2015-11-05 08:30:00 CET
2015-11-05 08:30:55 CET
REGULATED INFORMATION
Sampo - Interim report (Q1 and Q3)
Sampo Group's Interim Report for January-September 2015
SAMPO PLC INTERIM REPORT 5 November 2015 at 9:30 am
Sampo Group's Interim Report for January-September 2015
Sampo Group's profit before taxes for January - September 2015 amounted to EUR
1,475 million (1,313). The total comprehensive income for the period, taking
changes in the market value of assets into account, decreased to EUR 1,031
million (1,099).
* Earnings per share rose to EUR 2.31 (2.05). Marked-to-market EPS decreased
to EUR 1.84 per share (1.96). The return on equity (RoE) for the Group was
12.6 per cent (13.6). Net asset value per share on 30 September 2015
amounted to EUR 22.77 (22.63). The fair value reserve after tax on the Group
level decreased to EUR 831 million (1,017).
* Profit before taxes for the P&C insurance operations increased to EUR 756
million (711). Combined ratio improved to 84.6 per cent (87.8) with a
positive impact of 1.5 percentage points by the non-recurring items booked
in the second quarter of 2015. Excluding the non-recurring items, combined
ratio for January - September 2015 was 86.1 per cent. Comprehensive income
for the period decreased to EUR 434 million (532) and return on equity was
18.6 per cent (22.2).
* Sampo's share of the profit of its associated company Nordea for January -
September 2015 amounted to EUR 577 million (501). Nordea's operating profit
was up 13 per cent in local currencies and 11 per cent in euros from last
year excluding non-recurring items and its fully loaded Basel III Common
equity tier 1 (CET1) capital ratio rose to 16.3 per cent at the end of the
third quarter. Credit quality remains solid and loan loss ratio amounted to
13 basis points.
* Profit before taxes for the life insurance operations was EUR 132 million
(112). In the third quarter of 2015 the discount rate reserve was extended
to cover 2018. The rates used for 2015, 2016, 2017 and 2018 are now 1.0 per
cent, 1.25 per cent, 1.5 per cent and 3.0 per cent, respectively. The
comprehensive income decreased to EUR 50 million (103). Return on equity
decreased to 5.3 per cent (10.8).
KEY FIGURES
1-9/ 1-9/ Change, % 7-9/ 7-9/ Change, %
EURm 2015 2014 2015 2014
Profit before taxes 1,475 1,313 12 460 452 2
P&C insurance 756 711 6 245 228 7
Associate (Nordea) 577 501 15 159 192 -17
Life insurance 132 112 18 52 40 31
Holding (excl. Nordea) 12 -10 - 5 -7 -
Profit for the period 1,292 1,149 12 398 400 0
Change Change
Earnings per share, EUR 2.31 2.05 0.26 0.71 0.71 0
EPS (incl. change in FVR) EUR 1.84 1.96 -0.12 -0.21 0.55 -0.76
NAV per share, EUR *) 22.77 22.63 0.14 - - -
Average number of staff (FTE) 6,739 6,744 -5 - - -
Group solvency ratio, % *) 192.0 187.4 4.6 - - -
RoE, % 12.6 13.6 -1.0 - - -
*) comparison figure from 31 December 2014
The figures in this report are not audited. 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 1-9/2015 1-6/2015 1-3/2015 1-12/2014 1-9/2014
EUR 1 = SEK
Income statement (average) 9.3709 9.3416 9.3805 9.1011 9.0420
Balance sheet (at end of period) 9.4083 9.2150 9.2901 9.3930 9.1465
DKK 1 = SEK
Income statement (average) 1.2567 1.2530 1.2593 1.2205 1.2118
Balance sheet (at end of period) 1.2612 1.2352 1.2437 1.2616 1.2289
NOK 1 = SEK
Income statement (average) 1.0646 1.0809 1.0746 1.0893 1.0924
Balance sheet (at end of period) 0.9878 1.0482 1.0674 1.0388 1.1266
THIRD QUARTER 2015 IN BRIEF
Sampo Group's profit before taxes for the third quarter 2015 amounted to EUR
460 million (452). Earnings per share was stable at EUR 0.71 (0.71). Marked-to-
market earnings per share decreased to EUR -0.21 (0.55).
Net asset value per share decreased EUR 2.24 during the third quarter of 2015
and was EUR 22.77. The decrease is due to the negative development of the
valuation difference of Nordea holding corresponding to EUR 2.11 in Sampo's net
asset value per share and the weak capital market development in general.
P&C operations achieved a third quarter combined ratio of 83.8 per cent (86.9).
Profit before taxes increased to EUR 245 million (228). Share of the profits of
the associated company Topdanmark amounted to EUR 13 million (18).
Sampo's share of Nordea's third quarter 2015 net profit amounted to EUR 159
million (192).
Profit before taxes for the life insurance operations was EUR 52 million (40).
Premiums written decreased 14 per cent to EUR 162 million from EUR 188 million
at the corresponding period a year ago.
CHANGE IN REPORTING PRACTICES AS OF 1 JANUARY 2016
The Finnish Parliament has passed changes to the Securities Markets Act
implementing the amendments to the Transparency Directive. The changes will
enter into force on 26 November 2015. After the amendments have entered into
force listed companies no longer have an obligation to publish quarterly reports
for the first and the third quarter. The companies only have to publish a yearly
and a half-yearly report.
The Nasdaq Helsinki stock exchange is also introducing corresponding changes to
their rules. Sampo Group has decided on a new reporting policy that better takes
the special features of its operations, industry practices and investor
expectations into account. For more details see Sampo Group's Disclosure Policy
updated by the Board of Directors on 5 November 2015 and available at
www.sampo.com/governance/disclosure-policy.
As of 2016 Sampo Group's first and third quarter reports will be published in an
abridged format. Investor information will not be weakened by the change and the
consistency in reporting will not suffer.
BUSINESS AREAS
P&C insurance
Profit before taxes for the P&C insurance operations increased to EUR 756
million (711) in January - September 2015. Combined ratio improved to 84.6 per
cent (87.8) while risk ratio deteriorated to 67.1 per cent (65.4), impacted by
the two non-recurring items; lowering of the annuities discount rate in Finland
and the Norwegian pension reform, booked in the second quarter of 2015.
Excluding the non-recurring items, combined ratio for January - September 2015
was 86.1 per cent. Topdanmark's profit contribution for January - September
2015 was EUR 37 million (44).
Technical reserves relating to prior year claims were strengthened by EUR 83
million in January - September 2015 (EUR 18 million released in the comparison
period) explained by the discount rate changes of EUR 112 million. Return on
equity (RoE) decreased to 18.6 per cent (22.2) and the fair value reserve on 30
September 2015 to EUR 390 million (507).Technical result amounted to EUR 522
million (441). Insurance margin (technical result in relation to net premiums
earned) improved to 16.0 per cent (13.1).
The lowering of the annuities discount rate in Finland during the second quarter
affected all business areas' results in Finland negatively and weakened the
Finnish country specific result substantially in January - September 2015. In
Sweden, risk ratio improved by 10.1 percentage points supported by a positive
large claims outcome compared to the previous year. Swedish discount rate used
to discount the annuity reserves decreased 1 basis point to 0.40 per cent by the
end of September and had a EUR 1 million negative effect on the Swedish result
in the third quarter of 2015. Total large claims ended up EUR 6 million better
than expected.
Gross written premiums decreased to EUR 3,659 million (3,724). Adjusted for
currency, premium growth was slightly positive. Growth was positive in business
areas Private and Baltic, and negative in business areas Commercial and
Industrial.
Cost ratio improved to 17.6 per cent (22.5) and expense ratio to 11.8 per cent
(16.6), both impacted by the positive effect of the non-recurring reform of the
pension system in If Norway booked in the second quarter of 2015. Excluding the
non-recurring item the cost ratio was 22.3 per cent and expense ratio 16.5 per
cent.
On 30 September 2015, the total investment assets of If P&C amounted to EUR
11.5 billion (11.5), of which fixed income investments constituted 74 per cent
(75), money market 14 per cent (13) and equity 12 per cent (12). Net income from
investments amounted to EUR 234 million (278). Investment return marked-to-
market for January-September 2015 was 0.9 per cent (3.6). Duration for interest
bearing assets was 1.0 year (1.0) and average maturity 2.6 years (2.4). Fixed
income running yield was 1.8 per cent (2.5).
Associated company Nordea Bank AB
On 30 September 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 8.24 per share. The closing
price at the end of September 2015 was EUR 9.91. Nordea is accounted as an
associated company in Sampo Group's accounts.
Nordea's deposit margins continue to be under pressure and lending growth
remains low. In January-September 2015, net interest income was down 4 per cent
in local currencies and 6 per cent in euros from last year.
Operating profit was up 13 per cent in local currencies and 11 per cent in euros
from last year excluding non-recurring items. Cost/income ratio was down 3.1
percentage points to 46.4 per cent. Total income was up 4 per cent in local
currencies and 2 per cent in euros from last year.
Total expenses were down 2 per cent in local currencies and 4 per cent in euros
from previous year excluding non-recurring items.
Net loan loss provisions decreased to EUR 337 million, corresponding to a loan
loss ratio of 13 bps (15 bps for the first nine months 2014).
Net profit increased 15 per cent both in local currencies and in euros and
totalled EUR 2,814 million. Currency fluctuations had a reducing effect of 2
percentage points on income and expenses and approx. -3 percentage points on
loan and deposit volumes compared to first nine months of 2014.
Nordea continues to see a good inflow in savings and investment operations,
despite declining asset prices. Assets under management are up EUR 19 billion or
7 per cent compared to twelve months ago, fully driven by strong inflow.
The Group's Basel III Common equity tier 1 (CET1) capital ratio increased to
16.3 per cent at the end of the third quarter 2015 from 16.0 per cent at the end
of the second quarter 2015. The CET1 capital ratio was negatively affected by
currency effects in the CET1 capital, offset by strong profit generation and
lower risk exposure amount. The tier 1 capital ratio increased to 18.2 per cent
and the total capital ratio increased from 20.7 per cent to 21.3 per cent.
Further information on Nordea Bank AB and its January-September 2015 result is
available at www.nordea.com.
Life insurance
Profit before taxes in life insurance for January-September 2015 amounted to EUR
132 million (112). In the third quarter of 2015 the discount rate reserve was
extended to cover 2018, which had a negative profit impact of EUR 13 million in
the third quarter. The rates used for 2015, 2016, 2017 and 2018 are thus 1.0 per
cent, 1.25 per cent, 1.5 per cent and 3.0 per cent, respectively. All in all,
Mandatum Life has increased its technical reserves with a total of EUR 224
million (135) due to low level of interest rates. The figure does not take into
account the reserves of EUR 232 million relating to the segregated fund.
Return on equity (RoE) decreased to 5.3 per cent (10.8) mostly as a consequence
of increases in the discount rate reserves. The total comprehensive income for
the period, taking changes in the market value of assets into account, decreased
to EUR 50 million (103) after tax. The fair value reserve amounted to EUR 450
million (508).
Premium income in January - September 2015 rose 9 per cent to EUR 838 million
(772). The overall market share in Finland amounted to 17.3 per cent (17.4). The
expense result for January - September of 2015 rose to an all-time high and was
EUR 20 million (15). Risk result amounted to EUR 15 million (13).
The unit-linked reserves amounted to EUR 5.6 billion (5.3) at the end of
September 2015, down EUR 0.3 billion from the record level at the end of March
2015 because of the difficult capital market conditions. Net investment income
from unit-linked investments was EUR 23 million (258).
The with profit reserves decreased to EUR 5.0 billion (5.1), of which the
original Mandatum Life with profit reserves constituted EUR 3.8 billion (3.8)
and the segregated fund EUR 1.2 billion (1.2). The amount of higher guarantee
with profit reserves (3.5 and 4.5 per cent) continued to decrease according to
plan, i.e. EUR 154 million in the first three quarters of 2015 but the increase
in the reserves for decreased discount rate kept the overall reserves almost
unchanged.
The assets covering Mandatum Life's original with profit liabilities on 30
September 2015 amounted to EUR 5.3 billion (5.3) at market values. 45 per cent
(32) of the assets are in fixed income instruments, 10 per cent (23) in money
market, 29 per cent (30) in equities and 16 per cent (15) in alternative
investments. The investment return marked-to-market for January - September
2015 was 3.7 per cent (3.9). The duration of fixed income assets at the end of
September 2015 was 2.0 years (1.6) and average maturity 2.7 years (1.9). Fixed
income running yield was 3.2 per cent (3.5).
The assets covering the segregated fund amounted to EUR 1.2 billion (1.3), of
which 69 per cent (48) was in fixed income, 11 per cent (33) in money market,
10 per cent (8) in equities and 10 per cent (11) in alternative investments.
Segregated fund's investment return marked-to-market for January - September
2015 was 2.3 per cent. At the end of September 2015 the duration of fixed income
assets was 2.1 years and average maturity 3.6 years. Fixed income running yield
was 1.3 per cent.
Holding
The segment's profit before taxes amounted in January - September 2015 to EUR
589 million (491), of which EUR 577 million (501) comes from Sampo's share of
Nordea's January - September 2015 profit. The segment, excluding share of
Nordea's profit, reported a pre-tax profit of EUR 12 million (-10). Swedish
krona exchange rate changes affected the profit positively in the third quarter
by EUR 11 million and for January - September 2015 the effect of all currency
changes together was EUR 24 million.
Sampo plc's debt financing on 30 September 2015 amounted to EUR 2,284 million
(2,192) and interest bearing assets to EUR 630 million (1,233). Interest bearing
assets include bank accounts, EUR 503 million of hybrid capital and subordinated
debt instruments issued by the subsidiaries and associates and EUR 21 million of
other fixed income instruments. During January - September 2015 the net debt
increased to EUR 1,654 million (960). The net debt calculation only takes into
account interest bearing assets and liabilities. Gross debt to Sampo plc's
equity was 35 per cent (31) and financial leverage 26 per cent (24).
As at 30 September 2015 financial liabilities in Sampo plc's balance sheet
consisted of issued senior bonds and notes of EUR 1,984 million (1,888) and EUR
300 million (305) of outstanding CPs issued. The average interest, net of
interest rate swaps, on Sampo plc's debt as of 30 September 2015 was 1.52 per
cent (1.74).
GROUP SOLVENCY
Sampo Group is regarded as a financial and insurance conglomerate according to
the Act on the Supervision of Financial and Insurance Conglomerates (2004/699).
The Act is based on Directive 2002/87/EC of the European Parliament and of the
Council on the supplementary supervision of credit institutions, insurance
undertakings and investment. The Act will be amended as of 1 January 2016 to
correspond to the solvency rules - Solvency II and Basel III.
Insurance operations in Sampo Group are in different phases with regard to
solvency II process.
Mandatum Life will use a standard model for Solvency II calculations. The
company received an approval from Finnish FSA on 11 August 2015 to use
transitional measures on technical provisions. At the end of September 2015
after transitional measures, the estimated own funds (OF) of EUR 1,860 million
exceed Solvency Capital Requirement (SCR) of EUR 1,189 and coverage ratio is
strong at 156 per cent. Without transitional measures on technical reserves the
coverage ratio would have been 100 per cent.
If P&C Group has over a number of years used its internal economic capital model
to estimate the amount of capital needed to cover its risks. Since 2011
development of internal model has been conducted as part of the so called pre-
application process with authorities to correspond to the extent possible to
Solvency II requirements. As a result If P&C Group aims to use a partial
internal model for Solvency II to calculate its external SCR. An application for
the approval of the model was submitted to the authorities in June 2015.
The approval process will not be finalized before 1 January 2016. If P&C Group
will use a standard model for Solvency II as of 1 January 2016 and then switch
to the partial internal model once it has been approved by the authorities. The
standard model has roughly a EUR 460 million higher capital requirement than the
partial internal model. However, If P&C Group has an A rating from S&P which
will continue to require significantly more capital and therefore the use of
standard model has no practical implications on the Group's capital position. On
30 September 2015 If P&C Group's Solvency II capital requirement under standard
model would have been EUR 2,136 million and own funds of EUR 3,650 million.
Calculated with the partial internal model figures would have been EUR 1,676
million and EUR 3,830 million, respectively.
OUTLOOK
Outlook for the rest of 2015
Sampo Group's business areas are expected to report good operating results for
2015.
However, the marked-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 full-year combined ratio
of 86 - 88 per cent excluding the positive total 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 mainly through its separately managed major business units.
Parent Company Sampo plc's contribution to risks is minor. Major risks affecting
the Group's profitability and its variation are market, credit, insurance and
operational risks which are quantified independently by the major business
units.
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 also have a 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, +1 855 716 1597, +46 (0)8 566 42 702 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 Full-Year Report for 2015 on 10 February 2016.
Distribution:
Nasdaq Helsinki
The principal media
Financial Supervisory Authority
www.sampo.com
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