February • Sampo and Leonia published their results for 1999. Sampo’s operating profit almost tripled to EUR 565 million and Leonia’s operating profit was
Bank until February 2001) are already highly advanced technically and well capable of managing the new business.
The key banks in the Baltic countries have their own life insurance companies, which in Estonia in particular have gained a leading position. Pension reform in Estonia is believed to boost growth also in voluntary pension insurance. Growth in life insurance in Latvia has been weak, because the tax-deductibility of insurance premiums paid by companies has been restricted.
The new Polish pension scheme, which came into force at the beginning of 1999, provides private pension funds with extensive markets and a possibility for profitable business.
Sampo’s life insurance aims to make a long-term real profit from invested assets. The overall performance of the investment operations was good in 2000, despite the big drop in share prices. The return on assets rose to approximately six per cent.
Europe. In all, almost 12 million bank transactions were handled through the WebBank in 2000, which is 75 per cent more than in the previous year. The number of people using web services continues to show significant growth.
Operations in Lithuania started at the beginning of 2000 and market share is now approximately three per cent. Performance in Latvia has not met expectations and the market share there is approximately one per cent.
EUR 52.2 million). The companies successfully completed several negotiations on commutations of liabilities. Many of these included asbestos, environmental damage and health risk liabilities. The run-off companies were well in the black.
The Group’s operating profit more than doubled to EUR 1.6 billion.
Ltd decided to pay interim dividends totalling EUR 118 million, of which the share corresponding to Sampo’s holding is 50 per cent.
Income from companies accounted for by the equity method 1 1 0
Net income from securities transactions arose from equities trading. There was a slight loss on transactions in debt securities. Income from both securities transactions and foreign exchange dealing improved thanks to the customer business and favourable developments in interest rates.
Capital adequacy increased as a result of the growth in profits. Leonia plc, which merged into Sampo Insurance
The expense ratio was 25.3 per cent (21.8%). Accelerated depreciation on IT systems relating to the Sampo 2000 programme targeted at retail customers together with accelerated depreciation on old information systems increased operating expenses by a total of EUR 14 million, which weakened the expense ratio by 1.7 percentage points.
Net investment income rose to EUR 525 million, including a total of EUR 222 million from dividends (including avoir fiscal tax credit) and sales profits attributable to the sale of Pohjola shares. A gain of EUR 97 million was booked from the sale of Nokia shares. A total of EUR 137 million in value adjustments was recorded.
The interest rate risk related to the asset and liability activities of banking is illustrated by the fact that a drop of 1 percentage point in interest rates at the turn of the year would have weakened the euro-denominated value of total assets by EUR 21 million. Trading markets risk in banking remained low.
The tightening interest rate competition and the declining interest rates will put a strain on the net income from financial operations of banking. Customers’ transition to the web bank and the synergy effects will, however, ease the cost burden. The aim is to achieve the target level of 58 per cent for the cost to income ratio as soon as 2001. The
Claims incurred Claims paid 12 –296 –235 Reinsurers’ share 3 2
Banking and investment services operating profit 434 202 Non-life and life insurance profit before extraordinary items 985 418
Claims incurred 7 Claims paid –262 –238 Reinsurers’ share 10 4
Other charges Depreciation on consolidation difference –5 –5 Other –13 0
Arising out of reinsurance operations 4 14 Deferred tax liabilities 478 22 Other debtors 11 9
Capital and reserves 54 Subscribed capital 87 52 Premium reserve 902 – Revaluation reserve – 28 Legal reserve 366 366 Other reserves
Reserves provided for by the articles of association 621 75 Other reserves 12 12
Cash flow from business operations before financial items and taxes 638 248
Retail customers’creditworthiness is assessed by comparing a customer’s income, or that of his or her family, with their living expenses and debt repayment obligations. Uncertainties related to the estimation of creditworthiness are covered by means of collateral which, in the case of long-term loans, is usually a dwelling. In the case of smaller unsecured loans, the creditworthiness of personal customers is assessed by means of credit scoring, which estimates the customer’s ability to repay the loan. The incidence of delayed loan repayments and the development of nonperforming loans are monitored and reported on continuously.
operators’ network investments, but the shares were small and did not include finance for any UTMS licences. In Finland, exposure to small and medium-sized businesses continued to grow, and was mainly focused on counterparties in creditworthiness category L3. Leonia also played a significant role in financing mergers and acquisitions.
The Group’s Security Committee monitors the solvency and operations of reinsurance companies closely and recommends changes in the reinsurance programmes if necessary.
In addition, provisions and recommendations concerning companies listed on the Helsinki Exchanges have been taken into account.
Stocks and shares in the nature of fixed assets are presented at the lower of acquisition price or current value, if the value adjustment is considered permanent. The shares are valued according to the average price principle.
Industrial Holding B.V.’s shares and the goodwill arising from Sampo Industrial Insurance N.V.’s acquisition of the insurance operations from the French Assurances Generales de France insurance group, which totalled EUR 10.4 million, were written off to their full amount in the accounts of 2000.
The amount also includes the unrealised losses arising from valuation of the assets acquired in settlement of unpaid loans, and the losses on the sale of such assets. In addition, in the Group accounts, the additional depreciation on lease assets is included in Provisions for bad and doubtful debts.
Income taxes and taxes on extraordinary items are presented separately in the Profit and Loss Account. Taxes for the year are calculated on the basis of the taxable income calculated in accordance with tax regulations.
In the Group companies, the difference between planned depreciation and the total depreciation made in accordance with the Business Tax Act is presented as a separate item in the Profit and Loss Account, and the accumulated depreciation difference is presented under appropriations in the Balance Sheet. In the final accounts and key figures of the companies, deferred tax is not deducted from appropriations nor from valuation differences on investments. Unrealised gains from insurance operations entered as income are taxable income.
In the consolidated accounts and key figures, optional reserves and depreciation difference are divided into the change in deferred tax and share of profit, and deferred tax and share of capital and reserves. The minority interest is deducted from the share of capital and reserves. According to the Insurance Companies’ Act, the share entered under capital and reserves is not distributable non-restricted capital and reserves. Two calculation practices were used for calculating the consolidated net asset value capital in 1999 and
Section 3, a so-called Principle of Fairness must be observed in life insurance with respect to such policies which, according to the insurance contract, entitle to bonuses and rebates granted on the basis of any surplus yielded by the policies. If the solvency requirements do not prevent it, a reasonable part of the surplus has to be returned to these policies as bonuses.
Off-balance sheet items In banking and investment services, off-balance sheet items consist of contingent liabilities and commitments. Contingent liabilities comprise transactions in which companies have underwritten the obligations of third parties, including guarantees and assets pledged as collateral security.
Banking and investment services Derivative contracts made for trading purposes are marked to market and the resultant profits and losses are included in Net income from transactions in securities and foreign exchange dealing.
Assets and liabilities arising from derivative contracts are presented in Other assets and Other liabilities in the
The key figures of banking and investment services have been calculated in accordance with the regulation 20/420/
Profit before extraordinary items and tax EUR m 1,419 620 415 206 116 62
Return on equity (at current values) % 3.5 37.5 67.1 33.1 23.5 17.3 Return on assets (at current values) % 2.1 7.2 29.0 13.8 11.6 9.6
Banking and investment services 1 Interest receivable and payable 2 Net income from transactions in securities 3 Other operating income and expenses 4 Depreciation and write-downs of tangible and intangible assets 5 Provisions for bad and doubtful debts plus write-offs in respect of debt securities held as financial fixed assets 6 Segmental information
Debt securities and interest rate derivatives –6 –16 Equities and equity derivatives 53 –2 47 –18 3 OTHER OPERATING INCOME AND EXPENSES
Premiums written before reinsurers’ share 1,792 1,567 336 314 8 ITEMS DEDUCTED FROM PREMIUMS WRITTEN
Columns: 1 = Premiums written before reinsurers’ share 5 = Reinsurance balance 2 = Gross premiums earned before reinsurers’ share 6 = Balance on technical account before the change in 3 = Gross claims incurred before reinsurers’ share collective guarantee item, other technical charges 4 = Gross operating expenses before reinsurance commissions and the change in the equalisation provision and profit participations 7 = Combined ratio
Direct insurance commissions 5 5 Commissions on reinsurance assumed and profit participations 1 3 Other policy acquisition costs 17 16
Bad and doubtful debt provisions pooled by customer group –27 –7
Water areas and agricultural and forest land – 4 0.0 – Buildings under construction – – – –
The remaining acquisition cost of debt securities comprises: That difference between the amount repayable at maturity and purchase price, which has been released to interest income (+) or charged to interest income (-) –2 –2
Domicile / holding holding in the Group reserves year Name of company country % % EUR m EUR m 1) EUR m
Leonia Bank plc 3) 113 105 USD 7.73 Perpetual Leonia Bank plc 4) – 48 CAD 7.50 15.11.2004 Leonia Bank plc 4) – 44 CHF 7.13 7.9.2005 Leonia Corporate Bank plc 3) 107 100 USD 6.64 7.10.2002 1) Repayable on any interest payment date after year 2002. 2) Repayable on any interest payment date after 23 June 2002. 3) Repayable on any interest payment date. 4) Repayable in year 2000.
Liabilities to credit institutions and central banks 105 90 Liabilities to customers 36 37 Debt securities in issue 598 642 62 ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES
71 LOANS AND ADVANCES TO AND GUARANTEES ON BEHALF OF MEMBERS OF ADMINISTRATIVE AND SUPERVISORY BODIES
Asset management services supplied Asset management services based on an agreement between the customer and the company Mutual fund services Securities custody services
Share derivatives Futures and forwards, open underlying instrument 4 101 – –
The current values of option contracts include received and paid premiums. Negative valuation differences of derivative contracts made for other than hedging purposes have been entered as charges (current value = 0).
Auditing Standards. Those standards require that we plan and perform the audit in order to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting policies used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. The purpose of our audit of administration has been to examine that the Supervisory Board, the Board of
Board of Directors The Board of Directors is responsible for the administration of the Company and the proper management of its operations. The Board members are appointed by the
Of those companies, the ones that best meet the criteria for traditional investments are included in the Sampo-
A maximum of 5,200,000 option rights will be issued of which 2,600,000 are marked with the letter A and 2,600,000 with the letter B. Each option right entitles its holder to subscribe one Sampo A share. The share subscription period starts for option right A on 2 January 2003 and for option right B on 2 January 2004. The share subscription period ends on 31 December 2007 for all option rights. The share subscription price is the trading volume weighted average price of Sampo’s A share on the Helsinki
Shareholders The number of registered shareholders on 31 December 2000 was 35,103. Of shares, 1.77 per cent had not been entered into the book-entry securities system. Foreign ownership was 28.10 per cent of the share capital and 27.84 of the votes. Almost all foreign owners have listed their holdings in the administrative register.