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Sampo Group's results for January-March 2016

Sampo Group's profit before taxes for January - March 2016 amounted to EUR 416 million (487). The total comprehensive income for the period, taking changes in the market value of assets into account, decreased to EUR 204 million (701).

-Earnings per share decreased to EUR 0.65 (0.78). Mark-to-market earnings per share were EUR 0.36 (1.25). The return on equity for the Group was 7.1 per cent for January - March 2016 (24.8). Net asset value per share on 31 March 2016 amounted to EUR 22.09 (23.79).

-The Annual General Meeting held on 21 April 2016 decided to pay a dividend of EUR 2.15 per share (1.95). The dividend was paid on 3 May 2016.

-Profit before taxes for the P&C insurance segment increased to EUR 216 million (200). Combined ratio for January-March 2016 decreased to 83.0 per cent (89.2). Following a review of mortality tables by the Swedish insurance federation, EUR 72 million was released from the Swedish MTPL reserves. Excluding this release combined ratio was 89.8 per cent. Return on equity (RoE) was 15.3 per cent (35.1). The contribution of Topdanmark's net profit for the first quarter of 2016 amounted to EUR 5 million (12).

-Sampo's share of Nordea's net profit for the first quarter of 2016 amounted to EUR 159 million (223). Nordea's RoE decreased to 10.3 per cent (14.3). Core Tier 1 ratio (excluding transition rules) strengthened to 16.7 per cent (16.5). In segment reporting the share of Nordea's profit is included in the segment 'Holding'.

-In life insurance operations profit before taxes rose to EUR 53 million (39). Return on equity (RoE) dropped to -4.4 per cent (50.3). Premium income on own account decreased to EUR 244 million (377).

KEY FIGURES 1-3/ 2016 1-3/2015 Change, %
EURm      
Profit before taxes 416 487 -15
  P&C insurance 216 200 8
  Associate (Nordea) 159 223 -30
  Life insurance 53 39 36
  Holding (excl. Nordea) -12 26 -
Profit for the period 362 435 -17
       
      Change
Earnings per share, EUR 0.65 0.78 -0.13
EPS (incl. change in FVR) EUR 0.36 1.25 -0.89
NAV per share, EUR  *) 22.09 23.79 -1.70
Average number of staff (FTE) 6,763 6,711 52
Group solvency ratio, %  *) 143.4 145.0 -1.6
RoE, % 7.1 24.8 -17.7

*) comparison figure from 31.12.2015

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.

Sampo follows the disclosure procedure enabled by the Finnish Financial Supervisory Authority and hereby publishes its Interim Statement attached as a PDF file to this stock exchange release. The Interim Statement is also available at www.sampo.com/result.

Exchange rates used in reporting  1-3/2016  1-12/2015  1-9/2015  1-6/2015  1-3/2015
EUR 1 = SEK          
Income statement (average) 9.3241 9.3534 9.3709 9.3416 9.3805
Balance sheet (at end of period) 9.2253 9.1895 9.4083 9.2150 9.2901
DKK 1 = SEK          
Income statement (average) 1.2501 1.2542 1.2567 1.2530 1.2593
Balance sheet (at end of period) 1.2381 1.2314 1.2612 1.2352 1.2437
NOK 1 = SEK          
Income statement (average) 0.9790 1.0475 1.0646 1.0809 1.0746
Balance sheet (at end of period) 0.9799 0.9570 0.9878 1.0482 1.0674

P&C insurance

Profit before taxes for January-March 2016 for the P&C insurance segment increased to EUR 216 million (200). Combined ratio improved to 83.0 per cent (89.2) and risk ratio to 60.7 per cent (66.6). EUR 72 million was released from the Swedish MTPL reserves, following a review of mortality tables by the Swedish insurance federation. Excluding the non-recurring reserve release, combined ratio for the first quarter of 2016 would have been 89.8 per cent. The contribution of Topdanmark's net profit in the first quarter of 2016 amounted to EUR 5 million (12).

Technical reserves relating to prior year claims were released by altogether EUR 88 million in January - March 2016 (EUR 3 million in the comparison period). Return on equity (RoE) decreased to 15.3 per cent (35.1) and the fair value reserve on 31 March 2016 amounted to EUR 342 million (391). Technical result increased to EUR 184 million (124). Insurance margin (technical result in relation to net premiums earned) improved to 17.5 per cent (11.6).

The release from the Swedish MTPL reserves affected both the Swedish country specific result and the Private and Commercial business area results positively by 20.2, 9.6 and 3.2 percentage points, respectively. Industrial suffered from negative large claims outcome and large claims ended up EUR 23 million worse than normalized. Total large claims for If P&C ended up EUR 17 million worse than expected in the first quarter of 2016. Development was worst in Norway where large claims exceeded normalized level by EUR 19 million with a roughly 6 percentage point impact on combined ratio.

Swedish discount rate used to discount the annuity reserves decreased to 0.17 per cent by the end of March 2016 (0.41 at the end of December 2015) and had a negative effect of EUR 15 million in the first quarter results. In Finland the discount rate for annuities remained at 1.5 per cent.

Gross written premiums decreased to EUR 1,616 million (1,668) in January-March 2016. Adjusted for currency, premium growth was slightly negative. Growth was positive in business areas Private and Baltic, and negative in business areas Commercial and Industrial. Cost ratio improved to 22.3 per cent (22.6) while expense ratio deteriorated to 16.9 per cent (16.8).

On 31 March 2016, the total investment assets of If P&C amounted to EUR 11.1 billion (11.4), of which fixed income investments constituted 81 per cent (74), money market 6 per cent (12) and equity 13 per cent (13). Net income from investments decreased to EUR 36 million (79). Investment return marked-to-market for the first quarter of 2016 decreased to -0.2 per cent (2.0). Duration for interest bearing assets was 1.5 years (1.2) and average maturity 2.8 years (2.6). Fixed income running yield as at 31 March 2016 was 1.8 per cent (2.2).

Associated company Nordea Bank AB

On 31 March 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 8.01 per share. The closing price as at end of March 2016 was EUR 8.45.

The business environment has been relatively stable at the beginning of 2016, although turmoil on the financial markets, and even lower interest rates, have put pressure on revenues. Costs are under strict control and are developing according to plan.

Total income was down 14 per cent in local currencies (-16 per cent in EUR) from last year and operating profit was down 27 per cent in local currencies (-29 per cent in EUR) from last year.

Net interest income was down 4 per cent in local currencies (-7 per cent in EUR) from last year. Average lending volumes in local currencies in business areas increased 2 per cent from the first quarter of 2015. Average deposit volumes in local currencies in business areas increased 5 per cent from the first quarter of 2015, mainly driven by Retail deposits in Sweden and Finland and corporate deposits in Norway. Lending margins were up somewhat, while deposit margins were down significantly compared to one year ago.

Net fee and commission income decreased 4 per cent in local currencies (-5 per cent in EUR). The net result from items at fair value decreased 48 per cent in local currencies (-47 per cent in EUR) from a very strong first quarter of 2015.

Total expenses were unchanged in local currencies (-1 per cent in EUR) from the previous year and amounted to EUR 1,178 million. Staff costs were down 4 per cent in local currencies (-5 per cent in EUR).

Loan losses were below the 10-year average of 16 basis points. Net loan loss provisions decreased to EUR 111 million equalling a loan loss ratio of 13 basis points (14 basis points for the first quarter of 2015).

Net profit decreased 26 per cent in local currencies (-28 per cent in EUR) to EUR 782 million. Cost/income ratio was 51.3 per cent, up from 43.7 per cent in the first quarter of 2015.

The Group's fully loaded Basel III Common equity tier 1 (CET1) capital ratio increased to 16.7 at the end of the first quarter 2016 from 16.5 per cent at the end of the fourth quarter 2015. The increase to the CET1 capital ratio was due to an increase in common equity tier 1 capital due to a pay out from Nordea Life and Pension offset by an increase to the additional risk exposure amount buffer.

At the AGM, shareholders approved the plans for the mergers of the Norwegian, Danish and Finnish banking subsidiaries with Nordea Bank AB. The intention is to execute the merger plan in early January 2017.

Further information on Nordea Bank AB and its January-March 2016 result is available at www.nordea.com.

Life insurance

In January - March 2016 the profit before taxes for life insurance operations rose to EUR 53 million (39). As a result of the difficult investment market conditions, the total comprehensive income for the period after tax reflecting the changes in market values of assets dropped to EUR -14 million (171). Return on equity (RoE) was -4.4 per cent (50.3). Net investment income, excluding income on unit-linked contracts, amounted to EUR 78 million (68). Net income from unit-linked contracts was EUR -143 million (466). In the first quarter of 2016 fair value reserve decreased to EUR 475 million (532).

Mandatum Life Group's total technical reserves decreased to EUR 10.7 billion (10.9). In the first quarter 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 54 million to EUR 3.0 billion in January - March 2016. The unit-linked reserves decreased to EUR 5.7 billion (5.9) at the end of the first quarter of 2016, which corresponds to 54 per cent (54) of total technical reserves.

Mandatum Life has all in all 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 1.0 per cent, 1.25 per cent, and 2.00 per cent, respectively. Discount rate applied for the segregated fund is 0.75 per cent.

At the end of March 2016 Mandatum Life Group's investment assets, excluding the assets of EUR 5.8 billion (5.9) covering unit-linked liabilities, amounted to EUR 6.4 billion (6.7) at market values.

The assets covering Mandatum Life's original with profit liabilities on 31 March 2016 amounted to EUR 5.2 billion (5.5) at market values. 49 per cent (47) of the assets are in fixed income instruments, 6 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 - March 2016 was -0.1 per cent (4.2). The duration of fixed income assets at the end of March 2016 was 2.3 years (2.1) and average maturity 2.9 years (2.8). Fixed income (incl. money market) running yield was 3.5 per cent (3.4).

The assets covering the segregated fund amounted to EUR 1.2 billion (1.2), of which 75 per cent (71) was in fixed income, 5 per cent (9) in money market, 12 per cent (12) in equities and 8 per cent (8) in alternative investments. Segregated fund's investment return marked-to-market for January - March 2016 was 0.7 per cent (3.2). At the end of March 2016 the duration of fixed income assets was 2.7 years (2.3) and average maturity 4.2 years (3.8). Fixed income (incl. money market) running yield was 1.9 per cent (0.9).

Holding

Holding segment's profit before taxes for January - March 2016 amounted to EUR 148 million (249), of which EUR 159 million (223) relates to Sampo's share of Nordea's first quarter 2016 profit. Segment's profit excluding Nordea was EUR -12 million (26).

Sampo plc's debt financing on 31 March 2016 amounted to EUR 2,483 million (2,302) and interest bearing assets to EUR 2,137 million (1,343). Interest bearing assets include bank accounts, fixed income instruments and EUR 609 million (579) of hybrid capital and subordinated debt instruments issued by the subsidiaries. At the end of the first quarter of 2016 the net debt amounted to EUR 346 million (959). The net debt calculation only takes into account interest bearing assets and liabilities. Gross debt to Sampo plc's equity was 32 per cent (32) and financial leverage 24 per cent (24).

On 24 February 2016 Sampo plc repaid EUR 300 million senior notes maturing on that date. In connection to the repayment Sampo plc issued under its EMTN Programme senior unsecured fixed rate notes of EUR 500 maturing on 24 May 2019.

On 31 March 2016 financial liabilities in Sampo plc's balance sheet consisted of issued senior bonds and notes of EUR 2,183 million (1,997) and EUR 300 million (305) of CPs issued. The average interest, net of interest rate swaps, on Sampo plc's debt as of 31 March 2016 was 1.37 per cent (1.65).

Annual General Meeting

The Annual General Meeting of Sampo plc, held on 21 April 2016, decided to distribute a dividend of EUR 2.15 per share for 2015. The dividend was paid on 3 May 2016. The Annual General Meeting adopted the financial accounts for 2015 and discharged the Board of Directors and the Group CEO and President from liability for the financial year.

The Annual General Meeting elected eight members to the Board of Directors. The following members were re-elected to the Board: Jannica Fagerholm, Adine Grate Axén, Veli-Matti Mattila, Risto Murto, Eira Palin-Lehtinen, Per Arthur Sørlie and Björn Wahlroos. Christian Clausen was elected as a new member to the Board. Of the former members Anne Brunila was not available for re-election. The Members of the Board were elected for a term continuing until the close of the next Annual General Meeting.

At its organizational meeting, the Board elected Björn Wahlroos as Chairman and Eira Palin-Lehtinen as Vice-chairperson. Veli-Matti Mattila, Risto Murto, Eira Palin-Lehtinen and Björn Wahlroos (Chairman) were elected to the Nomination and Compensation Committee and Jannica Fagerholm (Chairperson), Christian Clausen, Adine Grate Axén and Per Arthur Sørlie to the Audit Committee. The compositions of the Committees fulfill the Finnish Corporate Governance Code's requirement for independence.

The Annual General Meeting decided to pay the following fees to the members of the Board of Directors until the close of the 2017 Annual General Meeting: the Chairman of the Board will be paid an annual fee of EUR 160,000, the Vice Chairman of the Board will be paid EUR 100,000 and the other members of the Board of Directors will be paid EUR 80,000 each. A Board member shall in accordance with the resolution of the Annual General Meeting acquire Sampo plc's A shares at the price paid in public trading for 50 per cent of his/her annual fee excluding taxes and similar payments.

Ernst & Young Oy was elected as Auditor. The Auditor will be paid a fee determined by an invoice approved by Sampo. Tomi Englund, APA, was elected as the principally responsible auditor.

There were 3,226 shareholders represented at the meeting holding altogether 366,334,768 shares and 371,134,768 votes in the company.

The minutes of the Annual General Meeting are available for viewing at www.sampo.com/agm.

Internal dividends

Mandatum Life paid a dividend of EUR 125 million to Sampo plc in March 2016. If P&C normally pays its dividend towards the end of the calendar year.

On 17 March 2016 Nordea Bank AB's Annual General Meeting decided to pay a dividend of EUR 0.64 per share. With its current holding Sampo plc's share amounted to EUR 551 million. The dividend was paid on 30 March 2016.

Ratings

All the ratings for Sampo Group companies remained unchanged in the first quarter of 2016.

After the end of the reporting period, 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 ratings at the end of April 2016.

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 31 March 2016 If P&C Group's Solvency II capital requirement under standard model amounted to EUR 2,058 million and own funds to EUR 3,169 million. Solvency ratio amounted to 154 per cent. If has applied for new calculation basis for the Finnish equalization provision in order to be adapted to the new Solvency II regulation. Equalization provision is based on the estimate since the basis has not yet been approved by the Finnish FSA. S&P rating total capital charge for If P&C Group amounted to EUR 2,999 million at the end of March 2016 while the capital base amounted to EUR 3,393 million.

Mandatum Life's solvency ratio after transitional measures is strong at 152 per cent (158). Own funds of EUR 1,702 million (1,913) exceed Solvency Capital Requirement (SCR) of EUR 1,117 million (1,212) by EUR 585 million. Without transitional measures, own funds would have amounted to EUR 1,227 and the solvency capital requirement EUR 1,265 million leading to a solvency ratio of 94 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.

Group's conglomerate solvency ratio (own funds in relation to minimum requirements for own funds) using Solvency II rules for the insurance subsidiaries was 143 per cent (145) as at 31 March 2016.

OUTLOOK

Outlook for 2016

Sampo Group's business areas are expected to report good operating results for 2016.

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 88 - 91 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 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 plc'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 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 also have a long-term impact on how the business shall be conducted.

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, Communications Manager, tel. +358 10 516 0031

Conference call

An English-language conference call for investors and analysts will be arranged at 4 pm Finnish time (2 pm UK time). Please call tel. +44 (0)20 3194 0552, +46 (0)8 566 427 02, +1 855 716 1597 or +358 (0)9 8171 0495.

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

Sampo will publish the Half-yearly Report for January-June 2016 on 10 August 2016.

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

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