HALF-YEAR FINANCIAL REPORT JANUARY JUNE 2016

Transcription

1 HALF-YEAR FINANCIAL REPORT JANUARY JUNE August 2016

2 CONTENTS Summary 3 Second quarter 2016 in brief 5 Business areas 6 P&C insurance 6 Associated company Nordea Bank AB 9 Life insurance 11 Holding 13 Other developments 14 Personnel 14 Remuneration 14 Shares and share capital 14 Ratings 16 Solvency 16 Debt financing 17 Outlook 18 Outlook for The major risks and uncertainties to the Group in the near-term 18 Tables 20 Group financial review 20 Calculation of key figures 21 Group quarterly comprehensive income statement 23 Statement of profit and other comprehensive income, IFRS 24 Consolidated balance sheet, IFRS 25 Statement of changes in equity, IFRS 26 Statement of cash flows, IFRS 27 Notes 28 Accounting policies 28 Comprehensive income statement by segment for six months ended 30 June Comprehensive income statement by segment for six months ended 30 June Consolidated balance sheet by segment at 30 June Consolidated balance sheet by segment at 31 December Other notes 33 1 Insurance premiums 33 2 Net income from investments 34 3 Claims incurred 37 4 Staff costs 38 5 Intangible assets 39 6 Financial assets 40 7 Derivative financial instruments 41 8 Determination and hierarchy of fair values 42 9 Movements in level 3 financial instruments measured at fair value Sensitivity analysis of level 3 financial instruments measured at fair value Investments related to unit-linked insurance Liabilities for insurance and investment contracts Liabilities from unit-linked insurance and investment contracts Financial liabilities Contingent liabilities and commitments Result analysis of P&C insurance business Sampo plc s income statement and balance sheet (FAS) 54 2

3 Summary 10 August 2016 Sampo Group s results for January June 2016 Sampo Group s profit before taxes for January June 2016 amounted to EUR 893 million (1,015). The total comprehensive income for the period, taking changes in the market value of assets into account, decreased to EUR 607 million (1,147). Earnings per share were EUR 1.40 (1.60). Mark-to-market earnings per share were EUR 1.08 (2.05). The return on equity for the Group was 10.9 per cent (20.9) for January June Net asset value per share on 30 June 2016 amounted to EUR (23.79). A dividend of EUR 2.15 per share was paid in early May. Profit before taxes for the P&C insurance segment amounted to EUR 436 million (511). Combined ratio for January-June 2016 was 83.7 per cent (85.0). The record low combined ratio was impacted by a EUR 72 million release from the Swedish MTPL reserves in the first quarter of The comparison figure is also impacted by non-recurring items. Excluding these combined ratio for January-June 2016 was 87.1 per cent and 87.2 for the corresponding period a year earlier. Return on equity (RoE) was 16.2 per cent (31.2). The contribution of Topdanmark s net profit for the first half of 2016 amounted to EUR 19 million (24). Sampo s share of Nordea s net profit for the first half of 2016 amounted to EUR 364 million (418). Nordea s RoE amounted to 10.8 per cent (13.7). Core Tier 1 ratio (excluding transition rules) strengthened to 16.8 per cent (16.5). In segment reporting the share of Nordea s profit is included in the segment Holding. Profit before taxes in life insurance operations rose to EUR 103 million (81). Return on equity (RoE) decreased to 6.5 per cent (21.8). Key figures EURm 1 6/ /2015 Change,% 4 6/ /2015 Change,% Profit before taxes 893 1, P&C insurance Associate (Nordea) Life insurance Holding (excl. Nordea) Profit for the period Change Change Earnings per share, EUR EPS (incl. change in FVR) EUR NAV per share, EUR *) Average number of staff (FTE) 6,774 6, Group solvency ratio, % *) RoE, % *) comparison figure from The figures in this report are not audited. Income statement items are compared on a year-on-year basis and comparison figures for balance sheet items are from 31 December 2015 unless otherwise stated. 3

4 Exchange rates used in reporting 1 6/ / / / /2015 EUR 1 = SEK Income statement (average) Balance sheet (at end of period) DKK 1 = SEK Income statement (average) Balance sheet (at end of period) NOK 1 = SEK Income statement (average) Balance sheet (at end of period)

5 Second quarter 2016 in brief Second quarter 2016 in brief Sampo Group s profit before taxes for the second quarter 2016 amounted to EUR 477 million (528). Earnings per share amounted to EUR 0.75 (0.82). Marked-to-market earnings per share were EUR 0.72 (0.80). Net asset value per share decreased EUR 3.26 during the second quarter of 2016 and was EUR A dividend of EUR 2.15 per share paid on 3 May 2016 and the change in the valuation difference of Nordea and Topdanmark holdings largely explain the decrease. The second quarter combined ratio in P&C insurance amounted to 84.5 per cent (80.9). Profit before taxes decreased to EUR 220 million (310). Share of the profits of the associated company Topdanmark amounted to EUR 14 million (12). Sampo s share of Nordea s second quarter 2016 net profit amounted to EUR 205 million (195). Profit before taxes for the life insurance operations increased to EUR 51 million (42). Technical reserves were further supplemented by EUR 24 million due to low level of interest rates. Premiums written decreased 17 per cent to EUR 248 million from EUR 299 million at the corresponding period a year ago. 5

6 Business areas Business areas P&C insurance 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 Danish insurance company Topdanmark is If P&C's associated company. Results EURm 1-6/ /2015 Change, % 4-6/ /2015 Change, % Premiums, net 2,558 2, ,040 1,065-2 Net income from investments Other operating income Claims incurred -1,312-1, Change in insurance liabilities Staff costs Other operating expenses Finance costs Share of associates profit/loss Profit before taxes Key figures Change Change Combined ratio, % *) Risk ratio, % Cost ratio, % Expense ratio, % Return on equity, % Average number of staff (FTE) 6,177 6, *) Excluding the non-recurring items combined ratio for the first half of 2016 would have been 87.1 per cent and 87.2 per cent for the first half of P&C insurance had an exceptionally strong first half year in terms of technical result. The decrease in profits is entirely attributable to lower investment income. Low interest rate environment is not only reflected in investment results but also burdens the profits by change in discount rates used for annuities. Solvency position continues to be strong. Profit before taxes for January-June 2016 for the P&C insurance segment amounted to EUR 436 million (511). Combined ratio improved to 83.7 per cent (85.0) and risk ratio to 61.6 per cent (69.7). In the first quarter of 2016 EUR 72 million was released from the Swedish 6

7 Business areas MTPL reserves, following a review of mortality tables by the Swedish insurance federation. This improved the combined ratio for the first half of 2016 by 3.4 percentage points. The comparison figure contains two non-recurring items the reform of the pension system in If Norway and the lowering of the interest rate used in discounting annuities in Finland from 2.0 per cent to 1.5 per cent. Their combined effect on combined ratio was 2.2 percentage points positive. EUR 95 million was released from technical reserves relating to prior year claims in January June In the same period in 2015 the interest rate used in discounting annuities in Finland was lowered resulting in a reserve strengthening of EUR 110 million. Return on equity (RoE) decreased to 16.2 per cent (31.2) and the fair value reserve at the end of June 2016 was EUR 355 million (391). The contribution of Topdanmark s net profit in the first half of 2016 amounted to EUR 19 million (24). Technical result rose to EUR 352 million (342). Insurance margin (technical result in relation to net premiums earned) continued to improve and amounted to 16.6 per cent (15.7). Combined ratio, % Risk ratio, % 1 6/ /2015 Change 1 6/ /2015 Change Private Commercial Industrial Baltic Sweden Norway Finland Denmark Combined ratio, % Risk ratio, % 4 6/ /2015 Change 4 6/ /2015 Change Private Commercial Industrial Baltic Sweden Norway Finland Denmark

8 Business areas The release from the Swedish MTPL reserves in the first quarter of 2016 improved both the Swedish country specific result and the Private and Commercial business area results positively by 10.0, 4.7 and 1.6 percentage points, respectively. BA Industrial s second quarter 2016 was strong and combined ratio for the first six months of 2016 improved to 89.5 per cent (105.7). Large claims in BA Industrial were EUR 21 million better than expected in April-June Total large claims for If P&C were EUR 7 million better than expected in the first half of Swedish discount rate used to discount the annuity reserves decreased to per cent by the end of June 2016 and had a negative effect of EUR 38 million in the first half results. The discount rate was 0.41 per cent at the end of In Finland the discount rate for annuities was unchanged at 1.5 per cent. The comparison figures for the Finnish business are burdened by the change in the Finnish discount rate in the second quarter of Combined ratio for the Norwegian business developed well in the second quarter, largely due to improved large claims development. Gross written premiums amounted to EUR 2,683 million (2,760) in January-June Adjusted for currency, premium growth was -0.3 per cent. Growth was positive in business areas Private and Baltic, and negative in business areas Commercial and Industrial. Operations in Sweden and Denmark showed healthy growth but in Finland and Norway premiums decreased. Cost ratio amounted to 22.2 per cent (15.4) while expense ratio was 16.8 per cent (9.6). The comparison figures are positively impacted, 7.2 percentage points, by the non-recurring reform of the pension system in If Norway. At the end of June 2016, the total investment assets of If P&C amounted to EUR 11.5 billion (11.4), of which fixed income investments constituted 81 per cent (74), money market 7 per cent (12) and equity 12 per cent (13). Net income from investments decreased to EUR 80 million (173). Investment return marked-to-market for January-June 2016 amounted to 0.5 per cent (2.1). Duration for interest bearing assets was 1.5 years (1.2) and average maturity 3.0 years (2.6). Fixed income running yield as at 30 June 2016 was 1.7 per cent (2.0). 8

9 Business areas Liiketoiminta-alueet Associated company Nordea Bank AB Nordea is among the ten largest universal banks in Europe in terms of total market capitalisation and has around 11 million customers, 30,000 employees and approximately 600 branch office locations. The Nordea share is listed on the Nasdaq exchanges in Stockholm, Helsinki and Copenhagen. In Sampo Group s reporting Nordea is treated as an associated company and is included in the segment Holding. Results EURm 1 6/ /2015 Change, % 4 6/ /2015 Change, % Net interest income 2,340 2, ,172 1,274-8 Total operating income* 4,700 5, ,405 2,523-5 Profit before loan losses 2,467 2, ,350 1,338 1 Net loan losses Operating profit* 2,078 2, ,072 1, Diluted EPS, EUR Return on equity*, % *) Excluding non-recurring items (Q2/2016: gain related to Visa Inc. s acquisition of Visa Europe amounting to EUR 151 million net of tax). On 30 June 2016 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 as at end of June 2016 was EUR Despite low growth and turbulent financial markets Nordea s revenues held up well. Margin pressure in net interest income is levelling off and the trend is expected to improve from the second half of Costs are in line with the plans and credit quality remains solid. The following text is based on Nordea s January June 2016 interim report published on 20 July Total income was down 9 per cent in local currencies (-10 per cent in euros) in January June 2016 compared to last year and operating profit was down 20 per cent in local currencies (-21 per cent in euros) from last year excluding non-recurring items. Net interest income was down 4 per cent in local currencies (-7 per cent in euros) from last year. Average lending volumes in local currencies in business areas were up 2 per cent from the first half year Average deposit volumes in local currencies in business areas were up 5 per cent from the first half year Both lending margins and deposit margins are down (EUR -5 million and -89 million respectively) compared to one year ago. Net fee and commission income decreased 3 per cent in local currencies (-4 per cent in euros) and the net result from items at fair value decreased by 28 per cent in local currencies (-27 per cent in euros) from last year. 9

10 Business areas Total expenses were up 2 per cent in local currencies (unchanged in euros) from the previous year excluding non-recurring items and amounted to EUR 2,384 million, in line with the cost target communicated in connection with the 2016 plan. Staff costs were down 2 per cent in local currencies. Net loan loss provisions increased to EUR 238 million, corresponding to a loan loss ratio of 14 basis points (13bps for the first half year 2015). Currency fluctuations had a reducing effect of 2 percentage points on income and 1 percentage point on expenses and -2 percentage point effect on loan and deposit volumes compared to a year ago. Net profit decreased 11 per cent in local currencies (-13 per cent in euros) to EUR 1,778 million. Cost/income ratio was up at 51 per cent from 45 per cent a year earlier. Nordea Group s Basel III Common equity tier 1 (CET1) capital ratio increased 10 bps in the quarter to 16.8 per cent at the end of the second quarter The increase to the CET1 capital ratio was due to an increase in common equity tier 1 capital due to FX movements as well as a decrease in REA of EUR 0.1 billion. At May 17, the Swedish Financial Authority approved the plans for the mergers of the Norwegian, Danish and Finnish banking subsidiaries with Nordea Bank AB. Nordea s intention is to execute on the merger plan in early January Further information on Nordea Bank AB and its January June 2016 result is available at 10

11 Business areas Liiketoiminta-alueet Life insurance Mandatum Life Group comprises Mandatum Life Insurance Co. Ltd., a wholly-owned subsidiary of Sampo plc, operating in Finland, and its five subsidiaries. Parent company, Mandatum Life, is responsible for sales functions and all the functions required by the Insurance Companies Act. The subsidiaries are Mandatum Life Services Ltd, Mandatum Life Investment Services Ltd., Mandatum Life Fund Management S.A., Innova Services Ltd. and Mandatum Life Insurance Baltic SE. Results EURm 1 6/ /2015 Change, % 4 6/ /2015 Change, % Premiums written Net income from investments Other operating income Claims incurred Change in liabilities for inv. and ins. contracts Staff costs Other operating expenses Finance costs Profit before taxes Key figures Change Expense ratio, % Return on equity, % Average number of staff (FTE) Life insurance profits increased despite the challenges in capital markets. In addition the technical reserves were further supplemented in preparation for continuing low interest rate level. Mandatum Life s solvency continues to be strong after the transitional measures. Profit before taxes for life insurance operations increased to EUR 103 million (81) in the first half of The total comprehensive income for the period after tax reflecting the changes in market values of assets decreased to EUR 44 million (144). Return on equity (RoE) amounted to 6.5 per cent (21.8). In the first half of 2016 fair value reserve decreased to EUR 492 million (532). At the end of June 2016 Mandatum Life Group s total technical reserves amounted to EUR 10.7 billion (10.9). In the first half of 2016 with profit reserves decreased to EUR 4.9 billion (5.0). Reserves related to the higher guarantees of 4.5 and 3.5 per cent decreased by EUR 108 million to EUR 3 billion during January June The unit-linked reserves were almost flat at EUR 5.9 billion, which corresponds to 55 per cent (54) of total technical reserves. 11

12 Business areas Mandatum Life has supplemented its technical reserves with a total of EUR 232 million (244) due to low level of interest rates. The figure does not take into account the reserves relating to the segregated fund. The discount rates used for 2016, 2017 and 2018 are 0.5 per cent, 1.0 per cent, and 1.75 per cent, respectively. Discount rate applied for the segregated fund is 0.75 per cent. Mandatum Life Group s investment assets, excluding the assets of EUR 5.8 billion (5.9) covering unit-linked liabilities, amounted to EUR 6.5 billion (6.7) at market values at the end of June The assets covering Mandatum Life s original with profit liabilities on 30 June 2016 amounted to EUR 5.3 billion (5.5) at market values. 45 per cent (47) of the assets are in fixed income instruments, 10 per cent (7) in money market, 29 per cent (29) in equities and 16 per cent (16) in alternative investments. The investment return marked-to-market for January - June 2016 was 1.5 per cent (5.9). The duration of fixed income assets at the end of June 2016 was 2.2 years (2.1) and average maturity 2.7 years (2.8). Fixed income (incl. money market) running yield was 3.1 per cent (2.9). The assets covering the segregated fund amounted to EUR 1.2 billion (1.2), of which 75 per cent (71) was in fixed income, 6 per cent (9) in money market, 12 per cent (12) in equities and 7 per cent (8) in alternative investments. Segregated fund s investment return marked-to-market for January June 2016 was 1.7 per cent (3.0). At the end of June 2016 the duration of fixed income assets was 2.7 years (2.3) and average maturity 4.0 years (3.8). Fixed income (incl. money market) running yield was 1.9 per cent (0.8). Mandatum Life s solvency position is described in the section Solvency. The expense result for life insurance segment amounted to EUR 9 million (13) and the risk result to EUR 10 million (11). Mandatum Life Group s premium income on own account decreased to EUR 492 million (676) in the first half of Mandatum Life s market share in Finland amounted to 21.2 per cent (18.0). 12

13 Business areas Liiketoiminta-alueet Holding Sampo plc owns and controls its subsidiaries engaged in P&C and life insurance. In addition Sampo plc held on 30 June 2016 approximately 21.2 per cent of the share capital of Nordea, the largest bank in the Nordic countries. Nordea is an associated company to Sampo plc. Results EURm 1 6/ /2015 Change, % 4 6/ /2015 Change, % Net investment income Other operating income Staff costs Other operating expenses Finance costs Share of associates profit Profit before taxes Key figures Change Average number of staff (FTE) Holding segment s profit before taxes for January June 2016 amounted to EUR 353 million (425), of which EUR 364 million (418) relates to Sampo s share of Nordea s first half 2016 profit. Segment s profit before taxes excluding Nordea was EUR -11 million (7). The depreciation of Swedish krone against EUR increased Holding segment s profit by EUR 12 million in April-June 2016 which explains the EUR 1 million positive finance costs for the quarter. Sampo plc s holding in Nordea Bank was booked in the consolidated balance sheet at EUR 7.1 billion. The market value of the holding was EUR 6.5 billion, i.e. EUR 7.52 per share, at 30 June In addition the assets on Sampo plc s balance sheet included holdings in subsidiaries for EUR 2.4 billion (2.4). 13

14 Other developments Other developments Personnel The number of full-time equivalent staff in Sampo Group on 30 June 2016 was 6,776 employees compared to 6,782 employees at the end of The number of staff decreased slightly in P&C insurance and increased in life insurance. During the first half of 2016, approximately 91 per cent of the staff worked in P&C insurance, 8 per cent in life insurance and 1 per cent in the Group s parent company Sampo plc. Geographically, 32 per cent worked in Finland, 28 per cent in Sweden, 20 per cent in Norway and 20 per cent in the Baltic and other countries. The average number of employees during January-June 2016 was 6,774. A year earlier the corresponding figure was 6,725. Remuneration In the first half of 2016 no long-term incentive payments were made. At the end of June 2016 Sampo Group had provisioned EUR 41 million (44) for future payments of long-term incentive schemes. The release of provisions for the long-term incentive schemes in force had a positive profit impact of EUR 3 million. EUR 37 million (31), including social costs, was paid as shortterm incentives during January June The terms of the long-term incentive schemes are available at incentiveterms. Sampo Group published a Remuneration Report in March The report has been prepared in accordance with section 7 of the Corporate Governance Code published by the Securities Market Association in October 2010 as permitted by the new Finnish Corporate Governance Code The report is available at Shares and share capital As at 30 June 2016, Sampo plc had 560,000,000 shares, which were divided into 558,800,000 A shares and 1,200,000 B shares. Total number of votes attached to the shares is 564,800,000. Each A share entitles the holder to one vote and each B share entitles the holder to five votes at the General Meeting of Shareholders. A shares have been listed on Nasdaq Helsinki since The Annual General Meeting held on 21 April 2016 authorized the Board to repurchase a maximum of 50,000,000 Sampo A shares. The authorization will be valid until the close of the next Annual General Meeting, nevertheless not more than 18 months after AGM's decision. Sampo plc did not repurchase its own shares during the first half of 2016 and at the end of June 2016, neither Sampo plc nor its Group companies held any Sampo A shares. During the first half of 2016 Sampo plc received altogether 14 notifications of change in holding pursuant to Chapter 9, Section 5 of the Securities Markets Act, of which 12 related to the total number of Sampo A shares or related voting rights owned by BlackRock, Inc. (tax ID ) and its funds directly or through financial instruments. After the end of the reporting period Sampo has received 7 further notifications from BlackRock, Inc. and its funds. 14

15 Other developments The notified changes are illustrated in the table below. Notifications by BlackRock, Inc. in 2016 % of shares and voting rights % of shares and voting rights through financial instruments Date of the change Shares Voting rights Shares Voting rights Shares Voting rights 25 Jan % <5% 0.03% <5% 5.04% <5% 26 Jan <5% <5% 29 Jan % <5% 0.02% <5% 5.02% <5% 1 Feb <5% <5% 3 Feb % <5% 0.02% <5% 5.03% <5% 4 Feb <5% <5% 4 Apr % <5% 0.05% <5% 5.01% <5% 5 Apr % 4.97% 0.03% 0.03% 5.05% 5.00% 6 Apr % 5.04% 0.01% 0.01% 5.09% 5.05% 22 Apr % 4.90% 0.24% 0.24% 5.19% 5.14% 25 Apr % 4.97% 0.17% 0.16% 5.18% 5.14% 26 Apr % 5.19% 0.14% 0.14% 5.38% 5.33% After the end of the reporting period 8 Jul % 4.995% 0.06% 0.06% 5.10% 5.05% 12 Jul % 4.94% 0.11% 0.11% 5.09% 5.05% 22 Jul % 4.98% 0.04% 0.04% 5.06% 5.02% 25 Jul % 4.92% 0.04% 0.04% 5.00% 4.96% 26 Jul % 5.00% 0.04% 0.04% 5.09% 5.04% 28 Jul % 4.97% 0.04% 0.04% 5.05% 5.01% 8 August % 5.03% 0.04% 0.04% 5.11% 5.06% Total In addition Sampo plc received two notifications regarding the total number of Sampo A shares and related voting rights owned by Capital Income Builder (CIB), a 100 per cent owned subsidiary of the Capital Group Companies, Inc., directly or through financial instruments. On 24 February 2016 the number of Sampo shares owned by CIB increased to over five (5) per cent of Sampo plc's entire stock (5.2). The voting rights attached to the shares remained below five (5) per cent of total number of voting rights. On 23 May 2016 the number of shares had increased to 5.10 per cent and the attached voting rights amounted to 5.06 per cent. The details of the notifications are available at 15

16 Other developments Ratings On 20 April 2016 S&P strengthened If P&C s ratings to A+ with a stable outlook. At the same time S&P initiated Sampo plc s rating with A- and a stable outlook. The table below illustrates all the ratings of Sampo Group companies at the end of June Rated company Moody s Standard & Poor s Rating Outlook Rating Outlook Sampo plc Baa2 Positive A- Stable If P&C Insurance Ltd (Sweden) A2 Positive A+ Stable If P&C Insurance Company Ltd (Finland) A2 Positive A+ Stable Solvency As of 1 January 2016 insurance subgroups If P&C and Mandatum Life apply Solvency II rules in their regulatory solvency calculations. Both subgroups use a standard model in calculating their solvency requirements and eligible own funds. On 30 June 2016 If P&C Group s Solvency II capital requirement under standard model amounted to EUR 2,099 million (2,073) and own funds to EUR 3,293 million (3,202). Solvency ratio was stable at 157 per cent (158). S&P rating total capital charge for If P&C Group amounted to EUR 2,950 million (3,058) at the end of June 2016 while the capital base stood at EUR 3,457 (3,455) million. Mandatum Life s solvency ratio after transitional measures remained strong at 154 per cent (158). Own funds of EUR 1,704 million (1,913) exceed Solvency Capital Requirement (SCR) of EUR 1,110 million (1,212) by EUR 594 million. Without transitional measures, own funds would have amounted to EUR 1,237 and the solvency capital requirement EUR 1,268 million leading to a solvency ratio of 98 per cent. 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 was amended as of 1 January 2016 to correspond to Solvency II and Basel III rules. Sampo Group is also treated as a Solvency II Group by the supervisor and therefore has to calculate its solvency requirement and own funds on the Group level based on Solvency II rules. The results of these Group Solvency calculations are submitted to the Finnish FSA on a quarterly basis and published once a year in the Annual Report. Currently the Solvency II Group calculations don t differ materially from the Conglomerate Solvency results. 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. 16

17 Other developments Sampo Group solvency EURm 30 Jun Dec 2015 Group capital 10,830 11,411 Goodwill, other intangibles and deductibles -2,470-3,371 Sectoral items 1,765 2,254 Group's own funds, total 10, Minimum requirements for own funds, total 6,995 7,114 Group solvency 3,130 3,179 Group solvency ratio (Own funds % of minimum requirements) Group s conglomerate solvency ratio (own funds in relation to minimum requirements for own funds) using Solvency II rules for the insurance subsidiaries was 145 per cent (145) as at 30 June More information on Sampo Group s capital policy is available at the Risk Management section of the Annual Report Debt financing Sampo plc s debt financing on 30 June 2016 amounted to EUR 2,462 million (2,302) and interest bearing assets to EUR 1,058 million (1,343). Interest bearing assets include bank accounts, fixed income instruments and EUR 614 million (579) of hybrid capital and subordinated debt instruments issued by the subsidiaries. At the end of the first half of 2016 the net debt amounted to EUR 1,403 million (959). The net debt calculation only takes into account interest bearing assets and liabilities. Gross debt to Sampo plc s equity was 37 per cent (32) and financial leverage 27 per cent (24). At the end of June 2016 financial liabilities in Sampo plc s balance sheet consisted of issued senior bonds and notes of EUR 2,157 million (1,997) and EUR 305 million (305) of CPs issued. The average interest, net of interest rate swaps, on Sampo plc s debt as of 30 June 2016 was 1.35 per cent (1.45). More information on Sampo Group s outstanding debt issues is available at 17

18 Outlook Outlook Outlook for 2016 Sampo Group s business areas are expected to report good operating results for However, the mark-to-market results are, particularly in life insurance, highly dependent on capital market developments. The continuing low interest rate level also creates a challenging environment for reinvestment in fixed income instruments. The P&C insurance operations are expected to reach a combined ratio of per cent excluding the release from the Swedish MTPL reserves. Nordea s contribution to the Group s profit is expected to be significant. The major risks and uncertainties to the Group in the near-term In its current 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's contribution to risks is a minor one. Major risks affecting the Group companies profitability and its variation are market, credit, insurance and operational risks that are quantified independently by the major business units. At the Group level sources of risks are same, but they are not directly additive because of diversification effects. 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 18

19 Information For more information, please contact: Peter Johansson, Group CFO, tel Jarmo Salonen, Head of Investor Relations and Group Communications, tel Essi Nikitin, IR Manager, tel Maria Silander, Communications Manager, tel Press conference & analyst conference call Sampo will arrange a press conference at Hotel Kämp (Conference room Paavo Nurmi, Pohjoisesplanadi 29, Helsinki) today at 12:30 pm Finnish time. The press conference will be held in Finnish. An English-language conference call for investors and analysts will be arranged at 4:00 pm Finnish time (2:00 pm UK time). Please call tel. +44 (0) , +46 (0) , , or +358 (0) The conference call can also be followed live at A recorded version will later be available at the same address. In addition the Supplementary Financial Information Package is available at Sampo will publish the Interim Statement for January September 2016 on 3 November Distribution: Nasdaq Helsinki London Stock Exchange The principal media Financial Supervisory Authority 19

20 Tables HALF-YEAR FINANCIAL REPORT FOR JANUARY JUNE 2016 Group financial review Financial highlights Group 1 6/ /2015 Profit before taxes EURm 893 1,015 Return on equity (at fair value) % Return on assets (at fair value) % Equity/assets ratio % Group solvency ¹) EURm 3,130 3,179 Group solvency ratio ¹) % Average number of staff 6,774 6,725 Property & casualty insurance Premiums written before reinsurers' share EURm 2,683 2,760 Premiums earned EURm 2,132 2,180 Profit before taxes EURm Return on equity (at current value) % Risk ratio ²) % Cost ratio ²) % Loss ratio, excl. unwinding of discounting ²) % Expense ratio ²) % Combined ratio, excl. unwinding of discounting % Average number of staff 6,177 6,148 Life insurance Premiums written before reinsurers' share EURm Profit before taxes EURm Return on equity (at current value) % Expense ratio % Average number of staff Holding Profit before taxes EURm Average number of staff Per share key figures Earnings per share EUR Earnings per share, incl. other comprehensive income EUR Capital and reserves per share EUR Net asset value per share EUR Adjusted share price, high EUR Adjusted share price, low EUR Market capitalisation EURm 20,457 23,660 1) The Group solvency is calculated according to the consolidation method defined in Chapter 3 of the Act on the Supervision of Financial and Insurance Conglomerates (2004/699). The comparison figures for the group solvency key figures are as of 31 December ) The key figures for P&C Insurance are based on activity based costs and cannot, therefore, be calculated directly from the consolidated income statement. The result analysis of P&C insurance is presented in note 16. The number of shares used at the balance sheet date and as the average number during the financial period was 560,000,000. The valuation differences on investment property have been taken into account in calculating the return on assets, return on equity, equity/assets ratio and net asset value per share. The tax component includes the tax corresponding to the result for the period, and the deferred tax liability related to valuation differences on investment property. The total comprehensive income has been used in the calculation of the return on assets and return on equity. The key figures for the insurance business have been calculated in accordance with the decree issued by the Ministry of Finance and the specifying regulations and instructions of the Finance Supervisory Authority. 20

21 Calculation of key figures Return on equity (fair values), % + total comprehensive income valuation differences on investments less deferred tax + total equity valuation differences on investments less deferred tax (average of values 1 Jan. and the end of reporting period) x 100 % Return on assets (at fair values), % + operating profit other comprehensive income before taxes + interest and other financial expense + calculated interest on technical provisions change in valuation differences on investments + balance sheet, total technical provisions relating to unit-linked insurance valuation differences on investments (average of values on 1 Jan. and the end of the reporting period) x 100 % Equity/assets ratio (at fair values), % + total equity valuation differences on investments after deduction of deferred tax + balance sheet total valuation differences on investments x 100 % Risk ratio for P&C insurance, % + claims incurred claims settlement expenses insurance premiums earned x 100 % Cost ratio for P&C insurance, % + operating expenses + claims settlement expenses insurance premiums earned x 100 % Loss ratio for P&C insurance, % claims incurred insurance premiums earned x 100 % Expense ratio for P&C insurance, % operating expenses insurance premiums earned x 100 % Combined ratio for P&C insurance, % Loss ratio + expense ratio Expense ratio for life insurance, % + operating expenses before change in deferred acquisition costs + claims settlement expenses expense charges x 100 % 21

22 Per share key figures Earnings per share profit for the financial period attributable to the parent company s equity holders adjusted average number of shares Equity per share equity attributable to the parent company s equity holders adjusted number of shares at the balance sheet date Net asset value per share + equity attributable to the parent company s equity holders valuation differences on listed associates in the Group valuation differences after the deduction of deferred taxes adjusted number of shares at balance sheet date Market capitalisation number of shares at the balance sheet date x closing share price at the balance sheet date 22

23 Group quarterly comprehensive income statement EURm 4 6/ / / / /2015 Insurance premiums written 1,289 1,734 1,191 1,027 1,364 Net income from investments Other operating income Claims incurred ,090 Change in liabilities for insurance and investment contracts Staff costs Other operating expenses Finance costs Share of associates' profit/loss Profit for the period before taxes Taxes Profit for the period Other comprehensive income for the period Items reclassifiable to profit or loss Exchange differences on translating foreign operations Available-for-sale financial assets Share of other comprehensive income of associates Taxes Total items reclassifiable to profit or loss, net of tax Items not reclassifiable to profit or loss Actuarial gains and losses from defined pension plans Taxes Total items not reclassifiable to profit or loss, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

24 Statement of profit and other comprehensive income, IFRS EURm Note 1 6/ /2015 Insurance premiums written 1 3,022 3,304 Net income from investments Other operating income Claims incurred 3-1,873-2,107 Change in liabilities for insurance and investment contracts ,002 Staff costs Other operating expenses Finance costs Share of associates' profit/loss Profit before taxes 893 1,015 Taxes Profit for the period Other comprehensive income for the period Items reclassifiable to profit or loss Exchange differences Available-for-sale financial assets Share of other comprehensive income of associates Taxes Total items reclassifiable to profit or loss, net of tax Items not reclassifiable to profit or loss Actuarial gains and losses from defined pension plans Taxes 5-8 Total items not reclassifiable to profit or loss, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 607 1,147 Basic earnings per share (eur)

25 Consolidated balance sheet, IFRS EURm Note 6/ /2015 Assets Property, plant and equipment Investment property Intangible assets Investments in associates 7,468 7,679 Financial assets 6, 7, 8, 9, 10 17,431 17,189 Investments related to unit-linked insurance contracts 11 5,806 5,847 Tax assets Reinsurers' share of insurance liabilities Other assets 1,953 1,708 Cash and cash equivalents 1,418 1,997 Total assets 35,310 35,639 Liabilities Liabilities for insurance and investment contracts 12 14,647 14,447 Liabilities for unit-linked insurance and investment contracts 13 5,810 5,841 Financial liabilities 14 2,535 2,375 Tax liabilities Provisions Employee benefits Other liabilities Total liabilities 24,480 24,228 Equity Share capital Reserves 1,531 1,531 Retained earnings 8,836 9,325 Other components of equity Total equity 10,830 11,411 Total equity and liabilities 35,310 35,639 25

26 Statement of changes in equity, IFRS EURm Share capital Legal reserve Invested unrestricted equity Retained earnings 1) Translation of foreign operations 2) Availablefor-sale financial assets 3) Total Equity at 1 Jan ,527 8, ,039 10,924 Changes in equity Recognition of undrawn dividends 8 8 Dividends -1,092-1,092 Share of associate's other changes in equity 3 3 Profit for the period Other comprehensive income for the period Equity at 30 June ,527 8, ,164 10,990 Equity at 31 Jan ,527 9, ,411 Changes in equity Recognition of undrawn dividends 9 9 Dividends -1,204-1,204 Share of associate's other changes in equity 7 7 Profit for the period Other comprehensive income for the period Equity at 30 June ,527 8, ,830 1) IAS 19 Pension benefits had a net effect of EURm -85 (69) on retained earnings. 2) The total comprehensive income includes also the share of the associate Nordea's other comprehensive income, in accordance with the Group's share holding. The retained earnings thus include EURm -69 (45) of Nordea's actuarial gains/losses from defined pension plans. The exchange differences include the share of Nordea's exchange differences EURm 26 (47). Respectively, availablefor-sale financial assets include EURm 12 (-11) of Nordea's valuation differences. 3) The amount recognised in equity from available-for-sale financial assets for the period totalled EURm -143 (361). The amount transferred to p/l amounted to EURm 47 (-215). EURm 16 (10) was transferred to the Segregated Suomi portfolio. The amount included in the translation, available-for-sale and defined benefit plans represent other comprehensive income for each component, net of tax. 26

27 Statement of cash flows, IFRS EURm 1 6/ /2015 Cash and cash equivalent at the beginning of the period 1,997 2,074 Cash flow from/used in operating activities Cash flow from/used in investing activities Cash flow from/used in financing activities -1, Dividends paid -1,189-1,078 Increase of liabilities Decrease of liabilities Cash and cash equivalent at the end of the period 1,418 2,027 The cash flow statement reports cash flows during the period classified by operating, investing and financing activities. Cash flows from operating activities derive primarily from the principal revenueproducing activities. Cash flows from investments in subsidiaries and associated undertakings and those from investments in intangible assets and property, plant and equipment are presented in investing activities. Financing activities include cash flows resulting from changes in equity and borrowings in order to conduct the business. Cash and cash equivalents consist of cash at bank and in hand and shortterm deposits (under 3 months). 27

28 Notes Accounting policies Sampo Group s consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) adopted by the EU. The interim financial statements are presented in accordance with IAS 34 Interim Financial Reporting. In preparing the interim financial statements, the same accounting policies and methods of computation are applied as in the financial statements for Sampo adopted new or revised standards and interpretations at the beginning of the year These standards and interpretations are explained in Sampos accounting policies for the financial year The financial statements are available at Accounting policies 28

29 Comprehensive income statement by segment for six months ended 30 June 2016 EURm P&C insurance Life insurance Holding Elimination Group Insurance premius written 2, ,022 Net income from investments Other operating income Claims incurred -1, ,873 Change in liabilities for insurance and investment contracts Staff costs Other operating expenses Finance costs Share of associates' profit/loss Profit before taxes Taxes Profit for the period Other comprehensive income for the period Items reclassifiable to profit or loss Exchange differences Available-for-sale financial assets Share of other comprehensive income of associates Taxes Total items reclassifiable to profit or loss, net of tax Items not reclassifiable to profit or loss Actuarial gains and losses from defined pension plans Taxes Total items not reclassifiable to profit or loss, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

30 Comprehensive income statement by segment for six months ended 30 June 2015 EURm P&C insurance Life insurance Holding Elimination Group Insurance premius written 2, ,304 Net income from investments Other operating income Claims incurred -1, ,107 Change in liabilities for insurance and investment contracts ,002 Staff costs Other operating expenses Finance costs Share of associates' profit/loss Profit before taxes ,015 Taxes Profit for the period Other comprehensive income for the period Items reclassifiable to profit or loss Exchange differences Available-for-sale financial assets Share of other comprehensive income of associates Taxes Total items not reclassifiable to profit or loss, net of tax Items not reclassifiable to profit or loss Actuarial gains and losses from defined pension plans Taxes Total items not reclassifiable to profit or loss, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ,147 30

31 Consolidated balance sheet by segment at 30 June 2016 EURm P&C insurance Life insurance Holding Elimination Group Assets Property, plant and equipment Investment property Intangible assets Investments in associates ,094-7,468 Financial assets 11,108 5,825 3,157-2,659 17,431 Investments related to unit-linked insurance contracts - 5, ,806 Tax assets Reinsurers' share of insurance liabilities Other assets 1, ,953 Cash and cash equivalents ,418 Total assets 14,732 12,584 10,716-2,722 35,310 Liabilities Liabilities for insurance and investment contracts 9,777 4, ,647 Liabilities for unit-linked insurance and investment contracts - 5, ,810 Financial liabilities , ,535 Tax liabilities Provisions Employee benefits Other liabilities Total liabilities 11,140 11,131 2, ,480 Equity Share capital 98 Reserves 1,531 Retained earnings 8,836 Other components of equity 366 Total equity 10,830 Total equity and liabilities 35,310 31

32 Consolidated balance sheet by segment at 31 December 2015 EURm P&C insurance Life insurance Holding Elimination Group Assets Property, plant and equipment Investment property Intangible assets Investments in associates ,305-7,679 Financial assets 10,566 6,039 3,243-2,659 17,189 Investments related to unit-linked insurance contracts - 5, ,847 Tax assets Reinsurers' share of insurance liabilities Other assets 1, ,708 Cash and cash equivalents ,997 Total assets 14,119 12,860 11,354-2,695 35,639 Liabilities Liabilities for insurance and investment contracts 9,433 5, ,447 Liabilities for unit-linked insurance and investment contracts - 5, ,841 Financial liabilities , ,375 Tax liabilities Provisions Employee benefits Other liabilities Total liabilities 10,772 11,327 2, ,228 Equity Share capital 98 Reserves 1,531 Retained earnings 9,325 Other components of equity 457 Total equity 11,411 Total equity and liabilities 35,639 32