telephone +358 (0)10 516 0100, fax +358 (0)10 516 0016, fi rstname.lastname@sampo.fi www.sampo.com, sampo plc Fabianinkatu 27, 00100 helsinki, finland
• If, the leading P&C insurer in the Nordic countries, with operations in Finland, Sweden, Norway, Denmark, the Baltic countries and Russia
• Sampo plc, the parent company, which owns and administers the insurance subsidiaries and manages investment assets of approximately eur 5 billion.
Sampo Group is also one of the largest investors in the Nordic countries. In the beginning of February 2008, Sampo Group’s investment assets totalled over eur 20 billion.
level strategy. Our goal is to create shareholder value by being able to seize opportunities emerging in the market. The sale of Sampo Bank Group, which was closed on 1 February 2007, is a case in point. We received an off er from Danske Bank in November 2006 and in a few weeks the completion of the transaction was missing only the authority approvals.
The transaction created another kind of Sampo with two strong operating units – P&C insurance and life insurance – and a huge pile of cash. The use of the sales proceeds has been the number one topic of our investor discussions ever since. The
Board made early on a decision to invest the proceeds in either
Northern European fi nancial stocks or cash. We also promised our shareholders and the media to revisit this issue in connection with our full-year 2007 result release in February 2008.
After going through the most promising investment opportunities a decision to focus on Nordea was made. While maintaining a sizeable part of holding company Sampo plc’s assets in cash, we have amassed a 10 per cent holding in Nordea with an average acquisition price of around 11 euros per share. The cash became very handy when the equity market turbulence pushed our own share price down and we activated our share repurchase programme. We have bought 6.4 million Sampo A
All this meant that there will be no breaking news to deliver to investors or the media on 12 February 2008. We have already picked our horse and will actively participate in building Nordea’s future.
Average number of staff (FTE) 6,846 11,657 –41 *Year 2007 fi gure is the Board of Directors’ dividend proposal 2 sampo group annual report 2007 | CEO's Review
sible to tell at this stage. The bank off ers in our view a lot of potential for operational improvements and, in the longer run, interesting strategic options.
What happens with the remaining roughly 2 billion euros of cash in Sampo plc’s balance sheet, depends entirely on valuations. We can increase our Nordea holding. If our own share price development so requires, we are ready to intensify the buyback eff orts. Our fi nancial muscle extends well beyond the excess cash as we have basically no leverage in the holding company. I will not totally rule out the possibility of an additional acquisition either. The valuations need to come down, however, for us to pursue this option. Looking at the stock market in late January 2008, when I write this review, everything seems possible.
To a great extent the speculation around our intentions and the volatile equity markets have overshadowed the outstanding results our business areas have continued to produce in 2007.
Capital market conditions in the latter half of 2007 were diffi cult. If also suff ered from the weak equity markets but managed to achieve an RoE of 19.2 per cent. All in all, 2007 was another successful year in building the leading pan-Nordic
Sampo Life reported an exceptionally good result as profi t before taxes rose to eur 342 million from the already high 2006 profi t of eur 295 million. The big question for Sampo Life in 2007 was how Sampo Bank would succeed in selling life insurance products after the change of ownership. When looking back at the sales results, one has to admit that the Bank did surprisingly well, with the exception of December when obviously the integration process with Danske Bank took its toll.
The area where our life insurance business keeps growing at an amazing pace is the Baltics. In 2007 the premiums written by
Baltic increased by almost 70 per cent and are already more than 10 per cent of Sampo Life’s total premiums.
'Where will Sampo be in fi ve years’ time?' is another question with which I am often faced with. My honest answer is that I don’t know. But I know that we intend to create a lot of shareholder value in getting there. Certainly we expect 2008 to be another interesting year for Sampo Group with turbulent capital markets and all the possibilities it may off er.
insurance. The Group is also a signifi cant investor on the
Nordic scale, with investment assets of approximately eur 21 billion in the end of 2007. The business areas have well-defi ned strategies, based on return on equity targets. Synergies between
P&C insurance operates under the If brand. If is the largest
Group has no strictly defi ned Group level strategy, it fl exibly utilizes opportunities arising in the market to create shareholder value through transactions such as disposals and acquisitions.
Distribution Policy The Board of Sampo plc adopted a distribution policy on 9
November 2006 according to which the company aims to distribute to the shareholders an annual dividend corresponding to a dividend yield of 4-6 per cent. However, the dividend shall not exceed the reported profi t after taxes for the calendar year for which the dividend is payable. Share buy-backs can be used to complement dividends.
SE Sampo Life Insurance Baltic, in all the Baltic countries. Sampo Life’s operations are divided into two diff erent kinds of businesses. New sales are focused on unit-linked insurance. Most of the technical reserves, however, relate to with-profi t policies.
The objective is to manage the assets covering the with-profi t reserves in a way that produces high investment yield. Sampo
Sampo plc manages the investment portfolios on behalf of the insurance subsidiaries and has close to eur 5 billion of investment assets itself. Sampo plc is also a major shareholder in the Nordic banking group Nordea. On 31 December 2007
21st century in Sampo Group has been refl ected by several structural changes. Sampo Group took its current form in February 2007, when the divestment of Sampo Bank Group to Danske Bank A/S was closed. Pictures below outline the largest changes in Sampo Group during the 21st century. The full history of the companies belonging to Sampo Group is available on the Internet at www.sampo.com/group.
2002 Sampo’s P&C insurance operations are merged with If. Following the transaction, Sampo owns 38 per cent of If ’s stock.
Sampo. Following the share transaction, Sampo has three core businesses: P&C insurance, banking and long-term savings.
Year 2007 was yet another successful year for If. For the fourth year running, the company exceeded its profit targets. The technical result increased to eur 565 million.
Private, Commercial and Industrial business areas. The Baltic countries and Russia – with special market conditions – are a separate business area.
Private If is the leading insurance company for private customers in the
Profi tability continued to be excellent for Private during 2007. The technical result increased somewhat to eur 301 million and the combined ratio was 90.1 per cent.
The success is a result of a number of endeavours to improve off erings for customers, with better services, new products like the home and motor 'superpolicies' which provide customers with the widest cover that exists on the market and with even faster assistance when an incident occurs. If now handles 60 per cent of customer claims at the time of the fi rst contact.
Year 2007 saw a number of new business initiatives being taken. During the year, several cooperation and distribution agreements have been made on car insurance, and some of If's already existing agreements have been widened to a Nordic level.
An agreement was entered into with Blocket, Sweden’s biggest internet portal for second-hand goods. Through the portal If off ers tailor-made warranty insurance policies for second-hand cars that have been sold via blocket.se. A collaborative agreement was also closed with S Group, Finland’s leading company in the grocery, hotels and restaurants fi eld. The agreement will come into force in the early summer of 2008.
Commercial Business area Commercial's target group includes companies with up to 500 employees. The business area is the market leader in the Nordic region with around 330,000 commercial customers. Approximately 70 per cent of these are small companies that are normally off ered standardised insurance solutions
Nordic area with some 3.6 million customers in the Nordic and Baltic countries and Russia. If has approximately 6,600 employees and off ers the entire range of P&C insurance solutions and services for everyone from private customers to global industrial companies.
while the other, medium-sized commercial customers often need more specialized services.
Despite that, 2007 was still a very profi table year for the Commercial business area. The technical result rose to eur 176 million, an increase of almost 10 per cent, and the combined ratio remained at an excellent level of 90.8 per cent.
A clear trend in the corporate market is that the insurance companies’ service solutions are being integrated more and more with the customers’ own solutions, not least through new
Internet solutions. If is right on the front line here. Through the
Apart from insuring their property, companies are now also widening their insurance cover for their employees, who naturally represent many companies’ most important resource. For example, health insurance is being used as a part of benefi t packages for retaining or recruiting staff .
They no longer deal only with routine protection against simple frequency claims, they are becoming better at utilising the entire extent of what an insurance company can off er, from disaster cover in the event of major damage, to benefi ts packages in the form of health insurance, for example.
Sampo Life Sampo Life Insurance Company Limited with its subsidiary are responsible for the Sampo Group’s life insurance business. Operating in Finland and the Baltic countries, Sampo Life provides savings and investment solutions spanning entire lifetime to private people, business entrepreneurs, and corporate and institutional customers, and provides the best possible security against personal risks.
However, the agreement on long-term cooperation signed in conjunction with the divestment creates a solid foundation for
Sampo Life to continue and further develop successful sales and product development cooperation with Sampo Bank.
Finnish Operations position bolstered in the corporate segment The sales and premiums written of the parent company, Sampo
Sampo Life’s premiums written totalled eur 556 million. This represented a decrease of more than 10 per cent, or eur 65 million, from the previous year. Single-premium unit-linked endowment policies accounted for almost the entire decline. At the same time, Sampo Life’s total premiums written from unit-linked products decreased by 13 per cent and totalled eur 344 million.
In the corporate segment, Sampo Life’s growth continued in the selected focus areas. Corporate customers showed increasing interest in life and pension insurance products that retain employees and off er them greater incentives, as well as in solutions that are tailored for the management of personal risks. Indeed, premiums written increased on a broad front: in corporate unit-linked group pension insurance by almost 35 per cent, in individual unit-linked pension insurance by approximately 20 per cent, and in pure life and disability insurance by almost 20 per cent on the previous year.
were eur 217 million, and the company remains the undisputed market leader with an almost one-third slice of the market.
costs in control The separation of key administrative and support services from
solvency remained good Despite the late-year rally on the equity markets, the unitlinked technical provisions of the parent company, Sampo Life, increased by a good 15 per cent to eur 1,957 million. Unitlinked business accounted for as much as 30 per cent of total technical provisions. Sampo Life Group’s unit-linked technical provisions exceeded the eur 2 billion threshold and amounted to eur 2,070 million.
Strong Growth Continues in the Baltic Countries The Baltic subsidiaries were merged into a single company,
SE Sampo Life Insurance Baltic, on 2 January 2007. The new company operates in all Baltic countries and is domiciled in
Estonia. In Latvia and Lithuania, the company operates through branch offi ces.
Internet services will be a key focus area. During the fi rst quarter of year 2008, the reorganization of the main sales channel,
Sampo Bank, will most probably have a somewhat unfavourable eff ect on the sales of pension and life insurance products.
In the Baltic countries, the growth of the life insurance market is expected to continue strong. As one of the three biggest actors in the market, Sampo Life's subsidiary's operations are expected to grow at a minimum in the pace of the market growth.
Change in liabilities for inv. and ins. contracts –145 –345 –58
Average number of staff (FTE) 375 365 3 sampo life group’s unit-linked savings, eurm premium development in the baltic subsidiaries, eurm
Sampo Group’s parent company, Sampo plc, owns and administers subsidiaries engaged in P&C and life insurance businesses.
Following the divestment of the Sampo Bank Group, Sampo plc's investment assets were worth approximately eur 5 billion at the end of 2007. More than half of the investment assets were invested in equities and the rest in short term fi xed income instruments. Sampo plc's largest equity holding is Nordea. At the end of December 2007, Sampo plc owned 238,283,129 Nordea shares, with a market value of eur 2.7 billion.
Sampo plc 10 sampo group annual report 2007 | Sampo plc
Life Insurance Baltic, operates in all Baltic countries and is domiciled in Estonia. In
The divested Sampo Bank Group consisted of Sampo Bank plc of Finland, its subsidiary banks in the Baltic countries and Russia and a number of investment service companies, of which the main ones were Mandatum Asset Management Ltd, Sampo Fund
Sampo announced that the holding of Exista hf. of Iceland and its subsidiaries in Sampo plc had increased to 19.98 per cent.
A shares with distributable capital and reserves. The maximum number of shares to be repurchased is 28,000,000 A shares, corresponding to approximately 4.8 per cent of Sampo’s total stock. Share repurchases started on 14 September, and at the end of 2007, Sampo plc held 4,322,000
S Group is Finland’s leading player in the food trade and in the hotel and restaurant business. Under the agreement, If ’s customers will be eligible, as of June 2008, for the
S Group’s customer bonus for P&C insurance policies off ered to households by If.
The companies will provide more details in 17 December Sampo applied for a permission to exceed 10 per cent in Nordea
Shareholders’ Meetings. The operating procedures and main duties of the Board of Directors have been defi ned in the
Group’s risk management and internal control, and is responsible for the proper management of the Group’s operations. The
The Board elects the ceo, the executives of Sampo Group and the Head of Internal Audit, releases them from their duties, and decides on the terms and conditions of their employment and on other compensation. In addition, the Board confi rms the
election and terms of office of the board members According to Sampo’s Articles of Association, the company’s
Board of Directors comprises no fewer than three and no more than ten members elected by shareholders at the Annual General Meeting. The Annual General Meeting of 2007 decided to elect eight members to the Board until the close of the Annual General Meeting to be held in 2008. The term of offi ce of the Board members ends at the close of the Annual General
Board annually elect a Chairman and a Vice Chairman from among their members, at their fi rst meeting following the Annual General Meeting.
The Board of Directors of Sampo plc convened 14 times in 2007. The average attendance of Board members at meetings was 99.10 per cent.
Executive Committee and other Committees appointed by the Board The Board may appoint committees, executive committees and other permanent or fi xed-term bodies for duties assigned by the Board. The Board confi rms the Charter of Sampo’s committees and Executive Committee, and also the guidelines and authorisations given to other bodies appointed by the Board.
The Board has a Nomination and Compensation Committee and an Audit Committee, whose members it appoints from its midst in accordance with the charters of the respective committees.
Sampo Group’s Executive Committee supports the ceo in the preparation of strategic issues relating to Sampo Group, in the handling of operating matters that are signifi cant or involve 16 sampo group annual report 2007 | Corporate Governance
The Executive Committee addresses especially the following: Sampo Group’s strategy, budget, large purchases and projects, the Group’s structure and organisation, as well as key strategic issues pertaining to administration and personnel.
corporate governance and confi rming the criteria and processes used for the Board’s self-evaluation.
Ervasti-Vaintola, Knut Arne Alsaker and Gunilla Werner Carlsson attended the Audit Committee’s meetings in 2007.
Sampo’s investment assets. The Investment Committee comprises the Group Deputy ceo, the Group cio and two other members appointed by Sampo’s Board.
The period of notice for terminating the service contract of the ceo of Sampo Group is six months. In addition to receiving salary for the period of notice, the ceo will be entitled to severance compensation of 18 months’ full salary, provided that the service contract has been terminated by Sampo.
In accordance with a decision of the Annual General Meeting in 2007, the members of the Board will be paid the following annual fees for their Board and committee work until the close of the Annual General Meeting in 2008: The Chairman eur 120,000, the Vice Chairman eur 85,000, and the other members of the Board eur 70,000, with 30 per cent of each
Nomination and Compensation Committee can decide, upon authorisation by the Board of Directors, on the salaries of the members of the Group Executive Committee, excluding the
principles of compensation system In addition to receiving monthly salaries, executives who are members of the Group’s Executive Committee are participants in the Group’s profi t bonus system which is decided upon separately each year. The criteria used in determining the profi t bonus are the Group’s result, the business area’s result and the individual performance of the person in question. The maximum profi t bonus that can be paid for 2007 to executives who are members of the Executive Committee is an amount corresponding to nine months’ salary.
With the exception of the Group ceo, the members of the
Sampo plc’s executive management. The members of the Executive Committee, including the Group ceo, are also participants in the long-term share incentive system for the Sampo Group’s key management, entitled Sampo 2006. The terms of the incentive systems are available on Sampo’s web pages at www.sampo.com.
The Audit Committee of Sampo’s Board of Directors annually approves the Internal Audit’s operating plan. The Internal
Committee. Company-specifi c audit observations are reported to the respective companies’ executive bodies and management.
In its auditing work, the Internal Audit complies with the international professional standards approved by the iia (the
Authority. Sampo Group’s Guidelines for Insiders are stricter than the above-mentioned norms on matters that concern the
The total fees paid to the auditor for services rendered and invoiced were eur 1,948,000. In addition, Ernst & Young Oy were paid fees for nonaudit services rendered and invoiced totalling eur 213,900.
–Brunila holds 2,591 Sampo plc shares directly or through a controlled company.
Georg Ehrnrooth, born 1940 Positions of Trust: Oy Karl Fazer Ab, Board Member
Tom Berglund, born 1951 professor, swedish school of economics and business administration (helsinki)
–Berglund holds 2,257 Sampo plc shares directly or through a controlled company.
–Pesonen holds 5,257 Sampo plc shares directly or through a controlled company.
–Wahlroos holds 11,839,890 Sampo plc shares directly or through a controlled company.
–Stadigh holds 217,498 Sampo plc shares directly or through controlled companies.
–Ervasti-Vaintola holds 309,131 Sampo plc shares directly or through controlled companies.
Line Hestvik, born 1969 group executive vice president, head of ba private, if p&c
–Hestvik holds 3,364 Sampo plc shares directly or through controlled companies.
–Johansson holds 40,356 Sampo plc shares directly or through controlled companies.
–Lapveteläinen holds 211,045 Sampo plc shares directly or through controlled companies.
Torbjörn Magnusson, born 1963 president and head of p&c insurance, if p&c insurance holding ltd
Ivar Martinsen, born 1961 group executive vice president, head of ba commercial, if p&c
If Life Insurance Ltd (Sweden), Board Member (from January 1 2008)
–Martinsen holds 2,917 Sampo plc shares directly or through controlled companies.
Ricard Wennerklint, born 1969 cfo, if p&c Positions of Trust: If Livförsäkring AB (Sweden), Board Member
strategy framework launched within If P&C in 2006 that puts personnel matters such as competence development, innovation, cooperation and health into the centre has been further developed during 2007. Some initiatives of special importance are listed below: if academy During 2007 If launched a project to create the 'If Academy'.
The aim is to create a hub for competence development which is recognised among the insurance industry. If Academy will be responsible for Leadership Development, being the link between corporate strategy and competence development and for coordinating training activities within the diff erent business areas. The fi rst steps have been taken and the If Academy will become fully operational from summer 2008 forward.
Evaluation, Competence Mapping and Development and Management Planning, a comprehensive e-tool called Perform ance
Dialogues, and to create Development and Performance Plans that are also stored electronically. Already after 8 months use close to 6,000 profi les have been created in the system. Apart from facilitating the manager/employee dialogue, the tool enables us to track competence and performance development on an aggregate level.
The new functional hr organization handles hr issues for the whole Sampo Group.
Preventing and alleviating damage is a natural part of If ’s business activity which aims to both increase profi tability and reduce distress for our customers. If contributes to long and short-term damage-prevention activities for private individuals and companies.
Important Events during 2007 natural damage and climate change in focus Year 2007 was aff ected by several natural disasters. At the beginning of the year, the storm ”Per” caused severe damage throughout Scandinavia. Then heavy summer rains led to fl ooding in many areas. Predicted climate changes will probably lead to natural disasters like these having increasing signifi cance in the insurance industry in Scandinavia and the Baltic countries. If continues to focus on the problems of climate change, and the ways in which society can adapt to it in the best possible way.
The experience gained from our claims handling will enable us to contribute to planning the structure of future society in the light of climate change.
Commission on Climate and Vulnerability. In the Commission’s fi nal report a broad perspective is given to the consequences of climate change and the adaptive actions needed to mitigate its negative eff ects. If has actively participated in the Commission’s proposals regarding future insurance requirements and begun a product survey, which in some respects has already resulted in extended insurance coverage.
This was also the case in Denmark where, for If ’s part, the greatest damage events occurred in 2007. A large and relatively constant problem for society is also the high incidence of arson.
The Swedish government has started a Commission with the objective of extending private motor insurance similar to the
'local heroes' in Sweden. In Finland, If ’s athletics school is operated with the collaboration with the Finnish Athletics Association. In Norway, If supports the ‘Norwegian Narcotics
(Don’t worry!), a safety campaign aimed at children in senior grade at upper secondary school. In Sweden, collaboration with the Swedish Fire Protection Association has started around the project ‘Fire Safety at Home’.
Experience to Prevent and Alleviate Damage If gives advice to prevent damage through various channels.
The starting point is our own extensive experience of damages and claims. Our business area Industrial publishes a newsletter ’Lessons from Losses’ where for example the company’s risks connected to working environment, fi re, fl ooding, and business travel are illustrated for 2007.
Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Sampo Group Risk Management Disclosure 2007 . . . . . . . . . . . . . . . . . . .67
Notes to the Parent Company Accounts . . . . . . . . . . . . . . . . . . . . . . . .131
Sampo plc sold in November 2006 all Sampo Bank plc’s shares to Danske Bank A/S for a cash consideration of 4,050 million euros. The transaction was closed on 1 February 2007. The profi t of eur 2,830 million is reported under ‘Discontinued operations’.
Sampo Group’s total investment assets at the end of the reporting period amounted to eur 21 billion, of which 74 per cent was invested in fi xed income instruments and 23 per cent in equities. Investment income was eur 974 million (1,008).
Sampo Group’s balance sheet total amounted to eur 25,424 million (47,620). The comparison fi gure includes Sampo Bank Group’s balance sheet. Asset growth was fastest in cash or equivalents, which increased to eur 958 million from eur 41 million, and in unit-linked investments, which increased by almost 20 per cent to eur 2,072 million. On the liability side of the balance sheet, other debt decreased by almost 40 per cent to eur 655 million and unit-linked liabilities increased from eur 1,752 to eur 2,071 million.
Business Areas in 2007 p&c insurance If P&C Insurance Company is the leading property and casualty insurance company in the Nordic region, with insurance operations that also encompass the Baltic countries and Russia. The
If has continued its strategy to focus on underwriting and customer value. The strategy paid off also in 2007 and If achieved all its objectives.
Combined ratio for 2007 was signifi cantly better than the long term target of below 95 per cent and ended at 90.6 per cent (89.9). Combined ratios in business area Industrial and in the Danish operation were negatively aff ected by the signifi cantly higher than average large claims outcome. Also the
Net income from investments decreased to eur 211 million (390) and the investment return was 2.6 per cent (4.3). The decrease was attributable to a weak development of the equity markets. On December 31, 2007 total investment assets amounted to eur 9.9 billion (10.1) of which 89 per cent (89) was invested in fi xed income instruments, 10 per cent (10) in equity and 1 per cent (1) in other assets. Duration for interest bearing assets was 2.2 years (3.0).
On December 31, 2007 solvency capital amounted to eur 2,681 million (2,841). Solvency ratio (solvency capital in relation to net premiums written) was 71 per cent (74).
Several important distribution agreements were concluded during the year. Within car-branded insurance If extended its cooperation with Nissan and General Motors (saab and Opel) to a
In Finland an important agreement was concluded with S Group, which is Finland’s leading company in food trade and in hotel and restaurant business. If ’s customers will be eligible for the S Group’s customer bonus for P&C insurance policies off ered to households by If. The agreement will be in eff ect as of June 2008.
Change in liabilities for inv. and ins. contracts -145 -345 -58
Return on equity (RoE) in life insurance operations fell below its target being 9.1 per cent (30.0).
(2) of the total assets. Equity investments, which include direct equity holdings, equity funds and private equity, have not been at such a low level since years 2002–2003.
Return on investments in 2007 was 5.0 per cent (9.7). The decrease in the return was attributable to a weak development of the equity markets. At the end of December 2007 the duration of fi xed income assets was 1.9 years (2.6).
Sampo Life Group’s solvency remained strong and amounted to eur 846 million (1,032) on 31 December, 2007. Solvency ratio was 16.5 per cent (20.1). Total technical reserves were eur 6.7 billion (6.4), of which unit-linked reserves accounted for 2.1 billion (1.8). The share of unitlinked reserves of total technical reserves grew to 31 per cent (27).
Sampo Life’s with-profi t policyholders received a bonus of 0–2.25 per cent depending on the quaranteed rate of their policies. Total bonuses for 2007 amounted to eur 36.1 million (26.7).
Baltic life insurance markets continued their strong growth. Sampo Life’s premiums from the
The assets on Sampo plc’s balance sheet on 31 December 2007 comprise investment assets of eur 4.9 billion, of which fi xed income instruments covered eur 2.1 billion and equities eur 2.7 billion.
held 11,270,000 Nordea shares. Sampo Group’s average acquisition price of Nordea share was eur 11.13 per share. Closing price for Nordea on 28 December 2007 was eur 11.41. Sampo plc’s assets also include holdings in subsidiaries for eur 2.4 billion (3.2).
On 17 December 2007 Sampo plc applied for a permission from the Swedish supervisory authorities to increase its holding above 10 per cent in Nordea. The permission was received on 6 February 2008. Sampo Group’s holding in Nordea exceeded 10 per cent on the same day.
Balance sheet liabilities include a subordinated note with face value of eur 600 million which can be paid back in April 2009 at the earliest.
Change in liabilities for insurance and investment contracts 180 193 -84 -477 -12
Sampo Life combined its Baltic subsidiaries under a new company SE Sampo Life Insurance
Sampo Bank’s deputy managing directors Ilkka Hallavo and Maarit Näkyvä left Sampo Group’s Executive Board with immediate eff ect after the closing of Sampo Bank transaction on 1 February 2007.
Sampo Life’s Annual General Meeting elected Jarmo Salonen, Sampo Group’s Head of Investor Relations and Group Communications, as a new member to its Board of Directors on 16 March 2007. Sampo Group’s cfo Peter Johansson was elected as Vice Chairman of the Board of Sampo Life and Kari Stadigh continues as Chairman of the Board.
The Annual General Meeting for Sampo plc was held 12 April 2007. The meeting adopted the fi nancial accounts for 2006 and discharged the Board of Directors and the Group ceo and
The Annual General Meeting re-elected the earlier Board of Directors. Georg Ehrnrooth continues his duties as Chairman of the Board and Matti Vuoria serves as Vice Chairman. Other members of the Board are Tom Berglund, Anne Brunila, Jussi Pesonen, Jukka Pekkarinen,
Wahlroos, Group ceo and President, for his work on the Board of Directors.
The Annual General Meeting approved the proposed amendments to the Articles of Association necessitated by amendments to the Finnish Companies Act and by other technical reasons.
The Annual General Meeting decided to distribute a dividend of eur 1.20 per share for year 2006.
Group is also committed to applying high ethical standards, and, to ensure this, the company’s corporate governance is based on principles that are more stringent than offi cial requirements
Due to substantial organisational restructuring in Sampo Group after the divestment of Sampo Bank Group to Danske Bank A/S, more emphasis in the Corporate Responsibility matters has been placed on the Group’s remaining business areas and especially on If P&C. It is natural for If, as a P&C insurance company, to promote a society in which everyone can live securely.
Preventing and limiting the need for claims is a natural feature of If ’s operations as it attempts to increase corporate profi tability while reducing the human suff ering of its customers. Therefore, If actively participates in claims prevention measures for private individuals and companies on both short and long term basis.
Bank Group, which was divested from Sampo Group on 1 February 2007.
management incentive schemes The payout on Sampo Group’s long-term management incentive schemes is dependent on Sampo ’s fi nancial and share price performance. The incentive schemes 2004I – 2006II extend to 2010.
The ‘Sampo 2006’ share-based incentive scheme increased staff costs by eur 5 million in 2007 and on 31 December 2007 the provision for the scheme was eur 5 million.
The terms of the share-based incentive scheme and other incentive schemes are available on
new share category called Sampo Uudet (Sampo New) was listed on the main list of the Helsinki Stock Exchange on 2 January 2007. The reason for the introduction of a new share category was that the Sampo A shares subscribed for with the warrants of the option programme 2000 after 31 December 2006 entitled their holders to dividends only after the dividend distribution for 2006. The Sampo Uudet category was combined with Sampo A share on 21 May 2007 after the dividends had been paid.
At the end of the fi nancial year, Sampo plc held 4,322,000 of its own A shares. Other Group companies did not hold any shares in the parent company.
authorizations granted to the board The Annual General Meeting of 12 April 2007 authorised the Board of Directors to repurchase
Sampo A shares can be repurchased in one or more lots to a total of up to 10 per cent of all the company’s shares. Sampo shares may be repurchased in other proportion than the shareholders ’ proportional shareholdings.
The share price will be no higher than the highest price paid for Sampo shares in public trading at the time of purchase. In implementing the repurchase of Sampo shares, normal derivatives, stock lending or other contracts may also be entered into as permitted by the laws and regulations at the price determined by the markets.
Based on the authorisation, Sampo plc’s Board of Directors decided on 22 August 2007 to repurchase Sampo’s A shares with distributable capital and reserves. The maximum amount to be repurchased is 28,000,000 A shares, corresponding to approximately 4.8 per cent of the total number of shares. The shares were acquired through public trading on the omx Nordic Stock
A total of 5,200,000 options were issued with each option entitling its holder to subscribe for fi ve Sampo A shares. The share subscription period ended on 31 January 2007.
Sampo’s shares and to 5.04 per cent of the voting rights. On 5 April 2007 Morgan Stanley notifi ed Sampo that its holding had decreased to 0.67 per cent of the shares and to 0.66 per cent of the voting rights.
- Morgan Stanley & Co International Limited notifi ed Sampo that its holding in Sampo plc had on 24 July 2007 risen to 5.33 per cent of the total amount of Sampo’s shares and 5.29 per cent of the voting rights. According to the same disclosure the holding had, as a result of the share transaction concluded on 25 July 2007, decreased to 1.55 per cent of the total amount of
shareholders by number of shares owned on 31 december 2007 shareholders book-entry votes number of shares number % number % number %
On waiting list, total 0 0 0 0 shareholder groups on 31 december 2007 (a and b shares) number group of shares %
Bond with Warrants, 1998 One conversion Warrant 281,250 93.21 A shares in 2004 conversion
Bond with Warrants, 1998 Seven Warrant 9,561,200 94.82 and Options 2000 conversions and option A shares in 2004 conversion
Decrease in 15 April 2006 Cancellation -7,000,000 94.98 share capital of shares bought back (7,000,000 A shares)
Bond with Warrants, 2000 Three conversions Warrant 15,740,245 98.11 A shares in 2007 conversion
Decrease in 23 February 2007 Cancellation -4,827,500 98.11 share capital of shares bought back (4,827,500 A shares)
risk management The key objectives of the risk management process are to ensure capital adequacy in relation to the risks inherent in business activities, and to limit fl uctuations in fi nancial results.
The risks in Sampo Group are aggregated internally through an economic capital framework, which describes the amount of capital needed to bear diff erent types of risks. The economic capital tied up in the Group’s operations was eur 3,395 million (3,419), which is well covered by the Group’s capital base. The major risks associated with Sampo Group’s activities in 2007 were market risk arising from investment portfolios, including the portfolio in Sampo plc built up in 2007 by retained proceeds from the disposal of Sampo Bank, and insurance risks in the life and P&C divisions. Operational risks and business risks, such as changes in the economic environment or business cycle, are inherent in all business areas. Sampo Group is continuously working with improving internal control, core processes and systems, as well as monitoring and analysing impacts from changes in the Group’s external operating environment to reduce the impact of such risks. The perceived risks in the businesses and operating environment did not change signifi cantly during 2007.
To achieve a uniform accounting practice in all of Sampo Group’s reporting segments, equity and fi xed income investments acquired as fi nancial assets in P&C insurance as of 1 January 2008 are treated as assets available for sale (afs). Assets are valued, as before, at market value in the balance sheet but diff ering from earlier practice, the valuation changes are recognized directly into the fair value reserve, which is part of the equity capital. The tax eff ect will be taken into account in the fair value reserve. At the time of sale of an asset, the valuation changes accumulated in equity capital and the sales gain or loss are recognized in the profi t.
Trading ehf. has extended the agreement of 9 August 2007 regarding 100,000 A shares in Sampo plc until 11 August 2008. The agreement, if consummated through delivery of the shares, will result in Exista hf. and companies controlled by Exista hf. holding shares in Sampo plc in excess of the fl agging threshold of 20 per cent of the number of shares as set forth in Chapter 2, Section 9 of the Securities Markets Act. According to the disclosure Exista hf. and its group companies hold 19.98 per cent of the total number of shares and 19.82 per cent of the voting rights in the Sampo plc.
Financial Standing internal dividends Sampo plc received in 2007 a total of eur 719 million in dividends from its subsidiary companies.
If P&C Insurance Holding Ltd EUR 519 million (SEK 4,890 million)
The adjusted solvency is determined on the basis of the Group fi nancial statements as permitted by the Insurance Supervisory Authority. In the comparative period, the Group solvency is calculated according to the consolidation method defi ned in Chapter 3 of the Act on the Supervision of Financial and Insurance Conglomerates, entered into force on 1 January 2005.
The Group’s solvency ratio (own funds in relation to minimum requirements for own funds)
Bank Group and is to a large extent situated in Sampo plc, the holding company. After the investments made into Nordea shares, Sampo plc has more than eur 2 billion of cash on its balance sheet.
In earlier disclosures Sampo has promised to provide more detailed comments on the use of the excess capital and excess cash. The Sampo Board of Directors has earlier made a decision to invest the sales proceeds in shares of Northern European fi nancials or to keep them in cash.
The Board identifi es two interesting fi nancials stocks presently – Sampo and Nordea. Sampo continues to invest its excess cash into Nordea and to repurchase its own A shares subject to valuations remaining favourable on both. If a situation arises, Sampo may also use leverage to increase its holdings and to enhance returns.
Parent company’s distributable capital and reserves totalled eur 5,107,162,398.78 of which profi t for the fi nancial year was eur 4,033,082,043.27.
The Board proposes to the Annual General Meeting a dividend of eur 1.20 per share. The maximum dividends to be paid are eur 694,237,068. Dividends are not paid to the Sampo A
shares that Sampo plc hold on the record date. Rest of the funds are left in the equity capital.
No signifi cant changes have taken place in the company’s fi nancial position since the end of the fi nancial year. The company’s liquidity position is good and the proposed distribution does not, in the Board’s view, jeopardize the company’s ability to fulfi l its obligations.
Outlook for 2008 The negative turn that capital markets took in the latter half of 2007, has steepened in the fi rst weeks of 2008. The macro-economic outlook of early 2008 is much dimmer than it has been for several years. For more than a year Sampo’s insurance companies have been signifi cant net sellers of equities, thus documenting a very cautious approach to investments. We have positioned ourselves to face an economic downturn by selling off more than 1.5 billion euros of equity holdings, keeping fi xed-income durations short and avoiding exotic investment instruments.
At the end of 2007 Sampo Life’s and If ’s equity allocations were lower and fi xed-income duration shorter than in years. Unavoidably, our ability to produce outstanding investment returns suff ers in present turbulent market conditions but our relative position vis-à-vis our main competitors is likely to improve. Capital markets do not impose a threat to the operational profi tability of Sampo Group’s insurance entities.
Operationally the focus of Sampo Life Group continues to be on unit-linked insurance and risk policies in Finland and the Baltics.
Sampo Group’s equity capital on 31 December 2007 exceeded the economic capital required to manage the operations by approximately eur 4.5 billion and Sampo can therefore sustain all foreseeable equity market downturns. A sudden rise in interest rates would in the short term cause some losses by lowering the value of bond portfolios, but in the longer run it would enhance fi xed income yields.
Return on equity (at fair values) % 52.6 22.6 28.4 26.5 14.0
Loss ratio excl. unwinding of discount 4) % 73.4 72.5 72.7 71.1
Average number of staff 6,415 6,428 6,592 6,776 *) Comparison fi gures of P&C insurance for the year 2004 are for 9 months from April to December. **) Based on the fi nancial statements of If Group.
life insurance Premiums written before reinsurers’ share EURm 622 662 655 528 528
Return on equity (at fair values) % 9.1 30.0 39.0 32.2 -
Key Figures ifrs ifrs ifrs ifrs fas per share key figures
Earnings per share, continuing operations EUR 1.25 1.27 - - -
Options diluted earnings per share EUR - 1.69 1.65 1.44 0.64
Earnings per share, incl. change in fair value reserve EUR 5.89 1.89 1.97 1.58 -
Adjusted number of shares at 31 Dec. 7) 1,000 574,209 562,791 564,701 563,762 553,920
Average adjusted number of shares 7) 1,000 576,602 561,892 563,664 556,877 552,659
Weighted average number of shares, incl. dilutive potential shares 7) 1,000 576,602 575,141 574,068 562,562 555,200
1) Sampo plc’s sales gain (EURm 2,830) arising from the disposal of the share stock of Sampo Bank plc to Danske Bank
A/S is included in the Group key fi gures. The comparison average numbers of staff include the average staff number of the
Banking and investment services (discontinued operations). 2) RoEC was calculated for the fi rst time in 2004. Due to changes in the Group structure and accounting principles, the diff erent years are not fully comparable. 3) The Group solvency for 2007 is based on adjusted solvency calculations for insurance groups according to the Decree of the
Ministry of Social Aff airs and Health (1106/2000), Chapter 7.1 §. The adjusted solvency is determined on the basis of the
Insurance Conglomerates entered into force on 1 January 2005. Before that Group’s Capital adequacy ratio was calculated according to the Act on Credit Insitutions, Chapter 9.72‒81 §. 4) Key fi gures for P&C Insurance are based on activity based costs and cannot, therefore, be calculated directly from the consolidated income statement. 5) The income of the Holding business includes the income from If Group, accounted for by the equity method, for the fi rst quarter of 2004. The comparative average numbers of staff include the staff of Primasoft Oy, then consolidated as a subsidiary.
In calculating the key fi gures the tax corresponding to the result for the accounting period has been taken into account. The valuation diff erences on investment property and held-to-maturity debt securities have been taken into account in return on assets, return on equity, equity/
assets ratio and net asset value per share. Additionally, the change in fair value reserve has been taken into account in return on assets and return on equity. A deferred tax liabilitiy has been deducted from valuation diff erences.
In calculating the net asset value per share and the return on equity as per 2003, an interpretation of the principle of fairness in life insurance has been taken into account, according to which the owners’ share of the valuation diff erences is a standard 25%. As a result of a change in accounting practice in 2004, the target level for total policyholder bonuses was kept as before, but the division of valuation diff erences in accounting was abandoned. Accordingly, the valuation diff erences on investments for years 2004−2007 have been treated entirely as capital and reserves in calculating the above-mentioned key fi gures.
If is consolidated as a subsidiary in Sampo Group’s accounts as of April 1, 2004. Between
January 1, 2004 and March 31, 2004 as well as in 2003 If has been treated as an associate.
Holding + net income from investments + other operating income – staff costs – other operating expenses – fi nance costs ± share of associates’ profi t/loss return on equity (at fair values), % + profi t before taxes ± change in fair value reserve ± change in valuation diff erences on investments – tax (incl. change in deferred tax relating to valuation diff erences on investments)
+ total equity ± valuation diff erences on investments less deferred tax (average of values on 1 Jan. and 31 Dec.)
return on assets (at fair values), % + operating profi t + interest and other fi nancial expenses + calculated interest on technical provisions ± change in fair value reserve ± change in valuation diff erences on investments
+ balance sheet total ± valuation diff erences on investments group solvency + total equity + sectoral items – intangible assets and sectoral deductibles – profi t distribution from previous period and proposed profi t distribution for current period own funds, total – minimum requirements for own funds, total group solvency group solvency ratio, % own funds minimum requirements for own funds average number of staff Average of month-end fi gures, adjusted for part-time staff .
return on equity (at fair values), % Formula shown above in connection with the Group key fi gures.
+ liabilities for insurance and investment contracts – reinsurers’ share of insurance liabilities solvency ratio (ifrs), % solvency capital premiums earned from 12 months x 100%
+ liabilities for insurance and investment contracts – reinsurers’ share of insurance liabilities – 75% technical provisions relating to unit-linked insurance
Per Share Key Figures earnings per share profi t for the fi nancial period attributable to the parent company’s equity holders adjusted average number of shares earnings per share, incl. change in fair value reserve profi t for the fi nancial period attributable to the parent company’s equity holders ± change in fair value reserve adjusted average number of shares equity per share equity attributable to the parent company’s equity holders adjusted number of shares at balance sheet date net asset value per share + equity attributable to the parent company’s equity holders ± valuation diff erences on investments ± deferred tax related to valuation diff erences on investments adjusted number of shares at balance sheet date x 100%
dividend per share, % dividend for the accounting period adjusted number of shares at balance sheet date dividend per earnings, % dividend per share earnings per share effective dividend yield, % dividend per share adjusted closing share price at 31 Dec.
Change in liabilities for insurance and investment contracts 5 -188 -353
Statement of Changes in Equity attributable to the equity holders of the parent company minority interest share fair share premium legal value retained assets held EURm capital account reserve reserve earnings for sale total total
Transfer to non-current assets classifi ed as held for sale -2 2 0 0
Income tax related to items recognised in equity or transferred to p/l -33 2 -32 -32
Net income recognised in equity - - - 92 72 -2 162 162
Profi t for the fi nancial year 3,572 3,572 0 3,573
Total income and expenses recognised for the period - - - -169 3,495 - 3,326 -21 3,305
Additional information to the statement of cash fl ows: Interest income received 682 1,331
Dividend income received 195 133 *) Investments include investment property, fi nancial assets and investments related to unit-linked insurance contracts.
The items of the statement of cash fl ows cannot be directly concluded from the balance sheets due to e.g. exchange rate diff erences, and acquisitions and disposals of subsidiaries during the period.
Ltd, 3C Asset Management Ltd and Arvo Value Asset Management Ltd. The trade became effective on 1 Feb. 2007.
Consolidated Income Statement by Business Segment . . . . . . . . . . . .64
Sampo Group Risk Management Disclosure 2007 . . . . . . . . . . . . . . . . 67
Notes to the Balance Sheet 18 Investments Related to Unit-Linked Insurance Contracts . . . . . . . . .108 19 Deferred Tax Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .108 23 Assets Classifi ed as Held for Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 24 Liabilities from Insurance and Investment Contracts . . . . . . . . . . . . . 112 25 Liabilities from Unit-Linked Insurance and Investment Contracts . . . 114 30 Liabilities Directly Associated with
52 sampo group annual report 2007 | IFRS Financial Statements: Summary of Significant Accounting Policies
Sampo has under transitional provisions adopted ifric 11 regarding ifrs 2 – Group and treasury share transactions, published by iasb in 2006. The interpretation addresses the how to apply ifrs 2 in arrangements that involve the entity’s own equity instruments or equity instruments of the parent company.
Sampo’s fi nancial statements information, per share key fi gures or accounting policies.
Furthermore, under transitional provisions, Sampo adopted already for the fi nancial year beginning on 1 January 2005, two standards whose application has been mandatory only from the fi nancial year beginning on 1 January 2007. Thus, fi nancial assets and liabilities are disclosed in accordance with ifrs 7 ’Financial Instruments: Disclosures’. Similarly, capital disclosures are disclosed in the notes together with risk management disclosures, in accordance with the amendment to ias 1 ’Presentation of Financial Statements – Capital Disclosures’.
The fi nancial statements have been prepared under the historical cost convention, modifi ed by changes in fair value, amortisation, depreciation or impairment losses, depending on the accounting treatment of the respective items.
The Board of Directors of Sampo plc accepted the fi nancial statements for issue on 12 February 2008.
Consolidation subsidiaries The consolidated fi nancial statements combine the fi nancial 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 fi nancial and operating policies of the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group, and cease to be consolidated from the date that control ceases.
associates Associates are entities in which the Group has signifi cant infl uence, but no control over the fi nancial management and operating policy decisions. Unless otherwise demonstrated, this is generally presumed when the Group holds in excess of 20 per cent, but no more than 50 per cent, of the voting rights of an entity. Investments in associates are treated by the equity method of accounting, in which the investment is initially recorded at cost and increased (or decreased)
foreign currency translation The consolidated fi nancial statements are presented in euro, which is the functional and reporting currency of the Group and the parent company. Items included in the fi nancial 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. Monetary balance sheet items denominated in foreign currencies are translated into the functional currency at the rate prevailing at the balance sheet date. Non-monetary balance sheet items measured at historical cost are
Translation diff erences arising from translation of transactions and monetary balance sheet items denominated in foreign currencies into functional currency are recognised as translation gains and losses in profi t or loss. Translation diff erences arising from equities classifi ed as available -for-sale fi nancial assets are included directly in the fair value reserve in equity.
The income statements of Group entities whose functional currency is other than euro are translated into euro at the average rate for the period, and the balance sheets at the rates prevailing at the balance sheet date. The resulting translation diff erences are included in equity. When a subsidiary is divested entirely or partially, the cumulative translation diff erences are included in the income statement under sales gains or losses.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as if they were assets and liabilities of the foreign entity. Exchange diff erences resulting from the translation of these items at the exchange rate of the balance sheet date are included in equity.
Inter-segment pricing is based on market prices. Inter-segment transactions, assets and liabilities are eliminated in the consolidated fi nancial statements on a line-by-line basis.
P&C insurance contracts are primarily of short duration (1 year), so that premiums written are recognised as earned on a pro rata basis, adjusting them by a change in the provision for unearned premiums i.e. by the proportion of the insurance premium income that, based on the period covered by the insurance contract, belongs to the following fi nancial year.
In Life insurance, liabilities arising from insurance and investment contracts count as longterm liabilities. Therefore the insurance premium and related claims are usually not recognised in the same accounting period. Depending on the type of insurance, premiums are recognised in premiums written either when the premium is charged, or when the premium has been paid.
The change in the provisions for unearned premiums is presented as an expense under
Purchases and sales of fi nancial assets at fair value through profi t or loss, held-to-maturity investments and available-for-sale fi nancial assets are recognised and derecognised on the trade date, which is the date on which the Group commits to purchase or sell the asset. Loans and receivables are recognised when cash is advanced.
Financial assets and liabilities are off set 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, fi nancial assets and liabilities at fair value through profi t of loss comprise derivatives held for trading, and fi nancial assets designated as at fair value through profi t or loss.
Financial assets designated as at fair value through profi t or loss are assets which, at inception, are irrevocably designated as such. They are initially recognised at cost which is the fair value of the consideration given, and subsequently remeasured at fair value. Gains and losses arising from changes in fair value, or realised on disposal, together with the related interest income and dividends, are recognised in the income statement.
According to the Group 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 personnel at fair value. In the P&C Insurance business, fi nancial investments are primarily designated as fi nancial assets at fair value through profi t or loss. Investments comprise debt and equity securities. In the Life Insurance business, fi nancial assets designated as at fair value through profi t or loss are investments related to unit-linked insurance, which are presented separately in the balance sheet. The corresponding liabilities are also presented separately.
In addition, in the Life Insurance business, investments classifi ed as the fi nancial assets of foreign subsidiaries, and fi nancial instruments in which embedded derivatives have not been separated from the host contract have been designated as at fair value through profi t or loss.
Loans and receivables are initially recognised at cost which is the fair value of the consideration given, including transaction costs that are directly attributable to the acquisition of the asset. Loans and receivables are subsequently measured at amortised cost using the eff ective interest rate method.
available-for-sale financial assets Available-for-sale fi nancial assets are non-derivative fi nancial investments that are designated as available for sale and or are not categorised into any other category. Available-for-sale fi nancial assets comprise debt and equity securities.
In the Holding business, available-for-sale fi nancial assets comprise assets that, although they are not acquired for trading purposes, might not be held to maturity.
Other fi nancial liabilities are recognised when the consideration is received and measured to amortised cost, using the eff ective interest rate method.
If a market for a fi nancial instrument is not active, or the instrument is not quoted, the fair value is established by using generally accepted valuation techniques including recent arm’s length market transactions between knowledgeable, willing parties, reference to the current fair value of another instrument that is substantially the same, discounted cash fl ow analysis and option pricing models.
If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profi t or loss, the impairment loss shall be reversed by recognising the amount in profi t or loss. Impairment losses recognised in profi t or loss for an equity instrument shall not be reversed through profi t or loss.
Derivative Financial Instruments and Hedge Accounting Derivative fi nancial instruments are classifi ed as those held for trading and those held for hedging, including interest rate derivatives, foreign exchange derivatives, equity derivatives and commodity derivatives. Derivative instruments are measured initially at fair value. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.
56 sampo group annual report 2007 | IFRS Financial Statements: Summary of Significant Accounting Policies
Hedge accounting applies to hedges that are eff ective in relation to the hedged risk and meet the hedge accounting requirements of ias 39. The hedging relationship between the hedging instrument and the hedged item, as well as the risk management objective and strategy for undertaking the hedge, are documented at the inception of the hedge. In addition, the eff ectiveness of a hedge is assessed both at inception and on an ongoing basis, to ensure that it is highly eff ective throughout the period for which it was designated. Hedges are regarded as highly effective in off setting changes in fair value or the cash fl ows attributable to a hedged risk within a range of 80–125 per cent.
In the Insurance segments, hedges are made against interest rate risk and currency risk, but hedge accounting is not applied.
The results of discontinued operations are presented separately on the face of the consolidated income statement. Assets or disposal groups that are classifi ed as held for sale, amounts related to assets held for sale and recognised directly in equity, and the liabilities included in disposal groups held for sale are presented separately on the face of the balance sheet.
Leases of assets in which substantially all the risks and rewards of ownership are transferred to the Group are classifi ed as fi nance leases. Finance leases are recognised at the lease’s inception at the lower of the fair value of the leased asset and the present value of the minimum lease payments. The corresponding obligation is included in ‘Other liabilities’ in the balance sheet. The assets acquired under fi nance leases are amortised or depreciated over the shorter of the asset’s useful life and the lease term. 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.
Assets in which the lessor retains substantially all the risks and rewards of ownership are classifi ed as operating leases and they are included in the lessor’s balance sheet. Payments made on operating leases are recognised on a straight-line basis over the lease term as rental expenses in profi t or loss.
IFRS Financial Statements: Summary of Significant Accounting Policies | sampo group annual report 2007 57
Intangible Assets goodwill Goodwill represents the excess of the cost of an acquisition (made after 1 January 2004) over the fair value of the Group’s share of the net identifi able 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.
other intangible assets IT software and other intangible assets, whether procured externally or internally generated, are recognised in the balance sheet as intangible assets with fi nite useful lives, if it is probable that the expected future economic benefi ts that are attributable to the assets will fl ow to the
Customer relationships based on insurance contracts and identifi able in conjunction with the merger of the P&C insurance business are also recognised as other intangible assets. Customer relationships were measured at fair value at the acquisition. Measurement of the present value of all future cash fl ows from an asset takes into consideration insurance premium revisions, cross-sales and general economic forecasts. The average validity period of insurance contracts, 6 years, is deemed as the asset’s useful life, during which time it is amortised on a straight-line basis. When necessary, customer relationships are tested for impairment.
Estimates of useful life are reviewed at fi nancial year-ends and the useful life is adjusted if the estimates change signifi cantly. The estimated useful lives by asset class are as follows: Residential, business premises and offi ces 20–60 years
Depreciation of property, plant or equipment will be discontinued, if the asset in question is classifi ed as held for sale in accordance with ifrs 5 ‘Non-current Assets Held for Sale and Discontinued Operations’.
The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. The value in use is calculated by estimating future net cash fl ows expected to be derived from an asset or a cash-generating unit, and by discounting them to their present value using a pre-tax discount rate. If the carrying amount of an asset is higher than its recoverable amount,
58 sampo group annual report 2007 | IFRS Financial Statements: Summary of Significant Accounting Policies an impairment loss is recognised in profi t or loss. In conjunction with this, the impaired asset’s useful life will be re-determined.
If there is any indication that an impairment loss recognised for an asset in prior periods may no longer exist or may have decreased, the recoverable amount of the asset will be estimated.
The valuation takes into account the characteristics of the property with respect to location, condition, lease situation and comparable market information regarding rents, yield requirements and unit prices. During the fi nancial year, the valuations were conducted by the
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 outfl ow of resources embodying economic benefi ts 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 Group will receive it.
Insurance and Investment Contracts Insurance contracts are treated in accordance with ifrs 4. Under the standard, insurance contracts are classifi ed as insurance contracts if signifi cant insurance risk is transferred between the policyholder and the insurer. If the risk transferred on the basis of the contract is essentially fi nancial risk rather than signifi cant insurance risk, the contract is classifi ed as an investment contract. Classifi cation of a contract as an insurance contract or investment contract determines the measurement principle applied to it.
Sampo treats the liabilities arising from contracts in the fi rst phase of the standard according to national accounting standards, except for the equalisation reserve and the provision for collective guarantee item and their changes which are reported in equity and profi t or loss, in accordance with the ifrs.
Receivables and liabilities related to reinsurance are measured uniformly with the cedant’s receivables and liabilities. Reinsurance receivables are tested annually for impairment. Impairment losses are recognised through profi t or loss, if there is objective evidence indicating that the Group (as the cedant) will not receive all amounts of money it is entitled to on a contractual basis.
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 fi nal insurer. For both the above types of contract, only the net eff ect 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.
IFRS Financial Statements: Summary of Significant Accounting Policies | sampo group annual report 2007 59
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 ibnr provision) are calculated using statistical methods. The provision for claims outstanding is not discounted, with the exception of provisions for vested annuities, which are discounted to present value using standard actuarial methods, taking anticipated infl ation and mortality into account.
A liability adequacy test is performed separately for both the provision for claims outstanding and the provision for unearned premiums. The provision for claims outstanding is based on estimates of future cash fl ows. The estimates are made by using well-established actuarial methods.
The provision for a collective guarantee is regulated by Finland’s Traffi c and Accident Insurance Act and must be collected by insurers. Its purpose is to guarantee the payment of claims to customers in the event that any insurers are put into liquidation or bankruptcy. The collection of funds for this provision is to guarantee the payment of obligations that may arise in the future. In the Sampo Group the provision for a collective guarantee is recognised in equity, in accor dance with the Framework of the ifrs, until it becomes probable that the obligation will be settled. The provision for a collective guarantee is not a part of distributable equity.
Pensions and compensation for healthcare or medical rehabilitation paid on the basis of Finland’s statutory P&C insurance (accident, motor third party liability and patient insurance) are raised annually by the tel (Employee Pensions Act) index in order to maintain the real value of the pensions. The index raises are not the responsibility of the insurance companies, but are funded by the so-called pay-as-you-go principle, i.e. each year premiums written include index raises to the same amount that is paid out in that year. In practice, the P&C insurance companies collect a so-called expense loading along with their premiums written, which is then forwarded to the central organisation for the particular insurance line. The central organisation distributes the pay-as-you-go contributions collected so that the company undertaking the type of insurance in question receives an amount equal to the compensation falling under the pay-as-yougo system it has paid that year. The insurer’s participation in the payment is proportional to the insurer’s market share in the insurance line in question.
60 sampo group annual report 2007 | IFRS Financial Statements: Summary of Significant Accounting Policies life insurance business Classifi cation of insurance contracts
Policies issued by the Life Insurance business are classifi ed as either insurance contracts or investment contracts. Insurance contracts are contracts that carry signifi cant insurance risk or contracts in which the policyholder has the right to change the contract by increasing the risk.
The discretionary participation feature (dpf) of a contract is a contractual right held by a policyholder to receive additional benefi ts, as a supplement to the guaranteed minimum benefi ts. The supplements are bonuses based on the reserves of policies credited to the policy reserve or additional benefi ts in the case of death. In Sampo Life, the principle of fairness specifi es the application of this feature. In unit-linked contracts the policyholder carries the investment risk by choosing the investment funds linked to the contracts.
All contracts, except unit-linked contracts and the assumed reinsurance, include dpf. In those unit-linked contracts which are not insurance contracts, the policyholder has the possibility to transfer the return on savings from unit-linked schemes to guaranteed interest with dpf. Thus, these contracts are also measured as contracts with dpf.
The interest rate used in discounting liabilities is, at most, the maximum rate accepted by the authorities in each country. The interest rate used in discounting liabilities is the same or lower than that used in premium calculation. Most of the liabilities of the accrued benefi ts of pension business with dpf is discounted by an interest rate of 3.5 per cent, and most of the life business with dpf by 2.5 per cent. The highest discount rate used for accrued benefi ts is 3.5 per cent. The guaranteed interest rate used in the direct insurance premium basis varies on the basis of the starting date of the insurance from 0 to 4.5 per cent.
Due to the diff erence in the discount rate of liabilities and the guaranteed interest of policies, supplementary provisions for guaranteed interest have been added to technical provisions.
Mortality assumptions have an essential eff ect on the amount of liability, particularly in group pension insurance, the liability of which accounts for about 37 per cent of the technical provisions of the Finnish life company. A so-called cohort mortality model has been used in calculating the group pension insurance liability since 2002, incorporating the insured person’s birth year in addition to his or her age and sex. The cohort mortality model assumes that life expectancy increases by one year over a ten-year period.
For unit-linked contracts, all the liabilities and the assets covering the unit-linked insurance are matched. Both the liabilities and the assets have been presented in the Notes to the fi nancial statements. In calculating the provision for claims outstanding of direct insurance, discounting is applied only in connection with the liabilities of pensions whose payment has commenced.
For the unit-linked business, the present values of the insurance risk and expense results are calculated correspondingly. If the aggregate amount of the liability for the unit-linked and other business presumes an augmentation, the liability is increased by the amount shown by the test and recognised in profi t or loss.
IFRS Financial Statements: Summary of Significant Accounting Policies | sampo group annual report 2007 61
Fairness must be observed in life insurance and investment contracts with a discretionary participation feature. If the solvency requirements do not prevent it, a reasonable part of the surplus has to be returned to these policies as bonuses.
The legislation of Estonia, Latvia and Lithuania respectively does not contain provisions corresponding to the Principle of Fairness. The insurance business undertaken by the Swedish company is not entitled to distribute profi t.
In defi ned benefi t plans, the company still has obligations after paying the contributions for the fi nancial period and bears their actuarial and/or investment risk. The obligation is calculated separately for each plan using the projected unit credit method. In calculating the amount of the obligation, actuarial assumptions are used. The pension costs are recognised as an expense for the service period of employees.
Defi ned benefi t plans are both funded and unfunded. The amounts reported as pension costs during a fi nancial year consist of 1) the actuarially calculated earnings of old-age pensions during the year, calculated straight-line, based on pensionable income at the time of retirement, and 2) calculated eff ects in the form of interest expense for crediting/appreciating the preceding years’ established pension obligations less 3) revenues from the assets covered by the plan.
The calculation of pension costs during the fi nancial year starts at the beginning of the year and is based on assumptions about such factors as salary growth and price infl ation throughout the duration of the obligation and on the anticipated/expected return on the plan’s assets and the market interest rate on the obligation during the fi nancial year.
In adopting the ifrs on 1 January 2004, Sampo did not apply ifrs 2 ‘Share-based payment’ to the year 2000 option programme, in accordance with the exemption permitted by ifrs 1.
Share Capital The incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are included in equity as a deduction, net of tax, from the proceeds.
Dividends are recognised in equity in the period when they are approved by the Annual
In the cash fl ow statement, interest received and paid is presented in cash fl ows from operating activities. In addition, the dividends received are included in cash fl ows from operating activities. Dividends paid are presented in cash fl ows from fi nancing.
actuarial assumptions Evaluation of insurance liabilities always involves uncertainty, as technical provisions are based on estimates and assumptions concerning future claims costs. The estimates are based on statistics on historical claims available to the Group on the balance sheet date. The uncertainty related to the estimates is generally greater when estimating new insurance portfolios or portfolios where clarifi cation of a loss takes a long time because complete claims statistics are not yet available. In addition to the historical data, estimates of insurance liabilities take into consideration other matters such as claims development, the amount of unpaid claims, legislative changes, court rulings and the general economic situation.
The actuarial assumptions applied to life insurance liabilities are discussed in more detail under ’Insurance and investment contract liabilities and reinsurance assets’.
Fair values of investment property have been determined internally during the fi nancial year on the basis of comparative information derived from the market. They include management assumptions concerning market return requirements and the discount rate applied.
Goodwill, intangible assets not yet available for use, and intangible assets with an indefi nite 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. These require management estimates on matters such as future cash fl ows, the discount rate, and general economic growth and infl ation.
Application of New or Revised ifrss and Interpretations In 2008, the Group will apply the following new or revised standards and interpretations related to the Group’s business and published by the iasb in 2007, provided that they are adopted by the eu commission: ias 1 Presentation of Financial Statements ifric 14 The Limit on a Defi ned Benefi t Asset Minimum Funding Requirements and their
The revised ias 1 aims to improve the analysis and comparison of the information in the fi nancial statements. The changes in the standard were yet not approved by eu at the balance sheet date.
ifric 14 clarifi es how to assess the limit on the amount of the surplus that can be recognised as an asset, and how the the pension asset or liability may be aff ected when there is a statutory or contractual minimum funding requirement. The interpretation was yet not approved by eu at the balance sheet date.
The view of Sampo’s management is that the introduction of the above revised standard and ifric interpretation will have no material eff ect on the Sampo Group’s fi nancial statements information, per share key fi gures or accounting policies. The application of revised ias 1 will only have an eff ect on the way the fi nancial information is presented and on the disclosures.
64 sampo group annual report 2007 | IFRS Financial Statements: Segment Information
Banking and investment services are presented as discontinued operations. The classifi cation was made on 9 Nov. 2006 when Sampo plc signed a contract to sell the entire share stock of Sampo
Segment information has been produced in accordance with the accounting policies adopt-
Consolidated Income Statement by Business Segment for Year Ended 31 December 2007 p&c life eliminaEURm insurance insurance holding tion group
Profi t from continuing operations before taxes 730 295 -27 -13 984
IFRS Financial Statements: Segment Information | sampo group annual report 2007 65
Liabilities for unit-linked insurance and investment contracts - 2,071 - - 2,071
Consolidated Balance Sheet by Business Segment at 31 December 2006 p&c life eliminaEURm insurance insurance holding tion group
Investments related to unit-linked insurance contracts - 1,753 - - 1,753
Assets classifi ed as held for sale - - - - 26,585
Liabilities for unit-linked insurance and investment contracts - 1,752 - - 1,752
Liabilities directly associated with assets classifi ed as held for sale - - - - 24,520
66 sampo group annual report 2007 | IFRS Financial Statements: Segment Information
Banking and investment services (discontinued operations) 60 - - - 8 0 68
Banking and investment services (discontinued operations) 23,611 - - - 3,015 17 - 26,643
Investments of P&C insurance have been allocated to diff erent countries based on the claims they have on their share of investment assets managed centrally in Sweden.
IFRS Financial Statements: Risk Management | sampo group annual report 2007 67
Economic Capital in Life Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 70
Market Risks in Life Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Credit Risk Management and Control . . . . . . . . . . . . . . . . . . . . . . . 76
Credit Risks in Life Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Insurance Risks in Life Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
To meet these objectives, we strive to ensure careful capital allocation planning and a reasonable risk to return ratio, and to guarantee effi cient and continued business processes under all circumstances.
risk management governance The risk management process consists of risk control and risk management. Risk control consists of formulating risk management principles, setting limits and granting authorisations, management accounting and risk calculation, assessing the economic capital needed, and monitoring the functionality of the risk management process. Risk management is about identifying and pricing risks, risk-taking decisions, and portfolio management.
Due to the divestment of Sampo Bank, the Board of Directors decided in January 2007 to abolish the Group’s Risk Control Committee and integrate relevant duties as part of the responsibilities of the Audit Committee. In addition, the Board of Directors has established and appointed the members of an Investment Committee to control the holding company’s investment activities and investment risks.
2 Reporting Structure and Risks Sampo Group’s reporting structure is divided into three segments, which are P&C Insurance
Sampo divested its banking and investment services operations to Danske Bank A/S in a deal that was closed on 1 February, 2007.
Market risks related to Sampo plc’s investment portfolio are monitored and regularly reported within the company’s and Sampo Group’s risk governance framework.
The group solvency for 2007 is based on adjusted solvency calculations for insurance groups according to the Decree of the Finnish Ministry of Social Aff airs and Health (1106/2000). The adjusted solvency is determined on the basis of the group fi nancial statements as regulated by the Insurance Supervisory Authority. In the comparative period, i.e. prior to 2007, the group solvency was calculated according to the consolidation method defi ned in Chapter 3 of the Act on the Supervision of Financial and Insurance Conglomerates.
economic capital In Sampo Group, and in its insurance subsidiaries, risks are measured and aggregated internally using an economic approach, in which the amount of capital required to protect the economic solvency over a one year time horizon at a confi dence level equalling the historic bond defaults of AA-rated issuers is calculated. The economic capital tied up in the Group’s operations on December 31, 2007 was eur 3,395 million compared to pro forma eur 2,695 million on 31 December, 2006 excluding Sampo Bank Group. The large increase is mainly due to the increase in market risk at Sampo plc following the large investment in Nordea Bank.
In Sampo Group the economic capital is determined by market, credit, insurance and operational risks. Economic capital does not only refl ect the capital needed for the diff erent kinds of risks, but also their mutual diversifi cation eff ect. This gives a more accurate view of the overall capital need as it is very unlikely that all risks in the Group’s segments will materialise simultaneously. The magnitude of the diversifi cation eff ect at the group level is approximately 13 per cent.
Group solvency ratio (Own funds % of minimum requirements) 774.6 202.7
The model is used, besides for calculating economic capital, also for making decisions on: • Overall capital needs for If and its subsidiaries
capitalisation and capital management process The basis for the Sampo Group’s capitalisation is the economic capital requirement. Other factors aff ecting the capital are the expected business growth, changes in the business environment, and the fi nancial strength rating targets together with the regulatory minimum capital requirements.
IFRS Financial Statements: Risk Management | sampo group annual report 2007 71
Cash and balances at central banks 163 10 12 - 184 184
72 sampo group annual report 2007 | IFRS Financial Statements: Risk Management
The currency positions of the Group’s companies against their home currency and the translation risks are shown in table 5.
The Boards of Directors of If and Sampo Life annually approve the companies’ investment policies, which defi ne the target allocation of the investment portfolio, the limits by instrument, the organisation of investment activities and the authorities to make and execute decisions.
Table 3 market risk by asset class on 31 december 2007 sampo group, financial assets and liabilities, sensitivity to market changes risk alternative interest rate equity investments 1% parallel 1% parallel 10% fall 10% fall EURm shift down shift up in prices in prices Assets
Table 4 market risk by segment on 31 december 2007 market risk sensitivities for financial assets and liabilities by segment risk alternative interest rate equity investments 1% parallel 1% parallel 10% fall 10% fall EURm shift down shift up in prices in prices
IFRS Financial Statements: Risk Management | sampo group annual report 2007 73 investment activities. Sampo Life’s Investment Committee meets every second week and If ’s
If ’s equity portfolio is actively managed in-house with a long term investment horizon and at year end the exposure was eur 1,008 million. The equity portfolio consists of Scandinavian small cap stocks as well as a diversifi ed global fund portfolio. Mandates for investments are given in the investment policy and according to the governance structure. Currency exposure is hedged back to sek and risk & return are monitored on a daily basis.
Both fi nancial assets and technical provisions are exposed to changes in interest rates.
EURm foreign currency currency risk open position home ccy eur sek nok dkk eek lvl ltl gbp usd jpy other
A major part of the technical provisions is stated in the balance sheet in nominal terms.
The duration of reserves, and thus the sensitivity to changes in risk factors, depends on the product. The overall duration of all technical provisions is approximately 4.9 years. Durations for Motor claims in Finland and in Sweden and for Worker’s Compensation claims in
Finland are long, which is due to the fact that claims are settled in the form of annuities. Any duration gap between liabilities and fi xed income assets is subject to constant monitoring and management.
The investment return in 2007 was 5.0 per cent. The amount of investment assets was eur 5,683 million. Sampo Life was a net seller of equity and decreased the equity allocation during the year. Short term fi xed income investments were overweighted in 2007.
Sampo Life’s equity portfolio is actively managed. The positions and risks in equity portfolio and related derivatives may not exceed the limits set in the Investment policy.
Geographical distribution of equity investments is presented in fi gure 4. The Nordic equity portfolio is managed by Sampo Group’s Investment Management unit while the equity investments outside the Nordic area are mainly managed through funds or external asset managers.
When investing in new funds, the Investment Committee or the Board of Sampo Life makes the investment decisions.
Graph 3 duration of technical provision for claims outstanding per product
Figure 4 equity investments, sampo group, sampo life, if p&c, 31 december 2007
Total Sampo Group eur 15,127 million Sampo Life eur 4,112 million If P&C eur 8,893 million
The investment policy sets limits for fi xed income investments regarding e.g. concentration risk and counterparty ratings. The major part of fi xed income investments will in all circumstances consist of credit risk free government bonds and short-term fi xed income investments in euro area.
5 Credit Risks Credit risk is the risk of loss, or of adverse change in the fi nancial situation, resulting from fl uctuations in the credit standing of issuers of securities, counterparties and any debtors to which insurance and reinsurance undertakings are exposed, in the form of counterparty default risk or spread risk. Credit risk arises both from investment and insurance operations.
credit risk management and control The Investment policies state specifi c credit risk limits, through maximum exposures towards single issuers or per class of rating. The credit risk in investment operations can be divided into
Figure 6 sector allocation fixed income investments; sampo group, sampo life, if p&c, 31 december 2007
credit risks in p&c insurance The credit risk in If ’s investment portfolio is mainly associated with corporates in the Nordic region. Before an investment in a new instrument, the credit standing of the issuer is thoroughly assessed as well as valuation and liquidity of the instrument. The exposure is controlled by having limits both for individual counterparties as well as per rating class in total. The portfolio development and the counterparties credit standing is followed up continuously.
The excluded amount relates mainly to captives and statutory pool solutions.
In order to limit and control credit risk associated with reinsurance, If has a Reinsurance security policy which sets requirements for the reinsurers’ minimum credit ratings and the maximum exposure to individual reinsurers. The distribution of ceded treaty and facultative premiums in 2007 per rating category is presented in Table 7.
Table 6 reinsurance receivables and reinsurers’ portion of outstanding claims per rating category, if p&c rating total eurm % of total total eurm
78 sampo group annual report 2007 | IFRS Financial Statements: Risk Management 6 Liquidity Risks Liquidity risk is the risk that insurance undertakings are unable to realize investments and other assets in order to settle their fi nancial obligations when they fall due.
As only a relatively small part of Sampo Life’s liabilities can be surrendered, it is possible to forecast short-term cash-fl ows related to claims payments. Because of this, and the high portion of liquid assets, liquidity risk does not play a major role in Sampo’s life business.
Figure 7 distribution of technical provisions for claims outstanding on period of payment
If sets the standard for its underwriting by having implemented an Underwriting policy and detailed Underwriting guidelines, which secure an accurate assessment and quantifi cation of the risks If undertakes, set limits for maximum insured values and defi ne the risks that may be accepted.
Within each business area in If, separate underwriting and pricing units are responsible for the tariff s and pricing of insurance contracts. Among other procedures, statistical analyses of historical claims and individual analyses of major undertakings are conducted on a continuous basis in order to secure adequate pricing.
To analyse the exposure to natural catastrophes, the probability of major losses and the need for reinsurance, If cooperates with external advisors. Two diff erent approaches are used for these analyses: • Statistical models in which historical losses are used to estimate distributions for the frequency and size of losses, and
• Technical, or catastrophe, models in which catastrophes are simulated based on historical and meteorological data. Subsequently, insurance losses can be calculated, taking into account vulnerability, exposure and policy terms.
Provision risk is the risk of loss due to technical provisions not being suffi cient to cover cost of claims. The estimation of technical provisions for P&C insurance business does always include an element of uncertainty as the provisions represent an estimate of future claims payments.
80 sampo group annual report 2007 | IFRS Financial Statements: Risk Management
The estimates are based on the facts and data on historical claims and exposures that are known and available at the closing date. Other factors that are monitored are the loss development trends, the level of unpaid claims, changes in legislation, legal cases and economic conditions.
The uncertainty of technical provisions is normally larger for new portfolios for which complete run-off statistics are not yet available, and for portfolios that include claims with an extended time horizon. Workers’ Compensation (wc), Motor Third Part Liability (mtpl), Personal Accident, and Liability insurance are products with such characteristics.
For statutory insurance lines such as mtpl and wc, legislation diff ers signifi cantly between countries. Some of the Finnish, Swedish and Danish provisions consist of annuities which are sensitive to changes in mortality assumptions and discount rates. The Swedish technical provisions are sensitive to changes in infl ation. The proportion of the technical provisions for claims related to mtpl and wc is 68 per cent of the total net claims provisions.
If ’s Chief Actuary is responsible for developing and presenting guidelines on how the technical provisions are to be calculated and for assessing whether the overall level of provisions are suffi cient in relation to the set policy. The Board of Directors of If approves guidelines governing the calculation of technical provisions, as stated in the Guiding Technical Principles. The Chief
Life Insurance pool. The mortality risk of this business is smaller than the other mortality business because it is re-priced annually.
Table 11 shows the result of underwriting risks in Sampo Life’s Finnish life insurance policies. The ratio of the actual claims costs assumed was 112 per cent in 2007 (88 per cent in 2006).
Excluding the group pension longevity supplement provision the ratio was 84 per cent.
The table also shows the change in each category during 2007. Table 13 also shows the maturity of each category.
In some older individual policies the mortality rate and structure of products diff er from the
It is also worth noting that surrender risk does not play an important role in valuation of pension liabilities. The surrender risk included in provisions is of signifi cance in with-profi t insurance. In pension insurance, surrender is possible only in exceptional cases. Surrender risk is therefore only really present in life insurance and capital redemption policy operations. This risk is reduced by the relatively short maturity of such contracts and having always at least equal value of liabilities in balance sheet as the surrender value is.
Table 11 claim ratios of sampo life after reinsurance, the figures of employees’ group life excluded.
82 sampo group annual report 2007 | IFRS Financial Statements: Risk Management
Reserve for decreased discount rate 142 0 0 0 0 0 1 143 2
84 sampo group annual report 2007 | IFRS Financial Statements: Risk Management
Sampo Life monitors monthly that principles are followed and limits are not exceeded.
The adequacy of liabilities is tested quarterly and changes in provisions are made according to this liability adequacy test. Decisions on changing the tariff s and the reserving principles are made by the Board of Directors.
The Reinsurance principles are reviewed and approved annually by the Board of
Concentration risks across the Sampo Group are mainly related to the individual segments’
Investment Offi cer, the Group’s Chief Risk Offi cer and the Group’s Audit Committee.
The largest single investment exposure to the Sampo Group on 31 December 2007 was related to its equity holding in Nordea. As of year-end, the Sampo Group owned 9.61 per cent of total Nordea shares having a market value of eur 2,847 million.
One concentration risk for If is the exposure to natural disasters, such as winter storms and fl oodings. The most exposed geographical areas to such disasters are Denmark, Norway and
Sweden. The risk is measured by analysing historical events and current exposures, and is managed by purchasing reinsurance. Since 2003, a Nordic-wide reinsurance program has been in place in If. In 2007 the retentions levels were between sek 100 million (app. eur 10 million)
Other concentration risk sampo group on 31 december 2007 top 10 concentrations EURm market value
IFRS Financial Statements: Risk Management | sampo group annual report 2007 85 9 Operational Risk Operational risk is the risk of loss arising from inadequate or failed internal processes, from personnel and systems, or from external events.
operational risk management and control If identifi es operational risks through several diff erent sources: Operational risk assessment (ora)
Continuity plans have been prepared. On the basis of these plans, key functions can be continued in situations of possible disruption. The plans are regularly tested and updated at least annually. Continuity issues are reported to Sampo plc’s Board of Directors.
10 Preparation for Legal Changes The European Commissions Solvency II draft framework directive was published in 2007. The introduction of a new economic risk based solvency regime aims to deepen the integration of the insurance and reinsurance market, enhance the protection of policyholders and benefi ciaries, to improve international competitiveness of eu insurers and reinsures and to promote a better regulation. The regulatory capital requirements will more closely refl ect the specifi c risk profi le of each company. This will encourage companies to focus on sound risk management and internal control procedures and thus embed risk awareness throughout the organization.
Sampo Life’s Solvency ii preparations and improved risk management framework, the company has among other things worked on the development of its internal capital model, participated in qis 3, and improved control related to operational risk.
86 sampo group annual report 2007 | IFRS Financial Statements: Other Notes
assets classified as held for sale, associated liabilities and related amounts recognised in equity EURm 2006
IFRS Financial Statements: Other Notes | sampo group annual report 2007 87 2 Insurance Premiums Written p&c insurance
Included in gains/losses from fi nancial assets available-for-sale is a net gain of eurm -1 (3) transferred from the fair value reserve.
Change in provision for claims outstanding (incurred and reported losses) -702 44 -658 -675 50 -626
Change in provision for claims outstanding (incurred but not reported losses, IBNR) -707 24 -683 -703 32 -671
Change in claims provision for annuities -10 - -10 -9 - -9
Total claims cost attributable to current-year operations -2,716 99 -2,617 -2,652 107 -2,545
Change in provision for claims outstanding (incurred and reported losses) 693 -67 626 666 -74 592
Total claims cost attributable to prior-year operations 56 19 76 46 19 65
Change in provision for claims outstanding (incurred but not reported losses, IBNR) -251 8 -244 -258 2 -257
Change in claims provision for annuities -1 0 -1 -7 0 -7
The provision for annuities is valued in accordance with normal actuarial principles taking anticipated infl ation and mortality into consideration, and discounted to take the anticipated future investment return into account. To cover the costs for the upward adjustment of annuity provisions required for the gradual reversal of such discounting, an anticipated return is added to the annuity results. Provisions for incurred but not reported losses pertaining to annuities in Finland are discounted. The provisions in 2007 amounted to approximately eurm 284 (236). The non-discounted value was eurm 463 (386). The growth is mainly caused by the increase in the provision for work insurance.
Contracts with discretionary participation feature (DPF) -140 -121 0 -3 -140 -125
IFRS Financial Statements: Other Notes | sampo group annual report 2007 93 5 Change in Liabilities for Insurance and Investment Contracts p&c insurance
Change in liabilities for insurance and investment contracts in total, net -145 -345
Pension costs - defi ned contribution plans -39 -38 - defi ned benefi t plans (Note 28) -27 -33
IFRS Financial Statements: Other Notes | sampo group annual report 2007 95 9 Performance Analysis per Class of P&C Insurance motor, motor, marine, fire and accident third party other air and other damage third party credit EURm and health liability classes transport to property liability insurance
Profi t or loss attributable to the equity holders of the parent company/continuing operations 720 714
Profi t or loss attributable to the equity holders of the parent company/discontinued operations 2,852 263
Profi t or loss attributable to the equity holders of the parent company/continuing operations - 714
Profi t or loss for the purpose of calculating diluted earning per share - 977
Weighted average number of shares outstanding during the period - 563
Weighted average number of shares outstanding during the period for the purpose of calculating diluted earning per share - 576
Financial assets designated as at fair value through p/l 11,560 297 236 - 27
Notes to the Balance Sheet 12 Property, Plant and Equipment 2007 2006p&c insurance EURm equipment equipment
Net carrying amount 29 28 life insurance land and land and EURm buildings equipment total buildings equipment total
100 sampo group annual report 2007 | IFRS Financial Statements: Other Notes life insurance
Expenses arising from investment property - direct operating expenses arising from investment property generating rental income during the period -8 -6 - direct operating expenses arising from investment property not generating rental income during the period 0 0
Fair value of investment property at 31 December 122 125 holding
Non-cancellable minimum rental - not later than one year 1 1 - later than one year and not later than fi ve years 2 1 - later than fi ve years 0 1
Expenses arising from investment property - direct operating expenses arising from investment property generating rental income during the period 1 1 - direct operating expenses arising from investment property not generating rental income during the period 1 0
IFRS Financial Statements: Other Notes | sampo group annual report 2007 101 14 Intangible Assets otherp&c insurance customer intangible EURm goodwill relations assets total
The intangible asset allocated to customer relations arose from the acquisition of If in 2004, when a part of the acquisition cost was allocated to the insurance contracts of If Group. The item is amortised on a straight-line basis over 6 years.
102 sampo group annual report 2007 | IFRS Financial Statements: Other Notes other otherlife insurance intangible intangible EURm goodwill assets total goodwill assets total
For the purpose of testing goodwill for impairment, Sampo determines the recoverable amount of its cash-generating units, to which goodwill has been allocated, on the basis of value in use. Sampo has defi ned these cash-generating units as If Group and Sampo Life.
IFRS Financial Statements: Other Notes | sampo group annual report 2007 103 15 Investments in Associates
At end of year 9 5 associates that have been accounted for by the equity method at 31 dec. 2007 name carrying fair % inter- assets/ profit EURm amount value *) est held liabilities revenue /loss associates not accounted for by the equity method at 31 dec. 2007 **)
Consulting AB Lennemark & Andersson 8 / 5 11 1 associates that have been accounted for by the equity method at 31 dec. 2006 name carrying fair % inter- assets/ profit EURm amount value *) est held liabilities revenue /loss
MB Equity Fund II Ky 2 22.56 14 / 0 32 32 associates not accounted for by the equity method at 31 dec. 2006 **)
Consulting AB Lennemark & Andersson 8 / 6 10 1 *) If there is a published price quatation **) Consulting AB Lennermark & Andersson, Tapio Technologies Oy and Euro-Alarm A/S have been excluded from accounting for by the equity method because of their immaterial eff ect on consolidated fi gures.
104 sampo group annual report 2007 | IFRS Financial Statements: Other Notes 16 Financial Assets Group investments comprise investments in derivatives, fi nancial assets designated as at fair value through p/l, held-to-maturity investments, loans and receivables and fi nancial assets available-for -sale. The Holding segment includes also investments in subsidiaries. In P&C insurance business, fi nancial investments have been designated on initial recognition as fi nancial assets at fair value through profi t or loss. In Life insurance and Holding business, fi nancial investments have been designated primarily as fi nancial assets available-for-sale.
Financial assets designated as at fair value through p/l 47 75
IFRS Financial Statements: Other Notes | sampo group annual report 2007 105
P&C Insurance, total fi nancial assets 9,467 9,821 life insurance Derivative fi nancial instruments 2007 2006 contract/ fair value contract/ fair value notional notional EURm amount assets liabilities amount assets liabilities
Currency options, bought and sold 52 0 0 82 1 0
Total derivatives held for trading 1,075 10 1 1,506 16 12
106 sampo group annual report 2007 | IFRS Financial Statements: Other Notes
Financial assets available-for-sale for life insurance include impairment losses eurm 47 (46).
Financial assets available for sale / debt securities: Debt securities available-for-sale include eurm 1,287 investments in bonds and eurm 2,392 investments in money market instruments. Financial assets available-for-sale /shares and participations: Listed equity securities include eurm 701 quoted shares. Unlisted equity securities include eurm 276 investments in capital trusts.
holding Derivative fi nancial instruments 2007 2006 contract/ fair value contract/ fair value notional notional EURm amount assets liabilities amount assets liabilities
IFRS Financial Statements: Other Notes | sampo group annual report 2007 107
Group, total 19,575 15,921 17 Fair Values fair carrying fair carrying EURm value amount value amount
The fair value of loans and other fi nancial instruments which have no quoted price in active markets is based on discounted cash fl ows, using quoted market rates. The market’s yield curve is adjusted by other components of the instrument, e.g. by credit risk.
108 sampo group annual report 2007 | IFRS Financial Statements: Other Notes 18 Investments Related to Unit-Linked Insurance Contracts life insurance
Total fi nancial assets designated at fair value through p/l 2,072 1,753
In P&C Insurance, no deferred tax asset has been recognised on unused tax losses and temporary diff erences of Run-off companies, totalling approximately eurm 3.
IFRS Financial Statements: Other Notes | sampo group annual report 2007 111 22 Cash and Cash Equivalents p&c insurance
23 Assets Classifi ed as Held for Sale On 9 Nov. 2006 Sampo plc signed a contract to sell the entire share stock of Sampo Bank plc to Danske Bank A/S. As a result, in the fi nancial year for 2006 the Banking and investment services segment was classifi ed as discontinued operations. The assets and liabilities related to the segment for the year 2006 are presented in the balance sheet items Assets classifi ed as held for sale and Liabilities directly associated with assets classifi ed as held for sale (Note 30). The trade became eff ective on 1 Feb. 2007.
Total assets classifi ed as held for sale in the consolidated balance sheet 26,585
As the P&C Insurance is exposed to various exchange rates, comparing the balance sheet data from year to year can be misleading. However, all exchange eff ects have been excluded from the income statement. The exchange eff ect on technical provisions for own account between 2006 and 2007 amounted to a net increase of eurm 222.
At the close of the claims year 4,916 2,515 2,457 2,617 2,628 2,695
Provision reported in the balance sheet 2,795 401 537 633 792 1,421 6,580 of which established vested annuities 1,219 62 45 67 60 14 1,467
IFRS Financial Statements: Other Notes | sampo group annual report 2007 113 claims costs after reinsurance Estimated claims cost
At the close of the claims year 4,319 2,397 2,387 2,474 2,521 2,597
Provision reported in the balance sheet 2,624 368 509 577 727 1,354 6,160 of which established vested annuities 1,219 62 45 67 60 14 1,467
Total provision reported in the BS 6,406 life insurance change in liabilities arising from other than unit-linked insurance and investment contracts insurance investment EURm contracts contracts total change in liabilities arising from unit-linked insurance and investment contracts insurance investment EURm contracts contracts total
The liabilities at 1 Jan. and at 31 Dec. include the future bonus reserves and the eff ect of the reserve for the decreased discount rate of individual insurances. The calculation is based on items before reinsurers’ share. For more detailed specifi cation of changes in liabilities arising from insurance and investment contracts, see Risk Management.
114 sampo group annual report 2007 | IFRS Financial Statements: Other Notes
Investment contracts do not include a provision for claims outstanding. Liability adequacy test does not give rise to supplementary claims. Exemption allowed in IFRS 4 Insurance contracts has been applied to investment contracts with dpf or contracts with a right to trade-off for an investment contract with dpf. These investment contracts have been valued like insurance contracts.
Unit-linked investment contracts 63 62 26 Financial Liabilities Financial liabilities in the segments include liabilities from derivatives, debt securities in issue and other fi nancial liabilities.
If P&C Insurance Ltd issued in 2001 eurm 200 preferred capital note. The loan pays fi xed interest rate for the fi rst ten years and fl oating rate interest after that. The loan falls due at the latest March 2021. The loan is listed on the Luxembourg Exchange.
If P&C Insurance Company Ltd issued in 2002 eurm 65 preferred capital note. The loan was wholly subscribed by If Group’s owners of that moment. The loan has a maturity of 20 years. It pays fi xed interest rate for the fi rst 10 years and the last 10 years fl oating rate interest. The loan is not listed.
Group, total 1,102 1,395 27 Provisions p&c insurance EURm 2007 At 1 Jan. 42
In addition to statutory retirement pension insurance, the Group has certain voluntary defi ned benefi t plans. The voluntary defi ned benefi t plans are intra-Group and included in the insurance liabilities of Sampo Life. The amount is negligible and they have no material impact on the Group profi t or loss or equity.
Net pension obligation recognised in the balance sheet 98 87 81 85
116 sampo group annual report 2007 | IFRS Financial Statements: Other Notes
The following actuarial assumptions have been used for the calculation of defi ned benefi t pension plans in Sweden and Norway: sweden sweden norway norway
The expected rate of return on the plan assets has been calculated based on the following division of investment assets: analysis of the employee benefit obligation funded unfunded funded unfunded EURm plans plans total plans plans total
Fair value of plan assets 255 - 255 228 - 228
Net pension obligation recognised in the balance sheet 44 54 98 39 48 87 recognised in income statement
Actuarial gains (-) or losses (+) recognised 3 2 1 -
Losses (+) or gains (-) on curtailments analysis of the change in net liability recognised in the balance sheet
Defi ned benefi t plans at 31 Dec. 406 405 359 302
IFRS Financial Statements: Other Notes | sampo group annual report 2007 117 30 Liabilities Directly Associated with Assets Classifi ed as Held for Sale On 9 Nov. 2006 Sampo plc signed a contract to sell the entire share stock of Sampo Bank plc to Danske Bank A/S. As a result, in the fi nancial year for 2006 the Banking and investment services segment was classifi ed as discontinued operations. The assets and liabilities related to the segment for the year 2006 are presented in the balance sheet items Assets classifi ed as held for sale (Note 23) and Liabilities directly associated with assets classifi ed as held for sale. The trade became eff ective 1 Feb. 2007.
Total liabilities directly associated with assets classifi ed as held for sale in the consolidated balance sheet 24,520 other short-term employee benefits There are other short-term staff incentive schemes in the Group, the terms of which vary according to country, business area or company. Benefi ts are recognised in the profi t or loss for the year they arise from. An estimated amount of these profi t-sharing bonuses, social security costs included, for 2007 is eurm 31.
Lease and sublease payments recognised as an expense in the period - minimum lease payments -38 -33
If P&C Holding Ltd has issued a guarantee to the benefi t of Svenska Handelsbanken Ab (publ) whereby If Holdings guarantees the commitments incurred by the If P&C Insurance Ltd deriving from short term credits up to an amount of eurm 53 and for commitments deriving from derivates transaction and – on behalf of – If P&C Insurance Ltd, If P&C Insurance Company Ltd and Capital Assurance Company for those companies commitments relating to Letters of Credits issued on behalf of their insurance operations.
Minimum lease payments not later than one year 2 2 later than one year and not later than fi ve years 6 6 later than fi ve years 4 5
IFRS Financial Statements: Other Notes | sampo group annual report 2007 119
Lease and sublease payments recognised as an expense in the period - minimum lease payments -2 -2
Sampo plc is involved in a case of VAT refund. If the decision of the Tax Offi ce for Major Corporations, which is under complain, remains fi nal, despite the appeals process, the impact on the net profi t for the period is estimated to be eurm 26, at the maximum. See Note 24 for the fi nancial statements of Sampo plc.
Minimum lease payments not later than one year 2 2 later than one year and not later than fi ve years 5 4 later than fi ve years 3 -
The Group had at the end of 2007 premises a total of 200,087 m2 (324,077) taken as a lessee. The contracts have been made mainly for 3 to 10 years.
Fair value reserve 317 488 movements in reserves: Legal reserve The legal reserve comprises the amounts that shall be transferred from the distributable equity according to the articles of association or on the basis of the decision of the AGM. No change has been in the legal reserve during the fi nancial years of 2006 or 2007.
The fair value reserve consists of changes in the fair values of the fi nancial assets available-for-sale and derivative instruments used for hedging cash fl ows.
Retained earnings related to discontinued operations -3 shares and votes The number of Sampo plc’s shares at 31 December 2007 was 578,530,890, of which 577,330,890 were A shares and 1,200,000 B shares. Each A share has 1 vote and each B share has 5 votes at General Meetings. All the B shares are owned by the Kaleva Mutual Insurance Company. B shares can be converted into A shares at the request of the holder of B shares.
The Annual General Meeting of 12 April 2007 granted the Board of Directors authorisation, valid until the close of of the next agm, to buy back Sampo shares. The maximum amount of A shares that can be bought back is 10 per cent of all the company’s shares. Shares can be bought back either by an off er made to all holders of A shares in proportion to their holdings and on equal terms determined by the Board, or through public trading on the Helsinki Stock Exchange, in which case the shares will not be bought in proportion to the shareholders’ holdings. Shares can be acquired for the purpose of share-based payments and/or for the cancellation of the shares.
On 31 December 2007, Sampo plc held 4,322,000 Sampo A shares, which corresponds to approximately 0.75 per cent of the total number of shares and 0.74 per cent of votes. The shares were bought through public trading on the Helsinki Stock Exchange and eur 80.5 million was used for the acquisition.
Other Group companies did not hold shares in the parent company at the end of 2007.
changes in share capital On 13 Feb. 2007 Sampo’s Board of Directors decided to cancel the 4,827,500 Sampo A shares acquired in 2006. The cancellation decreased the number of A-shares with an equal amount, but did not eff ect the share capital. The cancellation was traderegistered on 23 Feb. 2007.
In January 2007, Sampo’s Board of Directors approved subscription for 15,740,245 A shares under the option programme 2000. As a result of the subscriptions, Sampo’s share capital increased by eur 2.6 million.
33 Related Party Disclosures key management personnel The key management personnel in Sampo Group consists of the members of the Board of Directors of Sampo plc and Sampo Group’s Executive Committee.
Short-term employee benefi ts comprise salaries and other short-term benefi ts, including profi t-sharing bonuses accounted for the year, and social security costs.
Post employment benefi ts include pension benefi ts under the Employees’ Pensions Act (tel) in Finland and voluntary supplementary pension benefi ts.
A total of 5,200,000 options were issued, of which each option entitled its holder to subscribe for fi ve Sampo A shares.The options were traded on the main list of Helsinki Stock Exchange. The share subscriptionperiod for all the options ended at 31 Jan, 2007.
Sampo used in its fi rst-time adoption of ifrs at 1 Jan, 2004 the exemption under ifrs 1 not to apply ifrs 2 Share-based payments to the year 2000 option programme.
Each plan has three performance periods and bonuses are settled in cash in three installments. When the bonus is paid, the employee shall buy Sampo’s A shares at the fi rst possible opportunity, taking into account the provisions on insiders, with 20 per cent of the amount of the bonus after taxes and other comparable charges, and to keep the shares in his/her possession for two years.
As a result of the disposal of the banking business, the 2006 ii incentive scheme became due on 1 Feb. 2007, and a premature payment of the bonuses occurred.
End of performance period III 35% Q1-2006 Q4-2006 Q4-2006 Q4-2007 Q2-2008 Q2-2009 Q3-2009
Total cost for the fi nancial period, EURm (incl. social costs) 1 *) Grant dates vary **) Sampo A’s trade-weighted average for ten trading days from the approval of terms + 0–15%
Starting price, EUR 17.26 sampo 2006 share-based incentive programme On 5 April 2006, the Annual General Meeting of Sampo plc agreed on the ”Sampo 2006” share-based incentive programme. The programme applies to senior executive management of Sampo plc and its subsidiaries, and to Sampo’s president and ceo. On 11 May 2006, the Board of Directors of Sampo plc allocated 1,300,000 shares of the maximum of 1,500,000 shares of the programme.
124 sampo group annual report 2007 | IFRS Financial Statements: Other Notes 36 Legal Proceedings There are a number of legal proceedings against the Group companies outstanding on 31 December 2007, arising in the ordinary course of business. No provisions have been made as professional advice indicates that it is unlikely that any signifi cant loss will arise.
Total shares and participations 1,011 38 Investments in Shares and Participations Other than Subsidiaries and Associates
126 sampo group annual report 2007 | IFRS Financial Statements: Other Notes life insurance Listed companies amount/ EURm country no. of shares holding % fair value
Unit trusts amount/ EURm country no. of shares holding % fair value
IFRS Financial Statements: Other Notes | sampo group annual report 2007 127
BOF III CV Investors LP (Gilde Buyout Fund III) Netherlands 6
EQT III UK No 1 L.P. (EQT Northern Europe UK No. I L.P.) Great Britain 9
Schroder Ventures Asia Pacifi c Fund CLP 2 Cayman Islands 9 39 Events after the Balance Sheet Date The Board of Directors proposes to the Annual General Meeting on 14 April 2008 that a dividend of eur 1.20 per share be distributed for 2007. The dividends to be paid will be accounted for in the equity in 2008 as an appropriation of retained earnings.
VenCap 9 LLC (Preferential Equity Investors II LLC Cayman Islands 7
Shares and participations in total 1,713 holding Domestic other than listed companies amount/ EURm country no. of shares holding % fair value
Proceeds from the sale of group and associated undertakings 4,028 -
Net change in cash and cash equivalents -107 288 *) Investments include both investment property and fi nancial assets.
summary of significant account policies The presentation of separate fi nancial statements for Sampo plc for the fi nancial year 2007 have been changed. The fi nancial statements together with the notes have been prepared in accordance with the Finnish Accounting Act and Ordinance. In 2006, while the Group was a credit institution oriented fi nance conglomerate, the fi nancial statements for the parent company were prepared in accordande with the provisions of Article 4 of the Act on Credit Institutions (1607/1993), the Decree of the Ministry of Finance (1259/2000) and Standard 3.1 Financial statements and Annual report issued by the Finnish Financial Supervision Authority. The comparison fi gures for the year 2006 have been adjusted accordingly.
Income from property occupied for own activities 2 4 2 Depreciation and impairment
Losses on disposal of property occupied for own actitivies -4 0
Accumulated amortisation at beginning of year 12 -7 -9 -4 of which related to disposals 9 7 - -
Accumulated depreciation at beginning of year -1 -7 -1 -6 of which related to disposals 0 7 - -
Accumulated impairment losses at beginning of year -1 - -1 of which related to disposals 1 - - -
Carrying amount at end of year 3 3 14 4 8 Shares in Group Companies
VAT receivable (see Note 24) 34 34 14 Prepayments and Accrued Income
Notes on the liabilities 15 Movements in the Parent Company’s Equity restricted equity unrestricted equity share premium fair value other retained EURm share capital account legal reserve reserve reserves earnings total
Profi t for the year 4,033 4,033 distributable assets EURm 2007 2006 Parent company
16 Share Capital Information on share capital is disclosed in Note 32 in the consolidated fi nancial statements.
Debenture loan, nominal value EURm 600, call 21.4.09 due 2014 - annual fi xed interest 4.625% until April 2009, thereafter fl oating 589 586 18 Other Liabilities
22 Future Rental Commitments EURm 2007 2006 Not more than one year 2 2
To or on behalf of associates - 24 Other Financial Commitments Sampo plc’s group of entities liable to tax, as per Article 13 a of the Value Added Tax Act, was credited value added tax refunds in 2004 based on the fi nal vat refund decisions of the Tax Offi ce for Major Corporations.
Contrary to its previous fi nal decisions, the Tax Offi ce for Major Corporations reassessed the matter in December 2004, on the basis of which it debited eur 33.7 million of previously refunded vat. Had the reassessment been confi rmed as fi nal and enforced as such, the estimated eff ect on the Sampo Group’s net profi t could have been as much as eur 26 million.
As the Group member liable to tax, Sampo plc paid in January 2005 the vat debited in December 2004. Accordingly, the vat in question has been treated as a receivable from the Group member in the accounts since 2004
Notes on the staff and management 25 Staff Numbers average average during the year during the year
Notes on shares held 27 Shares Held as of 31 Dec, 2007 carrying percentage of amount company name share capital held*) eurm
Auditors’ Report to the shareholders of sampo plc We have audited the accounting records, the report of the Board of Directors, the fi nancial statements and the administration of Sampo plc for the fi nancial year 2007. The Board of Directors and the Managing Director have prepared the consolidated fi nancial statements, prepared in accordance with International Financial Reporting Standards as adopted by the eu, as well as the report of the Board of Directors and the parent company’s fi nancial statements, prepared in accordance with prevailing regulations in Finland, containing the parent company’s balance sheet, income statement and notes to the fi nancial statements. Based on our audit, we express an opinion on the consolidated fi nancial statements, as well as on the report of the Board of
We conducted our audit in accordance with Finnish Standards on Auditing. Those stan dards require that we perform the audit to obtain reasonable assurance about whether the report of the Board of Directors and the fi nancial statements are free of material misstatement. The purpose of our audit of the administration is to examine whether the members of the Board of
Finnish rules and regulations. The fi nancial statements and the report of the Board of Directors give a true and fair view of the parent company’s result of operations and of the fi nancial position. The report of the Board of Directors is consistent with the fi nancial statements.
The fi nancial statements can be adopted and the members of the Board of Directors and the Managing Directors of the parent company can be discharged from liability for the period audited by us. The proposal by the Board of Directors regarding the disposal of distributable funds is in compliance with the Companies Act.
Financial Information in 2008 The offi cial fi nancial statements for 2007 can be inspected in full at Sampo Legal Aff airs, Fabianinkatu 27, Helsinki, Finland.
To be entitled to participate in the agm, shareholders must be entered into the shareholder register maintained by the
To be entitled to participate in the agm, shareholders and nominee registered shareholders must register by 4 p.m. on 7
Apri sampo will publish three interim reports in 2008: Interim Report for 1 January – 31 March 2008
Interim Report for 1 January – 30 June 2008 5 November
Press and stock exchange releases, the monthly updated list of shareholders and other investor information published by Sampo is available on the
Design and production: Miltton Oy, Photos: Nina Dahl, Lehtikuva and Getty Images, Printing: Libris, Helsinki 2008.