2015-05-07 08:30:00 CEST
2015-05-07 08:31:06 CEST
REGULATED INFORMATION
Sampo - Interim report (Q1 and Q3)
Sampo Group's results for January - March 2015
SAMPO PLC INTERIM REPORT 7 May 2015 at 9.30 am
SAMPO GROUP'S RESULTS FOR JANUARY - MARCH 2015
Sampo Group's profit before taxes for January - March 2015 rose to EUR 487
million (396). The total comprehensive income for the period, taking changes in
the market value of assets into account, increased to EUR 701 million (374).
* Earnings per share amounted to EUR 0.78 (0.63) and mark-to-market EPS to EUR
1.25 per share (0.66). The return on equity for the Group was 24.8 per cent
(13.7).
* Net asset value per share on 31 March 2015 was EUR 27.02 (24.06) and the
fair value reserve after tax on the Group level increased to EUR 1,289
million (1,017).
* P&C insurance operations achieved its best-ever first quarter combined
ratio, which amounted to 89.2 per cent (90.3). The profit before taxes
increased to EUR 200 million (194). Comprehensive income for the period
increased to EUR 265 million (209) and return on equity was 35.1 per cent
(27.5).
* The Board of If's Swedish subsidiary has today made a decision to amend the
existing pension system in If Norway. As a result of the decision there will
be a non-recurring positive effect of approximately EUR 155 million in Sampo
Group's second quarter 2015 results. The Board of If's Finnish subsidiary
has at the same time made a decision to lower the discount rate used in
discounting annuities in Finland from 2.0 per cent to 1.5 per cent. The
lowering takes place in the second quarter of 2015 and will increase
technical reserves by approx. EUR 110 million.
* Nordea is accounted for as an associated company and Sampo's share of
Nordea's profit for January - March 2015 amounted to EUR 223 million (170).
* Profit before taxes for the life insurance operations amounted to EUR 39
million (37). The interest rate used to discount with profit liabilities in
2016 was lowered to 2.25 per cent. The interest rate used in 2015 is 2.00
per cent. The comprehensive income increased to EUR 171 million (18). The
return on equity at market value was 50.3 per cent (6.1).
KEY FIGURES 1-3/2015 1-3/2014 Change, %
EURm
Profit before taxes 487 396 23
P&C insurance 200 194 3
Associate (Nordea) 223 170 31
Life insurance 39 37 5
Holding (excl. Nordea) 26 -4 -
Profit for the period 461 351 31
Change
Earnings per share, EUR 0.78 0.63 0.15
EPS (incl. change in FVR) EUR 1.25 0.66 0.59
NAV per share, EUR *) 27.02 24.06 2.96
Average number of staff (FTE) 6,711 6,731 -20
Group solvency ratio, % *) 193.0 182.9 10.1
RoE, % 24.8 13.7 11.1
*) comparison figure from 31.12.2014
Income statement items are compared on a year-on-year basis whereas comparison
figures for balance sheet items are from 31 December 2014 unless otherwise
stated.
Sampo follows the disclosure procedure enabled by the Finnish Financial
Supervisory Authority and hereby publishes its Interim Report attached as a PDF
file to this stock exchange release. The Interim Report is also available at
www.sampo.com/result.
Exchange rates used in
reporting
1-3/2015 1-12/2014 1-9/2014 1-6/2014 1-3/2014
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EUR 1 = SEK
Income statement (average) 9.3805 9.1011 9.0420 8.9592 8.8598
Balance sheet (at end of 9.2901 9.3930 9.1465 9.1762 8.9483
period)
-------------------------------------------------------------------------------
DKK 1 = SEK
Income statement (average) 1.2593 1.2205 1.2118 1.2001 1.1865
Balance sheet (at end of 1.2437 1.2616 1.2289 1.2308 1.1986
period)
-------------------------------------------------------------------------------
NOK 1 = SEK
Income statement (average) 1.0746 1.0893 1.0924 1.0823 1.0574
Balance sheet (at end of 1.0674 1.0388 1.1266 1.0920 1.0840
period)
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BUSINESS AREAS
P&C insurance
Profit before taxes for P&C insurance increased to EUR 200 million (194) for
January - March 2015. Combined ratio improved to 89.2 per cent (90.3) and risk
ratio to 66.6 per cent (67.5). EUR 3 million (6) was released from technical
reserves relating to prior year claims. Topdanmark's profit contribution for the
first quarter of 2015 was EUR 12 million (11).
Technical result amounted to EUR 124 million (124). In business area Private,
technical result amounted to EUR 72 million (76), in Commercial EUR 30 million
(33), in Industrial EUR 13 million (7) and in the Baltic business area EUR 5
million (5). Insurance margin (technical result in relation to net premiums
earned) improved to 11.6 per cent (11.1). Swedish discount rate used to discount
the annuity reserves decreased 0.73 percentage points from the end of 2014 to
-0.15 per cent by the end of March 2015. This affected the Swedish result by EUR
-51 million in January-March 2015.
Return on equity (RoE) increased to 35.1 per cent (27.5) and fair value reserve
on 31 March 2015 increased from the end of 2014 to EUR 627 million (507).
Gross written premiums decreased to EUR 1,669 million (1,714). Adjusted for
currency, premiums decreased 0.4 per cent. Growth was positive in business areas
Private and Baltic, and slightly negative in business areas Commercial and
Industrial. Cost ratio improved to 22.6 per cent (22.8) and expense ratio
remained at 16.8 per cent (16.8).
On 31 March 2015 the total investment assets of If P&C amounted to EUR 11.8
billion (11.5), of which fixed income investments constituted 77 per cent (75),
money market 9 per cent (13) and equity 13 per cent (12). Net income from
investments amounted to EUR 79 million (81). Investment return mark-to-market
for January-March 2015 was 2.0 per cent (1.7). Duration for interest bearing
assets was 0.9 years (1.0) and average maturity 2.4 years (2.4). Fixed income
running yield was 2.2 per cent (2.8).
Norwegian statutory and occupational pension systems have gone through
substantial changes during the last few years. In order to adapt to changed
pension conditions and to reduce the pension liability risk, the Board of
Directors of If P&C Insurance Ltd (publ), If's Swedish insurance subsidiary, has
today decided to amend the Norwegian collective occupational pension scheme for
its own employees with effect from 1 January 2016. Employees currently covered
by the defined benefit pension scheme and born in 1958 or later will be
transferred to a defined contribution pension scheme. In connection with the
transition to the defined contribution pension scheme the employees and all
current pensioners will receive a paid-up policy for their rights. As a result
of the decision there will be a non-recurring positive financial effect
amounting to about EUR 155 million in Sampo Group's second quarter 2015 results.
In addition the predictability and stability of future pension costs in the
profit and loss account and other comprehensive income increases significantly.
The Board of Directors of If P&C Insurance Company Ltd, If's Finnish insurance
subsidiary has today decided to lower the interest rate used to discount Finnish
annuity reserves from 2.0 per cent to 1.5 per cent. The decision will increase
claims reserve related to annuities by approximately EUR 110 million. This will
take place in the second quarter of 2015 and be reflected in the results by
increasing the risk and claims ratio correspondingly.
All in all, the above decisions will impact the Sampo Group's operating profit
positively by approximately EUR 45 million in the second quarter of 2015 (i.e.
the net effect due to changes in the pension schemes and the lowering of
discount rates) but have no cash flow effects.
Associated company Nordea Bank AB
On 31 March 2015 Sampo plc held 860,440,497 Nordea shares corresponding to a
holding of 21.2 per cent. The average price paid per share amounted to EUR 6.46
and the book value in the Group accounts was EUR 7.85 per share. The closing
price as at end of March 2015 was EUR 11.34.
Net interest income decreased 4 per cent in local currencies (-5 per cent in
EUR) from previous quarter to EUR 1,288 million, mainly due to lower net
interest income in the business areas following pressure on deposit margins.
Net fee and commission income remained at a solid level in the first quarter at
EUR 757 million, unchanged in local currencies from the seasonally strong fourth
quarter (-1 per cent in EUR).
Total expenses in the first quarter amounted to EUR 1,184 million, down 3 per
cent in local currencies (-4 per cent in EUR) from the previous quarter.
Net loan loss provisions were EUR 122 million and the loan loss ratio was 14
basis points (EUR 129 million, 15 basis points in the previous quarter).
Operating profit was up 23 per cent in local currencies (+22 per cent in EUR),
to EUR 1,408 million for the continuing operations. Net profit from the
continuing operations increased 23 per cent from the previous quarter to EUR
1,082 million. Return on equity was 14.3 per cent, up 2.5 percentage points from
the previous quarter.
The Group's fully loaded Basel III common equity tier 1 (CET1) capital ratio
decreased to 15.6 per cent at the end of the first quarter 2015 from 15.7 per
cent at the end of the fourth quarter 2014. The CET1 capital ratio was
negatively affected by 20 basis points due to currency effects, countered by
strong profit generation and the continuous focus on capital management.
The AGM on 19 March 2015 decided on a dividend of EUR 0.62 per share,
corresponding to a payout ratio of 70 per cent of net profit (adjusted for an
impairment charge of EUR 344 million).
Further information on Nordea Bank AB and its January - March 2015 result is
available at www.nordea.com.
Life insurance
Profit before taxes in life insurance for January-March 2015 amounted to EUR 39
million (37). The interest rate used to discount all with profit liabilities in
2016 was lowered to 2.25 per cent. The interest rate used for 2015 is 2 per
cent. Return on equity (RoE) rose to 50.3 per cent (6.1). The total
comprehensive income for the period, taking changes in the market value of
assets into account, increased to EUR 171 million (18) after tax.
Premium income rose to a record high EUR 377 million (244) and the overall
market share in Finland to 18.4 per cent (15.8). The unit-linked reserves were
at an all-time high of EUR 5.9 billion (5.3) at the end of March 2015.
The assets covering Mandatum Life's original with profit liabilities amounted to
EUR 5.5 billion (5.3) at market values. 37 per cent (32) of the assets are in
fixed income instruments, 17 per cent (23) in money market, 31 per cent (30) in
equities, 4 per cent (5) in private equity and 10 per cent (10) in other
investments. The investment return mark-to-market for January - March 2015 was
4.2 per cent (1.1), the duration of fixed income assets at the end of March
2015 was 1.7 years (1.6) and average maturity 2.2 years (1.9). Fixed income
running yield was 3.4 per cent (3.7).
The assets covering the segregated fund amounted to EUR 1.3 billion (1.3), of
which 50 per cent (48) was in fixed income, 28 per cent (33) in money market,
11 per cent (8) in equities, 3 per cent (3) in private equity and 8 per cent (8)
in others. Segregated fund's investment return mark-to-market for January -
March 2015 was 3.2 per cent. At the end of March 2015 the duration of fixed
income assets was 2.3 years and average maturity 2.6 years. Fixed income running
yield was 0.9 per cent.
Holding
The segment's profit before taxes amounted to EUR 249 million (166), of which
EUR 223 million (170) comes from Sampo's share of Nordea's January - March 2015
profit. The segment, excluding share of Nordea's profit, reported a pre-tax
profit of EUR 26 million (-4). Net investment income increased significantly due
to equity and currency gains. The increase in finance costs was due to the
appreciation of Swedish krona.
Sampo plc's debt financing on 31 March 2015 amounted to EUR 2,171 million
(2,192) and interest bearing assets to EUR 1,837 million (1,233). Interest
bearing assets include bank accounts, EUR 501 million of hybrid capital issued
by the subsidiaries and associates and 21 million of other fixed income
instruments. During the first quarter of 2015 the net debt decreased to EUR 334
million (960). Gross debt to Sampo plc's equity was 28 per cent (31).
As at 31 March 2015 financial liabilities in Sampo plc's balance sheet consisted
of issued senior bonds and notes of EUR 1,873 million (1,888) and EUR 298
million (305) of outstanding CPs issued. The average interest, net of interest
rate swaps, on Sampo plc's debt as of 31 March 2015 was 1.65 per cent (1.74).
OUTLOOK
Outlook for the rest of 2015
Sampo Group's business areas are expected to report good operating results for
2015.
However, the mark-to-market results are, particularly in life insurance, highly
dependent on capital market developments. The very low interest rate level also
creates a challenging environment for reinvestment in fixed income assets.
The P&C insurance operations are expected to reach their long-term combined
ratio target of below 95 per cent in 2015 and achieve a combined ratio of 88 -
91 per cent excluding the effect of the Norwegian pension reform and the change
in discount rate for Finnish annuities.
Nordea's contribution to the Group's profit is expected to be significant.
Major risks and uncertainties to the Group in the near term
In its day-to-day business activities Sampo Group is exposed to various risks
and uncertainties which it identifies and assesses regularly.
Major risks affecting the Group's profitability and its variation are market,
credit, insurance and operational risks that can be quantified in most of the
cases by financial measurement techniques based on historical data. Currently
their quantified contributions to the Group's Economic Capital - used as an
internal basis for capital needs - represent normal levels of 34 per cent, 45
per cent, 11 per cent and 9 per cent, respectively.
Uncertainties in the form of major unforeseen events may have an immediate
impact on the Group's profitability. Identification of unforeseen events is
easier than estimation of their probabilities, timing and potential outcomes.
Currently there are a number of widely identified macro-economic, political and
other sources of uncertainty which can in various ways affect financial services
industry negatively.
Other sources of uncertainty are unforeseen structural changes in the business
environment and already identified trends and potential wide-impact events.
These external drivers may have also long-term impact on how business shall be
conducted.
SAMPO PLC
Board of Directors
For more information, please contact:
Peter Johansson, Group CFO, tel. +358 10 516 0010
Jarmo Salonen, Head of Investor Relations and Group Communications, tel.
+358 10 516 0030
Essi Nikitin, IR Manager, tel. +358 10 516 0066
Maria Silander, Communications Manager, tel. +358 10 516 0031
Conference call
An English-language conference call for investors and analysts will be arranged
at 4 pm Finnish time (2 pm UK time). Please call +44 (0)20
3194 0552, +1 8557 161 597, +46 (0)8 5664 2702 or +358 (0)9 8171 0495.
The conference call can also be followed live at www.sampo.com/result. A
recorded version will later be available at the same address.
In addition the Supplementary Financial Information Package is available at
www.sampo.com/result.
Sampo will publish the Interim Report for January - June 2015 on 12 August 2015.
Distribution:
Nasdaq Helsinki
The principal media
Financial Supervisory Authority
www.sampo.com
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