Sampo performed very well in 2014 despite slow economic growth, low interest rates and ever increasing regulation. Unfortunately, one cannot say the same for Europe as a whole.
If operates on a pan-Nordic basis leveraging both scale and capabilities across all areas in If. If’s key success factor is continuous improvement of its operations. Underwriting focus by understanding risk better than competitors, setting the right prices, and offering the best products, has been the strategic theme for more than a decade.
requirement on with-profit technical provisions. In the expense and risk result, Mandatum Life seeks growth through both higher operational efficiency and volume growth. The company’s financial target is to produce an RoE of at least 17.5 per cent.
Employee satisfaction is at a good level and has improved from last year. In a workplace atmosphere survey conducted in November 2014, overall satisfaction was 80 per cent (76). Overall, 88 per cent (81) of the employees regarded Mandatum Life as a very good workplace. The high response rate, 91 per cent, is also indicative of the level of employee satisfaction.
EnEnvirvironmental impact of claims handling:onmental impact of claims handling: In 2014, If handled around 950,000 claims for damaged cars and properties. The correct handling of damaged materials is a key environmental issue. If’s goal is to reuse undamaged parts and increase recycling. As a step towards achieving this, If has implemented stringent environmental standards for its suppliers.
• Business area Commercial in Norway has launched three new environment related insurance products.
Also participating in the meetings were the Auditor's representative, Group CEO, Group CFO, CFO of If P&C, Group Chief Risk Officer and Group Chief Audit Executive.
Information as of 31 December 2014, unless stated otherwise. The CVs of members of the Group
The total fees paid to the auditor for services rendered and invoiced were EUR 2,304,670. In addition, Ernst & Young Oy were paid fees for non-audit services rendered and invoiced totaling EUR 382,779.
Life insurance operations reported for 2014 profit before taxes of EUR 163 million (153). Return on equity (RoE) amounted to 11.4 per cent (18.3). Premium income on own account increased 4 per cent to EUR 1,105 million (1,063) and premiums from unitlinked policies reached an all-time high EUR 961 million (909).
On 31 December 2014 If P&C held 31,476,920 Topdanmark shares, corresponding to over 30 per cent of all votes. All Topdanmark shares held by Sampo Group are concentrated in If P&C Insurance Holding Ltd (publ). The acquisition price is DKK 2.5 billion (EUR 327 million) and the book value in Sampo Group’s balance sheet on 31 December 2014 was EUR 371 million.
Total expenses were down 1 per cent in local currencies (-4 per cent in EUR) compared to 2013 excluding impairment charge and restructuring costs. Staff costs were up 3 per cent in local currencies (largely unchanged in EUR) excluding restructuring costs. In local currencies and excluding non-recurring
The Group’s fully loaded Basel III Common equity tier 1 (CET1) capital ratio increased to 15.7 per cent at the end of the fourth quarter from 15.6 per cent at the end of the third quarter, following strong profit generation and the continuous focus on capital management. The CET1 capital ratio was negatively affected by 10 basis points due to currency effects. The tier 1 capital ratio increased to 17.6 per cent and the total capital ratio increased 0.4 percentage points to 20.7 per cent.
On 30 December 2014 Mandatum Life received Suomi Mutual’s with profit group pension portfolio. The portfolio comprises approximately 2,300 policies and 34,000 members. The amount of transferred assets and liabilities was EUR 1,337 million. Technical provisions include longevity and expense supplements totaling EUR 108 million. Due to the special features of the received portfolio, technical provisions excluding the longevity and expense supplements and related assets have been segregated from the rest of Mandatum Life’s balance sheet. Unless otherwise stated the information on technical provisions and the assets covering the provisions at the end of 2014 include the segregated group pension portfolio. The segregated group pension portfolio did not impact the profit and loss statement in 2014.
Holding segment’s profit before taxes amounted to EUR 669 million (589), of which EUR 680 million (635) relates to Sampo’s share of Nordea’s 2014 profit. Segment’s profit excluding Nordea was EUR -12 million (-45). The finance costs reduced significantly because the average running cost of debt, net of swaps, decreased by 0.50 per cent and the weakening of Swedish krona decreased the value of debt.
Changes in Group Structure Sampo Group’s main structure remained unchanged during 2014.
At its organizational meeting, the Board elected Björn Wahlroos as Chairman and Matti Vuoria as Vice Chairman. The following members were elected to the Nomination and Compensation Committee: Veli-Matti Mattila, Eira Palin-Lehtinen, Matti Vuoria, and Björn Wahlroos (Chairman). Anne Brunila (Chairman), Jannica Fagerholm, Adine Grate Axén, and Per Sørlie were elected to the Audit Committee.
Corporate Responsibility As a listed company, Sampo plc has the responsibility of acting in the best interests of its shareholders, in compliance with legislation and in accordance with sound business practices. Sampo Group's companies follow the common values of ethicality, loyalty, transparency and enterprise in their business operations and contacts with all stakeholders. Insurance is a business where responsibility and trust are inherent in daily customer contacts.
All of If P&C's activities are governed by a strict environmental policy. The essence of this policy is that If P&C will always endeavor to find the most environmentally viable solution for If P&C, its clients, suppliers and partners. Further details on If P&C’s environmental activities can be read from The If Environmental Report 2014 published in March 2015 available at www.sampo.com/environmentalreport.
The average number of Sampo Group’s employees (FTE) in 2014 amounted to 6,739 (6,832). P&C insurance is Sampo Group’s largest business area and employed 91.6 per cent of the personnel in 2014. Life insurance had approximately 7.6 per cent of the work force and the parent company Sampo plc 0.8 per cent.
More detailed information on personnel in Sampo Group is available in the Personnel section of this Annual Report.
YYearear A sharA shareses B sharB shareses TTotalotal Change during yChange during yearear RReason feason for changeor change
Shareholders The number of Sampo plc’s shareholders increased slightly and amounted to 82,817 (82,092) as at 31 December 2014. Approximately 1.3 per cent of shares had not been transferred to the book-entry system.
The following table presents the Board’s and Group Executive Committee’s holdings of Sampo A shares. At the end of 2014, the members of Sampo plc’s Board of Directors and their close family members owned either directly or indirectly 11,924,379
The P&C insurance operations are expected to reach their long-term combined ratio target of below 95 per cent in 2015 by a margin.
Average adjusted number of shares 1,000 558,800558,800 558,800 558,800 559,663 560,121
Business Model and Risk Management Sampo Group companies operate in business areas where a specific feature of value creation is pricing of risks and active management of risk portfolios in addition to sound client services.
• Underwriting risks are selected carefully and priced reflecting their inherent risk levels.
• Diversification is sought actively. • Reinsurance is used effectively to reduce largest exposures.
• Companies’ own risk policies and more detailed instructions related to risk management
CContinuous analyontinuous analysis of opportunities and risksis of opportunities and riskss
Decrease in mortality Life expectancy increase by 1 year Sweden 31.5
Unit-linkUnit-linked ted totalotal 4,4754,475 923923 -459-459 -57-57 00 00 277277 5,1595,159 5050
Sampo plc has a liquidity portfolio consisting mainly of money market instruments and a long-term portfolio including subordinated debt instruments issued by the insurance subsidiaries and the associated companies. The investments of Mandatum Life’s Baltic subsidiary are included in Mandatum Life’s investment assets as equity in all tables and graphs in this Risk Management section.
Settlement risk realizes when one party fails to deliver the terms of a contract with another party at the time of settlement. Settlement risk can be the loss associated with default at settlement and any timing differences in settlement between the two parties. Settlement risks are mitigated effectively by centralized settlement and clearing systems used by Sampo Group companies.
Default risk related to reinsurance counterparties mainly concerns If P&C, as the use of reinsurance in Mandatum Life is relatively limited.
In Mandatum Life, the importance of reinsurance agreements is limited and thus credit risk of reinsurance counterparties in Mandatum Life is immaterial.
The sensitivity of adjusted solvency capital is shown in the table Sensitivity Analysis of Capitalization to Market Risks, If P&C, Mandatum Life and Sampo plc,
Sensitivity Analysis of Capitalization to Market Risks If P&C, Mandatum Life and Sampo plc, 31 December 2014
The Operational Risk Committee (ORC) analyzes and handles operational risks, e.g. in relation to new products and services, changes in processes and risks as well as realized operational risk incidents. Significant observations are reported to the Risk Management Committee and to the Board of Directors quarterly. ORC is also responsible for maintaining and updating the continuity and preparedness plans as well as the Internal Control Policy.
• EC is calculated using a set of calculation methods seen suitable for each risk class.
Capitalization at Group Level Sampo Group’s EC is calculated as the sum of the Group companies’ ECs adjusted by correlation effect. To calculate the Group’s ASC the Group’s Solvency Capital is adjusted by the difference between the book value and the market value of insurance liabilities and equalization provisions. The difference between Group’s ASC and Group’s EC is the difference between actual capital and capital need for current business activities. This difference should not be interpreted as excess capital because the Group’s reported EC is based on other confidence level than what is reflected in individual companies’ capital needs.
If P&C and Mandatum Life participated in EIOPA’s 2014 stress test in June and submitted their first Group ORSA (FLAOR, Forward Looking Assessment of Own
161 Notes to the accounts 161 Summary of significant accounting policies 177 Segment information 184 Notes to the Group’s Financial Statements 250 Sampo plc’s Financial Statements 250 Sampo plc’s income statement 251 Sampo plc’s balance sheet 252 Sampo plc’s statement of cash flows 254 Summary of Sampo plc’s significant accounting policies 255 Notes to Sampo plc’s Financial Statements 264 Approval of the Financial Statements and the Board of Directors’ Report 265 Auditor's Report
Net cash frNet cash from operom operaating activitiesting activities 1,6601,660 230230
The share of associates’ profit or loss, equivalent to the Group’s holding, is presented as a separate line in the income statement. The Group’s share of associate’s changes in other comprehensive income is presented in the Group’s other comprehensive income items.
FFair vair value of inalue of invvesestment prtment property aoperty at 31 Dec.t 31 Dec. 2222 2323
Sampo's share of Nordea's loss/profit consists of the following as of 31 Dec. 2013: Share of loss/profit of the associate 708 662
TTotal fotal fororeign eeign exxchange derivchange derivaativtiveses 3,0083,008 4242 2121 2,1892,189 44 2020
Currency options, bought and sold 193 2 1 0 0 0
Minimum lease paMinimum lease paymentsyments not later than one year 31 32 later than one year and not later than five years 93 99 later than five years 59 78
Lease and sublease payments recognised as an expense in the period - minimum lease payments -22 -25
Minimum lease paMinimum lease paymentsyments not later than one year 1 1 later than one year and not later than five years 1 2
Net cash frNet cash from operom operaating activitiesting activities 821821 354354
Summary of Sampo plc's significant accounting policies The presentation of Sampo Plc's financial statements together with the notes has been prepared in accordance with the Finnish Accounting Act and Ordinance. The accounting principles applied to the separate financial statements of Sampo plc do not materially differ from those of the Group, prepared in accordance with the International Financial Reporting Standards (IFRSs). The financial assets are measured at fair value derived from the markets.
Financial InfFinancial Informaormation and Annualtion and Annual GenerGeneral Meeting in 2015al Meeting in 2015 Sampo will publish three Interim Reports in 2015. The Interim Reports and related supplementary materials are published on Sampo’s website at www.sampo.com/result. Press and stock exchange releases, the monthly updated list of shareholders and other investor information published by Sampo are available on the site as well.