altogether 360,849,587 shares and 365,649,587 votes in the company.
Sampo is committed to developing the corporate responsibility activities, targets, measurements, and reporting of the Group. This is in the interests of, and expected, by the Group’s various internal and external stakeholders.
During 2019, Sampo continued to work on corporate responsibility in line with the Group’s updated corporate responsibility themes: Responsible Business Management and Practices, Responsible Corporate Culture,
Responsible Business Management and Practice: During the year, the group-level Corporate Responsibility
Corporate responsibility covers a wide range of topics relevant for key business operations, therefore a steering group helps to guide the work on a group-level. In August 2019, Sampo Group joined the UN Global Compact and is committed to its ten principles concerning human rights, labor practices, environment, and anti-corruption.
Responsible Corporate Culture: In 2019, Sampo focused on identifying group-level key performance indicators to improve group-level reporting for example in terms of employee well-being, diversity and equality, and employee engagement. This is to better measure Sampo
Sampo Group will issue a report on non-financial information in accordance with Chapter 3a, Section 5 of the Accounting Act. The report, Sampo Group
In geographical terms Denmark had 30 per cent of the personnel, Finland 23 per cent, Sweden 23 per cent and
Topdanmark employed 2,366 persons at the end of the year and the total number of staff increased 2 per cent.
The total number of staff in Mandatum Life increased 8 per cent. As of 31 December 2019 Mandatum Life employed 573 persons.
Sampo plc had 64 employees (61) at the end of 2019.
The decision on payout of variable compensation shall be based on the assessment of the incurred risk exposure and the fulfillment of solvency capital requirements.
After the deferral period, a retrospective risk adjustment review shall be carried out and the Board of Directors of each Sampo Group company shall decide whether the deferred variable compensation shall be paid/released in full, partly or cancelled in whole. In 2019, altogether
EUR 10.5 million (7.0) of short-term and long-term incentives has been deferred.
The Board of Directors decides on multiannual long-term incentive schemes for the management and other key employees of Sampo Group. In the long-term incentive scheme 2014:1/2, altogether 21,525 units remain and will vest during 2020. In the long-term incentive scheme 2017:1, altogether 4,033,000 allocated incentive units remain and will vest during 2020 – 2023.
year2019. The Remuneration Report 2019 is part of the Remuneration Statement, which is available at www.sampo.com/ remunerationstatement. The statement has been prepared in accordance with the
The Remuneration Report prepared in accordance with the new Corporate Governance Code 2020, approved by the Securities Market Association on 19 September 2019, effective from 1 January 2020 has to be published first time for the financial year starting on 1 January 2020.
As dividends are Sampo plc’s major source of income, its primary target for every sub-group is to maintain a healthy balance between profits, risks and capital to facilitate a steady stream of dividend payments in the long term.
The second target is ensuring stable profitability at business portfolio level. Potential risk concentrations and more generally the correlation of reported profits are monitored closely and their sources are analyzed. To the extent possible risk concentrations are proactively managed by strategic decisions.
The size of assessed diversification benefits of the Group companies’ profits is reflected in Sampo’s decisions on its capital structure and liquidity position.
A more detailed description of Sampo Group’s risk management activities, governance, risks and capitalization is available in the Risk Management Report 2019 at www.sampo.com/year2019.
(98) and the equity capital in total to EUR 12,542 million
Shareholders by the Number of Shares Held Sampo plc, 31 December 2019
Number of shares Shareholders, number Share holders, % Shares, number Shares, %
Nasdaq Helsinki since 1988 and all of the B shares are held by Kaleva Mutual Insurance Company. B shares can be converted into A shares at the request of the holder. At the end of the financial year, neither Sampo plc nor its Group companies held any Sampo A shares.
The Annual General Meeting authorized the Board to repurchase a maximum of 50,000,000 Sampo A 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
The holdings of nominee-registered and foreign shareholders decreased to 64.6 per cent (66.5) of the shares and 64.1 per cent of the votes (66.3).
Executive Committee’s holdings of Sampo A shares. At the end of 2019, members of Sampo plc’s Board of Directors and their close family members owned either directly or indirectly 4,969,859 (6,651,102) Sampo A shares. Their combined holdings constituted 0.9 per cent (1.2) of the share capital and related votes.
Sampo plc’s share amounts to EUR 322 million if approved by the AGM on 25 March 2020.
Mandatum Life’s Board proposes a dividend of EUR 150 million to be paid to Sampo plc in the first quarter of 2020. If normally pays its dividend towards the end of the calendar year.
On 7 August 2019 Sampo Board made the formal decision to distribute a total of 55,517,639 shares of Nordea Bank
If P&C Insurance Holding Ltd (publ) - Issuer Credit Rating - - A Stable
Abp as an extra dividend (See section Extra dividend in the form of Nordea shares). As a result of the dividend, Sampo’s ownership in Nordea decreased below 20 per cent.
Hence, the conglomerate rules (FICO) solvency calculation was terminated by a formal approval by the Finnish
The insurance subsidiaries apply Solvency II rules in their regulatory solvency calculations. If Group companies use either partial internal models or standard model for calculation of their solo solvency position. Mandatum Life reports in accordance with standard formula for Solvency
If Group has an A+ rating from S&P which will continue to require significantly more capital than the standard formula and therefore the use of standard formula has no practical implications on If Group’s capital position.
On 31 December 2019 If Group’s Solvency II capital requirement under standard formula amounted to EUR
More information on Sampo Group’s capital policy is available in the Risk Management Report 2019 at www.sampo.com/year2019.
Sampo plc’s debt financing on 31 December 2019 amounted to EUR 3,908 million (4,067) and interest bearing assets to EUR 1,725 million (1,959). Interest bearing assets include bank accounts, fixed income instruments and EUR 359 million (489) of hybrid capital and subordinated debt instruments issued by the subsidiaries and associated companies.
At the end of 2019 the interest bearing net debt of Sampo plc amounted to EUR 2,183 million (2,108). The net debt calculation takes into account interest bearing assets and liabilities. Gross debt to Sampo plc’s equity was 51 per cent
On 23 May 2019 Sampo plc issued 30NC10 Fixed/Floating rate subordinated notes of EUR 500 million due 23 May
Senior Bond 2,000 SEKm Stibor3M + 0.77% Euribor3M + 0.59% 0.19% 28 May 2020
Senior Bond 1,000 SEKm 1.25% EUR 1.01% 1.01% 28 May 2020
Senior Bond 700 SEKm 0.88% Euribor6M + 0.38% 0.04% 23 May 2022
Senior Bond 500 EURm 1.250% Euribor6M + 0.74% 0.39% 20 May 2025
Hybrid Tier2 Bond 500 EURm 3.375% --- 3.48% 23 May 2029
Sampo Group’s business areas are expected to report good operating results for 2020.
If P&C is expected to reach a combined ratio of 85 – 89 per cent in 2020.
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, but they are not directly additive because of diversification effects.
Uncertainties in the form of major unforeseen events may have an immediate impact on the Group’s profitability.
Other sources of uncertainty are unforeseen structural changes in the business environment and already identified trends and potential wide-impact events.
These external drivers may have long-term impacts on how business shall be conducted. Examples of already identified trends are technological development in areas such as artificial intelligence and digitalization, demographic changes and sustainability issues that may have profound effects on financial sector companies as well.
Sampo has for several years had the ambition of annually increasing its nominal dividend per share. On 24 October 2019 Sampo management, however, concluded that in the present operating environment and with government bond yields expected to remain negative for some time to come, an increase in the dividend would not best serve the company or its shareholders. This view was further reinforced by a change in Nordea’s dividend policy announced earlier on the same day.
Sampo plc’s Board of Directors has on 6 February 2020 approved a new dividend policy according to which total annual dividends paid will be at least 70 per cent of
Group's net profit for the year (excluding extraordinary items). In addition share buy-backs can be used to complement the cash dividend.
The parent company’s distributable capital and reserves totalled EUR 7,383,547,646.18 of which profit for the financial year was EUR 1,489,678,098.42.
Return on equity (at fair values) % 12.0 7.5 17.1 15.0 14.0
Return on equity (at fair values) % 34.5 11.2 21.3 25.3 21.5
Adjusted number of shares at 31 Dec 1,000 555,352 555,352 555,352 560,000 560,000
Average adjusted number of shares 1,000 555,352 555,352 559,873 560,000 560,000
Weighted average number of shares, incl. dilutive potential shares 1,000 555,352 555,352 559,873 560,000 560,000
Adjusted number of shares at 31 Dec 1,000 554,152 554,152 554,152 558,800 558,800
Weighted average number of shares, incl. dilutive potential shares 1,000 554,152 554,152 554,152 558,800 558,800
Share trading volume during the financial year 1,000 250,282 239,051 179,568 203,996 182,762
Adjusted number of shares at 31 Dec 1,000 1,200 1,200 1,200 1,200 1,200
Return on equity (at fair values), % + total comprehensive income attributable to parent company equity holders
Earnings per share profit for the financial period attributable to the parent company’s equity holders adjusted average number of shares
Relative share trading volume, % number of shares traded through the Helsinki Exchanges
Group's IFRS Financial Statements Statement of Profit and Other Comprehensive Income, IFRS
Total items not reclassifiable to profit or loss, net of tax -45 -5
Other comprehensive income for the period -75 -37 440 328 328 1) IAS 19 Pension benefits had a net effect of EURm -90 (-34) on retained earnings. 2) The total comprehensive income includes also the share of the associate Nordea's other comprehensive income, in accordance with the Group's share holding. The retained earnings thus include EURm -30 (-26)
3) The amount recognised in equity from available-for-sale financial assets for the period totalled EURm 718 (-409). The amount transferred to p/l amounted to EURm -255 (-192). EURm -21 (20) was transferred to the Segregated Suomi portfolio.
Additional information to the cash flow statement: 2019 2018 Interest income received 543 474
Cash and cash equivalents include cash at bank and in hand EURm 2,662 (2,361) and short-term deposits (max 3 months) EURm 15 (-).
Sampo Group has prepared the consolidated financial statements for 2019 in compliance with the International
From January 2019 on, Sampo has applied the new standard IFRS 16 Leases. The standard superseded IAS 17 according to which leases were recognised either in the balance sheet as finance leases, or as other leases in which case the related liability was disclosed in the notes. The new standard requires all the leases, apart from low-value and short-term leases, to be recognised in the balance sheet. The related interest expenses and amortisations are recognised in the income statement.
The adoption of the standard had no material impact on the Group's financial result. The Group's assets increased by 141 million euro and liabilities by 137 million euro.
During the financial year, other adopted standards or annual improvements to the standards had no material impact on the Group’s financial statements reporting.
In preparing the notes to the consolidated financial statements, attention has also been paid to the Finnish accounting and company legislation and applicable regulatory requirements.
transferred, non-controlling interest and possibly previously held equity interest in the acquiree, over the
Group’s share of the fair value of the identifiable net assets acquired, is recognised as goodwill.
functional currency is other than euro are translated into euro at the average rate for the period, and the balance sheets at the rates prevailing at the balance sheet date.
The following exchange rates were applied in the consolidated financial statements: 1 euro (EUR) = Balance sheet date Average exchange rate
Interest income and expenses are recognised in the income statement using the effective interest rate method. This method recognises income and expenses on the instrument evenly in proportion to the amount outstanding over the period to maturity. Dividends on equity securities are recognised as revenue when the right to receive payment is established.
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 ‘Other operating expenses’.
P&C insurance contracts are primarily of short duration, so that premiums written are recognised as earned on a pro rata basis, adjusting them by a change in the provision for unearned premiums i.e. by the proportion of the insurance premium income that, based on the period covered by the insurance contract, belongs to the following financial year.
In the life insurance business, liabilities arising from insurance and investment contracts count as long-term
liabilities. Therefore, the insurance premium and related claims are usually not recognised in the same accounting period. Depending on the type of insurance, premiums are primarily recognised in premiums written when the premium has been paid. In group pension insurance, a part of the premiums is recognised already when charged.
In Sampo Group, financial assets and liabilities at fair value through profit of loss comprise financial assets held for trading and financial assets designated as at fair value through profit or loss.
Gains and losses arising from changes in fair value, or realised on disposal, together with related interest income and dividend, are recognised in the income statement.
Available-for-sale financial assets are non-derivative financial investments that are designated as available for sale and or are not categorised into any other category.
Available-for-sale financial assets are initially recognised fair value, including direct and incremental transaction costs. They are subsequently remeasured at fair value, and the changes in fair value are recorded in other comprehensive income and presented in the fair value reserve, taking the tax effect into account. Interest income and dividends are recognised in profit or loss. When the
Sampo assesses at the end of each reporting period whether there is any objective evidence that a financial asset, other than those at fair value through p/l, may be impaired. A financial asset is impaired and impairment losses are incurred, if there is objective evidence of impairment as a result of one or more loss events that occurred after the initial recognition of the asset, and if that event has an impact, that can be reliably estimated, on the estimated future cash flows of the financial asset.
When there is objective evidence of impairment of a financial asset carried at amortised cost, the amount of the loss is measured as the difference between the receivable’s carrying amount and the present value of estimated future cash flows discounted at the receivable’s original effective interest rate. The difference is
recognised as an impairment loss in profit or loss. The impairment is assessed individually.
As there are no quoted prices available in active markets for unquoted equities and participations, the aim is to determine their fair value with the help of generally accepted valuation techniques available in the markets. The most significant share of unquoted equities and participations comprise the private equity and venture capital investments. They are measured in accordance with the generally accepted common practice, International Private Equity and Venture Capital
When assessed that there is objective evidence of impairment in debt or equity securities classified as financial assets available-for-sale, the cumulative loss recognised in other comprehensive income is transferred from equity and recognised in profit or loss as an impairment loss.
Derivative financial instruments are classified as those held for trading and those held for hedging, including interest rate derivatives, credit risk derivatives, foreign exchange derivatives, equity derivatives and commodity derivatives. Derivative instruments are measured initially at fair value. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.
Sampo Group may hedge its operations against interest rate risks, currency risks and price risks through fair value hedging and cash flow hedging. Cash flow hedging is used as a protection against the variability of the future cash flows, while fair value hedging is used to protect against changes in the fair value of recognised assets or liabilities.
Leases are included in ‘Investment property’ in the balance sheet. They are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and equipment, and the impairment losses are recognised on the same basis as for these items.
Rental income is recognised on a straight-line basis over the lease term in profit or loss.
Property, plant and equipment are measured at historical cost less accumulated depreciation and impairment losses, except for Topdanmark where the carrying amount is based on revaluation i.e. fair value less accumulated depreciation and impairment losses.
Investment property is held to earn rentals and for capital appreciation. The investment property is measured the same way as property, plant and equipment. The depreciation periods and methods and the impairment principles are also the same as those applied to corresponding property occupied for own activities. The investment property of the associate Nordea in the Holding segment is measured at fair value in item Investments in associates.
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
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 Group will receive it.
4, either as insurance or investment contracts. Under the standard, insurance contracts are classified as insurance contracts if significant insurance risk is transferred between the policyholder and the insurer. If the risk transferred on the basis of the contract is essentially financial risk rather than significant insurance risk, the contract is classified as an investment contract. Classification of a contract as an insurance contract or investment contract determines the measurement principle applied to it.
Sampo treats the liabilities arising from contracts in the first phase of the standard according to national accounting standards, except for the equalisation reserve and its changes which is reported in equity and profit or loss, in accordance with the IFRS.
IFRS 4 requirements for insurance contracts and on the basis of which Sampo Group (the cedant) may receive compensation from another insurer (the reinsurer), if it becomes liable for paying compensation based on other insurance contracts it has issued. Such compensation received on the basis of reinsurance contracts is included in the balance sheet under 'Reinsurers’ share of insurance liabilities' and 'Other assets'. The former item includes the reinsurers’ share of the provisions for unearned premiums and claims outstanding in the Group’s reinsured insurance contracts, while the latter includes short-term receivables from reinsurers.
The pay-as-you-go system related to pension index raises is not treated as an insurance activity under
IFRS 4 and does not generate any risk for the insurance company. Thus, the pay-as-you-go contribution collected together with the insurance premium is not deemed to be premium income, and the pension index raise paid out is not deemed to be claims incurred. Because the collected index raise corresponds in amount to the paid out pension index raise, the said items are set-off in the
The share of a balancing figure not yet received from, or not paid by, a central organisation is presented as current receivables or liabilities in the balance sheet items 'Other assets' or 'Other liabilities'.
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. Thus, the same standard is applied to these contracts as to contracts with
The surrender right, guaranteed interest and the unbundling of the insurance component from the deposit component and similar features are not separated and measured separately.
All unit-linked contracts insurance are payable on demand at market value. In case of death, 101% of the amount is payable. This feature is considered an insignificant insurance risk, and the contracts are categorized and measured as investment contracts. There are no other surrender rights and values to take into consideration.
The interest rate used in discounting liabilities is, at most, the maximum rate accepted by the authorities in each country.
The provision for claims outstanding is intended to cover the anticipated future payments of all claims incurred, including claims not yet reported to the company (the
Mandatum aims at giving a total return before charges and taxes on the original insurance portfolio’s policyholders ’ savings in contracts with DPF that is at least the yield of those long term bonds, which are considered to have lowest risk. The total return consists of the guaranteed interest rate and bonuses determined annually. Continuity is pursued in the level of bonuses.
In the defined contribution plans, the Group pays fixed contributions to a pension insurance company and has no legal or constructive obligation to pay further contributions. The obligations arising from a defined c ontribution plan are recognised as an expense in the period that the obligation relates to.
In the defined benefit plans, the company still has obligations after paying the contributions for the financial period and bears their actuarial and/or investment risk.
The obligation is calculated separately for each plan using the projected unit credit method. In calculating the amount of the obligation, actuarial assumptions are used.
The current year pension cost and the net interest of the net liability is recognised thru p/l in pension costs. The actuarial gains and losses and the return of the plan assets
In the schemes settled in cash, the valuation is recognised as a liability and changes recognised through profit or loss.
In the schemes settled in shares, the strike amounts received on the exercise of the options are recognised in the shareholder’s equity.
The fair value of the schemes has been determined using the Black-Scholes-pricing model. The fair value of the market- based part of the incentive takes into consideration the model’s forecast concerning the number of incentive units to be paid as a reward. The effects of non-market based terms are not included in the fair value of the incentive; instead, they are taken into account in the number of those incentive units that are expected to be exercised during the vesting period. In this respect, the
Group will update the assumption on the estimated final number of incentive units at every interim or annual balance sheet date.
Item Tax expenses in the income statement comprise current and deferred tax. Tax expenses are recognised through profit or loss, except for items recognised directly in equity or other comprehensive income, in which case the tax effect will also be recognised those items. Current tax is calculated based on the valid tax rate of each country.
Deferred tax is calculated on all temporary differences between the carrying amount of an asset or liability in
the balance sheet and its tax base. Deferred tax is not recognised on non-deductible goodwill impairment, and nor is it recognised on the undistributed profits of subsidiaries to the extent that it is probable that the temporary difference will not reverse in the foreseeable future.
Evaluation of insurance liabilities always involves uncertainty, as technical provisions are based on estimates and assumptions concerning future claims costs. The estimates are based on statistics on historical claims available to the Group on the balance sheet date.
In addition to the historical data, estimates of insurance liabilities take into consideration other matters such as claims development, the amount of unpaid claims,
Insurance Contracts (by IASB tentative decision effective for annual periods beginning on 1 Jan 2022 or after) will have an impact on the insurance liabilities valuation, the insurance companies have been given additional options regarding the adoption of IFRS 9. If certain preconditions regarding the insurance liabilities are met, the company may apply the so-called temporary exception option and defer the implementation until the adoption of IFRS 17 standard, at the latest on annual period beginning on 1 Jan 2022. The temporary exemption may be applied, if the
The Group has analyzed the preconditions for applying the temporary exemption, and stated that they are met.
Share of associate's other comprehensive income - - - -30 - -30
Total items not reclassifiable to profit or loss, net of tax -45 - - - - -45
Consolidated Income Statement by Business Segment for Year Ended 31 December 2019
Actuarial gains and losses from defined pension plans -6 - - - - -6
Total items not reclassifiable to profit or loss, net of tax -5 - - - - -5
Liabilities for insurance and investment contracts 8,778 5,337 3,926 - - 18,041
Reinsurers' share of insurance liabilities 208 85 1 - - 294
The purchase price allocation on the acquisition is presented below: EURm Cost of the business acquisition 241
Included in gains/losses from financial assets available for-sale is a net gain of EURm -0 (-10) transferred from the fair value reserve.
Group change in liabilities for insurance and investment contracts total, net -2,919 -85 5 Staff costs
Asset management costs (investment expenses) -18 -21 8 Earnings per share
Profit or loss attributable to the equity holders of the parent company 1,130 1,687
If has signed three office lease contracts that have not yet commenced and therefore are not recognized in the balance sheet. Lease terms vary from 7 to 14 years. The new premises will subsequently replace currently leased premises included into the right-of-use assets.
Non-cancellable minimum rental - not later than one year 46 38 - later than one year and not later than five years 59 57 - later than five years 24 30
At the business acquisition of Topdanmark, EURm 95 were allocated to trademark. The useful life of trademark is deemed indefinite and it will not be amortised.
The recoverable amounts for If and Mandatum have been determined by using a discounted cash flow model. The model is based on Sampo’s management’s best estimates of both historical evidence and economic conditions such as volumes, interest rates, margins, capital structure and income and cost development. The value in use model for Mandatum is greatly influenced by the long-term development of insurance liabilities, affecting e.g. the required solvency capital and thus the recoverable amount. That is why the forecast period is longer for Mandatum, 10 years. The derived cash flows were discounted at the pre-tax rates of the cost of equity which for If was 8.8% and for Mandatum Life 9.6%. The cost of equity is used as the cost of capital as neither company has principal outstanding.
Forecasts for If, approved by the management, cover years 2020 – 2022. The cash flows beyond that have been extrapolated using a 2% growth rate. A 2% growth rate for years beyond 2029 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 EURm 570. With the calculation method used, e.g. an increase of about 2% point in the cost of equity combined with a long term 0% growth rate could lead to a situation where the recoverable amount of the entity would equal its carrying amount.
Komplementarselskabet Ottilia København ApS Denmark 35 50.00 *) Published price quatation 13 Investments in associates
Currency options, bought and sold 154 2 0 414 3 2
Total derivatives held for trading 11,004 79 168 14,096 72 166
In Mandatum, fair value hedging is used to hedge a proportion of foreign exchange and interest risk in available-for-sale financial assets. The interest elements of forward contracts have been excluded from hedging relationships in foreign exchange hedges. Net result from exchange derivatives designated as fair value hedges amounted to EURm 6 (12). Net result from hedged risks in fair value hedges of available for sale financial assets amounted to EURm -6 (-12).
In the table above are presented fair values and carrying amounts of financial assets and liabilities. The detailed measurement bases of financial assets and liabilities are disclosed in the Group Accounting policies.
The fair value of investment securities is assessed using quoted prices in active markets. If published price quotations are not available, the fair value is assessed using discounting method. Values for the discount rates are taken from the market’s yield curve.
For alternative funds the valuation is also conducted by the fund managers. Alternative funds often have complicated structures and the valuation is dependent on the nature of the underlying investments. There are many different valuation methods that can be used, for example, the method based on the cashflows of the underlying investments. The operations and valuation of alternative funds are regulated for example by the Alternative Investment Fund Managers Directive (AIFMD), which determines the principles and documentation requirements of the valuation process.
EURm Level 1 Level 2 Level 3 Total FINANCIAL ASSETS AT 31 DECEMBER 2018
Total financial assests measured at fair value 23,130 7,727 2,050 32,907
Total financial assests measured at fair value 2,009 17 -34 846 -430 2,408 -18
EURm Realised gains/losses Fair value gains and losses Total Total gains or losses included in profit or loss for the financial year 17 -33 -17
EURm Realised gains/losses Fair value gains and losses Total Total gains or losses included in profit or loss for the financial year 57 0 57
Recognised in comprehensive income statement Recognised in equity Exchange differences 31 Dec
Tax from previous years -2 -2 23 Components of other comprehensive income
Share of associate's other comprehensive income -30 - -30 -61 - -61
Incurred but not reported losses (IBNR) 2,602 48 2,554 2,813 43 2,770
EURm Gross Reinsurance Net Gross Reinsurance Net Provision for unearned premiums
Current estimate of total claims costs 20,366 2,579 2,759 2,673 2,695 2,648 2,643 2,719 2,798 3,012 3,032 47,924
Provision reported in the balance sheet 2,651 172 189 182 238 268 261 312 388 536 1,209 6,407 of which established vested annuities 1,608 79 75 77 84 85 72 60 52 56 4 2,251
At the close of the claims year 19,943 2,527 2,588 2,591 2,635 2,625 2,644 2,673 2,707 2,856 2,970
Provision reported in the balance sheet 2,627 171 167 180 232 252 255 296 375 515 1,178 6,247 of which established vested annuities 1,607 79 75 77 84 85 72 60 52 56 4 2,251
Current estimate of total claims costs 907 941 832 1,001 853 876 849 811 879 874 8,823
Provision reported in the balance sheet 60 56 69 75 83 116 135 151 228 424 1,397
Current estimate of total claims costs 859 799 788 827 798 816 793 784 826 841 8,131
Group liabilities from insurance and investment contracts, total 7,097 2 7,095 7,330 3 7,326
Life insurance liabilities from investment contracts at 31 December 2019, total 25
Group liabilities from unit-linked insurance and investment contracts, total 14,368 11,390
Preferred capital note, 2016 (nominal value 1,500 MSEK) 30 years 3 month Stibor +
Preferred capital note, 2016 (nominal value 500 MSEK) 30 years 2.42% 48 49
The loan of 500 MSEK issued in 2016 is issued with fixed interest rate terms for the first five years. After that period, the loan becomes subject to variable interest rate but it also includes terms stating the right of redemption at this point in time or at any interest payment date thereafter.
Preferred capital note, 2017 (nominal value 400 MDKK) bullet 3 month Cibor +
Subordinated loan, 2019 (nominal value EURm 500) 30 years 3.38% 494 -
Present value of estimated pension obligation, including social costs 330 268
The main Swedish defined-benefit pension plan is closed to new employees born in 1972 or later. The corresponding Norwegian pension plan consists solely of active people employed prior to 2006 and born 1957 and earlier.
For both countries, the pension benefits referred to are old-age pension and survivors’ pension. A common feature of the defined-benefit plans is that the employees and survivors encompassed by the plans are entitled to a guaranteed pension that depends on the employees’ service period and pensionable salary at the time of retirement. The dominating benefit is the old-age pension, which refers in part to temporary pension before the anticipated retirement age and in part to a life-long pension after the anticipated retirement age.
The anticipated retirement age in connection with life-long pension is 65 years for Sweden and 67 years for Norway. In Sweden, life-long old-age pension following a complete service period is payable at a rate of 10% of the pensionable salary between 0 and 7.5 income base amounts, 65%
The following tables contain a number of material assumptions, specifications of pension costs, assets and liabilities and a sensitivity analysis showing the potential effect on the obligations of reasonable changes in those assumptions as at the end of the fiscal year.
Interest expense on net pension liability 0 1 1 0 1 1
Remeasurement of the net pension liability 54 3 57 9 -3 6
Total in comprehensive income statement 59 6 65 14 0 14
Fair value of plan assets 202 28 231 186 31 217
EURm Funded plans Unfunded plans Total Funded plans Unfunded plans Total Analysis of the employee benefit obligation
Fair value of plan assets 231 - 231 217 - 217
There are other short-term staff incentive programmes in the Group, the terms of which vary according to country, business area or company. Benefits are recognised in the profit or loss for the year they arise from. An estimated amount of these short-term incentives, social security costs included, for 2019 is EURm 56.
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 ROU asset is depreciated on straight-line basis over the lease period.
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 32 Contingent liabilities and commitments
The subsidiary If P&C Insurance Ltd provides insurance with mutual undertakings within the Nordic Nuclear Insurance Pool, Norwegian Natural Perils’ Pool and the Dutch Terror Pool.
If P&C Insurance Company Ltd has outstanding commitments to private equity funds totalling EURm 5, which is the maximum amount that the company has committed to invest in the funds. Capital will be called to these funds over several years as the funds make investments. In addition, If P&C Insurance Ltd has outstanding commitments to borrowers totalling approximately EURm 4.
The Board of Directors of Sampo plc has decided on the long-term incentive schemes 2014 I - 2017 II for the management and key employees of Sampo Group. The Board has authorised the CEO to decide who will be included in the scheme, as well as the number of calculated incentive units granted for each individual used in determining the amount of the incentive reward. In the schemes, the number of calculated incentive units granted for the members of the Group Executive Committee is decided by the Board of Directors. Some 120 persons were included in the schemes at the end of year 2019.
At 31 December 2019, there were 106,000 options (163,000) which could be exercised.
39 Events after the balance sheet date In the meeting of 6 Feb 2020, the Board of Directors decided to propose at the Annual General Meeting on 23 April 2020 a dividend distribution of EUR 2.20 per share, or total EUR 1,221,774,070.00, for 2019. The dividends to be paid will be accounted for in the equity in 2020 as a deduction of retained earnings.
Sampo Capital Oy 100 1 *) The Group's ownership of votes.
External drivers behind such changes are varied, including for instance general economic development, changes in commonly shared values, developments in the institutional and physical environment and technological innovations. Because external drivers are inter-connected, the customer preferences and demand can change unpredictably and there may be a need to change regulations as well. In case the company’s internal understanding of needed changes or willingness and ability to act accordingly is inadequate and competitors are more able to meet clients’ and regulation’s altered expectations, the company is highly exposed to business risk.
Business risks do not have the regulatory capital charge, although they may be a material source of earnings volatility. Because of this, business risk may have an effect on the amount and structure of actual capital base, if deemed prudent in the existing business environment.
The issues related to corporate responsibility are changing the preferences and values of Sampo Group companies’
stakeholders and, as a result, the operating and competitive environment is also changing in different ways. The
Group companies operate mainly in the Nordic countries, which are characterized by an inherent respect for human rights, high transparency, and low levels of corruption and bribery. There is high compliance with labor rights, health and environmental legislation and freedom of speech and association. These themes are also inherent in the operations of all Sampo Group companies. Managing the economic, social, and environmental impacts and stakeholder relationships of Sampo Group businesses is increasingly important. Investors and governmental authorities are putting an increasing focus on corporate responsibility, but also consumers and employees are emphasizing these topics when choosing a brand or a company.
Group companies want to provide customers with the best service in all situations. Here skilled and motivated employees is an essential success factor. Losing talent or being perceived as an unattractive employer would pose large risks for the businesses. Therefore, Sampo Group companies strive to ensure a sound work environment, not only because it is stipulated by law, but also because it lays the foundation for sustainable business performance.
Group companies, which are committed in providing a non-discriminatory, open and agreeable working environment where everyone is treated fairly and equally.
Responsible investment management and operations are important in managing long-term investment risks and in mitigating potential adverse impacts on the Group’s reputation. Therefore, Sampo Group companies take environmental, social and governance (“ESG”) issues into account when assessing the security, quality, liquidity, profitability and availability of investments. Investment opportunities are carefully studied before any investments are made and
ESG issues are considered along with other factors that might affect the risk-return ratio of separate investments.
ESG issues have an impact on the long-term performance, risk and value of all companies. Taking these issues into consideration in the investment process is an important mean to improve the risk-return profile of investments, and it is a critical success factor of investment activities.
Since climate change could increase the frequency and/or severity of natural catastrophes, Sampo Group companies have conducted sensitivity analyses, using scenarios where the severity of natural catastrophes is assumed to increase. As a potential side effect, climate change could also result in large migrations or prolonged concentrations of people and animals where deceases can be transmitted or the change in environment could create new versions of known diseases. These risks are managed effectively with reinsurance programs.
Reputational risk is related to all activities shown in the graph Classification of Risks in Sampo Group. As the roots of reputational risk are varied, the tools to prevent it must be diverse and embedded within the corporate culture.
Group companies must have the following forms of capital in place: • Financial flexibility in the form of adequate capital and liquidity.
• Intellectual capital in the form of comprehensive proprietary actuarial data and analytical tools to convert this data to information.
Business, If, 31 December 2019, the If insurance portfolio is well diversified across Business Areas, Countries and Lines of Business. The six Lines of Business are segmented in accordance with insurance class segmentation used in IFRS. Graph 1, 2, 3
The following adjustments from IFRS LoBs to Solvency II LoBs are made: • IFRS Line of Business Motor other and Motor third party liability (1,918) include Solvency II Line of Business Motor vehicle liability insurance (541) and Other motor insurance (1,377). • IFRS Line of Business Accident (651) includes Solvency II Line of Businesss Income protection insurance (331), Other life (45), Medical expense insurance (275) and Assistance (0).
The Underwriting Committee shall give its opinion on and propose actions in respect of various issues related to underwriting risk. The committee also considers and proposes changes to the Underwriting Policy, which is the principal policy for underwriting, and sets general principles, restrictions and directions for the underwriting activities. This document shall be reviewed and approved at least yearly by the Boards of Directors.
The Chairman of the Underwriting Committee is responsible for the approval of underwriting deviations defined in the Underwriting Policy and other issues dealt with by the committee.
The Underwriting Policy is supplemented with guidelines outlining in greater detail how to conduct underwriting within each Business Area. These guidelines cover areas such as tariff and rating models for pricing, guidelines in respect of standard conditions and manuscript wordings, as well as authorities and limits. In accordance with the instructions for the Underwriting Committee, the
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.
Combined ratio, business area Commercial 88.3% +/- 1 percentage point +/- 12 +/- 12
Combined ratio, business area Industrial 89.3% +/- 1 percentage point +/- 4 +/- 4
Net premiums earned (EURm) 4,388 +/- 1 per cent +/- 44 +/- 43
Ceded written premiums (EURm) 200 +/- 10 per cent +/- 20 +/- 18
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.
Line of Business and major geographical area. Finland’s and Sweden’s share of technical provisions is larger than the share of gross written premiums, which is mainly due to Sweden and Finland having a long duration of Motor other and Motor third party liability (“MTPL”) and Finland also having a long duration of Workers compensation. The long duration is mainly due to annuities in these 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 2019 across the product portfolios was 6.5 years.
annuities. The choice of index is stipulated in regulation and is therefore exposed to regulatory change through e.g.
a political decision. The retirement age is another factor that affects the value of annuities since these decrease or expire at retirement. An increased retirement age through for example a political decision, will therefore increase the 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 balances in If of annuities with significant sensitivity to discount rates relates to the business in Sweden, Finland and Denmark.
The Board of Directors of If decides on the guidelines governing the calculation of technical provisions. The
Chief Actuary is responsible for developing and presenting guidelines on how the technical provisions are to be calculated and for assessing whether the level of total provisions is sufficient. On If level, the Chief Actuary issues a quarterly report on the adequacy of technical provisions.
Reserves are exposed mainly to inflation and discount rates and to some extent to life expectancy. The sensitivity of If’s technical provisions to an increase in inflation, an increase in life expectancy and a decrease in the discount rate is presented in the table Sensitivities of Technical Provisions,
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 to the Financial Statements.
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
Technical provision item Risk factor Change in risk parameter Country Effect
Annuities and estimated share of claims provisions to future annuities Decrease in mortality Life e xpectancy increase by 1 year
Credit bonds, funds and loans 8,692 78% 2.8 8,696 78% 2.8
The composition of the investment portfolios by asset classes in If at year end 2019 and at year end 2018 and average maturities of fixed income investments are shown in the table Investment Allocation, If, 31 December 2019 and 31 December 2018.
and rating in the following table, which also includes counterparty risk exposures relating to derivative transactions. Counterparty default risks are described in more detail in section Counterparty Default Risks. Due to differences in the reporting treatment of derivatives, the figures in the table are not fully comparable with other tables in Sampo Group’s Financial Statements.
Spread risk and equity risk are derived only from the asset side of the balance sheet. Exposures in fixed income and equity instruments are presented by sector, asset class
grade issues and currently the role of Nordic covered bonds and Nordic banks as issuers is central. Within fixed income investments part of the money market securities, cash and investment grade government bonds form a liquidity buffer.
The changes in equity positions during the year can be seen in the graph Breakdown of Listed Equity
In general, If is negatively affected when interest rates are decreasing or remaining at low levels, as the duration of liabilities in If is longer than the duration of assets.
Transaction Risk Position If, 31 December 2019 Base currency, SEKm EUR USD JPY GBP SEK NOK CHF DKK Other Total, net
If's transaction risk position in SEK represents exposure in foreign subsidiaries /branches within If with base currency other than SEK.
Reinsurance Counterparty Risk Reinsurance is used regularly to utilize If’s own capital base efficiently and reduce the cost of capital, limit large fluctuations of underwriting results and have access to the reinsurers’ competence base. The Reinsurance
Policy and the Internal Reinsurance Policy. The Chairman is responsible for reporting policy deviations and other issues dealt with by the committee.
Rating Total, EURm % of total Total, EURm % of total
Also, the own credit-analysis plays a central role when counter parties are selected.
The Reinsurance Security Committee shall give input and suggestions to decisions in respect of various issues regarding reinsurance default risk and risk exposure, as well as proposed deviations from the Reinsurance
A-. The ten largest individual reinsurance recoverables amounted to EUR 161 million, representing 70 per cent of the total reinsurance recoverables including captives and statutory pooled solutions.
2018. In the table EUR 136 million (142) of reinsurance recoverables are excluded, which mainly relates to captives and statutory pooled solutions.
Credit Support Annexes. If settles interest rate swaps in central clearing houses, which mitigates bilateral counterparty risk but also results in a systemic risk exposure related to centralised clearing parties.
NBCR (nuclear, biological, chemical, radiological) risks was closed as of 1 July 2019. Starting 1 July 2019, the NBCR
This is based on a new Act on NBCR acts of terrorism.
of operations are as follows: • Collection of data on risk and claims history
• Use of collected and processed data in profitability reporting, risk analyses and in the internal model
• Pricing using a statistical model tool including customer scoring tools
Provisions are recalculated, and the profitability reports are updated in the same context on a monthly basis.
In the private market segment, customer scoring is used, and customers are divided into groups according to their expected profitability levels. The customer scoring has two roles. First it helps to maintain the balance between the individual customer's price and risk. Secondly it facilitates the fairness between individual customers by ensuring that no customers are paying too large premiums to cover losses from customers who pay too small premiums.
(2019) Change in current level EURm after tax Combined ratio, business area Private 86.6% +/- 1 percentage point +/- 5.4
Ceded written premiums (EURm) -81 +/- 10 per cent +/- 6.3
Non-Life Insurance Risk Scenarios, Topdanmark, the first year. Long-tail lines relate to personal injury and liability and consist of the lines Workers' compensation,
Accident, Motor third party insurance and Commercial liability. Composition of non-life provisions for outstanding claims is presented in the following table.
Insurance which decides on compensation for injury and loss of earnings potential in all cases of serious industrial injuries. The practice adopted by the Danish
Labour Market Insurance also has some impact on the levels of compensation for accident and personal injury within motor, liability and commercial liability insurance.
Other claims provisions in workers' compensation 21.8 1.7 24.1 2.8 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
The actuarial team has a continuous dialogue with the claims departments on any changes in the practices regarding new legislation, case-law or compensation practices as well as on the impact of such changes on the routines used to calculate individual provisions.
last two years is presented in the table Sources of Gross
Sources of Gross Premiums Topdanmark Life Insurance, 31 December 2019 and 31 December 2018
The focus of sales is on unit-linked schemes and the premiums received are mostly of unit-linked schemes.
Result of Life Insurance Topdanmark, 31 December 2019 and 31 December 2018
is paid only to the beneficiaries in case of the insured’s death during the insurance period. It is irrelevant whether the death is due to accident or illness.
The loss-absorbing buffers are a crucial part of the with profit concept in leveling of yields and claims over time. Therefore, Topdanmark Livsforsikring has continuous focus on the solvency position, the changes in the individual risks and the development of the lossabsorbing buffers. The latter is important because over time it can level out the market and insurance risks within the individual risk groups.
Market risk is adjusted continuously in accordance with the risk capacity of the contribution groups, and the movements in interest rates are monitored so that risk reducing actions can be taken when needed.
Extra costs, due to a permanent change in disability risk, will be partially covered by individual and collective bonus potential. The remainder affects the result for the year and consequently shareholders' equity.
The remainder affects profit/loss for the year and consequently shareholders' equity.
The following risk reduction measures and methods are used in Topdanmark Livsforsikring: • All policies in the average return environment are divided according to the granted benefit guarantee and the investment policy is designed to ensure the ability to meet the guarantees
• Establishing business procedures that ensure that the products are sold at the right price/risk mix
The monitoring of whether the risk reduction methods are still effective is i.a. via continuous follow-up of the company’s risk profile and reinsurance cover in the Risk
Market Risks In general, the long-term value creation shall be based mainly on the acceptance of insurance risks. To supplement the Group’s profit from its insurance activities,
Topdanmark accepts a certain level of financial market risks as well, given its strong liquidity position and stable, high earnings from insurance operations. Hence, in addition to fixed income instruments, Topdanmark has invested, among other things, in equities, properties and
Risk Scenarios in Life Insurance Topdanmark, 31 December 2019 and 31 December 2018
The life insurance risk scenarios can be found in the following table.
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, without assets covering unit-linked liabilities.
Topdanmark Non-Life Topdanmark Life 31 Dec 2019 31 Dec 2018 31 Dec 2019 31 Dec 2018
Unlisted equities and hedge funds 50 2% 46 2% 349 7% 351 8%
VA component was 45 bps at the end of 2018 and 19 bps at the end of 2019.
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 decrease the interest rate sensitivity of the balance sheet, swaps and standard swaptions have been used for hedging purposes.
The Danish part of the equity portfolio is composed based on the OMXCCAP index. The rest of the equity holdings are in the foreign equity portfolio that is based on the MSCI World DC in its original currency. As a result,
The real estates are all located in Denmark, with the material part in the areas of Copenhagen and Århus. The holding is covering life insurance provisions and it is diversified over office buildings and residential buildings.
The majority of the holding related to Topdanmark’s property within equity is Topdanmark’s own offices. The properties are valued in accordance with the rules of the
● Far East 0 total EUR 483 million total EUR 534 million
Topdanmark has no significant concentrations on the investment side, except for the category treasury and mortgage bonds that consists primarily of AAA rated
Topdanmark Group has a strong liquidity position. Firstly, as premiums are paid in the beginning of the coverage period the liquidity risk related to customers’ payments is very limited. Secondly, the combination of insurance businesses is of a character in which it is highly unlikely that a liquidity shock could occur, because insurance liabilities are by their nature stable liabilities and in asset portfolios money market investments are complemented by a large portfolio of liquid listed Danish government and mortgage bonds.
The maturity structure of technical provisions and the bond portfolio is presented in the adjacent table.
EURm after tax Risk scenario 2019 2018 Effective interest rate 1 percentage point increase -1.3 3.3
Currency Annual loss with up to a 2.5% probability -0.7 -0.1
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 200-year catastrophe event. Topdanmark's counterparty risk is assessed by the SCR standard formula.
Underwriting Risks The development of insurance liabilities during 2019 is shown in the table Analysis of the Change in Provisions
To limit the counterparty risk of financial contracts, including derivative contracts, the choice of counterparties is restrictive, and collateral is required when the value of the financial contracts exceeds the predetermined limits. The size of the limits depends on the counterparty 's credit rating and the terms of the contract.
Mandatum Life. The Solvency Capital Requirement of longevity risk is also highly dependent on the interest rate level, which in practice means that the lower the applied discount rate is, the higher the longevity SCR
would be. Most of the longevity risk arises from the with profit group pension portfolio. With profit group pension policies have mostly been closed for new members for years and due to this the average age of members is relatively high, almost 70 years. In the unit-linked group pension and individual pension portfolio the longevity risk is less significant because most of these policies are fixed term annuities including death cover compensating the longevity risk.
Life, 31 December 2019 and 31 December 2018 shows the insurance risk result in Mandatum Life’s insurance policies. The ratio of the actual to expected claims costs was 75 per cent in 2019 (76). The sensitivity of the insurance risk result can also be assessed based on the information in the table. For instance, an increase of mortality by 100 per cent would increase the amount of benefit payments from EUR 12 million to EUR 24 million.
Policy terms and tariffs cannot usually be changed materially during the lifetime of the insurance, which increases the expense risk. The behavior of financial markets has also an influence on expense risk since normally the company’s fee income is linked to policy reserves in unit-linked policies. The main challenge is to keep the expenses related to insurance administrative
In Mandatum Life, the approach to market risk management is based on an analysis of technical provisions’ expected cash flows, interest rate level and current solvency position, i.e. active Asset and Liability
Management. A common feature for all with profit technical provisions is the guaranteed rate and bonuses.
Investment allocations and average maturities of fixed income investments as at year-end 2019 and 2018 are presented in the table Investment Allocation, Mandatum
High-yield bonds and loans 1,170 21% 3.7 953 17% 3.6 *Private equity also includes direct holdings in non-listed equities
Nordic equity exposure includes almost only direct investments to Finnish equities, and they account for almost one third of equity exposure. Two thirds of equity investments are allocated globally consisting of both fund investments and direct investments. The breakdown of Mandatum Life’s listed equity investments by geographical regions is presented in the following graph.
Market Risks of Balance Sheet The Board of Directors of Mandatum Life annually approves the Investment Policy, which covers both the segregated assets and the company’s other assets that carry investment risk. This policy sets principles and limits for investment portfolio activities and they are based on the features of insurance liabilities, risk taking capacity and shareholders’ return requirements.
Solvency II SCR and are based on predetermined market stress tests. When the above-mentioned control levels are crossed, the Asset and Liability Committee reports to the
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. Mandatum Life does not automatically close its FX
Liquidity risk is relatively immaterial for Mandatum Life because liability cash flows in most lines of business are fairly stable and predictable and an adequate share of the investment assets is in cash or short-term money market instruments.
In Mandatum Life, the default risk of derivative counterparties is a by-product of managing market risks. This stems from the fact that Mandatum Life is a frequent user of long-term interest rate derivatives in addition to FX
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 Agreements backed by Credit Support
Topdanmark have settled interest rate swaps in central counterparty clearing houses, which, while further mitigating bilateral counterparty risk, also expose Sampo
Group companies to the systemic risk related to central counterparty clearing houses.
Sampo Group is first and foremost exposed to general performance of the Nordic economies. However, the
Nordic economies typically are at any given time in somewhat different stages of their economic cycles, because of reasons such as different economic structures and separate currencies. Also, geographically the Nordics as a large area is more a source of underwriting diversification than a concentration. Hence, inherently the Nordic area is a good basis for diversified business.
Underwriting and market risk concentrations and their management are described in the next sections as well as the parent company's role as a risk manager of group-wide risks and as a source of liquidity.
Underwriting Risks at Sampo Group With respect to the underwriting businesses carried out in the subsidiary companies, it has been established that
Market Risks at Sampo Group Level For all subsidiaries, their insurance liabilities and the company specific risk appetite are the starting points for their investment activities. The insurance liabilities including loss absorbing buffers as well as the risk appetite of Mandatum Life, If and Topdanmark differ, and as a result the structures and risks of the investment portfolios and balance sheets of the three companies differ respectively.
Investment activities and market risk taking are arranged pro-actively in such a way that there is virtually no overlap between the wholly-owned subsidiaries’
single-name risks except with regards to Nordic banks where companies have their extra funds in the forms of 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 Sampo Group’s other insurance companies’
Exposures by Sector, Asset Class and Rating Sampo Group, 31 December 2019
in the Nordic countries as can be seen in the table Fixed
Fixed Income Investments in the Public Sector Sampo Group Excluding Topdanmark, 31 December 2019
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 breakdown of the listed equity exposures of
EUR 484 million at the end of year 2019 (534). Within
The geographical core of Sampo Group’s equity investments is in the Nordic companies. The proportion of Nordic companies’ equities corresponds to 59 per cent of the total equity portfolio. This is in line with
● Far East 271 total EUR 3,281 million total EUR 2,937 million
Topdanmark, 31 December 2019. The largest single name investments in Topdanmark’s portfolios are in AAA rated
Further, many of the rated companies have a rating lower than investment grade rating (high yield).
Balance Sheet Concentrations In general Sampo Group is structurally dependent on the performance of the Nordic economies as already described earlier. Sampo Group is also economically exposed to a fall in interest rates. The lower the rates and the flatter the yield curve, the more challenging the environment is for the current business models especially when the duration of insurance liabilities is longer than fixed income asset duration in If and Mandatum Life.
• Sampo’s net debt of EUR 2,183 (2,108) million is modest when compared to Sampo’s equity holdings and financial assets.
Sampo’s dividend payment takes place in April and it will significantly lower the liquidity position of Sampo.
Group companies (359) and a part of other investment assets (1,022) can be sold in case liquidity is needed.
Sampo plc is managing its funding, capital structure and liquidity it takes into account that some of its operative companies have other base currencies (the Swedish krona, the Danish krone) than the euro and that all its operative business areas are exposed to low interest rates. These risks may affect Sampo’s decisions on the issuance of debt instruments and the composition of the liquidity portfolio.
Capitalization at the Group Level The sub-group level balance of profits, risks and capital is the primary focus of Sampo Group. When all subsidiaries are well capitalized, as a result the Group should be adequately capitalized as well although for example the subordinated loans, which are eliminated from own funds, decrease the solvency. In addition, changes in the solvency capital requirements of the subsidiaries and Nordea’s market value have an effect on the level of capitalization in Sampo Group.
Factors affecting the size of group level buffer: • Profit diversification • Sampo plc’s liquidity capacity • Issuance capacity • Shareholders’ dividend expectations • Business risks & arrangements • Balance sheet volatility
Diversification benefit exists at two levels, within the companies and between the companies. The former is included in the companies’ SCRs.
When the reporting currencies of If and Topdanmark depreciate, the actual amount of the Group’s capital in the euros decreases and the capital requirements of If and
Sampo Group’s solvency on a going concern basis is analyzed regularly. 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’
Notes to the Income Statement 1–4 1 Other operating income ...................................................... 172 2 Other operating expenses .................................................. 172 4 Financial income and expense .......................................... 172
Notes to the Assets 5–9 5 Receivables from Group companies ............................... 173 6 Other shares and participations ....................................... 173 7 Other investment receivables ........................................... 173 9 Prepayments and accrued income ................................. 173
Notes to the Liabilities 10–13 10 Movements in the parent company's equity .............. 174 13 Accruals and deferred income .......................................... 175
Note to the Shares Held 20 20 Shares held as of 31 Dec 2019 .......................................... 177
Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts 171FINANCIAL STATEMENTS 2019
Summary of Significant Account Policies The presentation of Sampo Plc's financial statements together with the notes has been prepared in accordance with the Finnish Accounting Act and Ordinance. The accounting principles applied to the separate financial statements of Sampo plc do not materially differ from those of the Group, prepared in accordance with the International Financial Reporting Standards (IFRSs). The financial assets are measured at fair value derived from the markets.
Avalaible-for-sale equity securities 973 0 -131 745 10 32 7 Other investment receivables 2019 Fair value changes 2018 Fair value changes
Guarantees for derivate contracts 20 41 13 Accruals and deferred income
Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts 175FINANCIAL STATEMENTS 2019
Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts 176FINANCIAL STATEMENTS 2019
EURk Supplementary pension costs Statutory pension costs Total Pension contributions paid during the year
2) Group pension agreement with a retirement age of 60 years and a pension benefit of 66 per cent of the pensionable TyEL-salary (TyEL: Employee's Pension Act). The payment for 2019 is based on a TyEL index adjustment.
Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts 178FINANCIAL STATEMENTS 2019
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. The non-audit services that we have provided have been disclosed in note 36 to the consolidated financial statements and note 3 to the parent company financial statements.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period.
At 31 December 2019 the Group has insurance contract liabilities representing amounting to mEUR 32,409 (31 December 2018: mEUR 29,805) which represents 82% of the Group’s total liabilities and it is thus the single largest liability of the Group. The insurance contract liabilities comprise life and non-life insurance contract liabilities.
Our audit procedures included evaluation of the governance around the overall Group reserving process and included testing the operating effectiveness of key controls over the identification, measurement and management of the Group’s calculation of insurance liabilities.
In respect of the investments in private equity funds, we evaluated and tested the procedures of the Group to determine the fair value of these investments. The procedures include assessment of fund net asset value based on the fair value of underlying investment, independent broker valuations and evidence of underlying financial data.
We refer to the Summary of significant accounting policies and note 13.
The value of the Nordea shares in the consolidated balance sheet amounts to mEUR 6,712
(31 December 2018: mEUR 7,535). The Group’s ownership in Nordea Bank Abp is 19.87%.
The book value of the Nordea holding exceeded the market value of the Group’s ownership at the reporting date, due to which an impairment test has been prepared at
The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS)
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
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.