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Sampo Group's Interim Report for January - September 2013

Sampo Group's profit before taxes for January - September 2013 rose to EUR 1,228 million (1,183). The total comprehensive income for the period, taking changes in the market value of assets into account, decreased to EUR 1,112 million (1,425).

  • Earnings per share amounted to EUR 1.88 (1.81) and mark-to-market EPS was EUR 1.99 per share (2.55). The return on equity for the Group was 14.6 per cent for the period (20.6).
  • Net asset value per share at the end of the third quarter of 2013 was EUR 20.53 (17.38) and the fair value reserve after tax on the Group level strengthened to EUR 893 million (749).
  • The combined ratio of the P&C insurance operations improved further to 88.2 per cent (88.9) for the first three quarters of 2013. The profit before taxes amounted to EUR 700 million (660). Comprehensive income for the period decreased to EUR 586 million (763) and return on equity was 26.0 per cent (38.9).
  • Nordea is accounted for as an associated company and Sampo's share of Nordea's profit for January - September 2013 amounted to EUR 477 million (466).
  • Profit before taxes for the life insurance operations rose to EUR 103 million (98). The interest rate used to discount with profit liabilities in 2015 was lowered to 3 per cent. The discount rate used in 2013 and 2014 was already earlier lowered to 2.5 per cent. The comprehensive income decreased to EUR 137 million (218). The return on equity at market value was 15.7 per cent (29.9).
KEY FIGURES 1-9/2013 1-9/2012 Change, %
7-9/2013 7-9/2012 Change, %
EURm            
Profit before taxes 1,228 1,183 4 403 370 9
  P&C insurance 700 660 6 227 208 9
  Associate (Nordea) 477 466 2 158 140 13
  Life insurance 103 98 5 34 33 3
  Holding (excl. Nordea) -49 -40 24 -15 -11 44
Profit for the period 1,055 1,011 4 345 315 10
      Change     Change
Earnings per share, EUR 1.88 1.81 0.07 0.62 0.56 0.06
EPS (incl. change in FVR) EUR 1.99 2.55 -0.56 0.95 1.03 -0.08
NAV per share, EUR  *) 20.53 17.38 3.15 - - -
Average number of staff (FTE) 6,815 6,828 -13 - - -
Group solvency ratio, %  *) 184.2 170.4 13.8 - - -
RoE, % 14.6 20.6 -6.0 - - -

*) comparison figure from 31.12.2012

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 2012 unless otherwise stated.

Due to the adoption of the revised accounting standard IAS 19 on Employee benefits, the comparison figures for 2012 have been restated and differ from the earlier published figures. The changes concern directly the P&C insurance segment but are consequently reflected in the consolidated items as well.

The average EUR-SEK exchange rate used for income statement items for January - September 2013 is 8.5811 and the end of period exchange rate used for balance sheet items is 8.6575.

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.

Third quarter 2013 in brief

Sampo Group's profit before taxes for the third quarter of 2013 increased 9 per cent to EUR 403 million (370). Earnings per share amounted to EUR 0.62 (0.56). Mark-to-market earnings per share were EUR 0.95 (1.03).

The net asset value per share grew in the third quarter of 2013 to EUR 20.53 from EUR 19.27 at the end of June 2013.

Insurance technical profitability in the P&C operations was excellent and the combined ratio amounted to 87.2 per cent (89.0) for the third quarter. Profit before taxes increased to EUR 227 million (208). Share of the profits of the associated company Topdanmark amounted to EUR 8 million (8).

Sampo's share of Nordea's third quarter 2013 net profit amounted to EUR 158 million (140). Nordea continued to focus on income, cost and capital initiatives. Core tier one capital ratio rose to 14.4 per cent.

Profit before taxes for the life insurance operations amounted to EUR 34 million (33). Premiums written increased 29 per cent to EUR 238 million (185). The interest rate used for discounting all with profit liabilities was lowered to 3.0 per cent for 2015. The discount rate for 2013 and 2014 was already earlier lowered to 2.5 per cent.

 

Business areas

P&C insurance

Profit before taxes for P&C insurance rose to EUR 700 million (660) for January - September 2013. Combined ratio improved further and amounted to 88.2 per cent (88.9). Risk ratio decreased 0.6 percentage points as both frequency and large claims developed favorably. EUR 49 million (100) was released from technical reserves relating to prior year claims.

Technical result amounted to EUR 453 million (438) and improved in all business areas except Baltic, amounting to EUR 272 million (264) for Private, EUR 122 million (119) for Commercial and EUR 33 million (19) for business area Industrial. The technical result for business area Baltic decreased slightly to EUR 12 million (14).

Return on equity (RoE) decreased to 26.0 per cent (38.9) due to the lower investment returns. Fair value reserve on 30 September 2013 increased from the end of 2012 to EUR 449 million (364). Topdanmark's profit contribution for January-September 2013 was EUR 42 million (36).

At the end of September 2013 the total investment assets of If P&C amounted to EUR 12.0 billion (11.7). Net income from investments amounted to EUR 278 million (283). Investment return mark-to-market for January-September 2013 was 3.7 per cent (5.0). Duration for interest bearing assets was 1.3 years (1.3) and average maturity 2.3 years (2.5). Fixed income running yield was 3.0 per cent (3.6).

The cooperation between Nordea and If was launched in the summer of 2013 in Sweden and Finland. The sales results of the first few weeks look very promising. The integration of the business of the acquired Tryg branch in Finland is progressing according to plan.

Associated company Nordea Bank

On 30 September 2013 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 7.88 per share. The closing price as at end of September 2013 was EUR 8.95. Nordea is accounted as an associated company in Sampo Group's accounts.

Total income was largely unchanged compared to the same period of 2012. Operating profit was up 3 per cent compared to the same period last year. Risk-adjusted profit increased by 3 per cent compared to the preceding year. Net interest income decreased 1 per cent compared to the same period last year. Lending volumes were down 1 per cent excluding reversed repurchase agreements in local currencies and corporate lending margins were higher, while deposit margins have fallen from 2012. Net fee and commission income increased 9 per cent and the net result from items at fair value decreased by 9 per cent compared to the same period last year.

Total expenses were down 1 per cent compared to the same period of 2012 in local currencies when excluding performance-related salaries and profit sharing, i.e. with the cost definition for the cost target in the financial plan. Staff costs were down 1 per cent in local currencies when excluding performance-related salaries and profit sharing.

Net loan loss provisions decreased to EUR 555 million for the continued operations, corresponding to a loan loss ratio of 22 basis points (26 basis points last year).

Net profit for the continued operations increased 4 per cent to EUR 2,347 million. Net profit for the total operations was up 3 per cent to EUR 2,343 million.

The Group's core tier 1 capital ratio, excluding transition rules, was 14.4 per cent at the end of the third quarter, a strengthening of 0.4 percentage points from the end of the previous quarter. The tier 1 capital ratio excluding transition rules increased 0.5 percentage point to 15.3 per cent. The total capital ratio excluding transition rules increased 0.1 percentage point to 17.5 per cent.

Life insurance

Profit before taxes in life insurance for January-September 2013 amounted to EUR 103 million (98). The interest rate used to discount all with profit liabilities in 2015 was lowered to 3 per cent. The discount rate for 2013 and 2014 was already earlier lowered to 2.5 per cent. All in all, Mandatum Life has increased its technical reserves with a total of EUR 134 million due to low level of interest rates.

Return on equity (RoE) amounted to 15.7 per cent (29.9). The total comprehensive income for the period, taking changes in the market value of assets into account, was EUR 137 million (218).

Excluding the assets of EUR 4.4 billion (3.8) covering unit-linked liabilities, Mandatum Life Group's investment assets on 30 September 2013 amounted to EUR 5.4 billion (5.5) at market values.

Investment return mark-to-market during January - September 2013 was 5.2 per cent (7.5). The fair value reserve increased from the end of 2012 by EUR 56 million to EUR 447 million. At the end of September 2013 the duration of fixed income assets was 1.7 years (1.8) and average maturity 2.0 years (2.4). Fixed income running yield decreased to 4.1 per cent (5.2) as a result of lower reinvestment yields.

The various measures introduced during the last quarters to improve the cost efficiency are beginning to show, and together with the growing fee income, the expense result doubled to EUR 7 million (3). The favorable development is expected to continue in the fourth quarter. The risk result rose to EUR 17 million (14) during the first three quarters of 2013.

Mandatum Life's solvency position strengthened further and Mandatum Life Group's solvency ratio as at 30 September 2013 was 28.5 (27.7).

The unit-linked reserves reached an all-time high and amounted to EUR 4.4 billion (3.8). Their share of total technical reserves was 52 per cent (48). The with profit reserves continue to decline and their share of the total technical reserves of EUR 8.4 billion (7.9), was EUR 4.0 billion (4.1).

Holding

The segment's profit before taxes amounted to EUR 428 million (426), of which EUR 477 million (466) comes from Sampo's share of Nordea's January - September 2013 profit. The segment, excluding share of Nordea's profit, reported a loss of EUR 49 million (-40).

Sampo plc's debt financing on 30 September 2013 amounted to EUR 2,013 million (2,162) and interest bearing assets to EUR 514 million (1,048). Interest bearing assets include bank accounts and EUR 348 million of hybrid capital issued by the subsidiaries and associates. During the first three quarters of 2013 the net debt increased EUR 386 million to EUR 1,499 million (1,113). Gross debt to Sampo plc's equity was 32 per cent (32).

As at 30 September 2013 financial liabilities in Sampo plc's balance sheet consisted of issued senior bonds and notes of EUR 1,716 million (1,710) and EUR 298 million (451) of outstanding CPs issued. The average interest on Sampo plc's debt as of 30 September 2013 was 2.28 per cent (2.33).

On 28 May 2013 Sampo plc bought back SEK 3,391 million of SEK 4,000 million senior notes maturing 16 September 2013 in connection to issuing two senior unsecured floating rate notes of SEK 2,000 million maturing on 28 May 2015 and 29 May 2018, respectively. The remaining SEK 609 million of the SEK 4,000 million senior unsecured floating rate notes matured on 16 September 2013.

Outlook for the rest of 2013

Sampo Group's business areas are expected to report good operating results for 2013.

However, the mark-to-market results are, particularly in life insurance, highly dependent on capital market developments. The 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 2013 and achieve a combined ratio of 88 - 90 per cent.

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 which it identifies and assesses regularly. The Group publishes annually an extensive risk management report as part of its annual report at www.sampo.com/annualreport.

Major risks affecting the Group's profitability and its variation are market, credit and insurance risks that can be quantified by financial measurement techniques. Currently their quantified contributions to the Group's Economic Capital - used as an internal basis for capital needs - represent normal levels of 34 per cent, 45 per cent and 11 per cent, respectively.

Uncertainties in the form of major unforeseen events or abrupt structural changes in the business environment may have an immediate impact on the Group's profitability or they can affect its ability to conduct business in a longer run. Identification of uncertainties is easier than estimation of their probabilities and magnitudes of potential financial effects. Currently, one potential source of uncertainty is the continuing political crises combined with slow growth that may escalate in ways that can affect Group's activities unfavorably.

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
Maria Silander, Press Officer, tel. +358 10 516 0031

Conference call:

Sampo will today arrange a conference call for investors and analysts at 4 pm Finnish time (2 pm UK time). The call is held in English. Please call +44 (0)20 7162 0077, +46 (0)8 5052 0110, +1 334 323 6201 or +358 (0)9 2313 9201. Please be ready to state the conference code '937722' and title 'Sampo plc Q3 Release'.

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

Financial Statement Release 2013:

Sampo will publish the Financial Statement Release 2013 on 12 February 2014.

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

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