The number of persons employed by If on 31 December 2013 was 6,830 (6,788). The impact of normal efficiency improvements and some targeted efficiency actions within parts of the organization was offset by the one-time effect of acquiring Tryg in Finland and its approximately 200 employees. The integration of Tryg’s and If’s organizations during the year led to some overlaps in functions and subsequent redundancies of 26 employees.
Mandatum Life wants to increase the financial welfare of its customers and secure their accrued wealth.
• Member of Sampo Group Executive Committee since 2004. • Magnusson holds 22,154 Sampo plc shares directly or through controlled companies or persons closely associated with him.
In 2013, the Group Executive Committee convened four times at the request of Group CEO. The Group MD Committee, which assists the Group Executive Committee, met nine times.
Remuneration Fair and rewarding remuneration to all employees is an important factor in Sampo Group’s ability to enhance shareholder value in a competitive business environment. Remuneration is an equally important determinant of success in the competition for talent. Sampo's remuneration strategy is responsible both towards the employees and the shareholders and, consequently, long-term financial stability and value creation of the Group guides the design of compensation schemes.
Sampo’s share of Nordea’s net profit in 2013 amounted to EUR 635 million (653). Nordea’s RoE was 11.0 per cent (11.6) and core Tier 1 ratio (excluding transition rules) strengthened to 14.9 per cent (13.1). In segment reporting the share of Nordea’s profit is included in the segment ‘Holding’.
The average EUR-SEK exchange rate used for income statement items is 8.6522 and the year-end exchange rate used for balance sheet items is 8.8591. For 2012 the corresponding exchange rates used were 8.7040 and 8.5820, respectively.
Baltic countries. The P&C insurance group’s parent company, If P&C Insurance Holding Ltd, is located in Sweden, and the If subsidiaries and branches provide insurance solutions and services in Finland,
Net loan loss provisions decreased to EUR 735 million for the continuing operations, corresponding to a loan loss ratio of 21 basis points (26 basis points in 2012).
Given the inherent risks involved in the businesses carried out in different Group companies, it is of paramount importance that compensation mechanisms are tightly aligned with risk management. Neither the design of any compensation scheme nor the evaluation of the subsequent payouts can be separated from simultaneous assessment of related risks. Sampo’s remuneration strategy shall be responsible towards employees and shareholders. This means that the long-term financial stability and value creation of the Group shall guide the remuneration design.
(c) Pension Pensions shall be based on collective agreements and/or reflect conditions in the relevant labor market. As a general rule, pension plans should be of defined contribution nature.
As at 31 December 2013, Sampo plc had 560,000,000 shares, which were divided into 558,800,000 A shares and 1,200,000 B shares. Total number of votes attached to the shares is 564,800,000. Each A share entitles the holder to one vote and each B share entitles the holder to five votes at the General Meeting of Shareholders. According to the company’s Articles of Association, A Shares must number at least 179,000,000 and no more than 711,200,000.
In its day-to-day business activities Sampo Group is exposed to various risks and uncertainties which it identifies and assesses regularly.
Adjusted number of shares at 31 Dec. 1 558,800558,800 558,800 558,800 560,082 560,082
Weighted average number of shares, incl. dilutive potential shares 1 558,800558,800 558,800 559,663 560,121 560,170
²) Key figures for P&C Insurance are based on activity based costs and cannot, therefore, be calculated directly from the consolidated income statement.
In calculating the key figures the tax corresponding to the result for the accounting period has been taken into account. The valuation differences, adjusted with the deferred tax liability, on the investment property have been taken into account in return on assets, return on equity, equity/assets ratio and net asset value per share. Additionally, the items in the other comprehensive income have been taken into account in return on assets and return on equity. In the net asset value per share, the Group valuation difference on associates Nordea and Topdanmark have also been taken into account.
Return on equity (at fair values), % + total comprehensive income
Earnings per share, incl. change in fair value reserve total comprehensive income for the financial period attributable to the parent company’s equity holders adjusted average number of shares
Relative share trading volume, % number of shares traded through the Helsinki Exchanges adjusted average number of shares x100%
Reserve risk only relates to incurred claims, i.e. existing claims, and originates from claim sizes being greater than expected, differences in timing of claims payments from expected, and differences in claims frequency from those expected. As a result technical provisions are not sufficient to cover the cost for already incurred claims and there is a loss or adverse changes in the value of insurance liabilities.
Materialized operational risks can cause immediate negative impact on financial results due to additional costs or loss of earnings. In longer term materialized operational risks can lead to loss of reputation and, eventually, loss of customers which endangers the company’s ability to conduct business activities in accordance with the strategy.
Some risks such as interest rate, currency and liquidity risks are by their nature linked to various activities simultaneously. In order to manage these risks efficiently Sampo Group companies have to have a detailed understanding of expected cash flows and their variance within companies’ all activities. In addition, a thorough understanding of how expected cash flows and the market consistent values of assets and liabilities may fluctuate at the total balance sheet level under different scenarios is needed. These balance sheet level risks are commonly defined as Asset and Liability Management (ALM) risks. The ALM risks are one of the focus areas of the senior management because of their complexity and relevance to risks and earnings in the long run.
3. Sampo plc reviews the Group as a business portfolio and is active especially in matters related to the Group’s capitalization and risks as well as related to the parent company’s capital structure and liquidity.
The table Claim Ratios After Reinsurance, Mandatum Life, 2013 and 2012 shows the insurance risk result in Mandatum Life’s Finnish life insurance policies. The ratio of the actual claims costs to the assumed was 79 per cent in 2013 (82 per cent in 2012). Sensitivity of the insurance risk result can also be assessed on the basis of the information in the table. For instance the increase of mortality by 100 per cent would increase the amount of benefit payments from EUR 16 million to EUR 32 million.
Fixed income investments and listed equity instruments form major part of the subsidiaries’ investment portfolios. Money market securities, cash and investment grade government bonds form a liquidity buffer within fixed income investments. The average maturity of fixed income investments was 2.2 years in If P&C and 2.2 years in Mandatum Life. In both companies the average maturity is longer than duration (Interest Rate and Currency Risks section) because the fixed income investments include floating rate notes.
Exposures in debt and equity instruments are shown in the table Exposures by Sectors, Asset Classes and Rating, If P&C, Mandatum Life and Sampo Group, 31 December 2013. The table includes also counterparty risk exposures relating to reinsurance and derivative transactions. Counterparty risks are described in more detail in section Counterparty Credit Risks. Due to differences in the reporting treatment of derivatives, the figures in the table are not fully comparable with other tables in this annual report.
The equity investments of Sampo Group totaled EUR 2,749 million at the end of year 2013 (EUR 2,844 million in 2012). During 2013, the decrease in the weight of equity investments in the investment portfolio was mainly due to the net selling of equities.
In the Solvency I type of approach, control levels are set above the Solvency I requirement that is insensitive to market risks, using a VaR-analysis of the investment assets. In the Solvency II type of approach, control levels are set also based on other confidence levels in addition to the 99.5 per cent level used in Sampo Group. The general objective of these control levels and respective guidelines is to maintain the required solvency and to ensure that investments are sufficient and eligible for covering technical provisions.
TTotal effotal effect on equityect on equity 202202 -210-210 -550-550 -173-173
Sampo Group has a relatively low amount of financial liabilities and thus the Group’s respective refinancing risk is relatively small. During 2013, Sampo plc issued two bonds and the maturities were selected carefully in order to have a well-diversified maturity profile.
Operational Risks In Sampo Group, operational risk refers to the risk of loss resulting from inadequate or failed processes or systems, from personnel or from external events.
Internal control system in processes aims at preventing and identifying negative incidents and minimizing their impact. In addition, would there be an operational risk event or a near miss, this must be analyzed and reported to ORC.
Directors of Sampo plc has set an internal target that the Group’s adjusted solvency capital amount has to exceed the sum of the Group companies’ economic capital, excluding the diversification effects between companies.
Liquidity risk is managed at company level and the Group companies maintain liquidity buffers that are considered to be adequate in their businesses. In the subsidiaries, the adequacy of liquidity buffers is dependent on expected net outflows of insurance cash flows. In the parent company, the adequacy of liquidity buffers is dependent on potential strategic arrangements and a strong liquidity is preferred. In the normal course of business,the subsidiaries do not invest in Sampo plc’s debt instruments. However, a general prohibition to intra-Group asset transactions has not been deemed necessary and, thus, subsidiaries are allowed to invest in the parent company’s debt instruments and sell assets to each other at market prices, especially when this is justified by business opportunities. Thus, during possible market stresses these options are available to a certain extent as well. In Mandatum Life, there are investments in Sampo plc’s debt instruments related to unit-linked policies.
EURm 31 Dec 2012 31 Mar 2013 30 Jun 2013 30 Sep 2013 31 Dec 2013
The figure Breakdown of Capitalization, Sampo Group, 31 December 2013 presents the contributions of the different business areas including Nordea to Sampo Group’s total economic capital as well as the diversification effect included in the calculation of Group’s economic capital. The figure also presents the amount of adjusted solvency capital at group level, which comprises Solvency I capital and other loss absorbing items. In internal assessments, adjusted solvency capital is compared to economic capital. When regulatory capitalization is under consideration, the Solvency I capital is compared to the regulatory capital requirement.
Share of Nordea's capital not included in Group capital 816 803
Market risk is still the most significant risk for both If P&C and Mandatum Life. Underwriting risk decreased in If P&C during the year to EUR 565 million (EUR 620 million at the end of 2012) and insurance risk increased in Mandatum Life to EUR 367 million (EUR 362 million at the end of 2012).
EEquity aquity at 1 Jan. 2013t 1 Jan. 2013 9898 00 44 1,5271,527 7,5877,587 167167 760760 -29-29 10,11310,113
Sampo Group has prepared the consolidated financial statements for 2013 in compliance with the International Financial Reporting Standards (IFRSs). In preparing the financial statements, Sampo has applied all the standards and interpretations relating to its business, adopted by the commission of the EU and effective at 31 December 2013.
The acquisition method of accounting is used for the purchase of subsidiaries. The cost of an acquisition is allocated to the identifiable assets, liabilities and contingent liabilities, which are measured at the fair value of the date of the acquisition. Possible noncontrolling interest of the acquired entity is measured either at fair value or at proportionate interest in the
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. If the recoverable amount of the asset exceeds the carrying amount, the impairment loss is reversed, but no more than to the carrying amount which it would have been without recognition of the impairment loss. Impairment losses recognised for goodwill are not reversed.
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 financial 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. The liabilities of assumed reinsurance are based on the reports of the ceding company and on an estimate of claims which have not yet been settled. The assets covering the unit-linked liabilities include debt securities issued by the Group companies. These have not been eliminated. Elimination would lead to misleading information, as the policy holders carry the investment risk related to these investments, and to a mismatch between the unit-linked liabilities and assets covering them.
Nordea is an universal bank with positions within corporate merchant banking as well as retail banking and private banking. With approximately 1,400 branches, call centers in all Nordic countries and an e-bank, Nordea also has a large distribution network for customers in the Nordic and Baltic sea region, including more than 260 branches in five new European markets, Russia, Poland, Lithuania, Latvia and Estonia.
TTotal fotal fororeign eeign exxchange derivchange derivaativtiveses 2,1892,189 44 2020 2,1732,173 3737 3636
TTotal financial asotal financial assets designasets designatted as aed as at ft fair vair valuealue thrthrough p/lough p/l 4848 4848
Liabilities fLiabilities for insuror insurancance and ine and invvesestmenttment ccontrontracts tacts totalotal
DerivDerivaativtive financial inse financial instruments (nottruments (note 15)e 15) 18 19
When applying IAS 19, the pension obligations are calculated, as is the pension cost attributable to the fiscal period, using actuarial methods. Pension rights are considered to have been vested straight line during the service period. The calculation of pension obligations is based on future anticipated pension payments and includes assumptions regarding mortality, employee turnover and salary growth. The nominally calculated debt is discounted to the present value using an interest rate based on current market interest rates adjusted to take into account the duration of the company’s pension obligations. As a basis for determining the discount interest rate for the Swedish obligation, If uses liquid covered mortgage bonds issued by a mortgage institution. Covered mortgage bonds are also used for the Norwegian obligation. After a deduction for the plan assets, a net asset or net liability is recognised in the balance sheet.
Interest expense on net pension liability -2 -5 -7 -2 -6 -8
Each plan has three performance periods and incentive rewards are settled in cash in three installments. In the scheme 2009 I when the reward is paid, the employee shall buy Sampo's A-shares at the first possible opportunity, taking into account the provisions on insiders, with 30 per cent of the amount of the reward after taxes and other comparable charges, and to keep the shares in his/her possession for 2 years. In the 2011 I scheme, the employee shall buy Sampo A shares with 60 per cent of the net amount of reward received. The shares are subject to transfer restrictions for three years from the day of payout. A premature payment of the reward may occur in the event of changes in the group structure or in the case of employment termination on specifically determined bases. The fair value of the incentive schemes is estimated by using the Black-Scholes princing model.
Additional information to the statement of cash flows: Interest income received 61 84
Financial assets available-for-sale -recognised in equity -0 -0-0 -recognised in p/l -1 -1-1
Guarantees for derivate contracts 47 7878 14 A14 Acccruals and defcruals and deferrerred inced incomeome