Sampo Group's Results for 2013

EXCELLENT YEAR, HIGHER DIVIDEND

Sampo Group's profit before taxes for 2013 rose to EUR 1,668 million (1,622). Total comprehensive income for the period, taking changes in the market value of assets into account, amounted to EUR 1,425 million (1,887).

• Earnings per share amounted to EUR 2.59 (2.51). Mark-to-market earnings per share were EUR 2.54 (3.37) and return on equity for the Group decreased to 13.8 per cent for 2013 (19.9).
• The Board proposes to the Annual General Meeting to be held on 24 April 2014 a dividend of EUR 1.65 per share (1.35) and an authorization to repurchase a maximum of 50 million Sampo A shares. The proposed dividend payment amounts in total to EUR 924 million (756).
• Net asset value per share on 31 December 2013 increased to EUR 22.15 (17.38) supported by the increase in Nordea's share price.
• Profit before taxes in the P&C insurance segment amounted to EUR 929 million (864). Combined ratio for the full year 2013 was 88.1 per cent (88.9). This is the best ever combined ratio in If P&C's history. Return on equity amounted to 24.4 per cent (36.9). Share of associate Topdanmark's profit amounted to EUR 52 million (50).
• Sampo's share of Nordea's net profit in 2013 amounted to EUR 635 million (653). Nordea's RoE was 11.0 per cent (11.6) and core Tier 1 ratio (excluding transition rules) strengthened to 14.9 per cent (13.1). In segment reporting the share of Nordea's profit is included in the segment 'Holding'.
• Profit before taxes in life insurance rose to EUR 153 million (136). The interest rate used to discount the with profit liabilities was lowered to 2.25 per cent for 2014 and 2.75 per cent for 2015. Return on equity decreased to 18.3 per cent (28.5).
  
  

Income statement items are compared on a year-on-year basis and 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 is 8.6522 and the year-end exchange rate used for balance sheet items is 8.8591. For 2012 the corresponding exchange rates used were 8.7040 and 8.5820, respectively.

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.

FOURTH QUARTER 2013 IN BRIEF

Sampo Group's fourth quarter 2013 profit before taxes amounted to EUR 440 million (439). Earnings per share amounted to EUR 0.71 (0.71). Mark-to-market earnings per share decreased to EUR 0.56 (0.83) largely as a result of currency movements and changes in pension liabilities. Net asset value per share increased EUR 1.62 to EUR 22.15 during the fourth quarter of 2013.

The combined ratio in the P&C insurance operation in the fourth quarter amounted to 87.9 per cent (89.1). Profit before taxes rose to EUR 230 million (205). Share of the profits of the associated company Topdanmark amounted to EUR 10 million (14).

Sampo's share of Nordea's fourth quarter 2013 net profit amounted to EUR 157 million (188). Nordea's Group core tier 1 capital ratio, excluding transition rules, rose to 14.9 per cent (13.1) at the end of the year 2013.

Profit before taxes for the life insurance operations increased to EUR 49 million (38). Premiums written amounted to EUR 275 million (299).

BUSINESS AREAS

P&C insurance

P&C insurance segment's profit before taxes for 2013 rose to EUR 929 million (864) because of the excellent insurance technical profitability. Combined ratio for the full year 2013 was the best ever in If P&C's history and amounted to 88.1 per cent (88.9). EUR 79 million (133) was released from technical reserves relating to prior year claims.

Technical result improved to EUR 601 million (574) for the full year 2013. Technical result for Private business area increased to EUR 360 million (349) and for business area Industrial to EUR 43 million (28). The technical result for Commercial and Baltics remained stable at EUR 166 million (168) and EUR 15 million (17), respectively. The mild weather at the beginning and end of 2013 influenced the frequency claims development positively. Storm claims incurred in the fourth quarter of 2013 affected results at the same time negatively, the most significant storm amounted to approx. EUR 23 million. Insurance margin (technical result in relation to net premiums earned) improved to 13.3 per cent (13.1).

Return on equity (RoE) decreased to 24.4 per cent (36.9). Fair value reserve for If P&C rose to EUR 472 million (364) at the end of December 2013 because of the good equity market performance. Currency movements had a negative impact of EUR 153 million on the fair value reserve.

Gross written premiums increased 1.5 per cent to EUR 4,768 million (4,698). Adjusted for currency premiums increased 2.9 per cent. Premiums grew in all business areas except Industrial. In Private gross written premiums adjusted for currency increased 5.0 per cent, in Commercial 1.7 per cent and in the Baltic operations by 1.6 per cent. Gross written premiums in Industrial decreased by 4.4 per cent.

Cost ratio for 2013 improved by 0.2 percentage points and amounted to 22.8 per cent (23.0). Expense ratio decreased to 16.8 (16.9). In Finland the acquisition of Tryg's Finnish business increased nominal costs as the number of employees increased. The integration of the acquired business has proceeded according to plan.

At the end of December 2013 the total investment assets of If P&C amounted to EUR 11.7 billion (11.7). Net income from investments increased to EUR 368 million (359). Investment return mark-to-market for 2013 was 5.0 per cent (6.1). Duration for interest bearing assets was 1.3 year (1.1) and average maturity 2.3 years (2.3). Fixed income running yield as at 31 December 2013 was 2.9 per cent (3.6).

Associated company Nordea Bank AB

On 31 December 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 8.03 per share. The closing price as at 30 December 2013 was EUR 9.78.

Nordea's Board of Directors proposes to the AGM 2014 a dividend of EUR 0.43 per share (0.34). The ambition is to increase the dividend payout ratio in 2014 and 2015, while maintaining a strong capital base. If the AGM approves the Board's dividend proposal, Sampo plc will receive a dividend of EUR 370 million from Nordea in April 2014.

Total income was down 1 per cent compared to last year and operating profit was up 2 per cent compared to the last year. Risk-adjusted profit increased by 1 per cent compared to the preceding year. The effect from currency fluctuations was a reducing effect of 1 percentage point on income and on expenses and approximately -3 percentage points on loan and deposit volumes compared to one year ago.

Total expenses were largely unchanged compared to 2012 in local currencies when excluding performance-related salaries and profit sharing. For the 13th consecutive quarter, costs have been kept flat.

Net loan loss provisions decreased to EUR 735 million for the continuing operations, corresponding to a loan loss ratio of 21 basis points (26 basis points in 2012).

Net profit for the continuing operations increased 1 per cent to EUR 3,107 million. Net profit for the total operations was largely unchanged at EUR 3,116 million. Risk-adjusted profit increased 1 per cent from last year.

The core tier 1 ratio, excluding transition rules, has improved by 1.8 percentage point to 14.9 per cent ratio. Excluding the increased dividend payout ratio, the strengthening of the core tier 1 capital ratio would have been 0.8 percentage points. The tier 1 capital ratio excluding transition rules increased 0.4 percentage point to 15.7 per cent.

Since Nordea foresees in the coming years a lower loan demand, lower customer activity and lower interest rates than previously expected it will increase the focus on cost efficiency. In the fourth quarter 2012 report Nordea launched efficiency initiatives with an effect of EUR 450 million during 2013 to 2015. Nordea sees many of these initiatives delivering better than expected and in addition it will also accelerate the efficiency programme. Thus, the ambition has been raised from EUR 450 million towards a level of EUR 900 million during 2013 to 2015, of which EUR 210 million has already been achieved. Part of this will be offset by reinvestments, but net Nordea expects to have a 5 per cent lower cost base in 2015 compared to 2013. This will be possible by reducing activity related expenses, adjusting distribution to meet changed customer behaviour, increasing the Product and IT platform efficiency, optimising processes and reducing cost in central functions, including downscaling the internal service levels.

Life insurance

Profit before taxes in life insurance operations in 2013 increased by 12 per cent to EUR 153 million (136). The total comprehensive income for the period reflecting the changes in market values of assets was EUR 220 million (286). Return on equity (RoE) amounted to 18.3 per cent (28.5).

Mandatum Life Group's investment assets, excluding the assets of EUR 4.6 billion (3.8) covering unit-linked liabilities, amounted to EUR 5.5 billion (5.5) at market values as at 31 December 2013. Mark-to-market return on investments in 2013 was 7.1 per cent (9.4). At the end of December 2013 duration of fixed income assets was 1.8 years (1.8) and average maturity 2.2 years (2.1). Fixed income running yield was 3.7 per cent (4.8).

Mandatum Life Group's solvency margin clearly exceeded Solvency I requirements and the solvency capital amounted to EUR 1,403 million (1,391) as at 31 December 2013. The solvency ratio was 27.6 per cent (27.7). Total technical reserves of Mandatum Life Group increased to EUR 8.5 billion (7.9). The unit-linked reserves reached EUR 4.6 billion (3.8) at the end of 2013, which corresponds to 54 per cent (48) of total technical reserves. With profit reserves decreased further during 2013 and amounted to EUR 3.9 billion (4.1), of which the reserves to lower the discount rate for with profit liabilities amount to EUR 146 million.

The discount rate for with profit policies has been lowered to 3.5 per cent and subsequently technical reserves have been supplemented with EUR 75 million (71). In addition, EUR 71 million has been reserved to lower the interest rate of all with profit liabilities to 2.25 per cent in 2014 and to 2.75 per cent in 2015.

The various measures introduced during the last few quarters to improve the cost efficiency are beginning to show, and together with growing fee income, the expense result for life insurance segment increased to EUR 14 million (6). Risk result was excellent at EUR 24 million (19) in 2013. The expense result is expected to further improve during 2014 due to increased unit-linked savings and efficiency measures.

Holding

Holding segment's profit before taxes amounted to EUR 589 million (623), of which EUR 635 million (653) relates to Sampo's share of Nordea's 2013 profit. Segment's profit excluding Nordea was EUR -45 million (-30).

Sampo plc's debt financing on 31 December 2013 amounted to EUR 2,027 million (2,162) and interest bearing assets to EUR 980 million (1,048). Interest bearing assets include bank accounts, money market instruments and EUR 350 million of hybrid capital issued by the subsidiaries and associates. During 2013 the net debt decreased EUR 65 million to EUR 1,048 million (1,113). Gross debt to Sampo plc's equity was 29 per cent (32).

As at 31 December 2013 financial liabilities in Sampo plc's balance sheet consisted of issued senior bonds and notes of EUR 1,720 million (1,710) and EUR 308 million (451) of outstanding CPs issued. The average interest on Sampo plc's debt as of 31 December 2013 was 2.26 per cent (2.33).

OUTLOOK

Outlook for 2014

Sampo Group's business areas are expected to report good operating results for 2014. 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 their long-term combined ratio target of below 95 per cent in 2014 by a margin. 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 which it identifies and assesses regularly.

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 structural changes in the business environment may have an immediate impact on the Group's profitability or long-term impact on how business shall be conducted. Identification of uncertainties is easier than estimation of their probabilities, timing and potential outcomes.

DIVIDEND PROPOSAL

According to Sampo plc's dividend policy, total annual dividends paid shall be at least 50 per cent of Group's net profit for the year (excluding extraordinary items). In addition, share buy-backs can be used to complement the cash dividend.

The parent company's distributable capital and reserves totaled EUR 6,775,182,609.93, of which profit for the financial year was EUR 829,380,952.52.

The Board proposes to the Annual General Meeting a dividend of EUR 1.65 per share to company's 560,000,000 shares. The dividends to be paid are EUR 924,000,000.00 in total. Rest of funds are left in the equity capital.

The dividend will be paid to shareholders registered in the Register of Shareholders held by Euroclear Finland Ltd as at the record date of 29 April 2014. The Board proposes that the dividend be paid on 7 May 2014.

No significant changes have taken place in the company's financial position since the end of the financial year. The company's liquidity position is good and in the view of the Board, the proposed distribution does not jeopardize the company's ability to fulfill its obligations.

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

Press conference and conference call

Sampo will today arrange a Finnish-language press conference at the meeting room Akseli Gallen-Kallela, Hotel Kämp (Pohjoisesplanadi 29, 2nd floor, Helsinki), at 12.30 pm Finnish time.

An English-language conference call for investors and analysts will be arranged at 4 pm Finnish time (2 pm UK time). Please call +44 (0)20 3364 5372, +1 877 788 9023, +46 (0)8 5199 9354 or +358 (0)9 8171 0461. The title for the conference is 'Sampo Group's Results 2013'.

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

Sampo Group's Annual Report 2013 will be published in week 12. Sampo Group's Corporate Governance Statement and Remuneration Report will also be published at the same time.

Sampo will publish its first quarter 2014 Interim Report on 7 May 2014.

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