Our focus on growth in banking and long-term savings does not mean that we will neglect costs. For Sampo Group, cost control and the drive for greater efficiency are not just aspects of a one-off campaign, but established practice.
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Sa mp o G rou p fi led a lic en ce ap pli cat ion to th e S we dis h a uth ori tie s t o est ab lis h l ife in sur an ce op era tio ns in
Fin lan d. Cu sto me rs ma y a pp eal to a cu sto me r o mb ud sm an an d a cu sto me r p an el.
P&C insurance If, the leading P&C insurance company in the Nordic and Baltic countries, grew out of long-established P&C insurers in Finland, Sweden, Norway and Denmark. If was established in 999, when the property and casualty insurance businesses of Norway’s Storebrand and Sweden’s Skandia were combined. The Finnish Sampo’s P&C insurance operations became part of If in 2002.
A significant strategic change took place at Sampo Life in 2002 when it decided to focus on selling unit-linked insurance policies. The change meant a short-term loss of market share in total premiums written, but capital was used more efficiently. Sampo Life has gained a significant position in the sale of unit-linked products.
Sampo complies with the Corporate Governance Recommendation for Listed Companies issued by HEX Plc, the Central Chamber of Commerce of Finland and the Confederation of Finnish Industry and Employers which entered into effect on  July 2004. Sampo’s Board of Directors has also approved internal rules concerning corporate governance, internal control and reporting in Sampo Group.
Election and terms of office of Board Members According to Sampo’s Articles of Association, the company’s Board of Directors comprises no fewer than three and no more than ten members elected by shareholders at the Annual General Meeting. The Annual General Meeting of 2004 decided to elect eight members to the Board until the close of the Annual General Meeting to be held in 2005. The term of office of the Board members is one year. The members of the Board annually elect a Chairman and Vice Chairman from among their members, at their first meeting following the Annual General Meeting.
He was appointed member of the Board of Directors of Sampo plc on 5 April, 200
Maarit Näkyvä, born 953 Executive Vice President, Head of Retail and Private Banking
To be entitled to participate in the AGM, shareholders must be registered in the shareholder register maintained by Finnish Central Securities Depository Ltd (Suomen Arvopaperikeskus Oy) by the record date for the AGM,  April, 2005. Those shareholders whose shares are registered under a nominee and who wish to participate in the AGM and exercise their voting rights should temporarily register in the Shareholder Register no later than the record date for the AGM.
Financial Information in 2005 The official financial statements for 2004 can be inspected in full at Sampo Legal Affairs, Unioninkatu 22, Helsinki, Finland and at Sampo Bank’s branch at the address Yliopistonkatu 8, Turku, Finland.
Life and previously held by Sampo Credit, was transferred to Sampo plc.
The combined ratio for 2004 was 92.7 per cent (00.9). It improved considerably during both the fourth quarter and the whole year, as a result of the implemented premium adjustments and cost savings, combined with a favourable claims outcome, despite the Asian catastrophe in late December.
Sampo Group’s life insurance companies had EUR 845 million (865) of solvency capital at the end of the year. Solvency capital amounted to 7.5 per cent of technical reserves on own
The operating profit of the holding company for the financial year was EUR 20 million (–4). Operating profit contains EUR 95 million in sales gains from the sale of shares in Skandia on  March 2004 and a VAT refund of EUR 6 million in the second quarter.
Shares and participations 38 14 20 Shares and participations in associated undertakings 38, 110 28 19 Shares and participations in Group undertakings 38, 109 2 2 Intangible assets 40
Property and shares in property companies 86 157 Other tangible assets 7 8
Accruals and deferred income 95 47 16 Subordinated liabilities 96 596 – Deferred tax liabilities 99 – 0
(7 per cent). About 67 per cent of the banking business exposures to corporate customers are secured by category I–IV collateral.
The above exposures totalling EUR  million are secured with category I–IV collateral totalling about EUR 9 million. Additionally, the Group has made specific provisions pooled by customer group, totalling EUR 5 million. These provisions have not been deducted from the above figures.
Market risks in trading are measured and limited by using a technique called Value-at-Risk (VaR). VaR figures are calculated, with a confidence level of 99 per cent, for overnight risk. The volatility and correlation parameters required by the model are calculated daily on the basis of 60-banking day historical market observations. Risks are also monitored and limited by means of stress testing and exposure limits, thus ensuring that agreed levels of risk are also not exceeded in exceptional market conditions. At the end of the year the interest rate sensitivity of trading activities for a 00 bps rate rise was EUR –2 million.
Market risks in trading of Sampo Group’s Finnish banking operations for 2002–2004 (1% daily VaR figures), EUR thousands
The majority of Sampo Bank Group’s funding (EUR 0.5 billion) comes from liabilities to customers. This includes the demand deposits of private persons and companies and other term deposits. This balance sheet item is growing mainly in the Baltic countries. In contrast, the growth in loans has been rapid. Generally the growth has been fastest in the Baltic countries, but loans have also increased in Finland, particularly due to the brisk demand for home loans. The debt instruments bought from Sampo Credit created a one-off increase in assets.
The gap between customer-related assets and deposits has grown and Sampo Bank Group has increased the acquisition of market-based funding. At the Group level, Sampo Bank is the principal issuer of debt instruments, but the Baltic subsidiary banks also have their own roles in the Group’s funding. By operating actively on the local markets and working together with special credit institutions, they diversify the Group’s sources of funding. Sampo Bank’s long-term funding changed in 2004 as follows: Liquidity risk of Sampo Bank, 31 December 2004
External actuaries are also commissioned to check internal assessments of provisions. External actuaries performed a review of the technical provisions in the financial accounts for 2003.
Exchange rate risks in the insurance business In addition to the Nordic currencies, If also underwrites insurance to a limited extent in the most common international currencies. As asset management
4 Raw material indices 1% 5 Real estate 3% 6 Private equity 2% 7 Hedge funds 1%
management of risks, as well as the changes in risk position shown by risk indicators and analyses of the external environment.
Intra-Group transactions, assets and liabilities, gains and losses, and distribution of profit have been eliminated.
If there have been permanent diminutions in the values of tangible and intangible assets on the balance sheet date, the amounts have been charged to the profit and loss account.
Debt securities, comprising bonds and money-market instruments are primarily stated at amortised cost. The premium or discount at which securities have been purchased, is amortised over the period to maturity, adjusting the cost of the security and interest income.
The provision for claims outstanding includes claim payments plus all costs of claim settlements.
In accordance with Finnish accounting practice, the provision for claims outstanding includes an equalisation provision calculated according to risk theory for years with plenty of claims and a collective guarantee item.
Banking and investment services and holding company business Provisions for bad and doubtful debts Provisions for bad and doubtful debts consist of specific provisions made for loans and advances to credit institutions and customers, and for contingent liabilities and commitments and amounts written off these items. 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, the additional depreciation on lease assets is included in “Provisions for bad and doubtful debts”.
the valuation of the hedged balance sheet item. Further, the valuation loss, which exceeds the corresponding valuation gain on the hedged item, is recorded as a loss. Valuation gains on derivative contracts treated as hedges are recorded in the profit and loss account only to the amount recorded as valuation losses on the hedged item. As hedging derivatives are treated derivatives which are documented as hedges at the initial recognition and which have been shown by calculations to be effective hedges. In the life insurance business, hedging derivatives are used as fair value hedges against the exchange rate risks.
The valuation differences not included in the profit and loss account are fully taken into account in the solvency margin calculation. In addition, the maximum loss from non-hedging derivatives, calculated by the ValueAt -Risk method, is deducted from the solvency margin. However, there is no need to deduct from the solvency margin the maximum loss arising from exchange rate derivatives made to hedge operations to the extent that the current values of their deltaadjusted underlying assets correspond to the current values of currencydenominated cash investments on the balance sheet date.
Life insurance + technical result before bonuses and rebates and change in the equalisation provision ± other income and charges ± income from companies accounted for by the equity method
Note page 54 Investments in group undertakings and associated undertakings .107 55 Other loans by security ..................................................................107 56 Investments covering unit-linked insurance .................................107 57 Derivative contracts shown on the balance sheet ........................107 Holding Business Assets 58 Loans and advances to central banks included in loans and advances to credit institutions .......................................................108 59 Loans and advances to customers ................................................108 60 Subordinated loans ........................................................................108 61 Debt securities ...............................................................................108 62 Shares and participations ..............................................................109 63 Movements in shares and participations held as financial fixed assets and in tangible assets .................................109 64 Intangible assets ............................................................................110 65 Properties and shares in property companies ..............................110 66 Prepayments and accrued income ...............................................111 67 Movements in consolidated capital and reserves .........................112 68 Preferred capital notes ..................................................................112 69 Movements in parent company capital and reserves ....................113 Banking and Investment Services Liabilities 70 Unamortised discounts and premiums on liabilities ....................114 71 Debt securities in issue .................................................................114 72 Other liabilities ..............................................................................114 73 Accruals and deferred income ......................................................114 74 Subordinated liabilities ..................................................................114 75 Maturity analysis of assets and liabilities, by remaining maturity 115 76 Assets and liabilities denominated in domestic and foreign currencies .........................................................................116 77 Deferred tax ...................................................................................116 78 Assets pledged as collateral security and secured liabilities as well as other assets pledged on behalf of the company and other group undertakings .......................................................116 79 Pension liabilities ..........................................................................117 80 Rental commitments .....................................................................117 81 Off-balance sheet items ................................................................117 82 Derivative contracts ......................................................................117 83 Asset management services .........................................................118 Property & Casualty Insurance Liabilities 84 Technical provisions .......................................................................119 85 Obligatory provisions .....................................................................119 86 Deferred tax ...................................................................................119 87 Contingent liabilities, pledged assets and derivatives ..................120 Life Insurance Liabilities 88 Technical provisions .......................................................................121 89 Long-term liabilities (5 years or longer) .......................................121 90 Deferred tax ...................................................................................121 91 Contingent liabilities, pledged assets and derivatives ..................122 Holding Business Liabilities 92 Unamortised discounts and premiums on liabilities ....................123 93 Debt securities in issue .................................................................123 94 Other liabilities ..............................................................................123 95 Accruals and deferred income ......................................................123 96 Subordinated liabilities ..................................................................124 97 Maturity analysis of assets and liabilities, by remaining maturity .125 98 Assets and liabilities denominated in domestic and foreign currencies .........................................................................126 99 Deferred tax ...................................................................................126 100 Assets pledged as collateral security and secured liabilities as well as other assets pledged on behalf of the company and other group undertakings .................................127 101 Pension liabilities ..........................................................................127 102 Rental commitments .....................................................................127 103 Off-balance sheet items ................................................................127 104 Derivative contracts .......................................................................127 105 other liabilities and contingent liabilities ......................................128 Sampo Group 106 Staff numbers ................................................................................129 107 Emoluments of members of administrative and supervisory bodies .........................................................................129 108 Loans and advances to and guarantees on behalf of members of administrative and supervisory bodies .....................130 109 Group subsidiaries .........................................................................131 110 Associated undertakings of the group ..........................................133 111 Elimination items in the consolidated balance sheet ...................134
Property & Casualty Insurance Business EURm 2004 13 Net investment income INVESTMENT INCOME Income from investments in associated undertakings
Premiums from non-profit policies 1 1 Premiums from with-profit policies 251 300 Premiums from unit-linked insurance 285 221
Arising from appropriations –36 0 Arising from consolidation procedure –116 1 Included in the balance sheets of Group undertakings 114 –5
Interest receivable –5 –5 Interest payable 9 7 Net income from financial operations 5 2
Acquisition cost, 1 Jan. 391 0 Increase 32 Decrease –73 0
Accumulated depreciation, 1 Jan. –50 Accumulated depreciation on decreases and appropriations 1 Depreciation for the financial period –6
Life Insurance Business 53 Shares and participations in other than subsidiaries and associated companies
Other subordinated liabilities 54 35 of which amount of perpetuals 77 83 Due to Group undertakings – –
Less than 3 months 12,535 11,932 Liabilities to credit institutions and central banks 257 178 Liabilities to customers 9,849 9,982 Debt securities in issue 2,429 1,772
Written For other purposes underlying instruments 147 390 fair value 0 1
The currenct values of option contracts include received and paid premiums. Negative valuation differences of derivative contracts made for other than hedging purposes have been charged to the Profit and Loss Account (fair value = 0).
Assets Loans and advances to credit institutions 67 0 67 0 Loans and advances to customers 13 – 4 – Debt securities 99 – 121 – Other assets 1,057 – 1,436 –
Issued by other than public bodies –100 –116 Prepayments and accrued income –33 0 Other assets –6 –4