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Sampo Group's results for January - September 2011

Core businesses developed according to expectations

Sampo Group's profit before taxes for January - September 2011 decreased to EUR 906 million (959) as a result of impairment losses of EUR 189 million on the equity portfolios. Total comprehensive income for the period, taking changes in the market value of assets into account, decreased to EUR 162 million (1,344).

  • Earnings per share amounted to EUR 1.35 (1.43). Mark-to-market earnings per share were EUR 0.29 (2.39) and return on equity for the Group was 2.5 per cent (22.3).
  • Sampo plc's liquidity position is strong. The company has since the end of the reporting period received a EUR 406 million dividend from its P&C insurance subsidiary If. Currently Sampo plc holds about EUR 1 billion in cash and short-term money market instruments.
     
  • Net asset value per share on 30 September 2011 amounted to EUR 13.62 (17.79). Net asset value decreased because of the fall in Nordea's share price, poor equity market development and the dividend paid in April 2011. Fair value reserve on the Group level decreased to EUR 220 million (736).
  • Combined ratio for P&C insurance operation improved to 92.6 per cent for January-September 2011 (93.0). Profit before taxes decreased to EUR 465 million (519). Return on equity was 2.4 per cent (39.0) and fair value reserve decreased to EUR 70 million (315).
  • Sampo's share of Nordea's net profit amounted to EUR 373 million (371). 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 107 million (100). Fair value reserve decreased to EUR 150 million (436) on 30 September 2011. Return on equity was -29.3 per cent (35.2).
KEY FIGURES 1-9/2011 1-9/2010 Change %
7-9/2011 7-9/2010 Change %
EURm            
Profit before taxes 906 959 -6 150 338 -56
  P&C insurance 465 519 -10 43 186 -77
  Associate (Nordea) 373 371 1 80 140 -43
  Life insurance 107 100 7 23 31 -27
  Holding (excl. Nordea) -37 -28 35 5 -19 -
Profit for the period 759 801 -5 125 284 -56
      Change     Change
Earnings per share, EUR 1.35 1.43 -0.08 0.22 0.51 -0.29
EPS (incl. change in FVR) EUR 0.29 2.39 -2.10 -0.38 1.02 -1.40
NAV per share, EUR  *) 13.62 17.79 -4.17 - - -
Average number of staff (FTE) 6,888 6,933 -45 - - -
Group solvency ratio, %  *) 139.0 167.1 -28.1 - - -
RoE, % 2.5 22.3 -19.8 - - -

*) 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.

Third quarter 2011 in brief

Sampo Group's profit before taxes for third quarter of 2011 was EUR 150 million (338). Earnings per share were EUR 0.22 (0.51). Mark-to-market earnings per share were EUR -0.38 (1.02).

Net asset value per share decreased in the third quarter of 2011 to EUR 13.62 from EUR 16.24 at the end of the second quarter of 2011.

Combined ratio in the P&C operation was 92.3 per cent (90.6) for the third quarter. Claims incurred was adversely affected by EUR 39 million due to record low discount rate for annuities in Sweden, by EUR 21 million due to a heavy cloudburst in July in Copenhagen and because of poor large claims outcome exceeding the normalised level by EUR 18 million. Profit before taxes fell to EUR 43 million (186) as result of EUR 152 million in impairment losses.

Sampo's share of Nordea's third quarter 2011 net profit was EUR 80 million (140). Nordea's third quarter 2011 profit was burdened by a non-recurring restructuring cost provision of EUR 171 million.

Profit before taxes for the life insurance operations decreased to EUR 23 million (31). Impairment losses on investment assets were EUR 37 million. Premiums written amounted to EUR 168 million (223).

Holding segment, excl. Nordea, reported a pre-tax profit of EUR 5 million (-19) due to mark-to-market gains on interest rate swaps and positive currency effects.

Business areas

P&C insurance

Profit before taxes for P&C insurance in January-September 2011 decreased to EUR 465 million (519) largely due to impairment losses of EUR 152 million related to equity assets recognized through profit and loss account during the third quarter of 2011. Topdanmark's profit contribution was EUR 3 million. Risk ratio and combined ratio improved to 69.2 per cent (69.5) and 92.6 per cent (93.0), respectively.

Insurance technical profitability developed according to expectations in January-September 2011 and technical result remained at EUR 334 million (340). Technical result for Private business area increased to EUR 196 million (177). For business area Commercial technical result amounted to EUR 90 million (101), Industrial EUR 37 million (45) and Baltic & Russia EUR 13 million (13). EUR 98 million (92) was released from technical reserves relating to prior year claims.

Return on equity (RoE) decreased to 2.4 per cent (39.0) due to significantly lower investment result mark-to-market and the change in the accounting treatment of Topdanmark holding in the second quarter of 2011. The book value for Topdanmark in the Group balance sheet was EUR 329 million on 30 September 2011. Insurance margin (technical result in relation to net premiums earned) was 10.8 per cent (11.7). Fair value reserve decreased during the third quarter and at the end of September 2011 amounted to EUR 69.9 million (315).

Associated company Nordea Bank Ab

On 30 September 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 7.02 per share. The market price as at 30 September 2011 was EUR 6.07.

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

Total income decreased 11 per cent from the previous quarter to EUR 2,091 million. Net fee and commission income decreased 7 per cent to EUR 582 million.

Net loan loss provisions were EUR 112 million, including a reversal of provisions for the Danish deposit guarantee system related to Amagerbanken of EUR 27 million and a provision related to the collapse of Max Bank of EUR 15 million. Excluding these deposit guarantee-related provisions, the loan loss ratio was 16 basis points (12 basis points in the previous quarter).

Operating profit was down 22 per cent from the previous quarter, excluding the restructuring costs. Net profit decreased 24 per cent compared to the previous quarter, excluding the restructuring costs, corresponding to a return on equity of 8.5 per cent. Diluted earnings per share were EUR 0.10 (EUR 0.18 in the previous quarter).

Nordea has decided to replace its previous financial targets with one: to reach a return on equity (ROE) of 15 per cent in a normalised macroeconomic environment. It is anticipated that the measures now taken together with continued focus on efficiency will increase ROE substantially over the coming two years.

Life insurance

Profit before taxes in life insurance for January-September 2011 rose to EUR 107 million (100). Net income from investments, excluding income on unit-linked contracts, was EUR 202 million (233). The fall in the equity markets led to impairments on available-for-sale equity assets amounting to EUR 37 million in the third quarter of 2011. EUR 34 million was released from the reserve for future bonuses as the low Finnish Government bond rates presuppose low bonus payments in short term. Net income from unit-linked investments was EUR -375 million (206). Return on equity (RoE) decreased to -29.3 per cent (35.2) as a result of negative equity market development. 

Holding

The segment's profit before taxes amounted to EUR 336 million (343), of which EUR 373 million (371) relates to Sampo's share of Nordea's January - September 2011 profit. Segment's profit without Nordea was EUR -37 million (-28).

As at 30 September 2011 financial liabilities in Sampo plc's balance sheet consisted of issued senior bonds and notes of EUR 1,667 million and EUR 653 million of outstanding CPs issued. The average interest on Sampo plc's debt including EUR and SEK denominated items as of 30 September 2011 was 3.81 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 38 per cent, 36 per cent and 13 per cent, respectively. 

Currently sovereign debt crisis continues to be an external uncertainty factor which, in addition to creating volatility in the financial markets, can potentially generate abrupt structural changes in markets. The crisis has been aggravated by inability and slowness in political decision making increasing uncertainty and spreading the problems to the banking sector.

Sovereign debt crisis, crisis of political system and potential banking crisis may escalate in ways that can affect Group's activities unfavorably although Sampo Group companies do not have direct exposures in sovereigns under pressure and have small exposure to banking sector outside the Nordic region.

Outlook for the rest of 2011

Sampo Group's profit for full-year 2011, excluding further impairment losses, if any, 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.

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 highly dependent on capital market developments and further turmoil in capital markets can have an adverse effect on the profits.

 

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 an English-language telephone conference for investors and analysts 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 '904792' and the conference title 'Sampo plc 2011 Q3 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 the full year 2011 results on 9 February 2012.

Distribution:
NASDAQ OMX HelsinkiThe principal mediaFinancial Supervisory Authoritywww.sampo.com                                                                                                                                                    

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