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Sampo Group's results for January - June 2011

STRONG REPORTED PROFITS DESPITE MARKET UNCERTAINTY

Sampo Group's profit before taxes for January - June 2011 increased to EUR 756 million (621). Total comprehensive income for the period, taking changes in the market value of assets into account, decreased to  EUR 378 million (773) mainly because decline in fair value reserve and unfavorable currency movements.

  • Earnings per share rose to EUR 1.13 (0.92). Mark-to-market earnings per share were EUR 0.67 (1.38) and return on equity for the Group was 8.6 per cent (19.9) for the first half of 2011.
  • Net asset value per share on 30 June 2011 amounted to EUR 16.24 (17.79). The reduction is largely explained by the dividend paid in April 2011 and Nordea's share price development. Fair value reserve on the Group level decreased to EUR 526 million (736).
  • Combined ratio for P&C insurance operation improved to 92.7 per cent for the first half of 2011 (94.1). Profit before taxes rose to EUR 422 million (333). Topdanmark is treated as an associated company as of mid-May 2011 and had EUR 3 million positive effect on profit. Return on equity was 9.4 per cent (35.4) and fair value reserve decreased to EUR 163 million (315).
  • Sampo's share of Nordea's net profit increased to EUR 294 million (231). In segment reporting the share of Nordea's profit is included in the segment 'Holding'.
  • Profit before taxes for life insurance operation rose to EUR 84 million (69). Fair value reserve decreased to EUR 364 million as at 30 June 2011 (436). Return on equity at market value was -1.6 per cent (25.0).

 

KEY FIGURES 1-6/2011 1-6/2010 Change %
4-6/2011 4-6/2010 Change %
EURm            
Profit before taxes 756 621 22 369 334 10
  P&C insurance 422 333 27 200 208 -4
  Associate (Nordea) 294 231 27 142 106 34
  Life insurance 84 69 22 40 33 23
  Holding (excl. Nordea) -42 -8 396 -13 -11 18
Profit for the period 634 518 23 310 273 14
      Change     Change
Earnings per share, EUR 1.13 0.92 0.21 0.55 0.48 0.07
EPS (incl. change in FVR) EUR 0.67 1.38 -0.71 0.26 0.32 -0.06
NAV per share, EUR  *) 16.24 17.79 -1.55 - - -
Average number of staff (FTE) 6,881 6,958 -77 - - -
Group solvency ratio, %  *) 152.5 167.1 -14.6 - - -
RoE, % 8.6 19.9 -11.3 - - -

*) comparison figure from 31.12.2010

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 2010 unless otherwise stated.

Sampo follows the new disclosure procedure enabled by the Finnish Financial Supervisory Authority (Standard 5.2b) 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.

Second quarter 2011 in brief

Sampo Group's second quarter 2011 profit before taxes rose to EUR 369 million (334). Earnings per share were EUR 0.55 (0.48). Mark-to-market earnings per share were EUR 0.26 (0.32).

Net asset value per share decreased in the second quarter of 2011 to EUR 16.24 from EUR 17.71 at the end of the first quarter of 2011. Sampo plc paid a dividend of EUR 1.15 per share in the second quarter.

Combined ratio in the P&C operation was 91.1 per cent (89.9) for the second quarter. Profit before taxes amounted to EUR 200 million (208). Topdanmark was consolidated as an associated company as of 16 May 2011 and increased the profit by EUR 3 million,

Sampo's share of Nordea's second quarter 2011 net profit was EUR 142 million (106).

Profit before taxes for the life insurance operations rose to EUR 40 million (33). Premiums written decreased to EUR 228 million from EUR 256 million in the second quarter of 2010.

Consolidation of Topdanmark

If P&C's holding in the Danish insurance company Topdanmark exceeded 20 per cent on 16 May 2011. At the end of June 2011 If held 3,147,692 Topdanmark shares corresponding to 22.75 per cent of votes in the company. With If's holding exceeding 20 per cent Topdanmark became an associated company to If.

In connection with the change in accounting treatment the carrying value of the Topdanmark shares held by If and valued at fair value, was reinstated at acquisition cost of EUR 324 million. The ensuing reduction of the fair value reserve decreased Sampo Group's equity by EUR 51 million. The equity accounting of Topdanmark has, however, no effect on Sampo Group's net asset value because in the NAV calculation Topdanmark is valued at fair value.

The purchase price in excess of the carrying amount of the net assets of Topdanmark was EUR 204 million. Based on the purchase price allocation EUR 85 million was allocated to customer related intangibles. The annual amortization will be EUR 8 million during eight years.

As of 16 May 2011 Sampo's share of Topdanmark's net profit will be shown on the face of Sampo Group's profit and loss account on the line Share of associate's profit/loss. In segment reporting Topdanmark holding is included in the P&C insurance segment. Due to the late publication of financial reporting by Topdanmark, consensus estimate for the company's net result is used for this purpose and any deviations in relation to subsequently published amounts will be included in the next quarterly report. 

In Sampo Group's interim report for January - June 2011 the contribution of Topdanmark's net profit after the amortization amounts to EUR 3 million.

If's solvency capital on 30 June 2011 includes the proportion of Topdanmark's solvency capital corresponding to Sampo Group's holding.

Business areas

P&C insurance

Profit before taxes for P&C insurance in January-June 2011 increased to EUR 422 million (333), out of which If's share of Topdanmark's profit was EUR 3 million. Risk ratio and combined ratio improved to 69.4 percent (70.6) and 92.7 per cent (94.1), respectively, mainly due to less winter related claims than in the same period in 2010.

Technical result increased to EUR 228 million (210). Technical result for Private business area amounted to EUR 125 million (110), Commercial EUR 58 million (54), Industrial EUR 31 million (35) and Baltic & Russia EUR 9 million (8). EUR 76 million (68) was released from technical reserves, which related to prior year claims.

Return on equity (RoE) decreased to 9.4 per cent (35.4) due to lower investment result mark-to-market and the change in the accounting treatment of Topdanmark holding. Insurance margin (technical result in relation to net premiums earned) increased to 11.1 per cent (10.9). Fair value reserve at the end of June 2011 amounted to EUR 163 million (315).

Life insurance

Profit before taxes in life insurance for January-June 2011 amounted to EUR 84 million (69). Net income from investments, excluding income on unit-linked contracts, amounted to EUR 191 million (153). Impairments amounted to EUR 21 million. Net income from unit-linked investments was EUR -88 million (92). Return on equity (RoE) decreased to -1.6 per cent (25.0), because of the decrease in fair value reserve and the strengthening of technical reserves in the first quarter of 2011.

Mandatum Life and Sampo Bank agreed to continue the well-performing co-operation in life insurance sales. The agreement signed on 30 June 2011 secures for Mandatum Life the right to sell life and pension insurance products through Sampo Bank's branch network until the end of 2016.

Associated company Nordea Bank Ab

On 30 June 2011 Sampo plc held 860,440,497 Nordea shares corresponding to a holding of 21.3 per cent. The average price paid per share amounted to EUR 6.46 and the book value in the Group accounts was EUR 6.95 per share. The market price as at 30 June 2011 was EUR 7.41.

The following text is based on Nordea's January - June 2011 result release published on 19 July 2011.

Total income decreased 7 per cent from the record level in the previous quarter, mainly due to lower trading result and lower net interest income in Group Treasury. Total income increased 8 per cent compared to the second quarter last year.

Net loan losses decreased in all Nordic markets and net reversals were reported for Sweden.

Operating profit was down 5 per cent from the previous quarter, mainly due to lower income, to a large extent offset by lower net loan losses. Risk-adjusted profit decreased 17 per cent compared to the previous quarter and increased 25 per cent compared to the second quarter last year.

Holding

The segment's profit before taxes amounted to EUR 252 million (222), of which EUR 294 million (231) relates to Sampo's share of Nordea's January - June 2011 profit. Segment's profit without Nordea was EUR -42 million (-9).

As at 30 June 2011 financial liabilities in Sampo plc's balance sheet consisted of issued senior bonds and notes of EUR 1,341 million and EUR 549 million of outstanding CPs issued. The average interest on Sampo plc's debt as of 30 June 2011 was 3.55 per cent (3.36).

Outlook

The major risks and uncertainties to the Group in the near term

The major risks Sampo Group is exposed to in its normal business activities are credit risk, market risks and insurance risks. Their contributions to Group's Economic Capital requirement are currently within normal boundaries at levels 39 per cent, 36 per cent and 13 per cent, respectively. 

Currently sovereign debt crisis is an external uncertainty factor which, in addition to creating volatility in the financial markets, can potentially generate abrupt structural changes in markets. Sovereign debt crisis may escalate in ways that may affect Group's activities unfavorably although Sampo Group companies do not have direct exposures in sovereigns under pressure.


Outlook for the rest of 2011

Sampo Group's profit for the period (full-year 2011), excluding extraordinary items, is expected to be good.

If P&C is expected to achieve its long-term combined ratio target of below 95 per cent and to report a combined ratio of 92 - 94 per cent for the full-year 2011. Profit for the period (full-year 2011) is expected to remain very good.

Nordea's contribution to Group profit is expected to remain significant and to strengthen further as the effects of the efficiency measures (the New Normal Plan) outlined by Nordea start materializing.

Mandatum Life's profitability is expected to remain good although it is highly dependent on capital market developments.

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, Press Officer, tel. +358 10 516 0031

Sampo will arrange a Finnish-language press conference (Savoy, Eteläesplanadi 14, Helsinki), today at 12:30 pm Finnish time. An English-language telephone conference for investors and analysts will be arranged at 4 pm Finnish time (2 pm UK time). Please call +44 207 162 0025 (Europe) or +1 334 323 6201 (North America). Please be ready to state the conference ID '899481' and the conference title 'Sampo plc 2011 Q2 Release'.

The telephone conference can also be followed from a direct transmission on the Internet at www.sampo.com/result.  A recorded version will later be available at the same address.

In addition, a video with Group CEO and President Kari Stadigh and Group CFO Peter Johansson and Supplementary Financial Information are available at www.sampo.com/result.

Sampo Group will publish interim report for January - September 2011 on 2 November 2011.

 

Distribution:
NASDAQ OMX Helsinki
The principal media
Financial Supervisory Authority
www.sampo.com

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