— If, the leading P&C insurer in the Nordic region, with operations in Finland, Sweden, Norway, Denmark, the Baltic countries and Russia, — Mandatum Life, a life insurance company operating in Finland and the Baltic countries, and — Sampo plc, the parent company, which owns and administers the insurance subsidiaries and manages a signifi cant investment portfolio.
Approval of the Financial Statements and the Board of Directors' Report 162
As an economist I find it difficult to see how this development could last for an extended period of time. Central banks, particularly the Fed, have been pushing interest rates down to put a cost on risk aversion. Interest rates approaching zero per cent, maybe even entering negative territory, are bound to increase the willingness to invest. As I have often repeated in investor meetings, I am more worried about Europe than the United States. ECB’s actions and mindset have been difficult to understand. The euro faces huge pressures and must consequently weaken against other currencies. I am expecting to hear some positive news from the US economy by the end of next summer.
Dear Reader, On a number of occasions during the latter half of 2007 I commented on stock market developments and warned that the party was likely to be over. In my CEO's review for the Sampo Annual Report of 2007 I expected 2008 to become an interesting year for Sampo with turbulent capital markets. Looking back I think we got more than we bargained for.
This is my last CEO’s review as I will step down after the AGM on 7 April 2009 and, with its approval, become the chairman of the Board. I wish all the best to my successor, Kari Stadigh. He is, of course, not new to this game as he has acted as my deputy since 2001. Times are challenging and Kari is the right person to take over. I will remain one of the largest shareholders of Sampo and follow developments closely from the Board.
In the midst of all this gloominess I am looking very positively at Sampo Group’s future. We are a unique player among the Nordic financial institutions. Not only are we the biggest P&C insurer and a sizable life insurance provider, but we also have more than EUR 2 billion of excess capital left despite the dents we have taken in 2008. All in all Sampo Group has roughly 3 billion euros in cash. The capital can therefore quickly be leveraged and put to use as opportunities arise.
Another fact to keep me in an optimistic mood is the continuing good technical result of our P&C insurance operation, If. It is amazing how stable the combined ratio development has been since we took over the company in 2004. A well-run P&C insurance company can be very resistant to a weak economic environment. If P&C actually reported a higher operating profit in 2008 than in the year before. This has been achieved at the same time when new distribution channels have been opened and significant investments in Internet tools have been made. The cooperation agreement with the largest retail group in Finland, the S Group, is a prime example of this.
S ampo Group’s business areas are P&C insurance and life insurance. The Group is also a significant investor on the Nordic scale, with investment assets of approximately EUR 17 billion. The business areas have well-defined strategies, based on return on equity targets. Synergies between P&C
insurance and life insurance are minor. P&C insurance operates under the If brand. If is the largest Nordic P&C insurer with a market share of more than 20 per cent. Operations are focused on maintaining high profitability rather than increasing market share. The company also commands a strong position in the rapidly growing Baltic insurance markets. If ’s market position and size offer it advantages, which are reflected in cost efficiency, superior underwriting and geographical diversification.
Mandatum Life operates in Finland and, via its subsidiary, in all the Baltic countries. Mandatum Life’s operations are divided into two different kinds of businesses. New sales are focused on unit-linked insurance. Most of the technical reserves, however, relate to with-profit policies. The objective is to manage the assets covering the with-profit reserves in a way that produces high investment yield. Mandatum Life has a 19 per cent market share in Finland and approximately 11 per cent of the Baltic life insurance market.
Sampo pays no dividend to its shareholders for years 1991 and 1992.
Sampo’s A shares are listed on the Helsinki Stock Exchange on 14 January 1988. Sampo also carries out two successful share issues, accumulating a total of FIM 1.8 billion (currently approx. EUR 460 million) of capital.
Sampo’s share is included in the book-entry securities system in summer 1997. Almost 27,000 shareholders register their holdings in the system.
Sampo’s share is split in October 1997 so that each old share equals four new shares.
The P&C insurance company Kansa becomes a fullyowned subsidiary of Sampo in spring 1994. Kansa is merged with Sampo in late 1995.
As the completion of a process commenced in 1999, Sampo Insurance Company and Leonia Bank are merged into Sampo-Leonia financial group on 31 December 2000.
Corporate Governance Statement Acting in compliance with Recommendation 51 of the Corporate Governance Code, Sampo has published a separate Corporate Governance Statement on its website at www.sampo.com in fulfilment of the requirement referred to in the Finnish Securities Markets Act, chapter 2, section 6, paragraph 3.
The Board elects the Group CEO, the executives of Sampo Group and the Group Chief Audit Executive, releases them from their duties, and decides on the terms and conditions of their employment and on other compensation. In addition, the Board confirms the Group’s staff planning targets and monitors their fulfilment, determines the grounds for the Group’s compensation system and decides on other far-reaching matters concerning the staff.
ELECTION AND TERMS OF OFFICE OF BOARD MEMBERS According to Sampo’s Articles of Association, the company’s Board of Directors comprises no fewer than three and no more than ten members elected by shareholders at the Annual General Meeting. The Annual General Meeting of 2008 decided to elect nine members to the Board until the close of the Annual General Meeting to be held in 2009. The term of office of the Board members ends at the close of the Annual General Meeting that first follows their election. The members of the Board annually elect a Chairman and Vice Chairman from among their members at their first meeting following the Annual General Meeting.
Code, which was issued by the Securities Market Association and entered into force on 1 January, 2009. Sampo's Board of
Directors has also approved internal rules concerning corporate governance, internal control and reporting in Sampo Group.
The following Board members are independent of the company and its major shareholders: Tom Berglund, Georg
Ehrnrooth, Eira Palin-Lehtinen and Christoffer Taxell. During their term of office, Anne Brunila and Jukka Pekkarinen also became independent of the company and its major shareholders by the criteria laid down in the Corporate
The Board of Directors of Sampo plc convened 11 times in 2008. The average attendance of Board members at meetings was 94.95 per cent.
NOMINATION AND COMPENSATION COMMITTEE The Nomination and Compensation Committee is entrusted to prepare proposals for Sampo’s Annual General Meeting on the composition of the Board, the compensation of Board members and the principles on which this compensation is determined. The Committee consults the largest shareholders in these matters. The Committee is also responsible for preparing proposals for Sampo’s Board on the composition and chairmen of the Board’s committees and the composition of the Group MD Committee, on the appointment of Sampo Group’s CEO and the composition of Sampo Group’s Executive Committee, and on the principles by which the members of the Executive Committee are to be compensated and their compensation.
As authorised by the Board of Directors, the Committee also decides on the compensation of the members of the Executive Committee, excluding the Group’s CEO and Deputy CEO. Furthermore, the Committee prepares a proposal for the Board on the appointment, employment conditions and other compensation of the Sampo Group’s Chief Audit Executive, and on the principles by which the Sampo Group’s staff are to be compensated. In addition, the Committee is responsible for preparing proposals for the Board on issues relating to the development of good corporate governance and confirming the criteria and processes used for the Board’s self-evaluation.
In 2008, the Chairman of the Audit Committee was Christoffer Taxell, and the other members were Anne Brunila, Tom Berglund and Jukka Pekkarinen. Also participating in the meetings in 2008 were Tomi Englund, Björn Wahlroos, Kari Stadigh, Peter Johansson, Ilona Ervasti-Vaintola, Knut Arne Alsaker and Gunilla Werner Carlsson. The Audit Committee met four times in 2008. Each member of the committee participated in every meeting.
The composition of the Group Executive Committee in 2008 was as follows: Björn Wahlroos, Group CEO and President Kari Stadigh, Group Deputy CEO Ilona Ervasti-Vaintola, Group Chief Counsel, Principal Attorney
Line Hestvik, Group Executive Vice President, Head of BA Private, If P&C Peter Johansson, Group CFO Patrick Lapveteläinen, Group CIO Torbjörn Magnusson, President & CEO of If P&C Insurance Holding Ltd (publ) Ivar Martinsen, Group Executive Vice President, Head of BA Commercial, If P&C Petri Niemisvirta, Managing Director, Mandatum Life Insurance Company Limited Morten Thorsrud, Group Executive Vice President, Head of BA Industrial, If P&C Ricard Wennerklint, CFO, If P&C
In 2008, the Chairman of the Investment Committee was Kari Stadigh, and the other members were Patrick Lapveteläinen, Sirpa Mannila and Vesa Nurminen.
Chief Executive Officer The company has a Managing Director who is simultaneously the CEO of Sampo Group. The Board of Directors elects and releases the CEO, and decides on the terms of employment and other compensation. The Managing Director of the company and the CEO of Sampo Group is Björn Wahlroos until 7 April, 2009. The company’s Board of Directors has appointed Kari Stadigh as the new Managing Director and CEO of Sampo Group as of 8 April, 2009.
The period of notice for terminating the service contract of the CEO of Sampo Group is six months. In addition to receiving salary for the period of notice, the CEO will be entitled to severance compensation of 18 months’ full salary, provided that the service contract has been terminated by Sampo. The retirement age of the Group CEO and President is 60 years of age, in which case the pension benefit is 60 per cent of the pensionable salary.
Compensation COMPENSATION OF THE MEMBERS OF THE BOARD OF DIRECTORS According to Sampo’s Articles of Association, the Annual General Meeting decides on the compensation of the members of the Board of Directors.
Members of the Board of Directors did not receive any other benefits, nor did they participate in Sampo’s incentive systems. However, in accordance with a decision of the Annual General Meeting held in spring 2007, the Group CEO, Björn Wahlroos, is included in the Sampo 2006 long-term share incentive system for the company’s management. Group CEO Wahlroos has given notice that his participation in the Sampo 2006 share incentive system will terminate when he gives up his duties as Group CEO.
With the exception of the Group CEO, the members of the Group Executive Committee are also participants in the long-term incentive systems 2006 II, 2008 I and 2008 II for Sampo’s executive management. The members of the Executive Committee, including the Group CEO, are also partici-
The Group CEO was paid a total of EUR 1,805,553 in salaries and bonuses for 2008, of which the fixed salary and benefits made up EUR 780,553 and performance-based and incentive bonuses EUR 1,025,000. The Group Deputy CEO was paid a total of EUR 1,103,502 in salaries and profit bonuses, of which the fixed salary and benefits made up EUR 500,002 and performance-based and incentive bonuses EUR 603,500.
The members of the Group Executive Committee participate in the local retirement programs applicable to employees in their respective countries of residence. As part of their service contract, they also participate in supplementary retirement programs. The retirement ages are 60 or 65 years.
The Audit Committee of Sampo’s Board of Directors annually approves the Internal Audit’s operating plan. The Internal Audit reports on the audits performed to the CEO and the Audit Committee. Company-specific audit observations are reported to the respective companies’ executive bodies and management.
Insider Administration Sampo’s Board of Directors has approved Sampo Group’s Guidelines for Insiders. These comply with the NASDAQ OMX Helsinki’s Guidelines for Insiders and the Standards of the Financial Supervision Authority. Sampo Group’s Guidelines for Insiders are stricter than the above-mentioned norms on matters that concern the Group Executive Committee, other corporate executives and other specificallynamed persons, as these persons must ask for separate written permission in advance for each share-related securities transaction they make.
Sampo Group's insider guidelines and insider register may be viewed on the Internet at www.sampo.com.i
Matti Vuoria, born 1951 ceo, president of varma mutual pension insurance company Positions of Trust: Stora Enso Oyj, Board Member, Wärtsilä Corporation, Vice Chairman, Danisco A/S (Denmark), Board Member, The Finnish Pension Alliance TELA, Board Member, Securities Markets Association (Finland), Chairman, Federation of Finnish Financial Services, Board Member, Finnish-Russian Chamber of Commerce, Chairman –Member of the Board of Directors of Sampo plc since 7 April 2004. –Vuoria holds 29,325 Sampo plc shares directly or through a controlled company.
Anne Brunila, born 1957 president and ceo, finnish forest industries federation Positions of Trust: Confederation of European Paper Industries CEPI, Member, The Research Institute of the Finnish Economy ETLA, Board Member, Finnish Business and Policy Forum EVA, Board Member, The Finnish Innovation Fund Sitra, Board Member, Economic Information Office, Board Member, Aalto University Foundation, Board Member –Member of the Board of Directors of Sampo plc since 9 April 2003. –Brunila holds 3,520 Sampo plc shares directly or through a controlled company.
Jukka Pekkarinen, born 1947 director general, ministry of finance Positions of Trust: European Union, Economic Policy Committee, Vice Chairman, Incomes Policy Information Committee, Chairman, Advisory Board to the Government Institute for Economic Research, Chairman, The Local Government Pensions Institution, Investments Advisory Board, Chairman –Member of the Board of Directors of Sampo plc since 5 April 2006. –Pekkarinen holds 3,521 Sampo plc shares directly or through a controlled company.
Björn Wahlroos, born 1952 group ceo and president, managing director of sampo plc (until 7 april 2009) Positions of Trust: UPM-Kymmene Corporation, Chairman of the Board, Nordea Bank AB, Board Member, Finnish Business and Policy Forum EVA, Board Member, The Research Institute of the Finnish Economy ETLA, Board Member –Wahlroos was appointed to the Board of Directors of Sampo plc on 5 April 2001. –Wahlroos holds 11,839,890 Sampo plc shares directly or through a controlled company.
Information as on 31 December 2008.The CVs of members of the Board of Directors can be viewed on the Internet at www.sampo.com.
Peter Johansson, born 1957 group cfo Positions of Trust: If P&C Insurance Holding Ltd, Board Member, Mandatum Life Insurance Company Limited, Vice Chairman of the Board –Johansson holds 40,356 Sampo plc shares directly or through controlled companies.
Kari Stadigh, born 1955 group deputy ceo (until 7 april 2009), group ceo and president, managing director of sampo plc (from 8 april 2009) Positions of Trust: If P&C Insurance Holding Ltd, Chairman of the Board, Mandatum Life Insurance Company Limited, Chairman of the Board, Kaleva Mutual Insurance Company, Chairman of the Board, Aspo plc, Chairman of the Board (until 31.12.2008), Board Member (from 1.1.2009), Alma Media Corporation, Chairman of the Board, Federation of Finnish Financial Services, Board Member, Varma Mutual Pension Insurance Company, Board Member –Stadigh holds 217,498 Sampo plc shares directly or through controlled companies.
Morten Thorsrud, born 1971 group executive vice president, head of ba industrial, if p&c insurance Positions of Trust: If Livförsäkring AB (Sweden), Board Member, CJSC If Insurance (Russia), Board Member, IPSC Region (Russia), Board Member, Forsikring & Pension (Denmark), Board Member –Thorsrud holds 6,250 Sampo plc shares directly or through controlled companies.
Ricard Wennerklint, born 1969 deputy md, if p&c insurance holding ltd; md, if p&c insurance Positions of Trust: If P&C Insurance Company Ltd (Finland), Board Member, AS If Eesti Kindlustus (Estonia), Board Member, UAB If Draudimas (Lithuania), Board Member, AAS If Latvia (Latvia), Board Member, SOS International a/s (Denmark), Board Member, CJSC If Insurance (Russia), Board Member, IPSC Region (Russia), Board Member –Wennerklint holds 11,370 Sampo plc shares directly or through controlled companies.
EUR 870 million (3,833). The profit for the comparison year contains the sales gain of EUR 2,830 million from the Sampo Bank transaction closed on 1 February 2007. Earnings per share amounted to EUR 1.18 (6.18). The comparable earnings per share for 2007 were EUR 1.25. Earnings per share, including the change in the fair value reserve, amounted to EUR -3.52 per share (5.89). Net asset value per share amounted to EUR 8.28
(13.49). The fair value reserve after tax on the Group level decreased to EUR -2,364 million (316). The return on equity for the Group was -32.4 per cent for 2008 (52.6).
The Board proposes to the AGM on 7 April 2009 a dividend of EUR 0.80 per share and an authorisation to repurchase a maximum of 50 million Sampo A shares.
Reported profit before taxes for Sampo Group’s life insurance operation, Mandatum Life, decreased significantly due weakened investment returns and amounted to EUR 140 million (342). The fair value reserve decreased to EUR -192 million on 31 December 2008 (289). Return on equity at market value was -68.8 per cent (9.1).
EUR -1,759 million (26) because of the fall in the market value of the Nordea holding.
EUR 21,205 million (25,424). On the asset side the total amount of financial assets decreased by EUR 3,436 million to
Average number of staff (FTE) 7,145 6,855 4 Earnings per share, euro**) 1.18 1.25 -6 EPS including change in fair value reserve, euro**) -3.52 0.95 NAV per share, euro 8.28 13.49 -39 Adjusted share price, high, euro 19.30 24.79 -22 Adjusted share price, low, euro 11.42 17.95 -36 Market capitalization, EURm 7,433 10,382 -28 *) Comparison figures include the sales gain from Sampo Bank of EUR 2,830 million and
Business Areas in 2008 P&C INSURANCE If P&C Insurance is the leading property and casualty insurance company in the Nordic region, with insurance operations that also encompass the Baltic countries and Russia. The P&C insurance group’s parent company, If P&C Insurance Holding Ltd, is located in Sweden, and the If subsidiaries provide insurance solutions and services in Finland, Sweden, Norway, Denmark, the Baltic countries and
EUR 548 million (565). Of the technical result, business area Private accounted for 53 per cent, Commercial for 30 per cent, Industrial for 12 per cent and Baltic and Russia for 3 per cent. Insurance margin (technical result in relation to net premiums earned) decreased slightly from previous year and was 14.3 per cent (14.8). Return on equity (RoE)
To achieve a uniform accounting practice in all of Sampo Group’s reporting segments, equity and fixed income investments acquired as financial assets in P&C insurance as of 1 January 2008 have been from February 2008 on treated as assets available for sale (AFS). Assets are valued, as before, at market value in the balance sheet but differing from earlier practice, the valuation changes are recognized directly into the fair value reserve, which is part of the equity capital. The tax effect will be taken into account in the fair value reserve. At the time of sale of an asset, the valuation changes accumulated in equity capital and the sales gain or loss are recognised in the profit.
agreed on the cooperation in October 2007. Under the agreement, If ’s customers will be eligible for the S Group’s customer bonus for P&C insurance policies offered to households by If.
The agreement is long-term and significant in scope and has started out successfully for both parties.
Sampo Life Insurance Baltic SE, which has the form of a European company and is headquartered in Estonia. It operates in the other
Profit before taxes in life insurance for 2008 was EUR 140 million (342). Net investment income, excluding income on unit-linked contracts, amounted to EUR 263 million (543).
Excluding the assets of EUR 1.6 billion (2.1) covering unit-linked liabilities, Mandatum Life Group’s investment assets amounted to EUR 4.7 billion (5.7) at market values on 31 December 2008. Fixed income covered 78 per cent (72), equity 12 per cent (19), private equity 5 per cent (5), real estate 3 per cent (3) and other assets 2 per cent (2) of the total assets.
Net income from investments 268 211 27 Other operating income 26 29 -10
4,057 million (4,085). Growth adjusted for currency was, however, 1 per cent and compared to the previous year, premiums increased in all business areas except in Industrial. The strongest growth was again seen in business area Baltic and
Continued cost efficiency resulted in cost ratio remaining at the previous year’s level of 23.7 per cent (23.7). The total costs remained at EUR 962 million (963). The inclusion of SOAO
Net income from investments increased to EUR 268 million (211). Investment income includes EUR 76 million of impairment of financial assets. On 31 December 2008 total investment assets amounted to EUR 9.0 billion (10.0) of
Change in liabilities for inv. and ins. contracts 681 -145 -
In order to mitigate the interest rate risk, Mandatum Life has entered into interest rate swap agreements with nominal amounts of EUR 1.6 billion in 2008. Within these swaps,
Return on investments in 2008 was -7.8 per cent (5.0) due to the collapse of the equity markets. At the end of December 2008 the duration of fixed income assets was 3.6 years (1.9).
Mandatum Life Group’s solvency amounted EUR 384 million (846) on 31 December 2008 exceeding minimum requirements. Solvency ratio was 7.9 per cent (16.5). Total technical reserves were EUR 6.1 billion (6.7), of which unitlinked reserves accounted for 1.6 billion (2.1). The share of unit-linked reserves of total technical reserves decreased to 27 per cent (31).
The company adopted a new name, Mandatum Life Insurance Company, in August 2008. In connection with name change the company began using the marketing brand of
Mandatum Life and extended its business model to ‘asset management under insurance wrapper’.
An asset management unit was set up and first new products were launched.
In Finland Mandatum Life’s overall market share measured by premium income was 19.3 per cent (19.8). The market share in its focus area unit-linked business was 21.5 per cent (22.4) due to difficult conditions on the market. Sampo Life Baltic’s market share in the Baltics decreased to 11 per cent (15).
EUR -1,759 million (26) as a result of the fall in Nordea’s share price.
Attributable to Equity holders of parent company 153 175 241 106 113
SOAO Region, a Russian insurance company. SOAO Region ’s main focus is motor insurance with approximately
On 10 June 2008 If P&C announced a plan to combine its subsidiaries operating in Estonia, Latvia and Lithuania into one legal entity. The rearrangement will simplify and strengthen the structure of the Baltic property and casualty insurance operations and will improve efficiency. AS If Eesti Kindlustus, operating in Estonia, UAB If Draudimas, operating in Lithuania, and AAS If Latvia will be merged into one company to be domiciled in Tallinn, Estonia. The transactions are conditional on the receipt of necessary official permits by the authorities of the Baltic countries. The plan is to complete the transactions in first quarter of 2009.
Compensation Committee proposes to the AGM in the spring of 2009, having consulted the major shareholders, that Björn
Sampo’s Board of Directors confirmed the change in the Sampo Group’s administration by nominating on 5 November 2008
Kari Stadigh as Group CEO and President starting on 8 April 2009.
Ltd elected the company’s managing director Torbjörn Magnusson as a new member of the Board on 28 March 2008. Mr
Board of Directors. The Board of Directors of the company consists of Kari Stadigh, the Chairman of the Board, Patrick
Group’s Finnish subsidiary If P&C Insurance Co. on 12 August 2008. He is responsible for the Baltic and Russian operations of If and a member of If ’s Executive Management Team.
Code approved by The Board of the Securities Market Association in October 2008. The Code will replace the Corporate
Governance Recommendation for Listed Companies issued in 2003. A more detailed description of the Group’s governance systems is available in the Annual Report and on the Group’s homepage www.sampo.com.
CORPORATE RESPONSIBILITY As a listed company, Sampo plc has the responsibility to act in the best interests of its shareholders, in compliance with legislation and in accordance with sound business practices. Sampo
Sampo Group is managed according to healthy and sound business principles. It aims at anticipating changes in society and the capital market, and adapting its operations to them.
Sampo Group also aims to provide a non-discriminative, agreeable and open work environment. Through its services,
More detailed information about corporate responsibility in the day-to-day business of Sampo Group is available in the internet at www.if-insurance.com.
Majority of covered executives are members of long-term management incentive schemes, the outcome of which is determined by Sampo’s share-price development over a period of approximately three years starting from the issue of the respective program. The programs are subject to thresholds on share price development and company profitability, and ceilings for maximum bonuses. Furthermore the programs are subject to rules requiring part of the paid bonus to be used to acquire
Sampo Group are aggregated internally through an economic capital framework, which describes the amount of capital needed to bear different types of risks. The economic capital tied up in the Group’s operations was EUR 2,585 million (3,395), which is well covered by the Group’s capital base.
Market risks are managed by diversifying the investment portfolio and by constant monitoring of the composition of the investments in relation to the characteristics of the insurance liabilities. Investment risks are controlled through Investment Policies, which define target allocations for the investment portfolios and limits for the allocations and investment concentrations. The Investment Policies also include guidelines on the use of derivatives.
Sampo Group is continuously working with improving internal control, core processes and systems, as well as monitoring and analysing impacts from changes in the Group’s external operating environment to reduce the impact of operational and business risks.
General Meeting of Shareholders. Sampo A shares have been quoted on the main list of the Helsinki Stock Exchange since 1988. All the B shares are held by Kaleva Mutual Insurance
Company. B shares can be converted into an A shares at the request of the holder. Sampo plc’s share capital amounted to
AUTHORISATIONS GRANTED TO THE BOARD Based on the authorisation of Annual General meeting of 2007, Sampo plc repurchased 2,393,000 A shares during the first quarter of 2008. Together with the shares acquired in 2007
Sampo plc held 6,715,000 A shares corresponding to 1.2 per cent of all shares and related votes. All in all EUR 125 million was used to repurchase these shares at an average price of
Based on the above authorisation, Sampo plc’s Board of Directors decided on 7 May 2008 to repurchase Sampo’s A shares with distributable capital and reserves. Maximum amount to be repurchased is 50,000,000 A shares, corresponding to approximately 8.6 per cent of the total number of shares. Repurchases shall decrease the distributable capital and reserves.
The shares were to be acquired through public trading on the OMX Nordic Exchange at market price prevailing at the time of repurchase. Weighty financial reasons for repurchases exist as they are to be carried out in order to follow the company ’s distribution policy.
EUR 7.4 million was used for the purchases at an average price of EUR 16.66 per share. Repurchases decreased the distributable capital and reserves.
On 7 October 2008 Sampo received a disclosure according to which the Board of Directors of Exista hf. had decided on 6 October 2008 to engage Citigroup Global Markets Limited and Morgan Stanley & Co. International plc to conduct an accelerated book built offering of 114,257,867 Sampo A shares held by Exista hf. and its subsidiaries. The shares represented 19.98 per cent of the share capital of Sampo plc.
The shares were not acquired in the proportion in which the shareholders’ shareholdings are distributed. The price paid was 11.50 euros per share, all in all EUR 115 million was paid for the shares. Shares were purchased from Exista hf. and its subsidiaries, because of the low transaction costs and the price lower than in public trading.
1.3 per cent of shares had not been transferred to the bookentry system. The holdings of nominee-registered and foreign shareholders decreased to 53.3 per cent (54.5) of the shares and 52.9 per cent of the votes (54.4).
Sampo plc until 11 August 2008. The agreement, if consummated through delivery of the shares, would have resulted in Exista hf. and companies controlled by Exista hf. holding shares in Sampo plc in excess of the flagging threshold of 20 per cent of the number of shares as set forth in Chapter 2, Section 9 of the Securities Markets Act. According to the disclosure Exista hf. and its group companies held 19.98 per cent of the total number of shares and 19.82 per cent of the voting rights in the Sampo plc.
- On 8 October 2008 Exista hf. notified Sampo in accordance with Chapter 2 Section 9 of the Securities Market Act that Exista hf.’s holding in Sampo plc had fallen below 5 per cent of the shares and votes of Sampo plc and was 0 per cent on 7 October 2008.
Markets Act. The transaction was completed on 11 December 2008 and Sampo plc received a disclosure, according to which the total number of Sampo A shares and related voting rights owned by the State of Finland fell on 11 December 2008 below one twentieth (1/20) and the total number of Sampo A
Wärtsilä Oyj Abp 1,901,000 0.34 0.34 The Local Government Pensions Institution 1,616,677 0.29 0.29 Mutual Insurance Company Pension-Fennia 1,150,000 0.20 0.20 Odin Norden c/o Odin Forvaltning AS 1,063,000 0.19 0.19 SEB Gyllenberg Finlandia Fund 910,000 0.16 0.16 Danske Fund Finnish Institutional Equity 831,145 0.15 0.15 Nordea Fennia Fund 799,334 0.14 0.14 OMX Helsinki 25 Exchange Traded Fund 711,424 0.13 0.13 OP Finland Value Fund 708,000 0.13 0.13 OP Focus Non-UCITS Fund 685,000 0.12 0.12 Nordea Life Assurance Finland Ltd. 615,000 0.11 0.11 Nominee registered total 294,719,439 52.50 52.05 *) Entirely owned by the Finnish government. **) 4,927,855 A shares and 1,200,000 B shares.
Financial Standing INTERNAL DIVIDENDS Sampo plc received in 2008 a total of EUR 381 million in dividends from its subsidiary companies.
GROUP SOLVENCY The Group solvency is based on adjusted solvency calculations for insurance groups according to the Decree of the Ministry of
Group solvency ratio (Own funds % of minimum requirements) 433.6 774.6
Mode of increase/decrease Subscription period/registration Terms of subscription or subscriber or reason for decrease Number of new shares Share capital after increase/
Bond with Warrants, 1998 and Options 2000 A shares Six conversions in 2005
Outlook for 2009 2009 is likely to be a difficult year for the global economy. Due to the recessionary trends it may even turn out to be one of the weakest years for the global economy since the Second
World War. Governments and central banks have set up plans to guarantee bank liabilities and injected significant amounts of capital into the financial system. It will take some time for these policies to have the desired effect.
Inevitably the capital market conditions will leave their mark on Sampo Group’s investment assets and the returns achieved. Sampo Group’s result for 2009 will largely depend on the proceeds of the P&C insurance operation. The volatility of capital markets makes it impossible to estimate the return on investments at any level of accuracy. Profitability is expected to remain on a good level, however, because of the steady performance of the P&C insurance operations and the high yields expected on our fixed income portfolios.
The macroeconomic situation will have a slight negative impact on premium growth in P&C insurance. As claims costs are also forecast to trend down, the insurance technical result of If P&C is not expected to suffer in 2009 from the economic downturn. If P&C is as usual expected to reach its long-term combined ratio target of below 95 per cent.
Sampo plc’s profit will mostly consist of the dividends expected from Nordea in the second quarter of 2009. With its current asset composition Sampo plc’s profit contribution will be small in the Group context.
The main risks related to Sampo Group’s investment activities in 2008 were equity risk, interest rate risk and credit risk.
Currency risk is the risk that Sampo Group will incur losses due to changes in foreign currency exchange rates. Market risk relating to foreign currency in Sampo plc consists of the translation risk linked to the net asset value and dividends of If P&C, and the currency risk related to Sampo plc’s investment portfolio.
The perceived risks in the businesses and operating environment did not change significantly during 2008.
Board’s Dividend Proposal According to its dividend policy, Sampo plc aims to distribute an annual dividend corresponding to a dividend yield of 4–6 per cent.
extraordinary items) for the calendar year for which the dividend is paid. Share buy-backs can be used to complement dividends.
EUR 3,061,299,568.16 of which profit for the financial year was EUR 554,584,670.63.
The Board proposes to the Annual General Meeting a dividend of EUR 0.80 per share to company’s 561,372,390 shares.
Depository Ltd on the record date 14 April 2009. The Board proposes that the dividend will be paid on 21 April 2009.
Return on equity (at fair values) % -32.4 52.6 22.6 28.4 26.5 Return on assets (at fair values) % -7.4 11.5 4.0 4.4 4.0
Premiums written before reinsurers' share EURm 4,057 4,085 4,019 3,962 2,427
Return on equity (at fair values) % -0.8 19.2 22.0 24.1 20.3
Combined ratio excl. unwinding of discount % 91.8 90.6 89.9 90.5 89.8 *) Comparison figures of P&C insurance for the year 2004 are for 9 months from April to December.
B SHARES: Adjusted number of shares at 31 Dec. 1,000 1,200 1,200 1,200 1,200 1,200 Average adjusted number of shares 1,000 1,200 1,200 1,200 1,200 1,200 1) Sampo plc's sales gain (EURm 2,830) arising from the disposal of the share stock of Sampo Bank plc to Danske Bank A/S is included in the Group key figures for the year 2007.
The comparison average numbers of staff between the years 2004 and 2006 include the average staff number of the Banking and investment services (discontinued operations). 2) The group solvency for the years 2008 and 2007 is based on adjusted solvency calculations for insurance groups according to the Decree of the Ministry of Social Affairs and Health
RETURN ON ASSETS (AT FAIR VALUES), % + operating profit + interest and other financial expenses + calculated interest on technical provisions ± change in fair value reserve ± change in valuation differences on investments
+ balance sheet total - technical provisions relating to unit-linked insurance ± valuation differences on investments (average of values on 1 Jan. and 31 Dec.)
GROUP SOLVENCY + total equity + sectoral items - intangible assets and sectoral deductibles - profit distribution from previous period and proposed profit distribution for current period own funds, total - minimum requirements for own funds, total group solvency
RISK RATIO, % + claims incurred claims settlement expenses premiums earned
COST RATIO, % + operating expenses + claims settlement expenses premiums earned
COMBINED RATIO EXCL. UNWINDING OF DISCOUNT, % loss ratio before unwinding of discount + expense ratio
PROFIT BEFORE TAXES Formula shown above in connection with the Group key figures.
EXPENSE RATIO, % + operating expenses before change in deferred acquisition costs + claims settlement expenses expense charges
+ liabilities for insurance and investment contracts - reinsurers' share of insurance liabilities - 75 % technical provisions relating to unit-linked insurance
EARNINGS PER SHARE profit for the financial period attributable to the parent company's equity holders adjusted average number of shares
EQUITY PER SHARE equity attributable to the parent company's equity holders adjusted number of shares at balance sheet date
Sampo Group Risk Management 2008 1 Overview of Sampo Group’s Risks ....................... 44
| Sampo Group’s Risk Profile ................................ 44 2 Overview of Sampo Group’s Risk Management ... 45
Sampo Group is continuously working with improving internal control, core processes and systems, as well as monitoring and analyzing impacts from changes in the Group’s external operating environment to reduce the impact of such risks.
Although the classification of Sampo Group’s risks is based on Solvency II QIS 4 technical specifications, the classification does not entirely follow Solvency II. The main difference occurs from the definition of spread risk, which in Sampo Group’s case is defined into credit risk instead of market risk.
DEVELOPMENTS IN 2008 The year 2008 was characterized by the financial crisis which had considerable effects on Sampo Group’s business and operating environment. The level of risk related to financial investments is
384 million (EUR 846 million) while the regulatory minimum capital requirement was EUR 225 million (EUR 239 million). However, Sampo Group’s consolidated capital position was very strong. The Group solvency ratio was 434 per cent (775 per cent). The Group’s adjusted solvency capital was
The main change in Sampo Group’s risk profile in 2008 was the decline in the proportion of equity in the investment portfolios of Sampo Group’s insurance subsidiaries. In contrast,
Shareholders Investors require a risk premium on their investments. This will be smaller when Sampo Group has a robust and transparent risk management process in place.
Customers Sampo Group’s customers can rely on us to deliver reliable service without interruptions or unpleasant surprises.
Regulators Confidence in Sampo Group’s ability to control the risks associated with its activities improves our cooperation with the authorities.
Risk management increases the value of Sampo Group from the perspective of the following stakeholders: Benefits of risk management to Sampo Group's stakeholders
RISK GOVERNANCE AND REPORTING STRUCTURE This chapter describes Sampo Group’s governance framework regarding risk control. Sampo Group’s overall Corporate Governance and system of internal control is described in the Corporate Governance section of this annual report.
Board of Directors, for the preparation of Sampo Group’s risk management principles and other related guidelines. The AC
shall ensure that the operations are in compliance with these, control Sampo Group’s risks and risk concentrations as well as control the quality and scope of risk management. The committee shall also monitor the implementation of risk policies, the use of limits and the development of risks and profit. At least three members of the AC should be elected from those members of the Board, who do not hold management positions in Sampo Group and are independent of the company.
aims to secure a holistic view of the risks Sampo Group is exposed to by monitoring and measuring Sampo Group’s aggregated risk exposure and by coordinating and monitoring company specific and group level risk reporting.
The Boards of Directors in each insurance subsidiary have the overall responsibility for the risk management process and they are the ultimate decision making bodies at If P&C and
Mandatum Life, respectively. The respective Board ensures that the management and follow-up of the risks are satisfactory, monitors risk reports and approves risk management plan. The
Boards of Directors of If P&C, Mandatum Life and Sampo plc appoint the individual risk management committees within each legal entity.
Concentration risks across the Sampo Group are mainly market and credit risks related to the individual segments’ investment portfolios. These risks are managed by taking into account the total Group exposure when setting individual limits in the investment policies for the various subsidiaries within the Group. Concentrations of investment risks in
Risk Management writing Committee (UC), Actuarial Committee (AC), Reinsurance Committee (RC), and Operational Risk Committee
(ORC). ICC is responsible for the organization and control of investment activities in If P&C ensuring compliance with the principles and limits specified in the Investment Policy. ICC
UC is responsible for maintaining the Underwriting Policy and for reporting all deviations from the Underwriting Policy to IRCC. AC monitors the technical provisions and technical calculations and reports on provision risk to the IRCC on a quarterly basis. RC is responsible for approving on deviations from Reinsurance Security Policy and reporting all deviations to IRCC. ORC considers various policies and recommendations concerning operational risk management within If P&C
and monitors deviations from these policies. Moreover, the committee is responsible for follow-up of operational risks identified in the operational risk assessment process.
The actuarial department ensures that tariffs and prices are adequate and reports to the Board if changes to the tariffs are needed. The Board approves the tariffs and prices, defines the maximum amount of risk to be retained on company’s own account and approves the Reinsurance Policy annually. The actuarial department also monitors on a continuous basis that technical provisions are adequate and reports to the Board if changes in the calculation basis are needed. Any changes to calculation basis of technical provisions are approved by the Board.
Life’s business units and collected and analyzed by the Operational Risk Committee (ORC), are reported to the Management Team, managing director and the Board of Directors quarterly. ORC is also responsible for maintaining and updating the continuity plan and preparedness plan.
Sampo Group 2008 3 Valuation Methods of Financial Instruments 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 valuation methods of financial assets are shown in table 1.
Financial assets Available for sale assets 11,771 3,476 26 15,273 Financial assets at fair value through profit or loss 338 51 6 395
CAPITAL MANAGEMENT APPROACH One of the roles of capital is to act as a buffer against future losses. It is therefore convenient to define risk in terms of capital. The starting point is the Group’s risk appetite, which is implemented through a system of risk limits, policies and authorizations approved by the Board of Directors. Risk exposures are constantly monitored and their implications on the capital position are assessed. The risk and capital position is reported on at least a quarterly basis. If necessary, e.g. during the financial crisis, the reporting frequency is much higher.
In addition to maintaining capital resources at a sufficient level, we seek to: Allocate capital to support growth in profitable businesses,
Manage the Group’s debt to equity structure in order to enhance returns to shareholders while maintaining reasonable financial flexibility,
Ensure sustainable dividends in accordance with Group’s dividend policy (dividend yield 4-6 per cent, not more than profit for the financial year).
The new early warning solvency rules for life insurers became effective in Finland as of October 2008. The new rules are based on a similar framework as the Solvency II draft, but with different assumptions (zero correlations and 99 per cent confidence level instead of 99.5 per cent).
Supervisory Authority. The minimum requirement for the solvency capital is the supervisor’s view on how much capital is needed to cover the risks taken by the business operations of the Group.
The calculation of group solvency is shown in table 2. The group solvency ratio on 31 December 2008 was 434 per cent
If P&C Insurance (Sweden) and If P&C Insurance Co. (Finland ) are rated by Moody’s and Standard & Poor’s and Sampo plc by Moody’s. The Group’s rating objective is to retain at least a single A rating.
The economic capital in If P&C for market risk, insurance risk and credit risk relating to reinsurance assets is calculated using If P&C’s internal stochastic models. For credit risks related to investment assets and for operational risks, economic capital is estimated based on the standard model used in the fourth Quantitative Impact Study (’QIS 4’) in the Solvency
In order to assess the overall risk profile, it is necessary to incorporate the interrelationships between the various risk types, as some of the risks may develop in opposite directions creating natural hedges. For this purpose, If P&C has used an internal dynamic financial analysis (DFA) model for several years. Through simulations of both the investment and insurance operations, the effect on overall capital need of, for example, alternative reinsurance structures and investment allocations can be analyzed.
QIS 4 method for market risk. Due to the Nordea holding, the holding segment is a significant contributor to economic capital.
DISTRIBUTION OF ECONOMIC CAPITAL IN SAMPO GROUP Economic capital tied up in the Group’s operations calculated with a confidence level of 99.5 per cent on December 31, 2008 was EUR 1,895 million compared to EUR
Breakdown of economic capital calculated with the confidence level of 99.5 per cent by different risks and by segment on 31 December 2008 sampo group, eur 1,895 million
Economic capital does not only reflect the capital needed for the different kinds of risks, but also their mutual diversification effect. This gives a more accurate view of the overall capital need as it is very unlikely that all risks in the Group’s segments will materialize simultaneously. Figures 6–9 show the distribution of economic capital in the group between different risk areas and in the different business areas.
Breakdown of economic capital calculated with the confidence level of 99.97 per cent by different risks and by segment on 31 December 2008 sampo group, eur 2,585 million
Economic capital calculated with the confidence level of 99.5 per cent, If P&C, Mandatum Life on 31 December 2008 eurm eurm
Economic capital calculated with the confidence level of 99.97 per cent, If P&C, Mandatum Life on 31 December 2008
inadequate pricing, risk concentration, improper reinsurance coverage or random fluctuations in frequency and/or size of claims. Provision risk is the risk of loss due to technical provisions not being sufficient to cover the cost of claims from insurance business already written, e.g. due to higher inflation than expected.
Underwriting risk is the risk due to the inherent uncertainty associated with the pricing of undertaken insurance risks. The core business of P&C insurance is transfer of risk from the insured to the insurer. P&C insurance undertakes the obligation to indemnify the insured in case of claims, in exchange, the insured pay a premium. Naturally a crucial factor contributing to the profitability of P&C insurance operations is the ability to accurately estimate claims and administrative costs and thereby correctly price the insurance contracts.
insurance underwriting principles. The company should always have the necessary knowledge, expertise and data to understand and quantify the risks. As a rule, If P&C only writes insurance in the Nordic and Baltic countries and in Russia unless the risk is otherwise clearly related to the Nordic countries.
Given the inherent uncertainty of P&C insurance there is a risk that the future claims are unexpectedly high, which will lead to losses. Examples include large industrial fires, natural catastrophes such as severe windstorms and unforeseen increases in the frequency or the average size of small and medium-sized claims.
However, underwriting risk concentrations may still arise through for example exposures to natural disasters, such as winter storms and floods. The most exposed geographical areas to such disasters are Denmark, Norway and Sweden.
(approximately EUR 9.2 million) and SEK 200 million (approximately EUR 18.4 million) per risk and SEK 200 million per event.
If P&C’s Reinsurance Policy stipulates guidelines for purchase of reinsurance. The need and optimal choice of reinsurance is evaluated through statistical analysis. The remaining net exposure is subject to the capital requirements (regulatory, economic and rating) and the cost of reinsurance must be favourable compared to the cost of capital.
cooperates with external advisors. Two different approaches are used for these analyses: Statistical models in which historical losses are used to estimate distributions for the frequency and size of losses, and
Catastrophe models in which catastrophes are simulated based on historical and meteorological data. Subsequently, insurance losses can be calculated taking into account vulnerability, exposure and policy terms.
Technical provisions in P&C insurance, which represent the current best estimate, include an element of uncertainty as the size of claim payments and the frequency of unreported claims are not known. Claims are usually reported to If P&C
For insurance lines such as MTPL and WC, legislation differs significantly between countries. Some of the Finnish,
Swedish and Danish provisions for these lines include annuities which are sensitive to changes in mortality assumptions and discount rates. The proportion of the technical provisions related to MTPL and WC is 69 per cent.
Nominal reserves Inflation increase Increase by 1%-point Sweden 157.0 Denmark 14.4
Annuities Decrease in mortality Life expectancy increase by 1 year Sweden 7.5 Denmark 0.4
The technical provisions for many lines of business are sensitive to changes in inflation. The sensitivity of the inflation assumptions differ between countries due to the different national rules. A sensitivity analysis of the provision risk on 31
Analyses of the uncertainty in technical provisions are made by If P&C's actuaries. The actuaries monitor the levels of technical provisions on a continuous basis in order to ensure that they comply with the established guidelines. The actuaries also develop methods and systems to support these processes.
The actuarial estimates are based on the data on historical claims and any other information that is available at the closing date. Factors that are monitored are e.g. loss development trends, the level of unpaid claims, changes in legislation, legal cases and economic conditions. The methods used in general are the Chain
Claim ratios of Mandatum Life after reinsurance, the figures of employees' group life excluded
Table 7 shows the result of underwriting risks in Mandatum Life’s Finnish life insurance policies. The ratio of the actual claims costs assumed was 84 per cent in 2008 (112 per cent in 2007). Excluding the group pension longevity supplement provision the ratio was 84 per cent in 2007.
More than half of Mandatum Life’s mortality risk premium comes from the Employees’ Group Life Insurance pool. However, the mortality risk of this business is smaller than any other mortality business because it is re-priced annually.
Board of Directors annually determines the maximum amount of risk to be retained for the company’s own account, which for
In life insurance, the main provision risks are the discount rate risk within with-profit policies and risk of increase in life expectancy (longevity risk) within group pension policies.
Provision risk also contains the same risks as underwriting risk, such as random fluctuations in the claims. Provision risk is managed by analyzing and annually reviewing the assumptions related to the liabilities.
Expected maturity of insurance and investment contracts, Mandatum Life, 31 December 2008
MARKET RISK MANAGEMENT AND CONTROL IN SAMPO GROUP The investment operations of Sampo Group’s insurance companies aim at achieving the highest possible returns at acceptable levels of risk, and to ensure that both If P&C and Mandatum Life will exceed the required solvency ratio. The structure of the investment assets should be in line with regulations and they should cover the companies’ technical provisions.
Market risks are managed by diversifying the investment portfolio and by constant monitoring of the composition of the investments in relation to the characteristics of the insurance liabilities. The duration gap between the technical provisions and fixed income investments as well as the currency distribution of assets and liabilities is under constant monitoring and management in the Group’s insurance companies. Derivatives are commonly used for modifying different types of market risk exposures.
The Boards of Directors of If P&C and Mandatum Life annually approve the companies’ Investment Policies, which define target allocation of the investment portfolio, limits for the allocations, the organization of investment activities and the authorities to make and execute decisions. When making asset allocation
Allocation of investment assets, Sampo Group, If P&C, Mandatum Life, Sampo plc, 31 December 2008 sampo group eur 16,502 million if p&c eur 8,956 million mandatum life eur 4,728 million sampo plc eur 2,818 million
The aggregated market risks on Sampo Group level are controlled by the Group’s Audit Committee. The Boards of Directors in If P&C and Mandatum Life appoint investment control committees and the Board of Sampo plc appoints an Investment
Investment Committee ensure compliance with the principles and limits specified in the Investment Policy and report to the companies’ Board on investment activities.
Market risk management in P&C insurance is based on matching the composition of the investments with the characteristics of the insurance liabilities as well as on maintaining a good diversification among various asset classes and within each asset class.
The principle is that insurance liabilities are matched with fixed income investments of corresponding duration and the surplus capital is invested in a diversified portfolio of financial assets with the objective of enhancing the total return. The target allocations are based on an asset-liability-management (ALM) analysis, which defines the neutral allocation for the investments. In order to increase the returns of the investment operations, deviations can be made from the neutral reference portfolio allocations within the specific limits defined in the Investment Policy.
The Board approves the Investment Policy annually, which sets principles and limits for investment activities. Investment
Policy also includes measures and limits for maximum acceptable market risk. Limits of maximum acceptable market risk are based on both Solvency I and Solvency II types of approach. The objective is to meet the required solvency and to ensure that investments are sufficient and eligible as assets covering technical provisions.
Market risks related to Sampo plc’s investment portfolio are monitored and regularly reported within the company’s and
The investment allocations of Sampo Group and the different segments are shown in figure 12.
Sensitivity analysis of the fair values of financial assets and liabilities on 31 December 2008
EURm 1% Parallel shift down 1% Parallel shift up 20% fall in prices 20% fall in prices
As depicted in Figure 12 – Allocation of investment assets, all companies in Sampo Group mainly invest into fixed income assets. Fixed income assets are further broken down in figure 13 and in the credit risk section.
During 2008, several changes took place in Sampo Group’s investment portfolio. The proportion of equity investments decreased from 23 per cent to 16 per cent and the proportion of fixed income investments correspondingly increased from 74 per cent to 80 per cent. The decline in the proportion of equity is mainly due to the fall in equity prices.
If P&C’s investment operations generated a return of -3.1 per cent in 2008 (2.6 per cent in 2007). The investment assets amounted to EUR 8,956 million (EUR 9,944 million in 2007). The proportion of equities in the investment portfolio decreased from 10 per cent to 5 per cent during the year while the proportion of fixed income investments increased from 89 per cent to 95 per cent. The equity allocation of If
P&C at year-end was at a relatively low level in comparison to the neutral asset allocation defined in If P&C’s investment policy.
The investment return of Mandatum Life in 2008 was -7.8 per cent (5.0 per cent in 2007). The amount of investment assets was EUR 4,728 million (EUR 5,683 million in 2007).
The values of financial assets and liabilities are subject to changes in the underlying market variables. Table 10 shows the sensitivity analysis of the fair values of financial assets and financial liabilities to different market risk scenarios in Sampo
Sensitivity analysis of the fair values of financial assets and liabilities by segments on 31 December 2008
Effect on adjusted solvency capital -472 321 -529 -105 Effect on economic capital -26 -39 -181 -24
The breakdown of fixed income instruments in If P&C excludes credit default swaps with a fair value of EUR -4.2 million as well as the fixed income investments and deposits of the Business Area Baltic and Russia with a fair value of EUR 24.9 million.
According to the Investment Policies in Sampo Group’s insurance subsidiaries, the composition of investments assets shall take into account the nature of the insurance commitments with respect to interest rate risk and inflation risk.
Figure 13 presents the breakdown of fixed income investments by type of instruments. During 2008, the proportion of short-term fixed income investments decreased in all of the reporting segments, corresponding with the increase in Euro government/credits. On the Sampo Group level the proportion of short-term fixed income investments decreased from 43 per cent to 22 per cent. The proportion of
The interest rate sensitivity, i.e. duration, of fixed income investments in If P&C is shown in table 12. The duration of fixed income investments was 3.1 years (2.2 years in 2007).
Derivatives are shown under the fixed income categories to which they are related to.
A major part of the technical provisions in P&C insurance is stated in the balance sheet in nominal terms. Hence, from an accounting perspective, the company is mainly exposed to changes in future inflation. The economic value of these reserves, i.e. the present value of future claims payments is, however, exposed to changes in interest rates. Furthermore, the reserves for annuities in Finland, Sweden and Denmark are discounted, and potential changes in the discount rates will affect the level of technical provisions in the company’s balance sheet. The discount rates vary between countries mainly due to differences in legislation but they are at least indirectly impacted by the prevailing interest rate environment. The duration of reserves and thus the sensitivity to changes in interest rates is analyzed in more detail in the figure 11 and table 5 in the Insurance Risk section. In addition, cash flows of financial assets and liabilities according to contractual maturities are shown in table 19 in the Liquidity Risk section.
The most significant interest rate risk in the life insurance business is that fixed income investments will not over a long period of time generate a return at least equal to the guaranteed interest rate of technical provisions. This risk increases when market interest rates fall and remain at a low level. This risk is managed through constant monitoring and management of the duration gap between liabilities and fixed income investments in Life insurance.
The weighted average duration of Mandatum Life’s insurance liabilities (excluding unit-linked liabilities) was 7.9 years
(7.7 years in 2007). The duration of fixed income investments was 3.6 years at year end (1.9 years in 2007).
Mandatum Life has also prepared for low interest rates on the liability side by e.g. reducing the minimum guaranteed interest rate in new contracts and increasing the reserve for policies with higher guaranteed interest rates. In addition, existing contracts have been changed to accommodate improved management of reinvestment risk.
Table 9 in the Insurance Risk section shows the maturity and average durations of Mandatum Life’s insurance and investment contracts. The cash flows of financial assets and liabilities according to contractual maturities are shown in table 19 in the Liquidity Risk section.
Equity price risk is the risk of losses due to changes in share prices. Sampo Group is exposed to changes in the prices of equities through its investment operations in the insurance subsidiaries as well as in the holding company Sampo plc. The equity investments of Sampo Group totalled EUR 2,706 million at the year end (EUR 4,768 million). Equity investments in the holding consist almost entirely of the holdings in Nordea which at 31 December, 2008 were valued at EUR 1,602 million.
Breakdown of equity investments by geographical regions, Sampo Group, If P&C, Mandatum Life, 31 December 2008
Breakdown of equity investments by sectors, Sampo Group, If P&C, Mandatum Life, 31 December 2008
The geographical emphasis in Sampo Group’s equity investments is in Scandinavian companies. Proportion of Scandinavian companies’ equities (including Finland) corresponds to 85 per cent of the total equity portfolio. This is in line with
Figure 15 shows the sector allocation of equity investments in Sampo Group, If P&C and Mandatum Life.
If P&C, and the currency risk related to Sampo plc’s investment portfolio.
If P&C writes insurance policies that are mostly denominated in Scandinavian currencies and in Euros. The currency risk is reduced by matching technical provisions with investments in the corresponding currencies or by using derivatives.
Mandatum Life’s currency strategy is based on active management of the FX position. The objective is to achieve positive absolute return relative to a situation where the open currency risk exposure is fully hedged.
The currency positions of the Group’s companies against their home currency and the translation risks are shown in table 14. The table shows the net currency exposures (net assets)
7 Credit Risks Credit risk is the risk of loss, or of adverse change in the financial situation, resulting from fluctuations in the credit standing of issuers of securities, counterparties and any other debtors.
Credit risk in the investment operations includes the risk that a government or corporate issuer will not fulfil its obligations or otherwise obstruct the remittance of funds by debtors, particularly in the context of fixed income securities. The credit risk in investment operations can be divided into issuer risk, counterparty risk and spread risk. Issuer risk is often associated with a direct holding in a security, while counterparty risk is related to derivatives. The essential difference in terms of risk is that in the case of issuer risk, the entire nominal value of the instrument is at risk, whereas in the case of counterparty risk, it is only the current market value of the derivative contract that is at risk.
Spread risk relates mainly to changes in the credit spreads of fixed income investments issued by banks and corporations.
The figures for If P&C exclude credit default swaps with a market value of EUR -4.2 million as well as the fixed income investments and deposits of the Business Area Baltic and Russia with a market value of EUR 24.9 million.
Rating analysis of investments, Sampo Group, If P&C, Mandatum Life, 31 December 2008 sampo group eur 13,354 million if p&c eur 8,443 million
QUANTIFICATION OF CREDIT RISKS The most significant credit risk exposures in Sampo Group arise from investments into fixed income investments. Figure 16 shows
128 million (EUR 137 million) are excluded. The excluded amount relates mainly to captives and statutory pool solutions.
Rating Total EURm % of total Total EURm % of total
Concentration of market and credit risks in individual counterparties by asset class on 31 December 2008
Nordea. As of year-end, the Sampo Group owned over 10 per cent of total Nordea shares, having a market value of EUR
1,602 million. The largest market and credit risk concentrations related to individual counterparties are shown in Table 17. The same concentrations broken down in Sampo Group’s different business areas are shown in table 18.
The proportion of recoverables related to the ten largest individual reinsurance counterparties amounts to EUR 269 million, which is 65 per cent of total recoverables. The largest individual reinsurance counterparty is Munich Re (AA-rating ) which accounts for 34 per cent of total recoverables.
In Sampo Group, operational risk management is organized under the different business areas. Sampo plc’s main function is to own and control its subsidiaries. Sampo plc coordinates capital allocation, risk management, internal audit, group accounting, investor relations and legal and tax issues within
Sampo Group. Furthermore, Sampo plc manages a substantial amount of investment assets. Deficiencies or faults in processes of these functions could realise operational risks that might affect earnings and capital in the holding company.
Extensive guidelines, principles and policies have been stated in order to assure proper and adequate working methods and control systems both in the different functions and throughout the whole group.
The continuity of operational risk management is secured through the Operational Risk Committee (ORC). ORC shall handle policies and recommendations concerning operational risk management within If P&C as well as contingency plans, deviations from policies regarding operational risks, follow-up of operational risks identified in the Operational Risk Assessment
(ORA) process, occurred incidents, reports regarding operational risks and other issues connected to operational risks.
Coordination and development work related to operational risk management in If P&C is divided into two organizational units: Operational Excellence Unit (OPEX), which aggregates and reports on the Operational Risk Assessment exercises to the ORC on a quarterly basis, and Operational Risk Management Unit (ORM), which is responsible for the incident reporting database and reports quarterly to ORC on policy deviations and occurred incidents. Business areas have the ultimate responsibility for identifying, assessing, monitoring and managing operational risks within different units.
If P&C identifies operational risks through several different sources with different processes. The main processes used for identifying operational risks in If P&C include the environmental and macro analysis, the operational risk assessment process and incident reporting.
These assessments outline the most important external operational and business risks.
Operational risk assessment (ORA) is an annual process where operational risks are identified and assessed in the different business units through interviews and workshops. After quarterly ORA follow-up meetings, the operational risks are reported to ORC. In addition, legal risks and some business risks are captured in the ORA
process. The quarterly reporting is used as a basis for an overall risk assessment of an annual cycle, where the identified risks are analyzed and prioritized in all of If P&C’s business areas and corporate functions as a part of the annual business planning process.
ways depending on the type of the incident. Some incidents are collected through a separate incident database and some are collected through regular control investigations. To improve the overall management of operational risks, there is an ongoing project to integrate all incident information into a single database that will also serve as a common reporting tool.
In order to control operational risk, If P&C has approved a number of policies including e.g. Contingency Plans, Security Policies, Outsourcing Policy, Complaints Handling Policy,
and Board of Directors on a quarterly basis. The ORC is supported by Operational Risk Management (ORM) which on its behalf is responsible for the practical details related to incident reporting.
Operational risks are identified through several different sources and methods: process where the key trends in Mandatum Life’s business environment are identified, including a macro level business analysis of operational risks.
Deviations against different policies are followed up independently in each business unit and reported to ORM. Moreover, Key Risk Indicators are measured and followed up on a quarterly basis.
10 Risk outlook OTHER RISKS Sampo Group’s future results and profitability is affected by a number of different risk factors. In the near term, the main risks to the Group’s profitability and financial position are related to developments in the financial markets. Other risk factors that may affect profitability and outlook in the foreseeable future besides business risk are strategic risk, reputation risk, emerging insurance risk and legal risk.
If P&C’s market position in the Nordic P&C insurance market is very strong and that position is expected to remain solid in the future. Competitive pressure from new sources of competition such as smaller competitors and competition from new distribution channels such as web-based service models may restrict If P&C insurance’s market position and adversely affect growth expectations. If P&C has invested into its business in Russia during 2008 and strong growth is expected in the volume of insurance operations in Russia during the next few years. These growth objectives are subject to a number of risks and uncertainties related to the economic and political environment in Russia.
Both P&C and life insurance businesses are subject to new types of risk which may emerge. By their very nature these risks are evolving, uncertain, and difficult to quantify. In P&C
Risk Management impact of climate change, whereas in life insurance these risks may include e.g. risks related to pandemics. Emerging insurance risks are managed by monitoring the developments in these risks on the basis of industry research, assessments and scenario analyses and by incorporating these risks into the provisioning and pricing processes to the extent possible.
Sampo Group plans to continue to strengthen it’s risk management framework and systems in 2009. During 2009, Mandatum Life’s risk governance structure will be further developed particularly in relation to the role of Mandatum Life’s Investment Control Committee. Regarding investment risks Sampo
Solvency II draft, but at a lower confidence level. One aim is to ensure that Finnish life companies are well prepared for
Solvency II before 2012. Also in order to prepare for Solvency
II and to continuously improve the risk management framework, the company has worked on the development of its internal capital model and improved operational risk management during the year.
During 2008 the supervisors across Europe organized an impact study of the future Solvency II regulation. The insurance entities within Sampo Group took part in the test, called
Approval of the Financial Statements and the Board of Directors' Report .............................162
Attributable to Equity holders of parent company 675 3,572 Minority interest 0 0
Equity attributable to parent company's equityholders 4,631 7,733 Minority interest 0 0
Income tax related to items recognised in equity or transferred to p/l 60 60 60
Net income recognised in equity - - - -169 -78 -246 -22 -268 Profit for the financial year 3,572 3,572 0 3,573
Total income and expenses recognised for the period - - - -169 3,495 3,326 -21 3,305
Subscription for shares with options 3 4 6 6 Share-based payments 0 0 0 Acquisition of treasury shares -81 -81 -81 Recognition of undrawn dividends 6 6 6
Cash flow hedges: Income tax related to items recognised in equity or transferred to p/l 333 333 333
Net income recognised in equity - 1 - -2,681 -249 -2,928 - -2,928 Profit for the financial year 675 675 0 675
Share-based payments 3 3 3 Acquisition of treasury shares -167 -167 -167 Recognition of undrawn dividends 3 3 3
Operating activities Profit before taxes 870 3,833 Adjustments: Depreciation and amortisation 28 44 Unrealised gains and losses arising from valuation 393 339 Realised gains and losses on investments 92 -3,031 Impairment losses on loans and receivables - 2 Change in liabilities for insurance and investment contracts -35 903 Other adjustments 551 3,022 Adjustments total 1,029 1,280
Change (+/-) in liabilities of operating activities Financial liabilities 196 676 Other liabilities -85 22 Paid taxes -49 -172
Financing activities Subscription of share options - 6 Acquisition of own shares -167 -81 Dividends paid -678 -693 Issue of debt securities - 742 Repayments of debt securities in issue - -1,395
Cash and cash equivalents at 1 January 946 2,016 Effects of exchange rate changes 25 13 Cash and cash equivalents at 31 December 465 958 Net increase in cash and cash equivalents -506 -1,058
Additional information to the statement of cash flows: Interest income received 652 682 Interest expense paid 90 78 Dividend income received 431 195 *) Investments include investment property, financial assets and investments related to unit-linked insurance contracts.
Assets Property, plant and equipment 91 Intangible assets 64 Investments in associates 13 Financial assets 24,873 Deferred tax assets 24 Other assets 541 Cash and cash equivalents 799
The preliminary acquisition cost of EURm 28 was paid in cash in its entirety.
The assets and liabilities of the acquired company did not have a material effect on the Group's income statement, balance sheet or cash flows.
Disposed entities during the year 2007 In accordance with the contract signed on 9 Nov. 2006, Sampo plc sold the entire share stock of Sampo Bank plc to Danske
Bank A/S. The major subsidiaries in Sampo Bank Group were Sampo Fund Management Ltd, Mandatum Asset Management
Ltd, Mandatum Securities Ltd, Mandatum & Co Ltd, 3C Asset Management Ltd and Arvo Value Asset Management Ltd. The trade became effective on 1 Feb. 2007.
| 4 Change in Liabilities for Insurance and Investment Contracts ....107
Sampo has applied all the standards and interpretations relating to its business, adopted by the commission of the EU and effective at 31 December, 2008.
The changes, already adopted by the EU, became effective at 1
Since the group did not hold assets for which the management would have seen reclassifications necessary, these amendments do not have an impact on Sampo’s financial statements for the financial year of 2008.
During the financial year 2008 Sampo did not adopt any other new or amended standards or interpretations.
ASSOCIATES Associates are entities in which the Group has significant influence, but no control over the financial management and operating policy decisions. Unless otherwise demonstrated, this is generally presumed when the Group holds in excess of 20 per cent, but no more than 50 per cent, of the voting rights of an entity. Investments in associates are treated by the equity method of accounting, in which the investment is initially recorded at cost and increased (or decreased) each year by the
Group’s share of the post-acquisition net income (or loss), or other movements reflected directly in the equity of the associate. If the Group’s share of the associate’s loss exceeds the carrying amount of the investment, the investment is carried at zero value, and the loss in excess is consolidated only if the
The income statements of Group entities whose functional currency is other than euro are translated into euro at the
IFRS Financial Statements: Summary of Significant Accounting Policies average rate for the period, and the balance sheets at the rates prevailing at the balance sheet date. The resulting translation differences are included in equity. When a subsidiary is divested entirely or partially, the cumulative translation differences are included in the income statement under sales gains or losses.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as if they were assets and liabilities of the foreign entity. Exchange differences resulting from the translation of these items at the exchange rate of the balance sheet date are included in equity.
The transaction of selling the Banking and Investment services segment to Danske Bank A/S was closed on the 1 Feb.
In the inter-segment and inter-company pricing, for both domestic and cross border transactions, market-based prices are applied. The pricing is based on the Code of conduct on Transfer Pricing Documentation in the EU and OECD
Interest and dividends Interest income and expenses are recognised in the income statement using the effective interest rate method. This meth od recognises income and expenses on the instrument evenly in proportion to the amount outstanding over the period to maturity.
In the life insurance business the acquisition costs are treated as fee and commission expense under ‘Other operating expenses’.
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.
RECOGNITION AND DERECOGNITION Purchases and sales of financial assets at fair value through profit or loss, held-to-maturity investments and available-forsale financial assets are recognised and derecognised on the trade date, which is the date on which the Group commits to purchase or sell the asset. Loans and receivables are recognised when cash is advanced.
On 16 Oct. 2008, the EU approved the amendments, published by IASB, to standards IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures. In limited circumstances, the amendments permit reclassifications of certain financial assets measured at fair value, after the initial recognition.
If a debt instrument, classified as held for trading or available for sale, had met the definition of loans and receivables at initial recognition, it may be reclassified to loans and receivables, if the entity has the intention and ability to hold the asset for the foreseeable future or until maturity.
Any other debt instruments held for trading, or equity instruments, may be reclassified, in rare circumstances, to available for sale financial assets or held to maturity investments, if the asset is no longer held for the purpose of selling it in the near term.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS In Sampo Group, financial assets and liabilities at fair value through profit of loss comprise derivatives held for trading, and financial assets designated as at fair value through profit or loss.
Financial derivatives held for trading are initially recognised at cost, which is the fair value of the consideration paid or given. Derivative instruments are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Derivative instruments are recognised at fair value, and gains and losses arising from changes in fair value together with realised gains and losses are recognised in the income statement.
Financial assets designated as at fair value through profit or loss
HELD-TO-MATURITY INVESTMENTS Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold until maturity. Held-to-maturity investments are initially recorded at cost which is the fair value of the consideration given plus any directly attributable transaction costs, and are subsequently measured at amortised cost using the effective interest rate method.
Available-for-sale financial assets are initially recognised at cost, which is the fair value of the consideration given, including direct and incremental transaction costs. They are subsequently remeasured at fair value, and the changes in fair value are included as a separate component of equity, taking the tax effect into account. Interest income and dividends are recognised in profit or loss. When the available-for-sale assets are sold, the cumulative change in the fair value is transferred from equity and recognised together with realised gains or losses in profit or loss. The cumulative change in the fair value is also transferred to profit or loss when the assets are impaired and the impairment loss is recognised. Translation differences due to available-for-sale monetary balance sheet items are always recognised directly in profit or loss.
Impairment of financial assets Sampo assesses on each balance sheet date 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 a default occurs, the impairment of a loan is assessed. The amount of the loss is measured as the difference between the loan’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred), discounted at the loan’s original effective interest rate. The difference is recognised as an impairment loss in profit or loss. The impairment of loans is assessed individually.
AVAILABLE-FOR-SALE FINANCIAL ASSETS The impairment of available-for-sale financial assets is monitored through an investment plan. The credit risk limits by issuer have been determined in the investment plan and the plan is followed daily. Whether there is objective evidence of an impairment of available-for-sale financial assets is evaluated in a separate assessment, which is done if the credit rating of an issuer has declined or the entity is placed on watchlist, or there is a significant or prolonged decline in the fair value of
Sampo Group 2008 an equity instrument below its cost. The assessment is not, however, based solely on the general decline on values due to market conditions, but the acquisitions are assessed case by case. If it is assessed that an amount equivalent to the acquisition cost would not be recovered when selling the investment, an impairment loss is recognised. When the observable data indicates that an impairment has occurred, the cumulative loss recognised directly in equity is removed from equity and recognised in profit or loss.
Derivative financial instruments and hedge accounting Derivative financial instruments are classified as those held for trading and those held for hedging, including interest rate 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.
HEDGE ACCOUNTING The 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.
During the financial year, both fair value and cash flow hedging has been applied in life insurance. Sampo plc used fair value hedging in the comparison year.
must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups), the management must be committed to a plan to sell the asset (or disposal group), and the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Customer relationships based on insurance contracts and identifiable in conjunction with the merger of the P&C insurance business are also recognised as other intangible assets.
Customer relationships were measured at fair value at the acquisition. Measurement of the present value of all future cash flows from an asset takes into consideration insurance premium revisions, cross-sales and general economic forecasts.
The average validity period of insurance contracts, 6 years, is deemed as the asset’s useful life, during which time it is amortised on a straight-line basis. When necessary, customer relationships are tested for impairment.
Depreciation of property, plant or equipment will be discontinued, if the asset in question is classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and
4 requirements for insurance contracts and on the basis of which the 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
Group’s reinsured insurance contracts, while the latter includes short-term receivables from reinsurers.
P&C insurance (Reverse Flow Fronting contracts) in which the insurance company grants insurance and then transfers the insurance risk to the final insurer. For both the above types of contract, only the net effect of the contract relationship is recognised in the income statement and balance sheet (instead of the gross treatment, as previously). The prerequisite for net treatment is that the net retention recognised on the contract is zero.
Sampo Group 2008 through individual assessments of individual claims. Often a combination of the two methods is used, meaning large claims are assessed individually while small claims and claims incurred but not reported (the IBNR provision) are calculated using statistical methods. The provision for claims outstanding is not discounted, with the exception of provisions for vested annuities, which are discounted to present value using standard actuarial methods, taking anticipated inflation and mortality into account.
The provision for a collective guarantee is regulated by Finland ’s Traffic and Accident Insurance Act and must be collected by insurers. Its purpose is to guarantee the payment of claims to customers in the event that any insurers are put into liquidation or bankruptcy. The collection of funds for this provision is to guarantee the payment of obligations that may arise in the future. In the Sampo Group the provision for a collective guarantee is recognised in equity, in accordance with the
Pensions and compensation for healthcare or medical rehabilitation paid on the basis of Finland’s statutory P&C insurance
(accident, motor third party liability and patient insurance) are raised annually by the TEL (Employee Pensions Act) index in order to maintain the real value of the pensions. The index raises are not the responsibility of the insurance companies, but are funded by the so-called pay-as-you-go principle, i.e. each year premiums written include index raises to the same amount that is paid out in that year. In practice, the P&C insurance companies collect a so-called expense loading along with their premiums written, which is then forwarded to the central organisation for the particular insurance line. The central organisation distributes the pay-as-you-go contributions collected so that the company undertaking the type of insurance in question receives an amount equal to the compensation falling under the pay-asyou -go system it has paid that year. The insurer’s participation in the payment is proportional to the insurer’s market share in the insurance line in question.
In unit-linked contracts the policyholder carries the investment risk by choosing the investment funds linked to the contracts.
In the life insurance business, various methods are applied in calculating liabilities which involve assumptions on matters such as mortality, morbidity, the yield level of investments, future operating expenses and the settlement of claims.
In addition, Mandatum Life has lowered the claim of interest for the year 2009 to 3.0 per cent.
Mortality assumptions have an essential effect on the amount of liability, particularly in group pension insurance, the liability of which accounts for about 43 per cent of the technical provisions of the Finnish life company. A so-called cohort mortality model is used in calculating the group pension insurance liability since 2002, incorporating the insured person’s birth year in addition to his or her age and sex. The cohort mortality model assumes that life expectancy increases by one year over a ten-year period.
The provision for claims outstanding is intended to cover expected future payments for all claims incurred, including claims not yet reported to the company (the IBNR provision).
The amounts of short- and long-term liabilities in technical provisions are determined annually. Additionally, the risk management section of the Notes includes the forecast annual maturities of technical provisions.
Fairness. The insurance business undertaken by the Swedish company is not entitled to distribute profit.
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 (TEL) in Finland.
SHARE-BASED PAYMENTS Sampo has share-based incentive schemes that are settled either in cash (the long-term incentive schemes 2004 I, 2004 II, 2005 I, 2006 I, 2006 II, 2008 I and 2008 II) for executives and specialists) or in equity instruments (Sampo 2006). Schemes with cash payments are measured at the intrinsic value of the incentive on interim or annual balance sheet dates, and changes in the liability are recognised through profit or loss. Schemes where the payment is in equity instruments are measured at fair value at the grant date, and are recognised as an expense and as an increase in equity on a straight-line basis during the vesting period.
Cash and cash equivalents Cash and cash equivalents comprise cash and short-term deposits (3 months).
In the cash flow statement, interest received and paid is presented in cash flows from operating activities. In addition, the dividends received are included in cash flows from operating activities. Dividends paid are presented in cash flows from financing.
Sampo’s main assumptions concerning the future and 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
ACTUARIAL ASSUMPTIONS 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. The uncertainty related to the estimates is generally greater when estimating new insurance portfolios or portfolios where clarification of a loss takes a long time because complete claims statistics are not yet available. In addition to the historical data, estimates of insurance liabilities take into consideration other matters such as claims development, the amount of unpaid claims, legislative changes, court rulings and the general economic situation.
DETERMINATION OF FAIR VALUE The fair value of any non-quoted financial assets is determined using valuation methods that are generally accepted in the market. These methods are discussed in more detail above under ‘Fair value’.
The amendments to IFRS 2 Share-based payments – Vesting conditions and cancellations state that all non-vesting conditions must be taken into account when estimating the fair value of equity instruments granted. The amendment also clarifies the accounting treatment of cancellations. The adoption of the amendment will have no material effect on Sampo’s financial statements reporting.
IFRIC 13 Customer Loyalty Programmes (effective for the annual periods beginning on or after 1 July 2008) states that the loyalty award credits should be treated separately from the sale of goods and services. The adoption of the interpretation will have no material effect on Sampo’s financial statements reporting.
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
2008) clarifies the accounting treatment of a net investment in a foreign operation on the group level. The adoption of the interpretation will have no material effect on Sampo’s financial statements reporting.The interpretations was not approved by the EU at the balance sheet date.
Improvements to IFRSs – various minor changes made to different standards at the same time. The Group expects these changes to be immaterial to Sampo’s financial statements reporting.
IAS 39 Financial Instruments: Recognition and Measurement clarifies the hedging of one-sided risk of hedged items and inflation, in the case of financial assets or liabilities.
The Group’s business segments comprise P&C insurance, Life insurance and Holding company. In the comparison year, the banking and investment services are presented as discontinued operations. The classification was made on 9 Nov. 2006 when
Depreciation and amortisation by segment are disclosed in notes 11–13 and investments in associates in note 14.
Profit from continuing operations before taxes 534 342 95 3 974
Investments related to unit-linked insurance contracts - 1,637 - - 1,637
The revenue for insurance businesses includes insurance premiums according to the underwriting country, consisting of premiums earned for P&C insurance and premiums written for Life insurance.
The revenue for Holding includes all net investment income and other operating income in that segment.
The revenue for Banking and investment services includes the total operating income of the segment for the first month of 2007.
{ Acquired and Disposed Entities } Year 2008 If P&C Insurance Holding AB acquired the entire share stock of a Russian insurance company SOAO Region on 1 June, 2008. The preliminary acquisition cost of EURm 28 was paid in cash in its entirety.
The assets and liabilities of the acquired company did not have a material effect on the Group's income statement, balance sheet or cash flows. The goodwill arising from the acquisition was 17 EURm at the balance sheet date.
Premiums from insurance contracts Premiums written, direct insurance 3,967 4,000 Premiums written, assumed reinsurance 90 85
Premiums from insurance contracts Premiums written, direct insurance 487 607 Premiums written, assumed reinsurance 2 2
Premiums from investment contracts Premiums from contracts with discretionary participation feature 0 1 Premiums from unit-linked contracts 47 15
Net fee income Asset management -13 -16 Fee income 23 28
Net income from investments includes exchange differences Arising from investments -47 24
Equity securities Gains/losses 3 -1 Impairment losses -1 Dividend income 133 43
Included in gains/losses from financial assets available-for-sale is a net gain of EURm -2 (-1) transferred from the fair value reserve.
Total claims cost attributable to current-year operations -2,800 118 -2,682 -2,716 99 -2,617
Total claims cost attributable to prior-year operations 91 -1 90 56 19 76
Change in provision for claims outstanding Change in provision for claims outstanding (incurred and reported losses) -19 14 -5 -9 -23 -32 Change in provision for claims outstanding (incurred but not reported losses, IBNR) -122 -19 -141 -251 8 -244 Change in claims provision for annuities 23 0 23 -1 0 -1
The provision for annuities is valued in accordance with normal actuarial principles taking anticipated inflation and mortality into consideration, and discounted to take the anticipated future investment return into account. To cover costs for the upward adjustment of annuity provisions required for the gradual reversal of such discounting, an anticipated return is added to the annuity results. Provisions for incurred but not reported losses pertaining to annuities in Finland are discounted. The provisions in 2008 amounted to approximately EURm 303 (284). The non-discounted value was
EURm 467 (463). The growth is mainly caused by the increase in the provision for work insurance.
Pension insurance Contracts with discretionary participation feature (DPF) -284 -259 -113 -99 -397 -358
Life insurance, unit-linked Surrender benefits -124 -58 Death benefits -22 -20 Maturity benefits -29 -23 Loss adjustment expenses 0 0
Pension insurance, unit-linked Pension payments -1 0 Surrender benefits -3 -3 Death benefits -1 -2
Investment contracts Capital redemption policy, with-profit Surrender benefits -13 -32 Loss adjustment expenses -25 -4
Change in unearned premium provision -12 -43 Reinsurers' share -2 0
Insurance contracts Life insurance Contracts with discretionary participation feature (DPF) 114 90 Other contracts -1 0 Unit-linked contracts 301 -190
Investment contracts Capital redemption policy Contracts with discretionary participation feature (DPF) 42 33 Unit-linked contracts -36 0
Change in liabilities for insurance and investment contracts in total, gross 681 -145
Staff costs Wages and salaries -328 -311 Equity-settled share-based payments -1 -1 Cash-settled share-based payments -1 -1 Pension costs - defined contribution plans -45 -39 - defined benefit plans (Note 28) -21 -27
IT costs -20 -50 Other staff costs -17 -17 Marketing expenses -41 -45 Depreciation and amortisation -20 -32 Rental expenses -49 -48 Change in deferred acquisition costs 10 7 Direct insurance comissions -137 -130 Commissions on reinsurance ceded 20 19
IT costs -12 -10 Other staff costs -1 -1 Marketing expenses -4 -3 Depreciation and amortisation -3 -2 Rental expenses -3 -2 Direct insurance comissions -9 -13 Comissions of reinsurance assumed -1 -1 Commissions on reinsurance ceded 1 1
Item Other for P&C and Life Insurance includes e.g. expenses related to communication, external services and other administrative expenses.
IT costs -1 -2 Other staff costs 0 0 Marketing expenses -1 -1 Depreciation and amortisation -1 -2 Rental expenses -3 -2
Technical result 548 565 Net investment income 299 238 Allocated investment return transferred to the technical account -293 -261 Other income and expense -5 -8
Fire and other damage to property Third party liability Credit insurance
EURm Legal expenses Other Total direct insurance Reinsurance assumed Elimination Total
Technical result before investment return 1) Activity-based operating costs EURm 242 (247) have been allocated to claims incurred. 2) Includes other technical income EURm 26 (29) and other technical expenses EURm 22 (25).
Financial assets designated as at fair value through p/l 2,033 91 -696 - 4
Exchange differences -1 0 Closing net carrying amount at 31 December 27 29
At 31 December Cost 126 117 Accumulated depreciation -100 -88 Net carrying amount at 31 December 27 29
Opening net carrying amount at 1 January 4 1 5 4 1 5
Net carrying amount at 31 December 1 4 5 1 4 6
Impairment losses 0 -1 Reversal of impairment losses 10 7 Exchange differences 1 0
Property rented out under operating lease Non-cancellable minimum rental - not later than one year 1 1 - later than one year and not later than five years 1 1
Expenses arising from investment property - direct operating expenses arising from investment property generating rental income during the period -1 -1 - direct operating expenses arising from investment property not generating rental income during the period -1 -0
Property rented out under operating lease Non-cancellable minimum rental - not later than one year 8 10 - later than one year and not later than five years 6 11 - later than five years 5 14
Total rental recognised as income during the financial period 0 0
Expenses arising from investment property - direct operating expenses arising from investment property generating rental income during the period 0 1 - direct operating expenses arising from investment property not generating rental income during the period 1 1
Opening net carrying amount at 1 January 530 21 3 554
Opening net carrying amount at 1 January 549 29 13 592
Net carrying amount at 1 January 153 11 164 153 6 159
Closing net carrying amount at 31 December 153 14 167 153 11 164
Depreciation and impairment losses are included in the income statement item ‘Other operating expenses’.
A 2% growth rate for years beyond 2008 has been used for the markets where Mandatum Life operates.
At beginning of year 9 16 Share of loss/profit 1 3
ASSOCIATES THAT HAVE BEEN ACCOUNTED FOR BY THE EQUITY METHOD AT 31 DEC. 2008 EURm
Consulting AB Lennemark & Andersson 8/5 11 1 Euro-Alarm A/S 4/3 10 0 *) If there is a published price quatation.
Group's financial assets comprise investments in derivatives, financial assets designated as at fair value through p/l, held-to-maturity investments, loans and receivables, available-for-sale financial assets and investments in subsidiaries. The Holding segment includes also investments in subsidiaries.
The Group uses derivative instruments for trading and for hedging purposes. The derivatives used are foreign exchange, interest rate and equity derivatives. Derivatives held for trading relate primarily to customer business and, to a lesser degree to proprietary trading. In P&C insurance business derivatives are used for hedging interest rate risk and foreign exchange risk, but hedge accounting is not applied. In Life insurance, both fair value and cash flow hedging has been applied during the financial year 2008.
Derivative financial instruments 108 10 Financial assets designated as at fair value through p/l 41 47 Investments held-to-maturity 1 8 Loans and receivables 5 4 Financial assets available-for-sale 4,348 5,387
Derivative financial instruments 1 1 Financial assets available-for-sale 2,890 4,781 Investments in subsidiaries 2,370 2,370
Interest rate options, bought and sold - - - 5 0 0
Currency options, bought and sold 47 0 1 565 1 1
Financial assets designated as at fair value through p/l Debt securities - Other debt securities 211 4,708
Total financial assets designated as at fair value through p/l 354 9,283
Financial assets available-for-sale for P&C insurance include impairment losses EURm 85 (-).
Interest options, bought and sold - - - 225 0 0
Equity and equity index options - - - 39 2 0
Total derivatives held for trading 1,647 74 4 1,075 10 1
Fair value hedging is used to hedge a proportion of foreign exchange risk in available-for-sale financial assets. The aim is to eliminate the risk of fluctuations in the fair values of the hedged items as a result of changes in foreign exchange rates.
Net gains on foreign exchange contracts designated as fair value hedges during 2008 amounted to EURm 16. Net losses on available-for-sale financial assets hedged in the fair value hedges during 2008 amounted to EURm 17.
The total amount of gains recognised in equity from the changes in the fair values of hedging instruments was EURm 15 at 31 Dec. 2008. These gains are recognised in the income statement at the time when the hedged items affect profit or loss, depicted in the table below. Any ineffectiveness was recognized in the income statement. Total Up to 1 year 1–2 years 2–3 years 3–5 years
Certificates of deposit issued by banks 14 3 Other debt securities 15 29
Financial assets available-for-sale for life insurance include impairment losses EURm 43 (47).
Financial assets available for sale / debt securities: Debt securities available for sale include EURm 1,876 investments in bonds and EURm 1,297 investments in money market instruments.
Certificates of deposit issued by banks 107 65 Other debt securities 13 5
The historical cost of the equity securities related to unit-linked contracts was EURm 1,669 (1,665) and that of the debt securities EURm 130 (81).
In P&C Insurance, EURm 1 of deferred tax asset has not been recongised on unused tax losses and temporary differences.
EURm 1.1. Recognised in p/l Recognised in equity Exchange differences 31.12.
Tax losses for which no deferred tax asset has been recognised -3 0
Total tax for continuing operations -195 -254 Tax for discontinued operations - -6
Assets arising from direct insurance operations 767 845 Assets arising from reinsurance operations 44 40 Settlement receivables 17 2 Deferred acquisition costs1) 99 103 Assets related to Patient Insurance Pool 60 58
Receivables from policyholders 4 5 Assets arising from reinsurance operations 1 1 Settlement receivables 187 5
Cash at bank and in hand 149 163 Short-term deposits (max 3 months) 110 474
Cash and cash equivalents above equal those used in the statement of cash flows.
Provision for unearned premiums 1,521 1,691 Provision for claims outstanding 6,367 6,835
Reinsurers' share Provision for unearned premiums 54 55 Provision for claims outstanding 377 429
Four years later 4,895 2,122 2,095 Five years later 4,928 2,105 Six years later 4,924
Provision reported in the balance sheet 2,404 310 430 481 544 701 1,268 6,139 of which established vested annuities 1,164 59 45 67 73 36 10 1,455
At the close of the claims year 3,944 2,142 2,138 2,208 2,251 2,325 2,424
Current estimate of total claims costs 4,361 1,999 2,036 2,088 2,201 2,313 2,424
Provision reported in the balance sheet 2,286 285 411 444 498 651 1,198 5,773 of which established vested annuities 1,164 59 45 67 73 36 10 1,455
Liabilities for insurance and investment contracts total Provision for unearned premiums 2,707 2,954 Provision for claims outstanding 1,779 1,667
Debt securities in issue Subordinated debt securities Subordinated loans Euro-denominated loans
Preferred capital note, 2001 215 219 Preferred capital note, 2002 70 72 Preferred capital note, 2005 149 149
If P&C Insurance Company Ltd issued in 2002 EURm 65 preferred capital note. The loan was wholly subscribed by If Group's owners of that moment. The loan has a maturity of 20 years. It pays fixed interest rate for the first 10 years and the last 10 years floating rate interest. The loan is not listed.
If P&C Insurance issued in June 2005 EURm 150 preferred capital note. The loan is perpetual and pays fixed interest rate for the first ten years.
Debt securities in issue Subordinated debt securities Subordinated loans 100 100
Exchange rate differences -5 Additions 9 Amounts used during the period -10 Unused amounts reversed during the period -3
Current (less than 1 year) 13 Non-current (more than 1 year) 13
Net pension obligation recognised in the balance sheet 76 98 87 81 85
Net cumulative unrecognised actuarial gains/losses -86 -8 -94 -53 -1 -54
Expected rate of return on plan assets at the begninning of the year -15 -12 -12 -10 -9 Actuarial gains (-) or losses (+) recognised during the financial year 1 3 2 1 Losses (+) or gains (-) on curtailments and settlements 2 3 4 2 7
Losses or gains on curtailments and settlements 1 2 4 1 7 Release of obligation by payment - -2 - - Cost /return related to past service - - 4 -3 Exchange differences on foreign plans -79 5 -6 5 3
Defined benefit plans at 31 Dec. 390 406 405 359 302
OTHER SHORT-TERM EMPLOYEE BENEFITS There are other short-term staff incentive schemes 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 profit-sharing bonuses, social security costs included, for 2008 is EURm 27.
Liabilities arising out of direct insurance operations 5 Liabilities arising out of reinsurance operations 5 5 Settlement liabilities 183 6 Other liabilities 26 25
Commitments for non-cancellable operating leases Minimum lease payments not later than one year 32 35 later than one year and not later than five years 89 101 later than five years 90 99
Lease and sublease payments recognised as an expense in the period - minimum lease payments -39 -38
In connection with the transfer of property and casualty insurance business from the Skandia group to the If Group as of March 1, 1999, If P&C
If P&C Holding Ltd has issued a guarantee to the benefit of TietoEnator Corporation whereby If Holdings guarantees the commitments incurred by the If Group company If It Services A/S with TietoEnator based on an agreement covering IT-services. The guarantee will indemnify TietoEnator if If
Commitments for non-cancellable operating leases Minimum lease payments not later than one year 2 2 later than one year and not later than five years 7 6 later than five years 3 4
MOVEMENTS IN RESERVES: LEGAL RESERVE The legal reserve comprises the amounts to be transferred from the distributable equity according to the articles of association or on the basis of the decision of the AGM. No change has been in the legal reserve during the presented financial years.
Recognised in equity -3,116 6 Transferred to profit or loss 87 -238
Income taxes related to items above 333 60 Share related to discontinued operations - 3
Sampo's shares. The maximum amount of A-shares that can be bought back is 50,000,000 shares in either one or various set (about 8,6 % of all the company’s shares). Shares may be acquired otherwise than in proportion to the shareholders' holdings through public trading at a market price prevailing at the time of purchase.
Short-term employee benefits 6 6 Post employment benefits 1 1 Other long-term benefits 4 4
Terms approved*) 11 Feb 2004 5 Oct 2004 22 Mar 2005 22 Jun 2005 21 Dec 2006 16 Jan 2008 7 May 2008
Dividend-adjusted starting price at 31 Dec. 2008 - - - - 17.77 16.06 18.44
LONG-TERM INCENTIVE SCHEMES 2004 I – 2008 II The Board of Directors for Sampo plc has decided on the long-term incentive schemes 2004 I - 2008 II for the management and experts of the Sampo
Group. The Board has authorised the Nomination and Compensation Committee of the Board, or the CEO, to decide who will be included in the scheme, as well as the number of calculated bonus units granted for each individual used in determining the amount of the performance-related bonus.
The amount of the performance-related bonus is based on the value performance of Sampo's A-share and on the insurance margin (IM) and, regarding already terminated schemes, also on Sampo's return on the risk adjusted capital (RORAC). The value of one calculated bonus unit is the trade-weighted average price of Sampo's A-share at the time period specified in the terms of the scheme, and reduced by the starting price adjusted with the dividends per share distributed up to the payment date. The pre-dividend starting prices vary between EUR 8.88–20.17. The maximum value of one bonus unit varies between EUR 19–30, reduced by the dividend-adjusted starting price. The IM criteria in the schemes has three levels. If the insurance margin reaches 4 per cent or more, the bonus is paid in its entirety. If the insurance margin is between 2–3.99 per cent, the payout is 50 per cent. In the case of insurance margin staying below these benchmarks, no bonus will be paid out.
Sampo plc allocated 1,300,000 shares of the maximum of 1,500,000 shares of the programme.
The cost from the incentive scheme during the reporting period 2008 totalled EURm 2.7.
Life insurance 100 484 Mandatum Life Insurance Company Ltd 100 11 SE Sampo Life Insurance Baltic 100 5 If Livförsäkring Ab 100 3 OOO Region Life
Other business Oy Finnish Captive & Risk Services Ltd 100 0 If IT Services A/S 100 0 Riskienhallinta Oy 100 0 Barn i Bil 100 0 Sampo Capital Oy 100 1
Gunnebo AB Sweden 4,821,700 10.59 7 Hennes & Mauritz Ab B Sweden 73,000 0.00 2 Höganäs AB B Sweden 2,686,900 6.12 17 Husqvarna AB A Sweden 3,645,513 2.87 13 Husqvarna AB B Sweden 357,800 0.03 1 Lindab International AB Sweden 2,776,142 3.53 12 Nederman Holding AB Sweden 1,160,400 9.90 5 Nobia AB Sweden 14,632,850 8.35 22 Nolato Ab B Sweden 1,167,000 2.28 3 Scania AB B Sweden 395,000 0.01 3 Sectra AB B Sweden 4,396,300 7.28 14 Skanska Ab B Sweden 500,000 0.08 4 StatoilHydro ASA Norway 201,000 0.01 2 Svedbergs i Dalstorp AB B Sweden 2,298,600 7.04 6 TeliaSonera AB Sweden 1,708,000 0.04 6 TTS Marine ASA Norway 1,608,600 6.25 3 VBG AB B Sweden 474,200 1.92 2 Veidekke ASA Norway 11,649,680 8.57 27 Vestas Wind Systems A/S Denmark 68,100 0.04 3 Yara International ASA Norway 171,000 0.06 3
IShares S&P 500 Index Fund ETF U.S. 595,000 39 APS Japan Growth Fund JPY Cayman Island 141,555 7 APS Small Cap Alpha Fund Cayman Island 184,320 8 Danske Invest Emerging Asia Kasvu Finland 1,349,509 21 Danske Invest Europe Enhanced Index Finland 45,964,543 49 Danske Invest European Opportunities Kasvu Finland 12,620,831 8 Danske Invest North America Enhanced Index USD Finland 36,502,097 29 Danske Invest US Small Cap Value Kasvu Finland 26,386,762 24 Danske Invest Japani Osake Kasvu JPY Finland 315,965,078 27 PMI Venture Fund L.P. (CIM Venture Fund for Creative Industries L.P.) Finland 116,602 0 EQT IV (No. 1) Limited Partnership Finland 859,878 4 EQT III UK No 1 L.P. (EQT Northern Europe UK No. I L.P.) Finland 1,025,044 4 Mandatum Pääomarahasto I Ky Finland 626,705 5 Mandatum Pääomarahasto II Ky EUR Finland 106,000 1 Private Energy Market Fund L.P. Finland 297,559 3 WD Power Investment Finland 2,523 0 Mandatum Pääomarahasto II Ky USD Finland 451,200 3 WD Power Investment USD Finland 29,239 0 GS Loan partners I DEBT EUR U.S. 1,071,605 11 GS Loan partners I U.S. 1,368,000 10 GS Loan partners I DEBT U.S. 3,542,012 25
Access Capital II A L.P. Great Britain 6 Access Capital II C L.P. Great Britain 7 Access Capital L.P. Great Britain 16 BOF III CV Investors LP (Gilde Buyout Fund III) Netherlands 6 Behrman Capital III L.P. U.S. 8 CapMan Buyout VIII (Guernsey) L.P. Great Britain 5 Duke Street Capital Structured Solutions Great Britain 18 EQT V (General Partner) LP Great Britain 5 First European Fund Investments UK L.P. Great Britain 6 Goldman Sachs Loan Partners I, L.P. U.S. 13 Goldman Sachs Loan Partners I, L.P. U.S. 34 Goldman Sachs Loan Partners I, L.P. U.S. 14 Goldman Sachs Petershill Fund Offshore, L.P. Great Britain 17 Montagu Fund III L.P. Great Britain 6 Pai Europe IV L.P. Great Britain 7 Russia Partners II L.P. U.S. 8 Thomas H. Lee Equity Fund V L.P. U.S. 6 VenCap 9 LLC (Preferential Equity Investors II LLC) Great Britain 7
The Board of Directors proposes to the Annual General Meeting on 7 April 2009 that a dividend of EUR 0.80 per share, or total EUR 449.097.912, be distributed for 2008. The dividends to be paid will be accounted for in the equity in 2009 as an appropriation of retained earnings.
Other than Group companies -37 -37 Hedge accounting and exchange result 14 -4
Income taxes Tax for the financial year -14 -8 Tax from previous years 1 0 Deferred taxes 2 -17
Investments Shares in Group companies 8 2,370 2,370 Receivables from Group companies 9 122 128 Shares in participating undertakings 10 0 1 Other shares and participations 11 1,710 2,763
Equity 15 Share capital 98 98 Premium reserve 1,160 1,160 Fair value reserve -1,759 26 Other reserves
Retained earnings 3,993 811 Profit for the financial year 555 4,033
Operating activities Profit before taxes 564 4,058 Adjustments: Depreciation and amortisation 1 3 Unrealised gains and losses arising from valuation 1 0 Realised gains and losses on investments -3 -3,239 Other adjustments 568 2,685
Change (+/-) in liabilities of operating activities Financial liabilities 0 -12 Other liabilities -2 -21 Paid interests -37 -41 Paid taxes -9 -5
Cash and cash equivalents at 1 January 228 335 Cash and cash equivalents at 31 December 35 228
Net change in cash and cash equivalents -193 -107 *) Investments include both investment property and financial assets.
ADDITIONAL INFORMATION TO THE STATEMENT OF CASH FLOWS: Interest income received 83 147 Interest expense paid 37 41 Dividend income received 514 763
{ Notes to the Parent Company Financial Statements } SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
Rental expenses -3 -3 Expense on property occupied for own activities -1 -2 Losses on disposal of property occupied for own actitivies -1 -4
Received dividends in total 514 763 Interest income in total 84 135 Interest expense in total -37 -37 Gains on disposal in total 5 3 242 Losses on disposal in total 0 -2 Hedging and exchange result 14 -4
Acquisition of own shares -81 -81 Profit for the year 4,033 4,033
Recognition of undrawn dividends 3 3 Financial assets available-for-sale - recognised in equity -1,784 -1,784
Distributable assets EURm 2008 2007 Parent company Profit for the year 555 4,033 Retained earnings 3,993 811 Other reserves 273 273 Undistributable items -1,759 -10
Deferred tax liabilities Timing differences 2 4 Fair value reserve - 9
Sampo plc's group of entities liable to tax, as per Article 13 a of the Value Added Tax Act, was credited value added tax refunds in 2004 based on the final VAT refund decisions of the Tax Office for Major Corporations.
Contrary to its previous final decisions, the Tax Office for Major Corporations reassessed the matter in December 2004, on the basis of which it debited EUR 33.7 million of previously refunded VAT. Had the reassessment been confirmed as final and enforced as such, the estimated effect on the Sampo Group's net profit could have been as much as EUR 26 million.
By a decision made on 16 Dec. 2008, The Supreme Administrative Court denied the leave to appeal from the Tax Office for Major Corporations and the agent for the tax office of Uusimaa, and so the decision of the Helsinki Administrative Court was confirmed final.
Managing and Debuty Managing Directors Managing Director Björn Wahlroos 1,806 2,999 Deputy Managing Director Kari Stadigh 1,104 1,790
Members of the Board of Directors Georg Ehrnrooth 160 120 Tom Berglund 80 70 Anne Brunila 80 70 Lydur Gudmundsson 80 Eira Palin-Lehtonen 80 Jukka Pekkarinen 80 70 Christoffer Taxell 80 70 Matti Vuoria 100 85
Property company Kiinteistö Oy Hervannan Tieteenkatu 1, Tampere Finland 100.00 1
Approval of the Financial Statements and the Board of Directors' Report
THE RESPONSIBILITY OF THE BOARD OF DIRECTORS AND THE MANAGING DIRECTOR The Board of Directors and the Managing Director are responsible for the preparation of the financial statements and the report of the Board of Directors and for the fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the fair presentation of the parent company’s financial statements and the report of the
Board of Directors in accordance with laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the control of the company’s accounts and finances, and the Managing Director shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner.
OPINION ON THE CONSOLIDATED FINANCIAL STATEMENTS In our opinion, the consolidated financial statements give a true and fair view of the financial position, financial performance, and cash flows of the group in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.
OPINION ON THE COMPANY’S FINANCIAL STATEMENTS AND THE REPORT OF THE BOARD OF DIRECTORS In our opinion, the financial statements, together with the consolidated financial statements included therein, and the report of the Board of Directors give a true and fair view of the financial performance and financial position of the company in accordance with the laws and regulations governing the preparation of the financial statements and the report of the
We recommend that the financial statements should be adopted. The proposal by the Board of Directors regarding the use of the profit shown at the balance sheet is in compliance with the Limited Liability Companies Act. We recommend that the Members of the Board of Directors as well as the Managing Director of the parent company should be discharged from liability for the financial period audited by us.
Changes planned in Sampo Group's administration in 2009 Georg Ehrnrooth, Chairman of the Board, announced in Sampo Groups Annual General Meeting in April 2008 that he will not stand as candidate for Sampo’s Board of Directors at the Annual General Meeting of 2009. Ehrnrooth, who has been a member of Sampo’s Board of Directors since 1992 and Chairman of the Board since 2006, will thereby leave Sampo’s Board of Directors at the end of the Annual General Meeting of 2009.
The Annual Report is published on Sampo’s Internet pages at the address www.sampo.com. Printed Annual Reports can be ordered at the above Internet address, by calling +358 (0)10 516 0033 or by mail from Sampo plc Investor Relations, Fabianinkatu 27, 00100 Helsinki, Finland.
sampo will publish three interim reports in 2009: 6 May Interim Report for 1 January – 31 March 2009 12 August Interim Report for 1 January – 30 June 2009 4 November Interim Report for 1 January – 30 September 2009
The Interim Reports and related Supplementary Financial Materials are published on Sampo’s Internet pages.
The contact information for Group subsidiaries is available on the Internet at the address www.sampo.com.
‘Sampo's fourth-quarter earnings Wednesday told two stories: one of an insurer that managed to increase its quarterly net profi t to EUR 153 million from EUR 113 million a year earlier despite extraordinary economic headwinds, and one of a fi nancial investor that saw its assets dwindle in value due to weaker equity markets and unfavorable currency swings.’ - Anna Molin, Dow Jones Newswires, 11 February 2009