If PIf P&C's C&C's Combined Raombined Ratio Hits Netio Hits Neww RRececorord Ld Leevvelel
If’s vision is to offer insurance solutions that provide customers with security and stability in their daily lives and business operations with such excellence that If is the preferred insurance provider in the Nordic and Baltic markets. This vision is expressed through the customer promise “Relax, we’ll help you”.
Mandatum Life began offering its own wealth management services related to insurance and capital redemption contracts in 2008. These services are primarily focused on high-net-worth individuals, but the comprehensive range of investment baskets and funds is also available to a broad spectrum of private, corporate and institutional customers.
In Mandatum Life’s view, investing in personnel has a major impact on the company’s earnings power. Mandatum Life offers its corporate customers expert services and solutions for rewarding their entire personnel. For example, personnel funds are a key component of the services Mandatum Life provides companies.
Mandatum Life’s result consists of three components: investment result, risk result and expense result. In the expense and risk results, Mandatum Life seeks growth through both higher operational efficiency and volume growth. The company’s financial target is to produce a Return on Equity of at least 17.5 per cent.
Danish insurance company Topdanmark is Sampo plc's associated company. In May 2011 Sampo Group’s holding in Topdanmark exceeded 20 per cent and it started to be accounted for as an associated company. On 7 September 2016 Sampo’s ownership in Topdanmark exceeded one third of all shares, which obliged Sampo to make a mandatory public offer to the other shareholders of Topdanmark to acquire all outstanding shares. The offer period expired on 25 October 2016. At the beginning of February 2017, Sampo held 39,579,226 Topdanmark shares, corresponding to 45.7 per cent of all votes. In Sampo Group’s segment reporting Topdanmark holding is included in the P&C insurance segment.
If P&C Insurance is the leading property and casualty insurer in the Nordic region, with operations in Finland, Sweden, Norway, Denmark and the Baltic countries. If’s operations are divided into four business areas: Private, Commercial, Industrial and Baltic. In Group reporting, the share of profit of Danish insurance company Topdanmark, an associated company of Sampo plc, is reported in the segment P&C insurance.
On 2 January, 2017, the cross border mergers between Nordea Bank AB (publ) and its subsidiary banks in Denmark, Finland and Norway were executed. As a result, all assets and liabilities of the subsidiary banks have been transferred to Nordea Bank AB (publ) and the subsidiaries have been dissolved. The banking business in Denmark, Finland and Norway is now carried out in branches of Nordea Bank AB (publ).
insurance savings of some EUR 0.2 billion. The portfolio transfer is expected to be completed at the earliest at the end of 2017. Mandatum Life and Danske Bank have agreed to continue fund management cooperation during a transitional period which will last at least until the end of 2017 in order to ensure that the transition from Mandatum Life to Danske Bank will be as smooth as possible. From the customers’ perspective, the services will remain unchanged.
Annual DisAnnual Distribution of Ptribution of Personnel bersonnel by Cy Country (FTE Aountry (FTE Avvererageage)) Sampo Group, 2012–2016
In Finland, HR has promoted Employeeship through workshops held in several units. These workshops aimed at establishing a framework for the employees’ responsibility for their own development and motivation. In the workshops, feedback culture was promoted by feedback exercises and self-reflection.
During 2016 HR has continued to work extensively with promoting health and reducing sick leave. During the year, If P&C’s sick leave situation has been stable. Strong actions in Denmark have led to a clear improvement, while the situation in Sweden and Finland has deteriorated somewhat compared to 2015. Also in Norway, sickness absences have increased compared to 2015, but the situation has improved significantly compared to earlier years. In the Baltic countries, the number of sick leave days is very low, but there are signs of increase, something that needs close observation in the future.
In the results of the Great Place to Work Finland study, which measures well-being at work, Mandatum Life’s Finnish operations received an overall rating of 85 per cent in 2016. The result improved by one percentage point compared to the previous year. A particular improvement was seen in the claims Management delivers on its promises 88 per cent (84) and New employees feel welcomed into the organization 93 per cent (89). The response rate for the survey was 91 per cent (90).
Environmental issues are of critical importance and often have a direct impact on the operations of P&C insurance companies. All of If P&C's operations are governed by a strict environmental policy. The essence of this policy is that the most environmentally viable solution for clients, suppliers and partners, as well as the company itself, will always be looked for.
If P&C is also a significant tax payer in the Nordic countries, having paid more than EUR 157 million in corporate taxes in 2015.
Most of Sampo Group’s corporate responsibility work continues to be on the subsidiary level, since that is where the customers and most of the personnel are. The operations of
KKeey Eny Envirvironmental Isonmental Issues fsues for If Por If P&C&C
(Finland's Sustainable Investment Forum). Investment operations linked to the management of customers’ wealth are implemented according to these principles. ESG issues have been incorporated into the investment process, backed by a dialogue with operators, companies and co-operation partners in the sector.
Mandatum Life wishes to increase Finns’ awareness and their possibilities to influence the sufficiency of their income during retirement. Earlier retirement could lead to insufficient pension cover for entrepreneurs, for example, if they have not prepared themselves. The most cost-effective way to save is through a group pension insurance policy provided by the employer. Pension cover that is supplemented by the employer guarantees a better income level during retirement and reduces the need for employees to prepare themselves. Maintaining employees’ work ability and well-being, ability to cope at work and motivation also require companies to make plans at an increasingly earlier stage.
Member of the Board of Directors of Sampo plc since 18 April 2013. Fagerholm holds 2,167 Sampo plc shares directly or through a controlled company.
Group Chief Audit Executive, and releases them from their duties. The Board also decides on the terms and conditions of their employment and on other compensation. In addition, the Board confirms the Group's staff planning targets and monitors their fulfillment, determines the grounds for the Group's compensation system and decides on other farreaching matters concerning the staff.
On 10 February 2016 Sampo plc’s Board of Directors updated Sampo’s Policy on Diversity as regards the Board of Directors of Sampo. According to the Policy, when electing the Board of Directors the aim is to ensure that the Board as a whole for the purpose of its work possesses the requisite knowledge of and expertise in the social, business and cultural conditions of the regions and markets in which the main activities of the Group are carried out. A broad set of qualities and competences, diversity, including age, gender, geographical provenance and educational and professional background, is an important factor to take into consideration. According to the Policy on Diversity, and in compliance with the Corporate Governance Code, it is also important that the person to be elected to the Board shall have the qualifications required for the duties and the possibility to devote a sufficient amount of time to the work.
The Committee convened four times in 2016. The attendance of members at meetings was 100 per cent.
Group Executive Committee The Board of Directors has appointed the Sampo Group Executive Committee and a
PPositions of Tositions of Trusrust 12/31/2016t 12/31/2016 If P&C Insurance Company Ltd, Board Member; If P&C Insurance AS, Board Member; Nobia AB, Board Member; CJSC If Insurance, Board Member
During 2016 the Group CEO participated in the longterm incentive schemes 2011 I and 2014 I for Sampo Group's key employees. The terms of the incentive schemes are available on Sampo's website.
The Group Executive Committee and persons working with interim statements and other financial announcements and persons having access to such documents before publication thereof are under the following restrictions on trading: - persons must obtain a separate written permission in advance for each share related securities transaction they make with the securities of Sampo plc or any of Sampo’s publicly listed subsidiary or affiliate company, - persons must not conduct any transactions relating to the financial instruments of Sampo Group during a closed window of 30 calendar days before the announcement of financial report (so called extended closed window), and - persons are prohibited from having so called shortterm positions which refers to a situation where the period between the acquisition and disposal or the disposal and the acquisition of the same shares is less than one month.
Balance sheet (at the end of period) 9.5525 9.6210 9.4242 9.2253 9.1895
Average number of staff (FTE) 6,180 6,176 4 * Excluding the non-recurring items combined ratio for 2016 would have been 86.1 per cent and 86.5 per cent for 2015. ** Adjusted for non-recurring items the comparison figures for cost and expense ratio would have been 22.3 per cent and 16.6 per cent, respectively.
If P&C is the leading property and casualty insurance company in the Nordic region, with insurance operations that also encompass the 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, Sweden, Norway, Denmark and the Baltic countries. If’s operations are divided into four business areas: Private, Commercial, Industrial and Baltic. The share of profit of Danish insurance company Topdanmark, an associated company of Sampo plc, is reported in the segment
Technical result increased to EUR 658 million (657). Insurance margin (technical result in relation to net premiums earned) improved to 15.5 per cent (15.1).
The minutes of the Annual General Meeting are available for viewing at www.sampo.com.
In 2016 Sampo continued to develop the Group-level non-financial reporting. The three main focus areas were to develop the corporate responsibility organization within the Group, to outline the content of the actual Corporate Responsibility Report and to identify the most relevant corporate responsibility themes for Sampo.
YYearear A sharA shareses B sharB shareses TTotalotal ChangeChange duringduring yyearear RReason feason for changeor change
When Sampo plc’s shares were incorporated to the book-entry system in September 1997 shareholders were obliged to provide the share certificates and request registration of the shares into their book-entry accounts during the registration period set in the General Meeting’s resolution to incorporate the shares into the book-entry system. A joint book-entry account in the name of the Company was opened for those shareholders who did not request the registration of their shares.
The table below illustrates all the ratings of Sampo Group companies at the end of December 2016.
The starting point for the Group’s solvency capital is the consolidated Group equity. The sectoral items are added to it and the intangibles and other deductibles are subtracted from it.
Average adjusted number of shares 1.000 560,000 560,000 560,000 560,000 560,000
Being associated companies, Nordea and Topdanmark are not controlled by Sampo and their risk management is not covered in Sampo Group’s Annual Report. The associated companies do however have a material effect on the Group’s profits, risks and capital needs. Hence, Nordea and Topdanmark are carefully analysed by Sampo as separate businesses and as components of Sampo’s portfolio of Nordic financial companies.
Reputational risk refers to the risk that adverse publicity regarding the company’s business practices or associations, whether accurate or not, causes a loss of confidence in the integrity of the institution. Reputational risk is often a consequence of a materialized operational or compliance risk and often manifests as a deterioration of reputation amongst customers and other stakeholders. Reputational risk is related to all activities shown in the figure Classification of Risks in Sampo Group. As the roots of reputational risk are varied, the tools to prevent it must be diverse and embedded within the corporate culture. The corporate culture, which is based on the core values of ethicality, loyalty, openness and entrepreneurship, is thus seen as an essential tool in preventing reputational risk in Sampo Group. These core values are reflected in Sampo Group’s Corporate Governance system and in how Sampo deals with core stakeholders (i.e. customers, personnel, investors, other co-operation partners, tax authorities and supervisory authorities) and other parties, who may have an interest in Sampo’s business.
Before disclosing regulatory solvency figures, Sampo Group’s principles of capital management is discussed at conceptual level. In a nutshell a balance between profits, risks and capital means that the actual amount of capital – or Own Funds (“OF”) in Solvency II
terminology - is maintained over risk based capital need with a certain buffer; the size of this buffer is dependent on many things but mainly on expected profitability.
Conceptually, GrGroup’oup’s os own fundswn funds is the difference between the market value of assets and liabilities plus the subordinated liabilities. This difference has accrued during the lifetime of the Group and it includes the following main components: • Accrued profits that have not been paid as dividends over the years.
Under normal circumstances Group’s OF by Solvency II and conglomerate rules are close to each other due to the similar treatment of sectoral items.
Sampo Group’s own funds and SCR are presented in the figure Sampo Group Solvency by Solvency II rules, 31 December 2016. Sampo Group’s Ratio of Eligible own funds to group SCR at the end of 2016 was 155 per cent (145).
Reinsurance is used to limit the amount of individual mortality and disability risks. The Board of Directors annually approves the Reinsurance Policy and determines the maximum amount of risk to be retained on the company’s own account. The highest retention of Mandatum Life is EUR 1.5 million per insured. Mandatum Life has catastrophe cover to mitigate the effect of possible catastrophes.
The risk result is followed actively and thoroughly analyzed annually. Mandatum Life measures the efficiency of risk selection and the adequacy of tariffs by collecting information about the actual claims expenditure for each product line and each type of risk and comparing it to the claims expenditure assumed in insurance premiums of every risk cover.
The figure Forecast of With Profit Liabilities, 31 December 2016–31 December 2031 shows the expected trend of existing with profit liabilities.
The weighted average investment return of Group’s investment portfolios (including Sampo plc) in 2016 was 3.9 per cent (3.1).
FixFixed Inced Income Inome Invvesestments in Public Secttments in Public Sectoror Sampo Group, 31 December 2016
Furthermore, the largest direct listed equity exposures are presented in the table Ten Largest Direct Listed Equity Investments, Sampo Group, 31 December 2016.
RReinsureinsurancance Re Rececoovvererables and Pables and Pooled Solutionsooled Solutions If P&C, 31 December 2016 and 31 December 2015
The long-term target for investments is to provide sufficient return to cover the guaranteed interest rate plus bonuses based on the principle of fairness as well as the shareholder’s return requirement with an acceptable level of risk. In the long run, the most significant risk is that fixed income investments will not generate an adequate return compared to the guaranteed rate. In addition to investment and capitalization decisions, Mandatum Life has implemented active measures on the liability side to manage the balance sheet level interest rate risk. The company has reduced the minimum guaranteed interest rate in new contracts, supplemented the technical provisions with discount rate reserves and adjusted policy terms and conditions as well as policy administration processes to enable more efficient interest rate risk management.
In Sampo Group, liquidity risk is managed by the legal entities, which are responsible for liquidity planning and maintaining adequate liquidity buffers. Liquidity risk is monitored based on the expected cash flows resulting from assets, liabilities and other business. In the subsidiaries, the adequacy of liquidity buffers is dependent on the underwriting cash flows. In the parent company, the adequacy of liquidity buffers is dependent also on potential strategic arrangements. A high liquidity is generally preferred. At the end of 2016, the liquidity position in each legal entity was in accordance with internal requirements.
Business units are responsible for the identification, assessment and management of their own operational risks, including organizing adequate internal controls. The Operational Risk Committee (ORC) monitors and coordinates risk management issues regarding operational risks within Mandatum Life, such as policies and recommendations concerning operational risk management. The committee ensures that risks are identified and internal control and risk management have been organized in a proper way. The committee also analyses deviations from operational risk management policies and monitors operational risks identified in the self-assessments as well as in occurred incidents. The committee meets three times a year at a minimum. Significant observations on operational risks are submitted to the Risk Management Committee (“RMC”) and the Board of Directors on a quarterly basis.
Based on both the company and group level information, the Board of Directors of Sampo decides on Group’s capitalization as well as sets the guidelines on the parent company’s capital structure and liquidity reserve. The underlying objective for Sampo is to maintain a prudent capital structure and adequate liquidity in order to be able to arrange financing for strategic projects if needed. Strong liquidity and the ability to acquire financing are essential factors in maintaining Sampo Group’s strategic flexibility.
In addition to the risk specific committees, there are two other committees included in the Risk Governance structure. Their responsibilities are described as follows: • The Ethics Committee (“EC”) discusses and coordinates ethical issues in If P&C. The committee gives recommendations on ethical issues and proposes changes to the Ethics Policy. The Chairman is responsible for the reporting of ethics risk and other issues dealt with by the committee.
The first component is a source of underwriting risk and the second component affects the interest rate risk in the balance sheet.
The risk related to debt and equity instruments issued by a specific issuer can be defined as isissuer specificsuer specific markmarket risket risk that is managed by issuer specific limits.
Spread risk refers to losses resulting from changes in the credit spreads of debt instruments and credit derivatives. Credit spreads are affected when the market’s estimation of the probability of defaults is changing. In essence, credit spread is the market price of default risk which is priced into the market value of the debt instrument. Hence the debt instrument’s value should lower before the event of default occurs. Because of these features, spread risk, including also the default risk of debt instruments, is categorized in Sampo Group under investment portfolio market risks.
• Introduction of discounting for all technical provisions, leading to increased interest rate sensitivity in the technical provisions.
The main differences between technical provisions for solvency purposes and for financial statements are: • Applied discount rate and valuation of guarantees and options; • Contract boundary definitions, particularly how future expected premiums are taken into consideration; • Consideration of future years’ risk and expense result; and
Other provisions than technical provisions and contingent liabilities do not give any additional rise to either new liabilities being recognized for solvency purposes or existing liabilities being recognized differently to their financial statement recognition. Provisions and contingent liabilities as well as pension benefits and operating leases are presented in Sampo's Financial Statements in the Notes to the Accounts. There are no major financial leasing arrangements in Sampo Group.
Net cash frNet cash from inom invvesesting activitiesting activities 343343 582582
The provision for claims outstanding is intended to cover the anticipated future payments of all claims incurred, including claims not yet reported to the
TTotal claims paidotal claims paid -2,828-2,828 7373 -2,755-2,755 -2,734-2,734 6161 -2,689-2,689
Financial asFinancial assets, grsets, group toup totalotal 19,18519,185 307307 350350 -20-20 160160
Net carrying amount aNet carrying amount at 1 Jan.t 1 Jan. 1515 2020
Net carrying amount aNet carrying amount at 1 Jan.t 1 Jan. 547547 1717 564564
Associates that have been accounted for by the equity method at 31 Dec. 2016
Currency options, bought and sold 30 0 0 101 1 0
19 Sensitivity analysis of level 3 financial instruments measured at fair value
Share of associate's other comprehensive income 19 - 19 16 - 16
The anticipated retirement age in connection with life-long pension is 65 years for Sweden and 67 years for Norway. In Sweden, life-long old-age pension following a complete service period is payable at a rate of approximately 10% of the pensionable salary between 0 and 7.5 income base amounts, 65% of salary between 7.5 and 20 income base amounts and 32.5% between 20 and 30 income base amounts. In Norway, life-long old-age pension following a complete service period is payable at a rate of approximately 70% of the pensionable salary up to 12 National Insurance base amounts, together with the estimated statutory oldage pension. Paid-up policies and pension payments from the Swedish plans are normally indexed upwards in an amount corresponding to the change in the consumer price index. However, there is no agreement guaranteeing the value and future supplements in addition to the contractual pension benefit could either rise of fall. Pension payments from the Norwegian plans are were earlier indexed upwards in an amount corresponding to 80 -100% of the change in the consumer price index. Instead, as of January 2016, a paid-up policy is issued on retirement, whereby If is no longer responsible for and has no obligation in respect of future indexation of the insured plans.
TTotal in incotal in income some statattementement 77 -2-2 55 77 -144-144 -137-137
Expected contributions to the defined benefit plans during 2017 and 2016
Lease and sublease payments recognised as an expense in the period - minimum lease payments -33 -20
41 Investments in shares and participations other than subsidiaries and associates
PP&C insur&C insurancancee, t, total sharotal shares and participaes and participationstions 1,5471,547
Shareholder may register for the Annual General Meeting until 19 April 2017 at 4 pm (CET +1): • www.sampo.com/agm • By telephone to +358 10 516 0028 from Monday to Friday, 8 am–4 pm (CET+1)
Sampo will publish two Interim Statements and a Half-year Financial Report in 2017. These quarterly reports and related supplementary materials will be available at www.sampo.com/result. The website also includes releases published by Sampo, monthly updated shareholder data and other investor information. Sampo plc’s Annual General
Please note that you can find the latest information regarding events and dates at www.sampo.com/calendar.