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Sampo Group's interim report for January - September 2012

SIMPLY A GOOD QUARTER

Sampo Group's profit before taxes for January - September 2012 amounted to EUR 1,172 million (906). The total comprehensive income for the period, taking changes in the market value of assets into account, rose sharply to EUR 1,447 million (162).

Earnings per share rose to EUR 1.79 (1.35) and mark-to-market EPS surged to EUR 2.58 per share (0.29). The return on equity for the Group amounted to 20.7 per cent (2.5).

Net asset value per share increased to EUR 17.75 (14.05). The fair value reserve after tax on the Group level amounted to EUR 681 million (355).

The excellent technical profitability in P&C insurance operations was maintained and the combined ratio for January - September 2012 amounted to 89.4 per cent (92.6). The profit before taxes rose to EUR 648 million (465). The discount rates for annuities in Finland and Sweden were lowered to 3.0 per cent and 0.07 per cent, respectively. This affected the third quarter profit before taxes negatively by EUR 37 million. Mark-to-market result amounted to EUR 785 million (46). Return on equity increased to 37.4 per cent (2.4).
       
Sampo's share of the associated company Nordea's profit for January - September 2012 was EUR 466 million (373). Nordea continued to increase its efficiency and reported the highest ever income and operating profit for the first nine months of a year. Expenses remained flat and the core tier 1 capital ratio increased to 12.2 per cent.

Profit before taxes for the life insurance operations amounted to EUR 98 million (107). The mark-to-market result improved to EUR 218 million (-204). The return on equity amounted to 29.9 per cent (-29.3). The lowered with profit discount rates in use were extended and all with profit liabilities are now discounted with 2.5 per cent until the end of 2013. This had a negative effect of EUR 18 million on the profit before taxes for the third quarter.

KEY FIGURES 1-9/2012 1-9/2011 Change, %
7-9/2012 7-9/2011 Change, %
EURm            
Profit before taxes 1,172 906 29 368 150 146
  P&C insurance 648 465 39 206 43 374
  Associate (Nordea) 466 373 25 140 80 75
  Life insurance 98 107 -8 33 23 46
  Holding (excl. Nordea) -40 -37 7 -11 5 -
Profit for the period 1,003 759 32 314 125 151
      Change     Change
Earnings per share, EUR 1.79 1.35 0.44 0.56 0.22 0.34
EPS (incl. change in FVR) EUR 2.58 0.29 2.29 1.04 -0.38 1.42
NAV per share, EUR  *) 17.75 14.05 3.70 - - -
Average number of staff (FTE) 6,828 6,888 -60 - - -
Group solvency ratio, %  *) 161.7 138.6 23.1 - - -
RoE, % 20.7 2.5 18.2 - - -

*) comparison figure from 31.12.2011

The figures in the interim 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 2011 unless otherwise stated.

Sampo follows the 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 2012 in brief

Sampo Group's third quarter 2012 profit before taxes amounted to EUR 368 million (150). Earnings per share amounted to EUR 0.56 (0.22). Mark-to-market earnings per share were EUR 1.04 (-0.38). Net asset value per share increased EUR 2.26 to EUR 17.75 during the third quarter of 2012.

In the third quarter of 2012 the combined ratio in the P&C operation remained on an excellent level at 89.3 per cent (92.3). Profit before taxes increased to EUR 206 million (43), despite the negative effect of the lowered discount rates. Share of the profits of the associated company Topdanmark amounted to EUR 8 million (0).

Sampo's share of Nordea's third quarter 2012 net profit amounted to EUR 140 million (80). Nordea's Group core tier 1 capital ratio, excluding transition rules, was 12.2 per cent at the end of the third quarter 2012, a strengthening by 0.4 percentage points from the end of the previous quarter.

Profit before taxes for the life insurance operations was EUR 33 million (23). Premiums written rose to EUR 185 million from EUR 168 million in the third quarter of 2011.

BUSINESS AREAS

P&C insurance

Profit before taxes for P&C insurance increased to EUR 648 million (465) in January-September 2012 as a result of a strong operating profitability during the year. Net income from investments also improved significantly compared to previous year, as the comparison period was burdened with impairment losses of EUR 152 million related to equity assets. Return on equity (RoE) increased significantly to 37.4 per cent (2.4). Fair value reserve increased from the year end to EUR 334 million (139) at the end of September 2012.

Both risk ratio and combined ratio improved significantly in January-September 2012 to 66.1 per cent (69.2) and 89.4 per cent (92.6), respectively. EUR 100 million (98) was released from technical reserves relating to prior year claims.

Technical result increased to EUR 421 million (334). Insurance margin (technical result in relation to net premiums earned) improved to 12.9 per cent (10.8). Discount rates for annuities in Finland and Sweden were lowered to 3 per cent (nominal) in Finland and 0.07 per cent (real) in Sweden, which increased the technical reserves by EUR 23 million and EUR 15 million, respectively. Profit before taxes was negatively affected by these amounts.

Topdanmark's profit contribution for January-September 2012 was EUR 36 million. At the end of September 2012 If P&C held altogether 3,147,692 Topdanmark shares. The holding represents, according to Topdanmark's latest disclosure, 24.6 per cent of outstanding shares and 22.9 per cent of the total number of registered shares.
                                                
Investment return mark-to-market for January-September 2012 was 5.0 per cent (0.2). Duration for interest bearing assets was 1.0 year (1.2) and average maturity 2.0 years (2.5). Fixed income running yield as at 30 September 2012 was 3.6 per cent (4.1).

On 5 November 2012 If P&C Insurance Company Ltd (Finland) signed an agreement to acquire the P&C insurance business of the Finnish branch of Tryg A/S for a consideration of EUR 15 million. Tryg's Finnish branch had a premium income of EUR 84 million in 2011, approximately 155,000 customers and a market share of approximately two per cent.  The acquisition is expected to have a minor positive impact on If P&C's result in medium term. The deal is subject to approval by the authorities and is expected to be completed during the spring of 2013.

On the same day If P&C and Nordea signed a partnership agreement whereby Nordea will market If P&C's products in Finland, Sweden, Estonia, Latvia and Lithuania. The partnership will begin no later than 1 July 2013.

If is also the key insurance partner to the automotive industry in the Nordic countries. As an indication of this the large car branded insurance agreement with Volkswagen in Sweden was extended until the end of 2015.

Associated company Nordea

On 30 September 2012 Sampo plc held 860,440,497 Nordea shares corresponding to a holding of 21.25 per cent. The average price paid per share amounted to EUR 6.46 and the book value in the Group accounts was EUR 7.57 per share. The closing price as at 30 September 2012 was EUR 7.69.

Sampo's holding exceeds 20 per cent and Nordea has been accounted as an associated company in Sampo Group's accounts since 31 December 2009. Sampo's share of Nordea's net profit is shown on the face of Sampo Group's profit and loss account on the line Share of associate's profit.

In January - September 2012 Nordea continued to increase efficiency in line with the plan. Expenses remained flat and the core tier 1 capital ratio increased to 12.2 per cent. Nordea is fully compliant with liquidity requirements and has excellent access to the international funding markets.

Operating profit increased 21 per cent, due to higher total income, and stable costs. Risk-adjusted profit increased by 26 per cent compared to the same period last year.

Net loan loss provisions increased to EUR 689 million, corresponding to a loan loss ratio of 27 basis points (20 basis points in the same period last year excluding provisions related to the Danish deposit guarantee fund).

The Group's core tier 1 capital ratio, excluding transition rules, was 12.2 per cent at the end of the third quarter, a strengthening by 0.4 percentage points from the end of the previous quarter. The total capital ratio excluding transition rules increased 1.0 percentage point to 15.3 per cent. Improved capital ratios have been achieved by strong profit generation and a decrease in risk-weighted assets (RWA). RWA were EUR 179.0 billion excluding transition rules, down EUR 2.2 billion, or 1.2 per cent, compared to the previous quarter.
The core tier 1 ratio including transition rules under Basel II was 9.8 per cent. The capital base was EUR 27.3 billion, the tier 1 capital was EUR 23.8 billion and the core tier 1 capital was EUR 21.8 billion.

Life insurance

Profit before taxes in life insurance for January-September 2012 amounted to EUR 98 million (107). The profit was burdened by the lowering of the with profit discount rates. All with profit liabilities are now discounted with 2.5 per cent for the years 2012 and 2013. The negative effect on the third quarter 2012 profit before taxes was EUR 18 million. The total comprehensive income for the period reflecting the changes in market values of assets increased to EUR 218 million (-204). Return on equity (RoE) rose to 29.9 per cent (-29.3).

Investment return mark-to-market during January - September 2012 was 7.5 per cent (-3.8). The fair value reserve increased to EUR 351 million from EUR 214 million at the end of 2011. At the end of September 2012 the duration of fixed income assets was 1.9 years (1.8) and average maturity 2.2 years (2.3). The fixed income running yield as at 30 September 2012 was 5.2 per cent (5.5).

The solvency I position of Mandatum Life Group strengthened further and solvency ratio rose to 26.0 per cent (20.9) at the end of September 2012. Mandatum Life Group's total technical reserves amounted to EUR 7.7 billion (7.3), of which unit-linked reserves accounted for 3.6 billion (3.1). Mandatum Life has increased its with profit technical reserves over the last years with EUR 126 million due to low level of interest rates. All with profit liabilities are discounted with 2.50 per cent in 2012 and in 2013. As of 1 January 2014 the discount rate to be used will be 3.50 per cent at highest. The unit-linked reserves' share of total technical reserves increased to a record level of 46 per cent (42).

Holding

The segment's profit before taxes rose to EUR 426 million (336), of which EUR 466 million (373) relates to Sampo's share of Nordea's January - September 2012 profit. The segment, excluding share of Nordea's profit, reported a loss of EUR 40 million (-37). Staff costs increased mainly because of the payments based on long-term incentive systems in the third quarter of 2012.

In the first nine months of 2012 no dividends were paid to Sampo plc by its insurance subsidiaries. A dividend of EUR 224 million was received on 3 April 2012 from the associated company Nordea.

Sampo plc's debt financing on 30 September 2012 amounted to EUR 2,306 million (2,329) and interest bearing assets including bank accounts to EUR 588 million (1,121). As at 30 September 2012 the net debt was EUR 1,718 (1,208). Gross debt to Sampo plc's equity was 37.0 per cent (34.6).

OUTLOOK

Outlook for the rest of 2012

Sampo Group's business areas are expected to report good operating results for 2012. However, the mark-to-market results are, particularly in life insurance, highly dependent on capital market developments.

P&C insurance operations are expected to reach a combined ratio of 89 - 91 per cent for the full year 2012 and thus achieve the long-term target of below 95 per cent. 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 day-to-day business activities Sampo Group is exposed to various risks. As a financial group the major sources of profitability and its variation for Sampo Group are market, credit and insurance risks. Their contributions to the Group's Economic Capital - used as an internal basis for capital needs - currently represent normal levels of 38 per cent, 36 per cent and 14 per cent, respectively. For more information on Sampo Group's risk exposures and their management see www.sampo.com/riskmanagement and the risk management section of the 2011 Annual Report at www.sampo.com/annualreport.

Abrupt changes in the business environment or major unforeseen events may always impact the profitability of a company. Adverse macro economic developments, such as current Euro crisis, and slow growth in Europe are major sources of uncertainty which may escalate in ways that can affect the Group's activities unfavorably. This is, however, mitigated by the fact that Sampo Group companies do not have direct exposures in sovereigns under pressure and have small exposure to banking sector outside the Nordic region. 

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

An English-language telephone conference for investors and analysts will be arranged at 4 pm Finnish time (2 pm UK time). Please call +44 (0)20 3003 2666 (Standard International Access), +1 866 966 5335 (US Toll Free), +44 (0)808 109 0700 (UK Toll Free) or +358 (0)800 914 672 (Finland Toll Free). Please be ready to state the conference name 'Sampo plc Q3 2012 Release' and password 'Sampo'.

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 Supplementary Financial Information is available at www.sampo.com/result.

Sampo will publish the full-year 2012 Financial Statement Release on 13 February 2013.

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

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