Statement of Profit and Other Comprehensive Income, IFRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Statement of Changes in Equity, IFRS . . . . . . . . . . . . . . . . .41 Statement of Cash Flows, IFRS . . . . . . . . . . . . . . . . . . . . . . . . . . .42 Group’s Notes to the Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Summary of Significant Accounting Policies . .170 Notes on the Income Statement 1–4 . . . . . . . . . . . . .170
Notes on the Income Taxes 14 . . . . . . . . . . . . . . . . . . . . .173 Notes on the Liabilities and Commitments 15–16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .174 Notes on the Staff and Management 17–19 . . . .174
Group amounted to 7.5 per cent (17.1) for 2018. Net asset value per share on 31 December 2018 decreased to
The Board proposes to the Annual General Meeting to be held on 9 April 2019 a dividend of EUR 2.85 per share
(2.60). The proposed dividend payment amounts in total to EUR 1,583 million (1,444).
Topdanmark segment’s profit before taxes was EUR 199 million (848). The comparison figure contains a positive non-recurring item of EUR 706 million arising from the difference between the carrying value and the fair value of Sampo's holding on 30 September 2017 when Sampo started to consolidate Topdanmark as a subsidiary.
Topdanmark’s Board of Directors proposes to the AGM of 2019 a dividend of DKK 15 per share. If approved Sampo plc’s share of the dividend payment is EUR 84 million.
Sampo’s share of Nordea’s net profit for 2018 amounted to EUR 625 million (616). Nordea’s RoE, excluding nonrecurring items, amounted to 9.7 per cent (9.5) and core
450 million (236). The profit includes the contribution of EUR 197 million from the Danske Bank co-operation agreement in the second quarter of 2018. Return on equity decreased to 8.7 per cent (13.3) because of the decrease in the market value of investment assets. The discount rate for with profit policies used for 2019 and 2020 is 0.25 per cent and 2.50 per cent for 2021.
Topdanmark’s life insurance assets, on 31 December 2018 amounted to EUR 21.7 billion (22.2), of which 79 per cent was invested in fixed income instruments (79), 14 per cent in equities (15) and 7 per cent in other assets (6). If’s share of assets was 50 per cent (52), Topdanmark’s 13 per cent
Sampo Group’s equity as at 31 December 2018 amounted to EUR 12,386 million (12,848), excluding the minority share of EUR 628 million (660). Dividend payment of
EUR 3,313 million (3,858) and the conglomerate solvency ratio stood at 147 per cent (154).
Balance sheet (at end of period) 10.2548 10.3090 10.4530 10.2843 9.8438
Balance sheet (at end of period) 1.3733 1.3826 1.4026 1.3799 1.3222
Finland finally caught up with the global growth trend and started the year with a positive momentum. However, after a good first half of the year, growth decelerated more than expected, ending up at an annual rate of around 2.5 per cent in 2018. Exports and investments declined especially due to the global weakness. Thus, private consumption became the main driver for growth, supported by strong employment performance and rising wages.
In Finland unemployment rate declined, total employment rate continued increasing and reached the government’s target of 72 per cent. Despite the positive employment development, the challenge of recruiting skilled labour has become an even bigger problem to companies and the labour market remains inflexible.
In Sweden, the economy posted a fair growth rate of above 2 per cent in 2018, but the outlook dimmed towards the year end. Investment and domestic demand weakened, the latter partly affected by increased uncertainty stemming from the housing market. Housing prices started to decline in autumn 2017 and stabilised last year, but the turbulence left its mark and weakened the krona as well. Despite the depreciating krona, export growth remained weak over the year due to stagnating global trade. The Swedish labour market was still robust: unemployment remained low at the same time as new labour entered the market. Inflation accelerated slightly during the year, and in December Riksbank hiked its policy rate for the first time since 2011. In the autumn, the parliamentary elections and difficulties to form a new government also added some uncertainty in economy.
In mainland Norway, GDP growth accelerated from the previous year as its economic fundamentals were aligning. Private consumption continued to grow steadily, being a key driver for economic growth. As in Sweden, the housing market stabilised and home prices turned into a slight upward trend. The Norwegian krona appreciated somewhat in the first half of the year, but towards the end of the year oil prices dropped sharply causing the krona to depreciate again. The oil investments are starting to grow gradually again which will be an important driver for growth in future. The Norwegian labour market continued to perform strongly and unemployment decreased further. Inflation picked up last year above Norges Bank’s target level and the central bank raised its key policy rate in September.
If is the leading property and casualty insurance company in the Nordic region, with insurance operations that also encompass the Baltic countries. The P&C insurance group’s parent company, If P&C Insurance Holding Ltd
Finland, Sweden, Norway, Denmark and the Baltic countries. If’s operations are divided into four business areas: Private, Commercial, Industrial and Baltic.
Profit before taxes for 2018 for the If segment was EUR 848 million (818). Combined ratio amounted to 85.2 per cent
Technical result was EUR 643 million (640). Insurance margin (technical result in relation to net premiums earned) was stable at 15.1 per cent (15.1).
Large claims for If were EUR 29 million (46) worse than expected for the full-year 2018. In BA Industrial they were EUR 2 million worse and in BA Commercial EUR 26 million worse than expected in 2018. In the fourth quarter of 2018 the large claims were EUR 10 million worse than expected. Sweden and Finland were most impacted by the large claims outcome.
19 million. In Finland the discount rate for annuities was kept at 1.2 per cent during 2018.
Finland, had growth. Premiums in BA Private grew in all markets including Finland. The growth was highest in the
Private Sweden the premium growth slowed down significantly in the second half of 2018, because of the changes in taxation of new cars introduced as of 1 July 2018. In
Finland the premium development improved towards the end of the year but remained negative for the full year 2018 and was -1.3 per cent.
Cost ratio improved slightly to 21.9 per cent (22.0) and expense ratio remained at 16.4 per cent (16.4).
On 31 December 2018, the total investment assets of If amounted to EUR 10.9 billion (11.5), of which fixed income investments constituted 88 per cent (84), money market 2 per cent (3) and equity 10 per cent (13). Net income from investments amounted to EUR 229 million (216).
(2.7). Fixed income running yield without taking into account the FX hedging cost as at 31 December 2018 was 1.7 per cent (1.5).
In non-life insurance, Topdanmark has a 17 per cent market share. Topdanmark focuses on the private, agricultural and SME market where the company has around 600,000 customers and handles around 300,000 claims a year. In life insurance, Topdanmark has a 10 per cent market share in Denmark.
Sampo started to consolidate Topdanmark as a subsidiary from 30 September 2017. In Sampo Group’s segment
Topdanmark Sampo plc’s share of Topdanmark’s purchase price allocated to customer relations is amortized over a period of 10 years leading to a quarterly amortization of around EUR 5 million, net of tax
Gain from fair valuation of former associated company - 706 -
AGM 2019 a dividend of EUR 0.69 per share (0.68). If the
The following text is based on Nordea’s full-year 2018 result release published on 6 February 2019.
2018 featured challenges in terms of revenues. Net interest income was down 7 per cent in 2018 compared to 2017 driven mainly by margin pressure and the deconsolidation of the Baltic operations. In recent quarters, the level has stabilised, and towards the end of the year, Nordea saw volume growth and stabilising blended margins. The FICC trading environment has been challenging throughout the year, and the worsening market conditions in the fourth quarter further weighted on net fair value as well as fees and commission.
Change in liabilities for inv. and ins. contracts 426 -377 -
The total comprehensive income for the period after tax reflecting the changes in market values of assets amounted to EUR 112 million (188). Return on equity amounted to 8.7 per cent (13.3).
Net investment income, excluding income on unit-linked contracts, amounted to EUR 232 million (376). Net income from unit-linked contracts was EUR -259 million (405).
December 2018. With profit reserves related to the higher guarantees of 4.5 and 3.5 per cent decreased EUR 209 million to EUR 2.4 billion at the end of 2018.
Mandatum Life has overall supplemented its technical reserves with a total of EUR 232 million (325), of which
EUR 193 million is allocated to years 2019 - 2021. The figure does not take into account the reserves relating to the segregated fund. The discount rate used for 2019 and 2020 is 0.25 per cent. For 2021 a rate of 2.50 per cent is used. Discount rate of segregated liabilities is 0.50 per cent and discount rate reserve of segregated liabilities amounted to EUR 250 million (261).
At the end of 2018 Mandatum Life Group’s investment assets, excluding the assets of EUR 7.0 billion (7.1)
The assets covering Mandatum Life’s original with profit liabilities at the end of 2018 amounted to EUR 4.6 billion
(5.2) at market values. 49 per cent (42) of the assets are in fixed income instruments, 9 per cent (16) in money market, 27 per cent (28) in equities and 15 per cent (13) in
Sampo plc owns 36.25 per cent. The company was established for the takeover of Nordax Group AB.
Sampo plc’s holding in Nordea Bank was booked in the consolidated balance sheet at EUR 7.5 billion. The market value of the holding was EUR 6.3 billion, i.e. EUR 7.27 per share, at 31 December 2018. In addition the assets on Sampo plc’s balance sheet included holdings in subsidiaries for
Danske Bank paid the agreed transaction price of EUR 197 million in late June 2018.
Knut Arne Alsaker, 45, took over as the new Group CFO
Topdanmark Peter Hermann *) Knut Arne Alsaker as of 1 January 2019 **) Ann-Marie Andtback Beckman as of 1 March 2019 ***) Måns Edsman as of 1 January 2019
Governance Statement on its website in fulfillment of the requirement referred to in the Finnish Securities
April 2018, decided to distribute a dividend of EUR 2.60 per share for 2017. The dividend was paid on 3 May 2018.
Mäkinen was elected as a new member to the Board. The
Members of the Board were elected for a term continuing until the close of the next Annual General Meeting.
The Annual General Meeting decided to pay the following fees to the members of the Board of Directors until the close of the 2019 Annual General Meeting:the Chairman of the Board will be paid an annual fee of EUR 175,000, the
90,000 each. A Board member shall in accordance with the resolution of the Annual General Meeting acquire
Sampo. Kristina Sandin, APA, will act as the principally responsible auditor.
Based on the proposal made by the Board of Directors, the
Annual General Meeting decided to amend Sections 9 and 12 of the Articles of Association.
year2018. More information on Mandatum Life’s activities can be found from the company website english.mandatumlife.fi/csr.
If is Sampo Group’s largest business area and employed on average 70 per cent of the personnel. Topdanmark employed 24 per cent and Mandatum Life approximately 6 per cent of the personnel. The parent company Sampo plc employed 1 per cent of the work force.
Norway 14 per cent. The share of other countries was 10 per cent.
The total number of staff in If increased 4 per cent. As of 31 December 2018 If employed 6,680 persons.
Topdanmark employed 2,309 persons at the end of the year and the total number of staff decreased 4 per cent.
Sampo plc had 61 employees (60) at the end of 2018.
At the end of the year, the total number of staff in Sampo
Sampo Group’s remuneration strategy shall be responsible towards employees and shareholders. This means that the long-term financial stability and value creation of
Furthermore, the payment of a certain portion of the variable compensation payable to the Senior Executive
7.0 million (6.4) of short-term and long-term incentives has been deferred.
In October 2018 the remaining incentive units of the scheme 2017:1 were allocated by the decision of the Group
CEO and President Kari Stadigh. Altogether 85,000 units were allocated to 9 participants who are either new recruits or current employees with materially changed circumstances. None of the remaining incentive units were allocated to the Group CEO or Group Executive Committee members. The scheme will vest in three annual instalments starting from three years from the allocation of the units.
The Article contains further provisions on calculating the shareholder’s holding and redemption price.
Nasdaq Helsinki since 1988 and all of the B shares are held by Kaleva Mutual Insurance Company. B shares can be converted into A shares at the request of the holder.
The holdings of nominee-registered and foreign shareholders increased to 66.9 per cent (62.0) of the shares and 66.3 per cent of the votes (61.9).
Foreign and nominee registered total 371,371,028 66.87 66.30 *) 1,472,719 A shares and 1,200,000 B shares.
At the end of 2018, members of Sampo plc’s Board of
Directors and their close family members owned either directly or indirectly 6,663,732 (10,523,345) Sampo
Members of the Group Executive Committee and their spouses owned either directly or indirectly 887,565
Sampo plc, Sampo Group’s parent company, received almost EUR 1.7 billion in dividends from its subsidiaries and associated company Nordea during 2018. The following dividend payments were received: • Mandatum Life; EUR 150 million in March 2018 and
On 6 February 2019 Nordea’s Board of Directors announced that it is going to propose to the Annual
A dividend of EUR 150 million is planned to be paid by
calculations. This decreased the total minimum capital requirement by approximately EUR 470 million in the fourth quarter of 2018.
Moody's Standard & Poor’s Rated company Rating Outlook Rating Outlook Sampo plc – Long-term Issuer Rating A3 Stable A- Stable
In Solvency II Sampo Group has not, however, an approved Group PIM, although the PIMs of If and
FICO and Solvency II and the effects of any changes are similar as well.
Pillar 2 to Pillar 1 due to the re-domiciliation of the bank from Sweden to Finland. At the same time, the systemic risk buffer (SRB) decreased temporarily to zero per cent.
31 December 2018. However, the SRB has to be applied in Finland starting 1 January 2019 (2 per cent in the first half of 2019 and 3 per cent from 1 July 2019) which will increase Nordea’s capital requirement for Sampo accordingly in 2019 and decrease the Group solvency ratio. As the situation develops Sampo will be looking into different measures to counter the impact.
Group’s conglomerate solvency ratio (own funds in relation to minimum requirements for own funds) amounted to 147 per cent (154) as at 31 December 2018. The components of the calculation are described in the table below.
Topdanmark uses a partial internal model to report its stand-alone solvency position.
534 million and own funds to EUR 872 million. Solvency ratio amounted to 163 per cent (166).
Mandatum Life’s solvency ratio after transitional measures remained strong despite the dividend payment and the negative capital market development and was 176 per cent (182) on 31 December 2018. Own funds of EUR 1,740 million (1,977) exceed Solvency Capital Requirement
Without transitional measures, own funds would have amounted to EUR 1,348 million (1,555) and the solvency capital requirement to EUR 1,030 million (1,220) leading to a solvency ratio of 131 per cent (127).
Goodwill, other intangibles, foreseeable dividends and distributions and deductibles -5,269 -5,004
Sampo plc’s debt financing on 31 December 2018 amounted to EUR 4,067 million (3,177) and interest bearing assets to EUR 1,959 million (1,754). Interest bearing assets include bank accounts, fixed income instruments and EUR 489 million (496) of hybrid capital and subordinated debt instruments issued by the subsidiaries and associated companies. Altogether, excluding cash and equivalents, the fixed income instruments’ yield was over 5 per cent.
At the end of 2018 the interest bearing net debt of Sampo plc amounted to EUR 2,108 million (1,423). The net debt calculation takes into account interest bearing assets and liabilities. Gross debt to Sampo plc’s equity was 52 per cent
issued perpetual floating rate callable restricted Tier1 notes of SEK 1,000 million callable on 22 March 2023.
On 23 May 2018 Sampo plc issued under its EMTN Programme senior unsecured floating rate notes of SEK 1,300 million and unsecured fixed rate notes of SEK 700 million both maturing on 23 May 2022.
Programme senior unsecured fixed rate notes of EUR 500 million maturing on 27 September 2030.
Senior Bond 1,000 SEKm 1.250% EUR 1.007% 1.0070% 28 May 2020
Senior Bond 700 SEKm 0.875% Euribor6M + 0.3761% 0.1061% 23 May 2022
Senior Bond 500 EURm 1.625% EUR6M + 0.562% 0.2960% 21 Feb 2028
Senior Bond 1,000 NOKm 3.100% Euribor6M + 0.77% 0.5010% 7 Sep 2028
These derivatives are valued at fair value in the profit and loss account although economically they are related the underlying bonds. As a result Sampo plc maintains the flexibility to adjust derivative position if needed but this comes at the cost of increased volatility in the Holding segment’s net finance costs.
The underlying objective of Sampo plc is to maintain a well-diversified debt structure, relatively low leverage and strong liquidity in order for the company to be able to arrange financing for strategic projects if needed. Strong liquidity and the ability to acquire financing are essential factors in maintaining Sampo Group’s strategic flexibility.
However, the marked-to-market results are, particularly in life insurance, highly dependent on capital market developments. The continuing low interest rate level also creates a challenging environment for reinvestment in fixed income instruments.
Other sources of uncertainty are unforeseen structural changes in the business environment and already identified trends and potential wide-impact events. These external drivers may also have a long-term impact on how business shall be conducted. Examples of already identified trends are technological development in areas such as artificial intelligence and digitalization, demographic changes and sustainability issues that may have profound effects on financial sector companies as well.
The Board proposes to the Annual General Meeting a dividend of EUR 2.85 per share to company’s 555,351,850 shares. The dividends to be paid are EUR 1,582,752,772.50 in total. Rest of funds are left in the equity capital.
Register of Shareholders held by Euroclear Finland Ltd as at the record date of 11 April 2019. The Board proposes that the dividend be paid on 18 April 2019.
Return on assets (at fair values) % 3.2 7.6 7.3 7.2 5.6
Premiums written before reinsurers' share EURm 4,502 4,525 4,458 4,559 4,634
Return on equity (at fair values) % 11.2 21.3 25.3 21.5 18.1
Premiums written before reinsurers' share, life insurance EURm 1,357 294 - - -
Premiums written before reinsurers' share EURm 1,082 967 1,122 1,149 1,110
Net asset value per share EUR 20.60 25.37 24.86 23.79 22.63
Adjusted number of shares at 31 Dec. 1,000 555,352 555,352 560,000 560,000 560,000
Weighted average number of shares, incl. dilutive potential shares 1,000 555,352 559,873 560,000 560,000 560,000
Adjusted number of shares at 31 Dec. 1,000 554,152 554,152 558,800 558,800 558,800
Weighted average number of shares, incl. dilutive potential shares 1,000 554,152 554,152 558,800 558,800 558,800
Share trading volume during the financial year 1,000 239,051 179,568 203,996 182,762 194,492
2) Key figures for P&C insurance are based on activity based costs and cannot, therefore, be calculated directly from the consolidated income statement. 3) The Board of Director's proposal to the Annual General Meeting for the accounting period 2018.
Property & casualty and life insurance + insurance premiums written + net income from investments + other operating income – claims incurred – change in liabilities for investment and insurance contracts – staff costs – other operating expenses – finance costs +/– share of associates’ profit/loss
Holding + net income from investments + other operating income – staff costs – other operating expenses – finance costs +/– share of associates’ profit/loss
+ total balance sheet (average of values on 1 Jan. and 31 Dec.)
– technical provisions relating to unit-linked insurance (average of values on 1 Jan. and 31 Dec.)
Expense ratio + operating expenses before change in deferred acquisition costs
Relative share trading volume, % number of shares traded through the Helsinki Exchanges X 100%
Loss ratio excl. unwinding of discount, % claims incurred before unwinding of discount
3) The amount recognised in equity from available-for-sale financial assets for the period totalled EURm -409 (266). The amount transferred to p/l amounted to EURm -192 (-204). EURm 20 (-7) was transferred to the Segregated Suomi portfolio.
Dividend income received 183 124 *) Investments include investment property, financial assets and investments related to unit-linked insurance contracts.
Cash and cash equivalents include cash at bank and in hand EURm 2,361 (2,711). The comparison year includes also short-term deposits EURm 22 (max. 3 months).
Financial Reporting Standards (IFRSs). In preparing the financial statements, Sampo has applied all the standards and interpretations relating to its business, adopted by the commission of the EU and effective at 31 December, 2018.
December 2017 has been consolidated line by line. As a separate line item is also presented the gain from the fair valuation of former associated company.
During the financial year, the adopted standards or annual improvements to the standards had no material impact on the Group’s financial statements reporting.
Subsidiaries The consolidated financial statements combine the financial statements of Sampo plc and all its subsidiaries. Entities qualify as subsidiaries if the Group has the controlling power. The Group exercises control if its shareholding is more than 50 per cent of the voting rights or it otherwise has the power to exercise control over the financial and operating policies of the entity. Subsidiaries are consolidated from the date on which control is transferred to the
The acquisition method of accounting is used for the purchase of subsidiaries. The cost of an acquisition is allocated to the identifiable assets, liabilities and contingent liabilities, which are measured at the fair value of the date of the acquisition. Possible non-controlling interest of the acquired entity is measured either at fair value or at proportionate interest in the acquiree’s net assets. The acquisition-specific choice affects both the amount of recognised goodwill and non-controlling interest. The excess of the aggregate of consideration transferred, noncontrolling interest and possibly previously held equity interest in the acquiree, over the Group’s share of the fair value of the identifiable net assets acquired, is recognised as goodwill.
post-acquisition net income (or loss), or other movements reflected directly in the equity of the associate. If the
Group’s share of the associate’s loss exceeds the carrying amount of the investment, the investment is carried at zero value, and the loss in excess is consolidated only if the Group is committed to fulfilling the obligations of the associate. Goodwill arising on the acquisition is included in the cost of the investment. Unrealised gains (losses) on transactions are eliminated to the extent of the Group’s interest in the entity.
Group’s holding, is presented as a separate line in the income statement. The Group’s share of associate’s changes in other comprehensive income is presented in the Group’s other comprehensive income items.
Foreign currency translation The consolidated financial statements are presented in euro, which is the functional and reporting currency of the Group and the parent company. Items included in the financial statements of each of the Group entities are measured using their functional currency, being the currency of the primary economic environment in which the entity operates. Foreign currency transactions are translated into the appropriate functional currency using the exchange rates prevailing at the dates of transactions or the average rate for a month. The balance sheet items denominated in foreign currencies are translated into the functional currency at the rate prevailing at the balance sheet date.
Geographical information has been given on income from external customers and non-current assets. The reported segments are Finland, Sweden, Norway, Denmark and the
According to the Group’s risk management policy, investments are managed at fair value in order to have the most realistic and real-time picture of investments, and they are reported to the Group key management at fair value.
For private equity funds the valuation of the underlying investments is conducted by the fund manager who has all the relevant information required in the valuation process. The valuation is usually updated quarterly based on the value of the underlying assets and the amount of debt in the fund. There are several valuation methods, which can be based on, for example, the acquisition value of the investments, the value of publicly traded peer companies, the multiple based valuation or the cashflows of the underlying investments. Most private equity funds follow the International Private Equity and Venture Capital
Investment Fund Managers Directive (AIFMD), which determines the principles and documentation requirements of the valuation process.
These contracts and investments made to cover shareholders ’ equity are managed in their entirety and are classified mainly as available-for-sale financial assets.
An exception to the rule are investments related to unitlinked insurance, valued at fair value thru p/l and shown as a separate line item in the balance sheet. The corresponding liability is also shown as a separate line item.
Financial assets and liabilities are offset and the net amount is presented in the balance sheet only when the
Group has a legally enforceable right to set off the recognised amounts and it intends to settle on a net basis, or to realise the asset and settle the liability simultaneously.
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 financial assets held for trading and financial assets designated as at fair value through profit or loss.
Financial derivatives held for trading are initially recognised at fair value. 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.
Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial investments that are designated as available for sale and or are not categorised into any other category.
Instruments are measured either at the bid price or at the last trade price, if there is an auction policy in the stock market of the price source. The financial derivatives are also measured at the last trade price. If the financial instrument has a counter-item that will offset its market risk, the same price source is used in assets and liabilities to that extent. If a published price quotation does not exist for a financial instrument in its entirety, but active markets exist for its component parts, the fair value is determined on the basis of the relevant market prices of the component parts.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 48FINANCIAL STATEMENTS 2018
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.
Financial assets carried at amortised cost There is objective evidence of impairment, if an issuer or debtor e.g. encounters significant financial difficulties that will lead to insolvency and to estimation that the customer will probably not be able to meet the obligations to the
When there is objective evidence of impairment of a financial asset carried at amortised cost, the amount of the loss is measured as the difference between the receivable ’s carrying amount and the present value of estimated future cash flows discounted at the receivable’s original effective interest rate. The difference is recognised as an impairment loss in profit or loss. The impairment is assessed individually.
The assessment is done case by case and with consideration paid not only to qualitative criteria but also historical changes in the value of an equity as well as time period during which the fair value of an equity security has been lower than the acquisition cost. In Sampo Group, the impairment is normally assessed to be significant, if the fair value of a listed equity or participation decreases below the average acquisition cost by 20 per cent and prolonged, when the fair value has been lower than the acquisition cost for over 12 months.
The most significant share of unquoted equities and participations comprise the private equity and venture capital investments. They are measured in accordance with the generally accepted common practice, International
However, if additionally there is a well-founded reason to believe that an amount equivalent to the acquisition cost will not be recovered when selling the investment, an impairment loss is recognised.
Changes in the fair value of derivative instruments that are documented as fair value hedges and are effective in relation to the hedged risk are recognised in profit or loss.
In addition, the hedged assets and liabilities are measured at fair value during the period for which the hedge was designated, with changes in fair value recognised in profit or loss.
Securities lending Securities lent to counterparties are retained in the balance sheet. Conversely, securities borrowed are not recognised in the balance sheet, unless these are sold to third parties, in which case the purchase is recorded as a trading asset and the obligation to return the securities as a trading liability at fair value through profit or loss.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 50FINANCIAL STATEMENTS 2018
terms that are usual and customary for sales of such assets
Each lease payment is allocated between the liability and the interest expense. The interest expense is amortised over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Group’s share of the net identifiable assets, liabilities and contingent liabilities of the acquired entity at the date of acquisition. Goodwill on acquisitions before 1 January 2004 is accounted for in accordance with the previous accounting standards and the carrying amount is used as the deemed cost in accordance with the IFRS.
The cost of internally generated intangible assets is determined as the sum of all costs directly attributable to the assets. Research costs are recognised as expenses in profit or loss as they are incurred. Costs arising from development of new IT software or from significant improvement of existing software are recognised only to the extent they meet the above-mentioned requirements for being recognised as assets in the balance sheet.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 51FINANCIAL STATEMENTS 2018
Property, plant and equipment Property, plant and equipment comprise properties occupied for Sampo’s own activities, office equipment, fixtures and fittings, and furniture. Classification of properties as those occupied for own activities and those for investment activities is based on the square metres in use. If the proportion of a property in Sampo’s use is no more than 10 per cent, the property is classified as an investment property.
Items of property, plant and equipment are depreciated on a straight-line basis over their estimated useful life. In most cases, the residual value is estimated at zero. Land is not depreciated. Estimates of useful life are reviewed at financial year-ends and the useful life is adjusted if the estimates change significantly. The estimated useful lives by asset class are as follows: Residential, business premises and offices 20–60 years
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
Investment property Investment property is held to earn rentals and for capital appreciation. The investment property is measured the same way as property, plant and equipment. The depreciation periods and methods and the impairment principles are also the same as those applied to corresponding property occupied for own activities. The investment property of the associate Nordea in the Holding segment is measured at fair value in item Investments in associates.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 52FINANCIAL STATEMENTS 2018
property with respect to location, condition, lease situation and comparable market information regarding rents, yield requirements and unit prices. During the financial year, the valuations were conducted by the Group’s internal resources.
Provisions A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the Group can reliably estimate the amount of the obligation. If it is expected that some or all of the expenditure required to settle the provision will be reimbursed by another party, the reimbursement will be treated as a separate asset only when it is virtually certain that the
4 Insurance Contracts, either as insurance or investment contracts. Under the standard, insurance contracts are classified as insurance contracts if significant insurance risk is transferred between the policyholder and the insurer. If the risk transferred on the basis of the contract is essentially financial risk rather than significant insurance risk, the contract is classified as an investment contract. Classification of a contract as an insurance contract or investment contract determines the measurement principle applied to it.
The risks involved in insurance and investment contracts are widely elaborated in the Group’s note 41.
Other than insurance contracts, i.e. contracts where the risk is not transferred, include Captive contracts in which an insurance company underwrites a company’s direct business and reinsures the same risk in an insurance company in the same group as the policyholder. There are also contracts in P&C insurance (Reverse Flow Fronting contracts ) in which the insurance company grants insurance and then transfers the insurance risk to the final insurer.
For both the above types of contract, only the net effect of the contract relationship is recognised in the income statement and balance sheet (instead of the gross treatment, as previously). The prerequisite for net treatment is that the net retention recognised on the contract is zero.
There are also contracts in P&C insurance in which the insurance risk is eliminated by a retrospective insurance premium, i.e. the difference between forecast and actual losses is evened out by an additional premium directly or in connection with the annual renewal of the insurance.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 53FINANCIAL STATEMENTS 2018
in the balance sheet, without recognising it first in the income statement as premiums written and claims incurred.
Insurance liabilities Insurance liabilities are the net contractual obligations which the insurer has on the basis of insurance contracts.
Insurance liabilities, consisting of the provisions for unearned premiums and unexpired risks and for claims outstanding, correspond to the obligations under insurance contracts.
The provision for claims outstanding is intended to cover the anticipated future payments of all claims incurred, including claims not yet reported to the company; i.e. the
The provision for claims outstanding in direct P&C insurance and reinsurance may be calculated by statistical methods or 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
insurance (accident, motor third party liability and patient insurance) are raised annually by the TEL (Employee
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 54FINANCIAL STATEMENTS 2018
“IBNR” provision). The provision for claims outstanding includes claim payments plus all costs of claim settlements.
Liability adequacy test A liability adequacy test is applied to all portfolios and the need for augmentation is checked, company by company, on the basis of the adequacy of the whole technical provisions. The test includes all the expected contractual cash flows for non-unit-linked liabilities. The expected contractual cash flows include expected premiums, claims, bonuses and expenses. The claims have been estimated including surrenders and other insurance transactions based on historical data. The amounts of claims include the guaranteed interest and an estimation of future bonuses. The present values of the cash flows have been discounted to the balance sheet date.
(excl. net interest) are recognised as a separate item in other comprehensive income.
Share-based payments During the financial year, Sampo had four valid sharebased incentive schemes settled in cash (the long-term incentive schemes 2014 I, 2014 II,2017 I and 2017 II for the management and key employees). Topdanmark had one mainly share-settled incentive scheme for the executive board and senior executives during the financial year.
Income taxes Item Tax expenses in the income statement comprise current and deferred tax. Tax expenses are recognised through profit or loss, except for items recognised directly in equity or other comprehensive income, in which case the tax effect will also be recognised those items. Current tax is calculated based on the valid tax rate of each country. Tax is adjusted by any tax related to previous periods.
Accounting policies requiring management judgement and key sources of estimation uncertainties Preparation of the accounts in accordance with the
The estimation is based on historical experiences and most probable assumptions concerning the future at the balance sheet date. The actual outcome may deviate from results based on estimates and assumptions. Any changes in the estimates will be recognised in the financial year during which the estimate is reviewed and in all subsequent periods.
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'.
Impairment tests Goodwill, intangible assets not yet available for use, and intangible assets with an indefinite useful life are tested for impairment at least annually. The recoverable amounts from cash-generating units have mainly been determined using calculations based on value in use.
Jan 2022. The temporary exemption may be applied, if the Group’s amount of insurance liabilities is greater than 90% of the total amount of liabilities. The application is also possible, if the ratio is greater than 80%, and the
Group does not engage in a significant activity unconnected with insurance. Another allowed option is to apply
IFRS 9 from 1 Jan 2018 on, but to remove some of the accounting mismatches, caused by the different valuation methods of assets and liabilities, from the income statement and transfer them to other comprehensive income
17 standard. The Group has started analyzing the effects of applications in all the other areas as well, as the new standards will have a significant impact on the Group’s financial statements.
Geographical information has been disclosed about income from external customers and non-current assets.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 60FINANCIAL STATEMENTS 2018
Total items reclassifiable to profit or loss, net of tax -372 -9 -247 -112 - -739
Change in liabilities for insurance and investment contracts -64 -163 -377 - 1 -603
Total items reclassifiable to profit or loss, net of tax -61 -1 3 -39 - -97
Total items not reclassifiable to profit or loss, net of tax 4 - - - - 4
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 581 836 188 537 4 2,146
Liabilities for unit-linked insurance and investment contracts - 4,460 6,955 - -24 11,390
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 63FINANCIAL STATEMENTS 2018
Liabilities for insurance and investment contracts 9,120 5,405 4,375 - - 18,900
Liabilities related to assets held for sale - - 3,299 - - 3,299
Equity interest held by non-controlling interests Name Country 2018 2017 Topdanmark A/S Denmark 51.4 51.1
At the acquisition date, the total number of shares was 95,000,000 of which Sampo held 41,977,070 shares.
Topdanmark's balance sheet on 30 September 2017 was fully consolidated line-by-line. The share of
The fair values of consolidated assets and liabilities as of 30 September 2017 are disclosed below.
A/S since May 2011 as an associated company by reporting in the P&C Insurance segment the share of Topdanmark's profit corresponding to Sampo's holding. From 30
EURm 1,398 which was the fair value of Topdanmark's shares on the acquisition date, 30 September 2017. The carrying amount of Topdanmark's shares at the same time was EURm 692. The difference EURm 706 was recognised through p/l as an increase of the carrying amount.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 67FINANCIAL STATEMENTS 2018
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 69FINANCIAL STATEMENTS 2018
Included in gains/losses from financial assets available for-sale is a net gain of EURm -10 (-7) transferred from the fair value reserve.
Group change in liabilities for insurance and investment contracts total, net -85 -603 5 Staff costs
Pension costs - defined contribution plans -88 -67 - defined benefit plans (Note 30) -8 -9
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 73FINANCIAL STATEMENTS 2018
Financial assets and liabilities have been categorised in accordance with IAS 39.9. In the table are also included interest income and expenses, realised and unrealised gains and losses recognised in P/L, impairment losses and dividend income arising from those assets and liabilities. The financial assets in the table include balance sheet items Financial assets and Cash and cash equivalents. The comparison year includes also Assets held for sale.
The premises in investment property for different segments are leased on market-based, irrevocable contracts. The lengths of the contracts vary from those for the time being to those for several years.
Goodwill is split between the segments as follows: 2018 2017 *) The change in the cost is due both to Topdanmark's consolidation as a subsidiary and If P&C Insurance Ltd becoming a branch of its Swedish sister company. Exchange differences affect the cost of the intangible assets as well.
The recoverable amounts for If and Mandatum have been determined by using a discounted cash flow model. The model is based on Sampo’s management’s best estimates of both historical evidence and economic conditions such as volumes, interest rates, margins, capital structure and income and cost development. The value in use model for Mandatum is greatly influenced by the long-term development of insurance liabilities, affecting e.g. the required solvency capital and thus the recoverable amount. That is why the forecast period is longer for Mandatum, 10 years. The derived cash flows were discounted at the pre-tax rates of the cost of equity which for If was 8.4% and for Mandatum Life 9.8%. The cost of equity is used as the cost of capital as neither company has principal outstanding.
In Mandatum Life, the recoverable amount exceeds its carrying amount by some EURm 660. With the calculation method used, e.g. an increase of about 3% point in the cost of equity combined with a long term 0% growth rate could lead to a situation where the recoverable amount of the entity would equal its carrying amount.
Associates that have been accounted for by the equity method at 31 December 2018
Dividend income from the associate during the financial year 585 559
At the end of the financial year 2018, Nordea's book value per share 8.76 euro exceeded its market value 7.27 euro. As a consequence, Sampo performed an impairment test in accordance with IAS 36 Impairment of Assets where the recoverable amount for Nordea was compared with its carrying amount in the Group.The recoverable amount was defined using a discounted cash flow model, where the cash flows were based on the public information on Nordea and Sampo's estimates of Nordea's future based on this information. Based on the test, the recoverable amount exceeded Nordea's carrying amount and no impairment losses were recognised.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 80FINANCIAL STATEMENTS 2018
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 81FINANCIAL STATEMENTS 2018
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 82FINANCIAL STATEMENTS 2018
EURm Level 1 Level 2 Level 3 Total FINANCIAL ASSETS AT 31 DECEMBER 2017
Total financial assests measured at fair value 24,779 7,054 1,250 33,083
Transfers from level 1 to level 2 Financial assets held for trading
The sensitivity analysis of the Group's fair values of financial assets and liabilities in differenct market risk scenarios is presented below. The effects represent the instantaneous effects of a one-off change in the underlying market variable on the fair values on 31 December 2018.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 88FINANCIAL STATEMENTS 2018
EURm Realised gains/losses Fair value gains and losses Total Total gains or losses included in profir or loss for the financial year 57 0 57
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 89FINANCIAL STATEMENTS 2018
Total financial assests measured at fair value 1,058 -40 10 878 -675 1,231 -39 *) Purhcases of debt securities include additions from business acquisitions EURm 57 in assets held for trading and EURm 21 in financial assets related to unit-linked insurance.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 90FINANCIAL STATEMENTS 2018
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 92FINANCIAL STATEMENTS 2018
Recognised in comprehensive income statement Recognised in equity Exchange differences 31 Dec 2017 Deferred tax assets
Tax from previous years -2 0 23 Components of other comprehensive income
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 94FINANCIAL STATEMENTS 2018
Exchange differences -2 -6 24 Tax effects relating to components of other comprehensive income
Share of associate's other comprehensive income -61 - -61 -57 - -57
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 95FINANCIAL STATEMENTS 2018
EURm Gross Ceded Net Gross Ceded Net Provision for claims outstanding
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 96FINANCIAL STATEMENTS 2018
The tables below show the cost trend for the claims for different years. The upper part of the tables shows how an estimate of the total claims costs per claims year evolves annually.
Provision reported in the balance sheet 2,724 170 197 214 212 273 331 330 424 564 1,206 6,645 of which established vested annuities 1,588 63 76 75 76 86 88 66 50 25 8 2,202
At the close of the claims year 17,645 2,447 2,533 2,595 2,600 2,643 2,633 2,652 2,681 2,717 2,867
Current estimate of total claims costs 17,109 2,276 2,486 2,573 2,528 2,671 2,627 2,636 2,688 2,759 2,867 43,219
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 98FINANCIAL STATEMENTS 2018
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 99FINANCIAL STATEMENTS 2018
Group liabilities from insurance and investment contracts, total 7,330 3 7,326 7,618 0 7,618
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 101FINANCIAL STATEMENTS 2018
Life insurance liabilities from investment contracts at 31 December 2018, total 24
Life insurance liabilities from investment contracts at 31 December 2017, total 26
The liabilities at 1 January and at 31 December include the future bonus reserves and the effect of the reserve for the decreased discount rate. The calculation is based on items before reinsurers' share. More details on the insurance liabilities are presented in the risk management note 41.
Group consolidated insurance and investment contracts, total 18,414 18,900 27 Liabilities from unit-linked insurance and investment contracts
Preferred capital note, 2011 (nominal value EURm 110) 30 years 6.00% 110 110
Holding, total financial liabilities 4,104 3,187 *) The determination and hierarchy of financial assets and liabilities at fair value is disclosed in note 17. Based on the principles of this determination, the bonds of the Holding Company fall under level 2.
Total liabilities from financing activities 3,548 -353 -16 -2 3,177 29 Provisions
Present value of estimated pension obligation, including social costs 268 268
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 106FINANCIAL STATEMENTS 2018
Remeasurement of the net pension liability 9 -3 6 -9 4 -5
Present value of estimated pension liability, including social costs 210 58 268 199 69 268
The following actuarial assumptions have been used for the calculation of defined benefit pension plans in Norway and Sweden: Sweden Sweden Norway Norway
Expected contributions to the defined benefit plans during 2018 and 2017 9 9 2 3
Present value of estimated pension liability, including social costs 240 28 268 239 29 268
Reconciliation of plan assets: At the beginning of the year 211 214
Lease and sublease payments recognised as an expense in the period - minimum lease payments -36 -37
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.
Post employment benefits include pension benefits under the Employees’ Pensions Act (TyEL) in Finland and voluntary supplementary pension benefits.
The Group's receivables from Nordea coprise mainly long-term investments in bonds and deposits. In addition, the Group has several on-going derivative contracts related to the Group's risk management of investments and liabilities.
Dividend-adjusted starting price at 31 December 2018 29.26 36.33 41.21 44.10
Total cost for the financial period, EURm (incl. social costs) 5 *) Grant dates vary **) Trade-weighted average for ten trading days from the approval of terms
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 112FINANCIAL STATEMENTS 2018
Executive board Senior executives Resigned Total Average strike price exercised options 2018 29 29 27 29
Ernst & Young 0 0 38 Legal proceedings There are a number of legal proceedings against the Group companies outstanding on 31 December 2018, arising in the ordinary course of business. The companies estimate it unlikely that any significant loss will arise from these proceedings.
The table excludes property and housing companies accounted for in the consolidated accounts.
In the meeting of 7 Feb. 2019, the Board of Directors decided to propose at the Annual General Meeting on 9 April 2019 a dividend distribution of EUR 2.85 per share, or total EUR 1.582.752.772,50, for 2018. The dividends to be paid will be accounted for in the equity in 2019 as a deduction of retained earnings.
Reputational risk is related to all activities shown in the figure Classification of Risks in Sampo Group. As the roots of reputational risk are varied, the tools to prevent it must be diverse and embedded within the corporate culture.
Group’s Risks In Sampo Group the risks associated with business activities fall into three main categories as shown in the picture
Classification of Risks in Sampo Group: business risks, reputational risk and risks inherent in the business operations. The first two risk classes are only briefly described in this Risk Management Disclosure as the focus is on the third risk class.
Risks Inherent in Business Operations In its underwriting and investment operations, Sampo
Concentration risk Concentration risk Concentration risk Concentration risk Concentration risk Concentration risk
Mitigation of consequential risks is the responsibility of the business areas and the investment unit. The capital need for these risks is measured by independent risk management functions.
Some risks, such as interest rate, currency and liquidity risks, are by their nature simultaneously linked to various activities. In order to manage these risks efficiently,
large single name or industry specific insurance or investment exposures – or across activities when a single name or an industry is contributing widely to the profitability and risks of the company through both insurance and investment activities.
Concentration risk may also materialize indirectly when profitability and capital position react similarly to general economic developments or to structural changes in the institutional environment in different areas of business.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 119FINANCIAL STATEMENTS 2018
Business, If, 31 December 2018, the If insurance portfolio is well diversified across Business Areas, Countries and Lines of Business. The six Lines of Business are segmented in accordance with insurance class segmentation used in IFRS.
There are minor differences between the figures reported by Sampo Group and If due to differences in foreign exchange rates used in consolidation.
Breakdown of Gross Written Premiums by Business Area If, 31 December 2018, total EUR 4,502 million
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 120FINANCIAL STATEMENTS 2018
Despite the diversified portfolio, risk concentrations and consequently severe claims may arise through, for example, exposures to natural catastrophes such as storms and floods. The geographical areas most exposed to such events are Denmark, Norway and Sweden. In addition to natural catastrophes, single large claims could have an impact on the insurance operations’ result. The negative economic impact of natural catastrophes and single large claims is effectively mitigated by having a well-diversified portfolio and a group wide reinsurance program in place.
Sensitivity Test of Underwriting Result If, 31 December 2018 and 31 December 2017
Combined ratio, business area Commercial 86.9% +/- 1 percentage point 12 +/- 12
Combined ratio, business area Industrial 92.3% +/- 1 percentage point 4 +/- 4
Net premiums earned (EURm) 4,290 +/- 1 per cent 43 +/- 43
Net claims incurred (EURm) 2,954 +/- 1 per cent 30 +/- 30
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 121FINANCIAL STATEMENTS 2018
Reserve Risk and Its Management and Control The main reserve risks for If are stemming from uncertainty in the claim amounts caused by higher than expected claim inflation, life expectancy increase, retirement age or annuity indexing system, with the consequences that both annuities and lump sum payments would increase.
Line of Business and Major Geographical Area. When the breakdown of technical provisions is compared to the breakdown of gross written premiums it can be seen that
Technical Provisions by Line of Business and Major Geographical Area If, 31 December 2018
Finland’s and Sweden’s share of technical provisions is larger than the share of gross written premiums. This is mainly due to Sweden and Finland having a long duration of Motor other and Motor third party liability and Finland also having a long duration of Workers compensation. The long duration is mainly due to annuities in these Lines of Business, which increases the amount of technical provisions. The duration of the provisions, and thus the sensitivity to changes in interest rates, varies with each product portfolio. The weighted average duration for 2018 across the product portfolios was 6.6 years.
Reserves are exposed mainly to inflation and discount rates and to some extent to life expectancy. The sensitivity of If’s technical provisions to an increase in inflation, an increase in life expectancy and a decrease in the discount rate is presented in the table Sensitivities of Technical
The technical provisions are further analyzed by claims years. The output from this analysis is illustrated both before and after reinsurance in the claims cost trend tables. These are disclosed in the Note 26 to the
The Actuarial Committee is a preparatory and advisory board for If Chief Actuary. The committee secures a comprehensive view over reserve risk, discusses and gives recommendations on policies and guidelines for calculating technical provisions.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 123FINANCIAL STATEMENTS 2018
Both investment performance and market risks are actively monitored and controlled by the Investment
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 126FINANCIAL STATEMENTS 2018
If has over the years decreased its combined ratio to counteract falling interest rates. Interest rate sensitivity in terms of the average duration of fixed income investments was 1.4. The respective duration of insurance liabilities was 6.6. Interest rate risk is managed by changing the duration of assets and interest rate derivatives based on the market view and risk appetite.
In the financial accounts, most of the technical provisions are nominal, while a significant part, namely the annuity and annuity IBNR reserves, are discounted using interest rates in accordance with regulatory rules. Thereby If is,
The changes of equity positions during the year can be seen in the figure Breakdown of Listed Equity
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 127FINANCIAL STATEMENTS 2018
From an economic perspective, in which the cash flows of insurance liabilities are discounted with prevailing interest rates, If is exposed to changes both in inflation and nominal interest rates. For more information see the table
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 128FINANCIAL STATEMENTS 2018
Cash flows of which interest rate swaps 0 0 0 0 0 0 0 0 0 0 of which interest rate swaps 2 0 2 -1 -1 -1 0 0 0 0
Reinsurance Counterparty Risk In If, reinsurance is used regularly and If has number of programs in place. If is using reinsurance to utilize its own capital base efficiently and reduce the cost of capital, limit large fluctuations of underwriting results and have access to the reinsurers’ competence base. The Reinsurance
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 129FINANCIAL STATEMENTS 2018
Reinsurance Recoverables and Pooled Solutions If, 31 December 2018 and 31 December 2017
As seen from the above table, most of the reinsurers have ratings between AA+ and A-. The ten largest individual reinsurance recoverables amounted to EUR 151 million, representing 67 per cent of the total reinsurance recoverables.
The cost of risk transfer related to the reinsurance recoverables and pooled solutions amounted to EUR
Counterparty Risk Related to Financial Derivatives In If, the default risk of derivative counterparties is a by-product of managing market risks. The role of long term interest rate derivatives has been immaterial and counterparty risk stems mainly from short-term FX
derivatives. The counterparty risk of bilaterally settled derivatives is mitigated by a careful selection of counterparties, by diversification of counterparties to prevent risk concentrations and by using collateral techniques, e.g. ISDA Master Agreements backed by Credit Support
Annexes. If settles interest rate swaps in central clearing houses, which while further mitigating bilateral counterparty risk also exposes If to the systemic risk related to centralised clearing parties.
The Reinsurance Security Committee (“RSC”) shall give input and suggestions to decisions in respect of various issues regarding reinsurance default risk and risk exposure, as well as proposed deviations from the Reinsurance
Recoverables and Pooled Solutions, If, 31 December 2018 and 31 December 2017.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 130FINANCIAL STATEMENTS 2018
Business, Topdanmark Non-Life, 2018, Topdanmark’s insurance portfolio is diversified across Business Areas and Lines of Business.
Topdanmark Forsikring has a very comprehensive reinsurance programme in place contributing to the low level of underwriting risk. The largest retention level of DKK
100 million plus reinstatement for each event is on storm events. The maximum retention on fire events is DKK 25 million and in Workers' compensation up to DKK 1 billion is covered with a retention of DKK 50 million.
● Baltic 0 by Business Area by Country by Line of Business
In addition to the above described analysis, Topdanmark continuously improves its administration systems to achieve more detailed data. This in turn enables the
Non-Life Insurance Risk Scenarios Topdanmark, 31 December 2018 and 31 December 2017
Storm claims up to DKK 5,100m -10.4 -10.5 company to identify the claims trends at an earlier point in time and compile information on the constituent parts of the various types of claims.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 132FINANCIAL STATEMENTS 2018
The reserve risk is calculated using Topdanmark’s partial internal model for insurance risk. Workers’ compensation claims provision has by far the biggest risk, followed by the other long-tail claims provisions.
During such a long period of settlement, the levels of compensation could be significantly affected by changes in legislation, case-law or practice in the compensation of damages adopted by the Danish Labour Market Insurance which decides on compensation for injury and loss of earnings potential in all cases of serious industrial injuries. The practice adopted by the Danish Labour Market
Insurance also has some impact on the levels of compensation for accident and personal injury within motor, liability and commercial liability insurance. Supreme court decisions can also influence the provisions for former years especially for Workers’ compensation.
Other claims provisions in workers' compensation 24.1 2.8 25.3 3.2 increase in the level of compensation due to the annual increase in compensation per policy being higher than the general development in prices or due to a change in judicial practice or legislation. The sufficiency of the provisions is tested in key lines by calculating the provisions using alternative models as well, and then comparing the compensation with information from external sources, primarily statistical material from the Danish Labour
Life Underwriting Risks During the latest two years, premiums were split between products as follows.
The focus of sales is on unit-linked schemes and the premiums received are mostly of unit-linked schemes as shown in the table Sources of Gross Premiums,
The risk inherent in the life business is firstly related to the with profit technical provisions. When the majority of new contracts are written as unit-linked contracts, the risk will not increase as much as the volume of premiums and total provisions.
The decline in profit is mainly due to a drop in the risk result on disability insurance and premiums waived.
These results may fluctuate between years because of new claims for disability and recovery. In addition to this, the results for 2018 were impacted by weak financial markets.
• Sales and administration, which consists mainly of the cost fees received from the customers deducted by actual costs.
• Insurance risk, which is the insurance risk result on death, invalidity, and other such items.
Result of Life Insurance Topdanmark, 31 December 2018 and 31 December 2017
In order to protect shareholders' equity, in general it will be relevant to reduce market risks in the event of lower interest rates.
All policies have been split into contribution groups according to the guaranteed benefit scheme. For all contribution groups, there are separate loss absorbing buffers and hence in each contribution group, the separate investment policy must be in line with risk taking capacity to ensure the ability to meet the guaranteed benefits. Market risk is adjusted continuously in accordance with the risk capacity of the contribution groups, and the movements in interest rates are monitored so that risk reducing actions can be taken when needed.
Extra costs, due to a permanent change in disability risk, will be partially covered by individual and collective bonus potential. The remainder affects result for the year and consequently shareholders' equity.
Extra costs, due to longer lifetimes, will be partially covered by individual and collective bonus potential.
Following risk reduction measures and methods are used in Topdanmark Livsforsikring: • All policies in the average return environment are divided according to the granted benefit guarantee and the investment policy is organized to ensure the ability to honor the guarantees
• Prices for death and disability are adjusted continuously in relation to the market situation and the observed injury history
• Establishment of business processes that ensure that the products are sold at the right price / risk mix
Market risks are limited to the extent that is considered appropriate, so that it is highly probable that the company gains a profit even in the very unfavourable financial market scenarios. Large risk exposures or highly correlated risks are covered to prevent unnecessary losses and market risks originating from insurance operations.
The investment portfolio shall be managed in a way that market risk taking shall not endanger the normal operations or implementation of planned actions in unfavourable market conditions.
EURm verojen jälkeen 2018 2017 *35% increase first year, subsequently 25%, coincident with 20% decline in reactivation rates
To monitor effectiveness of the aforementioned risk reduction methods over time Topdanmark Risk Committee continuously monitors the company’s risk profile and reinsurance cover. Also, forecasts are followed up.
Livsforsikring, so that the company can continue to offer attractive savings products to its clients with competitive returns in relation to the accepted investment risks.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 137FINANCIAL STATEMENTS 2018
Unlisted equities and hedge funds 46 2% 45 2 % 351 8% 325 7%
The equity portfolios are well diversified and without major single positions, when associated companies are disregarded.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 138FINANCIAL STATEMENTS 2018
Generally, the interest rate risk is limited and controlled by investing in interest-bearing assets in order to reduce the overall interest rate exposure of the assets and liabilities to the desired level. Therefore, the Danish mortgage bonds and government bonds have a central role in the asset portfolios. To further decrease the interest rate sensitivity of balance sheet, swaps and standard swaptions have been used for hedging purposes.
Topdanmark uses to calculate its provisions. The general principles regarding the inclusion of an allowance for inflation differs between Workers' compensation and
An expected higher future inflation rate would generally be included in the provisions with a certain time delay, while at the same time the result would be impacted by higher future indexation of premiums. To reduce the risk of inflation within Workers' compensation and Illness/
The adjacent table is a summary of selected market risk sensitivities. It can be seen from the table that the net effect of 1 percentage point parallel change in interest rates would be a less than 10 per cent drop in equity or property prices.
Expected Cash Flows for Provisions and the Bond Portfolio Topdanmark, 31 December 2018 and 31 December 2017
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 141FINANCIAL STATEMENTS 2018
Topdanmark A/S. Topdanmark A/S finances its activities and dividend programme by receiving dividend from its subsidiaries. Further financing requirements are covered by short term money market loans, typically with a maturity of one month or less.
Counterparty Default Risks Topdanmark is exposed to counterparty risk in both its insurance and investment activities.
For reinsurance counterparties, the Board approves security guidelines for how large a portion of a reinsurance contract can be placed per a separate reinsurer. This portion is dependent on the reinsurer's rating as well as on Topdanmark’s own assessment of the reinsurer. The largest risk concentrations may occur in case of major catastrophe events, including storms and cloudbursts.
Financial Derivative Activities To limit the counterparty risk of financial contracts, the choice of counterparties is restrictive, and collateral is required when the value of the financial contracts exceeds the predetermined limits. The size of the limits depends on the counterparty's credit rating and the terms of the contract.
Reserve for decreased discount rate (3.5% -> 0.50%) 261 0 0 0 0 0 -11 250 2%
Reserve for decreased discount rate 325 0 0 0 0 0 -93 232 2%
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 143FINANCIAL STATEMENTS 2018
Mandatum Life. The solvency capital requirement of longevity risk is also highly dependent on the interest rate level, which in practice means that the lower the applied discount rate is, the higher the longevity SCR would be.
Most of the longevity risk arises from the with profit group pension portfolio. With profit group pension policies have mostly been closed for new members for years and due to this the average age of members is relatively high, almost 70 years. In the unit-linked group pension and individual pension portfolio the longevity risk is less significant because most of these policies are fixed term annuities including death cover compensating the longevity risk.
95 million (105) including a EUR 79 million longevity reserve for the segregated group pension portfolio. The cumulative longevity risk result has been positive since these revisions. The longevity risk result of group pension for the year 2018 was EUR 8.3 million (6.8) after a EUR 9.7 million release from the longevity reserve.
The insurance risk result of other biometric risks has been pro fitable overall, although the different risk results vary considerably. In the longer term, disability and morbidity risks are mitigated by the company’s right to raise insurance premiums for existing policies in case the claims experience deteriorates.
EURm Risk income Claims expense Claims ratio Risk income Claims expense Claims ratio
Policy sets principles for risk selection and limits for sums insured. The Reinsurance Policy governs the use of Reinsurance. The Board approves the Underwriting policy,
Reinsurance Policy, pricing guidelines and the central principles for the calculation of technical provisions.
Policy terms and tariffs cannot usually be changed materially during the lifetime of the insurance, which increases the expense risk. The behavior of financial markets has also an influence on expense risk since normally company ’s fee income is linked to policy reserves in unit-linked policies. The main challenge is to keep the expenses related to insurance administrative processes and complex IT infrastructure at an effective and competitive level. In year 2018, the expense result of Mandatum Life
common feature for all with profit technical provisions is the guaranteed rate and bonuses. The cash flows of
Mandatum Life´s technical provisions are relatively well predictable because in most of the company’s with profit policies, surrenders and additional investments are not possible.
Mandatum Life has prepared for low interest rates on the liability side by e.g. reducing the minimum guaranteed interest rate in new contracts and by supplementing the technical provisions with reserve for decreased discount rate. In addition, existing contracts have been changed to accommodate improved management of reinvestment risk.
Investment allocations and average maturities of fixed income investments as at year-end 2018 and 2017 are presented in the table Investment Allocation, Mandatum
Life’s with profit business i.e. that part of the business where Mandatum Life carries investment risk. As mentioned earlier, the behavior of financial markets has also an influence on unit-linked business since normally company’s fee income is linked to policy reserves in unitlinked policies. This risk is taken into account as part of expense risk.
In Mandatum Life, the approach to market risk management is based on an analysis of technical provisions’
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 146FINANCIAL STATEMENTS 2018
Investment Allocation Mandatum Life, 31 December 2018 and 31 December 2017
Credit bonds, funds and loans 2,988 53% 3.3 2,994 48% 3.2
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 147FINANCIAL STATEMENTS 2018
Exposures by Sector, Asset Class and Rating Mandatum Life, 31 December 2018
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 148FINANCIAL STATEMENTS 2018
Within the total portfolio the size of private equity and alternative investments has slightly increased. Since the beginning of 2018, these asset classes have been managed by Sampo plc’s investment operations instead of external asset managers. The real estate portfolio is also managed by Sampo Group’s own real estate management unit. The real estate portfolio includes both direct investments in properties and indirect investments in real estate funds as well as in shares of real estate companies and it has been quite stable.
The average duration of fixed income investments was 2.5 years including the effect of hedging derivatives. The respective duration of the insurance liabilities was around 10 years. Interest rate risk is managed at the balance sheet level by changing the duration of assets and by using interest rate derivatives.
Cash Flows According to Contractual Maturity Mandatum Life, 31 December 2018
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 151FINANCIAL STATEMENTS 2018
Counterparty Risk Related to Financial Derivatives In Mandatum Life, the default risk of derivative counterparties is a by-product of managing market risks. This stems from the fact that Mandatum Life is a frequent user of long-term interest rate derivatives in addition to FX
Group proactively prevents concentrations to the extent possible by segregating the duties of separate business areas. As a result, separate companies have very few overlapping areas in their underwriting and investments activities. Despite proactive strategic decisions on segregation of duties, concentrations in underwriting and investments may appear and hence liabilities and assets are monitored at the Group level to identify potential concentrations at single company or risk factor level.
principle, Sampo Group has two principles proactively preventing the Group risks. The amount of intragroup exposures between the Group companies are few and the parent company is the only source of liquidity and the main source of capital within the Group. These principles effectively prevent the contagion risk and hence potential problems of one company will not affect directly the other
Also, in Denmark If and Topdanmark have some overlapping areas. However, there are no material underwriting risk concentrations in the normal course of business.
Market Risks at Sampo Group Level For all subsidiaries, their insurance liabilities and the company specific risk appetite are the starting points for their investment activities. The insurance liabilities including loss absorbing buffers as well as the risk appetite of Mandatum Life, If and Topdanmark differ, and as a result the structures and risks of the investment portfolios and balance sheets of the three companies differ respectively. Companies’ average investment returns, and volatilities of investment returns also differ.
Topdanmark’s investment assets presented here do not include assets which cover unit-linked contracts.
Investment activities and market risk taking are arranged pro-actively in such a way that there is virtually no overlap between the wholly-owned subsidiaries’ single-name risks except with regards to Nordic banks where companies have their extra funds in forms of the short-term money market assets and cash. From the asset side’s diversification perspective Topdanmark is a positive factor because the role of Danish assets is dominant in portfolios and especially the role of Danish covered bonds is central. In Sampo Group’s other insurance companies’
Regarding fixed income and equity exposures financial institutions and covered bonds have a material weight in the group-wide portfolios whereas the role of public sector investments is quite limited. Most of these assets are issued by Nordic corporates and institutions. Most corporate issuers, although being based in the Nordic countries, are operating at global markets and hence their performance is not that dependent on the Nordic markets.
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 155FINANCIAL STATEMENTS 2018
Fixed Income Investments in the Public Sector Sampo Group Excluding Topdanmark, 31 December 2018
panies. However, these Nordic companies are mainly competing in global markets, only a few are operationally purely domestic companies. Hence, the ultimate risk is not highly dependent on the Nordic economies.
EUR 534 million at the end of year 2018 (608). Within
The geographical core of Sampo Group’s equity investments is in the Nordic companies. The proportion of
Nordic companies’ equities corresponds to 53 per cent of the total equity portfolio. This is in line with Sampo
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 158FINANCIAL STATEMENTS 2018
Largest Holdings by Single Name The largest exposures by individual issuers and counterparties are presented in the table Largest
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 159FINANCIAL STATEMENTS 2018
investment single-name exposures are presented in the table Ten Largest Direct High Yield and Non-rated
Further, many of the rated companies have a rating lower than investment grade -rating (high yield).
Ten Largest Direct High Yield and Non-rated Fixed Income Investments and Direct Listed Equity Investments Sampo Group Excluding Topdanmark, 31 December 2018
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 160FINANCIAL STATEMENTS 2018
Balance Sheet Concentrations In general Sampo Group is structurally dependent on the performance of the Nordic economies as already described earlier. Sampo Group is also economically exposed to the low level of interest rates. The lower the rates and the flatter the yield curve, the more challenging the environment is for the current business models especially when duration of insurance liabilities is longer than asset duration in If and Mandatum Life. In Topdanmark interest rate risk of balance sheet is minor and hence
As at 31 December 2018 Sampo had long-term strategic holdings of EUR 9,200 million and they were funded mainly by capital of EUR 7,890 million and senior debt of EUR 4,067 million. Average remaining maturity of senior debt was 5.2 years and EUR 1,600 million of it had a maturity longer than 5 years. Senior debt is used to fund other financial assets as well. The average maturity of subordinated loans and fixed income instruments of EUR
The capacity to generate funds is dependent on leverage and liquidity buffers which can be inferred from the table
Notes to Sampo plc’s Financial StatementsGroup's Notes to the Accounts 161FINANCIAL STATEMENTS 2018
• Sampo’s net debt of EUR 2,108 (1,424) million is modest when compared to Sampo’s equity holdings and financial assets.
EUR 1,447 (1,199) million. Liquidity is mainly affected by received and paid dividends as well as changes in issued debt instruments and changes in investments. Sampo’s dividend payment takes place in April and it will significantly lower the liquidity position of Sampo. A significant portion of subordinated loans issued by group-companies
All in all, Sampo plc is in a good position to refinance its current debt and even issue more debt. This capacity together with the tradable financial assets, means that
Currently Sampo Group has a capital buffer in excess of minimum capital requirement. Because subordinated loans presented in the table Balance Sheet Structure,
Sampo plc, 31 December 2018 and 31 December 2017 are issued by If, Mandatum Life, Nordea and Topdanmark, they are eliminated from Group’s own funds. In case these assets would be sold, in addition to liquidity in Sampo plc, also own funds and Sampo Group Solvency ratio would increase.
Capitalization at Group Level The sub-group level balance of profits, risks and capital is the primary focus of Sampo Group. When all subgroups are well capitalized, as a result the Group should be adequately capitalized as well although for example the subordinated loans, which are eliminated from own funds, decrease the solvency. In addition, changes in the solvency capital requirements of the sub-groups have an effect on the level of capitalization in Sampo Group.
Factors affecting the size of group level buffer: • Profit diversification • Sampo plc’s liquidity capacity • Issuance capacity • Shareholders’ dividend expectations • Business risks & arrangements
Group’s capital requirement is dependent mainly on the capital requirements of the business areas. The parent company’s contribution to Group capital need is minor most of the time, because Sampo plc does not have any business activities of its own other than the management of its capital structure and liquidity portfolio. However, investments in the Nordic financial service companies increase Sampo plc’s capital requirement.
Due to the use of the same sectoral rules in both Solvency
II and financial conglomerate calculations, there is no material difference between Sampo’s Solvency II or FICO
At the Group level, the capital requirement and own funds are both exposed to foreign currency translation risk. Translation risk may realize when the actual capital and the capital needs of If and Topdanmark are converted from their reporting currencies to euros. When the reporting currencies of If and Topdanmark depreciate, the actual amount of Group’s capital in euros decreases and the capital requirements of If and Topdanmark will be
Group level buffer is the difference between the amount of Group’s own funds and the Group capital requirement.
Group's Notes to the Accounts Notes to Sampo plc’s Financial Statements
Notes on the Income Statement 1 Other operating income ...................................................... 170 2 Other operating expenses .................................................. 170 4 Financial income and expense .......................................... 170
Notes on the Assets 5 Receivables from group companies ............................... 171 6 Other shares and participations ....................................... 171 7 Other investment receivables ........................................... 171 9 Prepayments and accrued income ................................. 171
Notes on the Liabilities 10 Movements in the parent company's equity ............... 172 13 Accruals and deferred income .......................................... 173
Notes on the Income Taxes 14 Deferred tax assets and liabilities .................................... 173
Notes on the Staff and Management 18 Board fees and management remuneration................ 174 19 Pension contributions to the CEO, Deputy CEO and the Members of the Board .............................. 175
Income from property occupied for own activities 17 18 2 Other operating expenses
Receivables are subordinated loans issued by subsidiaries. More information in the consolidated note 28 Financial liabilities.
6 Other shares and participations 2018 Fair value changes 2017 Fair value changes
Avalaible-for-sale equity securities 745 10 32 175 3 -15 7 Other investment receivables 2018 Fair value changes 2017 Fair value changes
Information on share capital is disclosed in Note 33 in the consolidated financial statements.
19 Pension contributions to the CEO, Deputy CEO and the Members of the Board
Former Presidents/CEO:s 1) The Group CEO is entitled to a supplementary defined contribution pension in accordance with the present pension contract. The annual pension premium is fixed at EUR 400,000. 2) Group pension agreement with a retirement age of 60 years and a pension benefit of 66 per cent of the pensionable TyEL-salary (TyEL: Employee's Pension Act). The payment for 2018 is based on a TyEL index adjustment. 3) Group pension agreement with a retirement age of 60 and a pension benefit of 60 per cent of the pensionable TyEL-salary. The payment for 2018 is based on a TyEL index adjustment.
Basis for Opinion We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor’s
In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies are in compliance with laws and regulations applicable in Finland regarding these services, and we have not provided any prohibited nonaudit services referred to in Article 5(1) of regulation (EU)
537/2014. The non-audit services that we have provided have been disclosed in note 37 to the consolidated financial statements and note 3 to the parent company financial statements.
Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period.
(business identity code 0142213-3) for the year ended 31 December, 2018. The financial statements comprise the consolidated balance sheet, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies, as well as the parent company’s balance sheet, income statement, statement of cash flows and notes.
• the consolidated financial statements give a true and fair view of the group’s financial position as well as its financial performance and its cash flows in accordance with International Financial Reporting Standards
• the financial statements give a true and fair view of the parent company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in
At 31.12.2018 the Group has insurance contract liabilities representing amounting to mEUR
We refer to the Summary of significant accounting policies, Accounting policies regarding management judgment and key sources of estimation uncertainties and Notes 9 and 14-19.
The Group’s investment portfolio excluding investments in associates represents amounts to mEUR 33.363 (2017: mEUR 33.615 which represents 68 % of the Group’s total assets.
This matter is a significant risk of material misstatement referred to in EU Regulation
We performed additional procedures for areas of higher risk and estimation, involving our valuation specialists.
The value of the Nordea shares in the consolidated balance sheet amounts to mEUR 7.535
(31.12.2017: mEUR 7.578). The Group’s ownership in Nordea Bank Abp is 21.25%. Nordea
Our audit procedures included, among others, involving our valuation specialists to assist us in evaluating the assumptions and methodologies used by the Group in preparing the impairment test.
responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS)
as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view.
Information on our audit engagement We were first appointed as auditors by the Annual General
Other information The Board of Directors and the Managing Director are responsible for the other information. The other information comprises the report of the Board of Directors with referred statements and the Corporate Governance
Statement, Remuneration report and the Group CEO’s review, but does not include the financial statements and our auditor’s report thereon. We have obtained the report of the Board of Directors prior to the date of this auditor’s report, and the other reports and statements mentioned above are expected to be made available to us after that date.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
With respect to report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.