Q&A – Sampo’s Board’s proposal to be authorized to resolve on the distribution of an extra dividend

Sampo’s Board has today proposed that the Annual General Meeting authorizes the Board to resolve, in its discretion, on the distribution of an extra dividend. The extra dividend could be paid either in cash and/or in financial instruments (including, but not limited to, shares and/or other securities) held by the company. The proposed authorization for the total dividend is up to EUR 500 million (i.e. EUR 0.90 per share).

Why does the Board propose this kind of authorization?

The background for this proposal is the increasing capital requirement for Sampo regarding its ownership in Nordea. This has been disclosed earlier.

Extract from Sampo’s Results for 2018:

“In the fourth quarter of 2018 Nordea’s Risk Exposure Amount (REA) increased EUR 35 billion to EUR 156 billion stemming mainly from migration of existing items from Pillar 2 to Pillar 1 due to the re-domiciliation of the bank from Sweden to Finland. At the same time, the systemic risk buffer (SRB) decreased temporarily to zero per cent.

As a consequence of these two effects, the nominal capital requirement for Sampo was EUR 3,779 million on 31 December 2018. However, the SRB has to be applied in Finland starting 1 January 2019 (2 per cent in the first half of 2019 and 3 per cent from 1 July 2019) which will increase Nordea’s capital requirement for Sampo accordingly in 2019 and decrease the Group solvency ratio. As the situation develops Sampo will be looking into different measures to counter the impact.”

The proposed authorization is one conceivable measure, among other measures, for the Board to counter the impact of the changes in the capital requirement. Distribution of extra dividend in the form of financial instruments would increase Sampo’s solvency.

Why this authorization was not proposed in the original Notice to the AGM?

Sampo’s Board looks into different measures to counter the increasing capital requirement. This measure was not introduced to the Board until now.

Should the shareholders be worried about Sampo’s solvency?

There is no need to be worried. Sampo’s solvency is at sufficient level, but with stronger solvency we are able to operate more freely in the investment markets. It also supports our ability to pay dividend and creates better possibilities to create value for our shareholders, for example by participating mergers and acquisitions or making large-scale direct financial investments.

Would shares of Nordea held by Sampo be included the financial instruments mentioned in the proposal?

Yes.

If the Board decided to distribute extra dividend in the form of Nordea’s shares, could Sampo’s ownership in Nordea decrease below 20 per cent?

This option is not excluded.

What would the decrease of the ownership below 20 per cent mean?

In that case, Nordea would no longer be Sampo’s associated company and the profit would not be consolidated in Sampo’s income statement. This would also substantially change the capital requirement rules for Sampo.

Would this change Sampo’s view on Nordea?

No, it would not. As the largest shareholder in Nordea, Sampo is still committed to participate developing the company to create value for shareholders.

When would this extra dividend be distributed?

This is an authorization, which the Board can, in its discretion, use or not use. The authorization would be valid until the next Annual General Meeting.

What would be the tax treatment for the possible extra dividend in financial instruments?

The tax treatment for the dividend in the form of financial instruments is similar as for cash dividends. Also, the Finnish transfer tax of 1.6 per cent would become payable but Sampo would pay it on behalf of the shareholders. If the AGM approves the proposed authorization and the Board decides to use it, we will provide further information on the tax treatment.