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Acquisition costs

Hankintakulut

The acquisition costs for insurance and investment contracts included in operating expenses (direct insurance commissions, commissions for reinsurance assumed and other acquisitions costs).

Adjusted solvency capital

Muokattu vakavaraisuuspääoma

The basis for ASC is capital items included in Group's own funds. On top of those, other risk absorbing items such as the difference between the book value and market value (including a risk margin) of technical provisions are added.

Allocated investment return transferred to the technical account

Vakuutustoimintaan kohdistettu sijoitustoiminnan nettotuotto

Return on average insurance liabilities in P&C insurance, after deducting the capital employed in insurance operations in the form of premium receivables, reinsurance deposits and net of other receivables and liabilities plus half of the technical result before allocated investment return.

The allocated investment return is based on risk-free interest.

ALM risks

Taseriskit

The company is exposed to ALM risk when changes in different market variables (e.g.interest rates, inflation, foreign exchange rates) cause a change in the fair values of investment assets and derivatives that is of different size than respective change in the economic value of insurance liabilities.

It is crucial to remember that the cash flows of insurance liabilities are modelled estimates and therefore uncertain in relation to both their timing and amount. This uncertainty is central component of ALM risk as well.

Associated company

Osakkuusyhtiö

An associated company is a company in which another company owns a dominant position due to for example a significant portion of voting shares.

Assumed reinsurance

Tuleva jälleenvakuutus

Reinsurance business received from another insurance company.

Available for sale assets

Myytävissä olevat varat

Financial assets that are designated as available for sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss (life insurance business).

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Capital redemption policy

Kapitalisaatiosopimus

Commonly used life policy without any insurable risk. Policy consists purely of savings.

Catastrophe risk

Katastrofiriski

Catastrophe risk can be seen as an extreme case of premium risk. It is the risk of low frequency, high severity events, such as natural catastrophes. These events lead to significant deviations in actual claims from the total expected claims.

Ceded reinsurance

Menevä jälleenvakuutus

Part of insurance risk transferred to reinsurers.

Cedent

Sedentti

Direct insurance company that reinsures a part of its direct business to a reinsurer.

Change in fair value reserve

Käyvän arvon rahaston muutos

Change in the fair value reserve includes potential cash flow hedges as well as unrealised profits and losses i.e. changes in the fair value of financial instruments classified as available-for-sale investment assets.

These changes in value are recognized in the income statement when the investments are sold or they expire. The change in the fair value reserve includes also the change in the tax liability related to value changes. Change in the fair value reserve is an important element in analyzing the result, especially in life insurance business.

Change in liabilities for insurance and investment contracts

Vakuutus- ja sijoitussopimusten velkojen muutos

In life insurance business the insurance portfolio is classified as either insurance contracts or investment contracts depending on, whether they carry insurance risk or not. In life insurance business area “investment contracts” comprise only capital redemption policies.

The amount of technical provisions is determined at every balance sheet date. The change in liabilities for insurance and investment contracts is the difference between the value at the balance sheet date in year x and the value a year earlier.

Claims frequency

Vahinkotiheys

The observed relationship during a specific period between the number of claims arising within a certain category of insurance (a certain insurance portfolio) and the number of insurance policies within the same category (the portfolio). Does not include large claims.

Claims handling

Korvauskäsittely

Activities in connection with the investigation, settlement and payment of claims from the time of their occurrence until settlement.

Claims incurred

Korvauskulut

The sum of paid claims and change in provision for claims outstanding. Includes the claims costs for the insured events during the year regardless if they have been paid during the same year or not.

Claims paid

Maksetut korvaukset

When the insured event occures the benefit paid to the named beneficiaries in insurance contracts or to the unnamed third party.

Combined ratio

Yhdistetty kulusuhde

In P&C insurance claims incurred and operating expenses in relation to premiums earned, expressed as a percentage.

Calculation formula:

  

Compliance

Compliance

Adherence to laws, regulations, code(s) of conduct and standards of good practice in the industry. Sampo plc's Board of Directors has issued Sampo Group Compliance Principles on 9th November, 2012.

Compliance risk

Compliance-riski

Compliance risk is the risk of legal or regulatory sanctions, material financial loss or loss of reputation, resulting from a company failure to comply with laws, regulations and administrative orders applicable to its activities.

Compliance risk is usually a consequence of internal misconduct and hence it can be seen as a part of operational risk.

Concentration risks

Keskittymäriskit

In general concentration risks arise when the company’s risk exposures are not diversified enough and as a result of this for instance an individual claim or financial market event could threaten the solvency or the financial position of the company.

Direct concentrations can evolve within separate activities – large single name or industry specific insurance or investment exposures – or across the activities when a single name or an industry is contributing widely on profitability and risks of the company through both insurance and investment activities. Concentration risk may materialize also when profitability and capital position react similarly to general economic development or to structural changes in institutional environment in different areas of business. In that case concentration risk can be seen as part of strategic risk.

Cost ratio

Toimintakulusuhde

Operating expenses and claims adjustment expenses divided by premiums earned in P&C insurance company. The ratio is expressed as a percentage.

Calculation formula:

Counterparty default risk

Vastapuoliriski

In case of counterparty risk, final loss depends on the positive mark-to-market value of derivatives or reinsurance recovables at the time of default and on the recovery rate.

Counterparty risk is mitigated by careful selection of counterparties, by diversification of counterparties to prevent risk concentrations and by using collateral techniques, e.g. ISDA Master Agreements backed by Credit Support Annexes. Counterparty risk is one subclass of credit risk.

Credit risk

Luottoriski

Credit risk refers to negative impact in the financial results arising from increased probability of, or already occurred defaults of debtors (Issuer risk) or, in case of derivative and/or reinsurance contracts, other counterparties (Counterparty default risk). Further information: Market risks

Currency risk

Valuuttariski

Currency risk refers to fluctuations in the financial results and capital caused by changes in market values of financial assets and liabilities, as well as by changes in the economic value of insurance liabilities, after currency exchange rates change. Further information: Market risks

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Earnings per share (EPS)

Osakekohtainen tulos (EPS)

The earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock. The EPS is thus profitability measure. It is especially useful when comparing subsequent years' EPS figures and their development. If the amount of shares changes from year to year (e.g. due to a split), this change has to be taken into account when EPS comparisation is made.

Calculation formula:

Economic capital (EC)

Taloudellinen pääoma

Capital needed for measurable risks of current activities, estimated by Sampo Group.

Economic value of insurance liabilities

Vakuutusvelkojen markkinaperusteinen arvo

Sampo Group calculates the economic value of insurance liabilities for internal purposes by discounting expected liability cash flows with market rates. The difference between technical provisions and the economic value of insurance liabilities is a major component of the liability side adjustment and it is part of reported adjusted solvency capital.

Effective dividend yield

Efektiivinen osinkotuotto

Effective dividend yield shows how much the dividend was in relation to the value of the share at the end of the year. This figure added to the share value development shows the direct monetary return on the share investment in the company.

Calculation formula:

Embedded value

Kertymäarvo

Value of life insurance company, which consists of the future profit from in-force policies from their whole life cycle (value of in-force) and company's own Net Asset Value (NAV).

EPS including change in the fair value reserve

Osakekohtainen tulos mukaan lukien käyvän arvon rahaston muutos

Earnings per share in case market value changes in available-for-sale investment portfolios would be recorded in the income statement instead of balance sheet.

Calculation formula:

Equalization provision

Tasoitusmäärä

Buffer against fluctuations of risk results.

Equity per share

Osakekohtainen oma pääoma

Equity per share indicates the amount of capital per share.

Calculation formula:

Equity risk

Osakeriski

Equity risk refers to fluctuations in the financial results and capital caused by changes in market values of financial assets and liabilities, as well as by changes in the economic value of insurance liabilities, after equity price change. Further information: Market risks

Equity/assets ratio

Omavaraisuusaste

Company's equity in relation to its total assets.

Calculation formula:

 

Expense ratio (life insurance)

Liikekustannussuhde (henkivakuutus)

In life insurance expense ratio means expenses divided by load income. Expense ratio measures the effectiveness of life insurance activities.

Calculation formula:

Expense ratio (P&C insurance)

Liikekulusuhde (vahinkovakuutus)

In property and casualty insurance expense ratio is a ratio between operating expenses and premiums earned expressed as a percentage.

Calculation formula:

Expense result

Kustannusliikkeen tulos

Load income minus operating expenses (life insurance terminology).

Expense risk

Kustannusriski

Expense risk arises from the fact that the timing and/or the amount of expenses incurred differs from those expected at the timing of pricing. As a result expense charges originally assumed may not be enough to cover the realized expenses.

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Group pension policy

Ryhmäeläkevakuutus

Pension insurance where the policyholder is company and insureds are a named group of company's employees.

Group solvency

Ryhmittymän vakavaraisuus

Group solvency describes the amount of solvency capital exceeding minimum requirements for own funds.

Calculation formula:

Group solvency ratio

Konsernin vakavaraisuussuhde

Group's own funds in relation to the minimum requirement set by the supervising regulators. Supervisors define what items can be included in the eligible own funds.

Calculation formula:

Guaranteed interest

Laskuperustekorko

With profit life insurance policies have guaranteed fixed interest rates.

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Individual life insurance

Yksilöllinen henkivakuutus

Life policy, in which a person is insured. The life policy can be a with profit policy or a unit-linked policy.

Individual pension insurance

Yksilöllinen eläkevakuutus

Pension policy, in which a person is insured. The pension policy can be a with profit policy or a unit-linked policy.

Inflation risk

Inflaatioriski

Inflation risk refers to unexpected changes in future expected cash flows of insurance contracts and financial assets causing changes in the market values of financial assets and liabilities as well as by changes in the economic value of insurance liabilities. Ultimately there are fluctuations in the financial results and capital.

Insurance margin (IM)

Vakuutusliikkeen tuotto

Technical result less other technical income and expense in relation to net premiums earned, expressed as a percentage. Compare with Technical result.

Insurance policy

Vakuutussopimus

IFRS-category for policy, where considerable insured risk is transferred from policyholder into insurance company.

Insured

Vakuutettu

Person or company, who is insured against event described in insurance contract.

Interest rate risk

Korkoriski

The interest rate risk refers to fluctuations in the financial results and capital caused by changes in market values of financial assets and liabilities, as well as by changes in the economic value of insurance liabilities, after interest rates change. Further information: Market risks

Internal model

Sisäinen malli

Risk management system of an insurer for the analysis of the overall risk situation of the insurance undertaking, to quantify risks and/or to determine the capital requirement on the basis of the company specific risk profile.

Investment assets

Sijoitusomaisuus

Company invests the coverage of insurance liabilities and own equity for example in stocks, bonds and properties.

Investment contract

Sijoitussopimus

IFRS-category for life insurance policy with no insurance risk (capitalisation policy).

Investment result

Sijoitustoiminnan tulos

Net income from investments less paid guaranteed interest rates and possible bonuses.

Issuer risk

Liikkeeseenlaskijariski

When an issuer risk materializes, the size of the final loss depends on the investors holding of the security at the time of default, mitigated with the potential recovery rate.

In most cases, issuer risk has already been fully priced as a lower market value before the event of default has occurred. In essence, credit spread is the market price of credit risk for issued tradable securities. Similar with other earnings risks, spread risk can be actively managed. Therefore, issuer risk is categorized in Sampo Group as being part of spread risk under investment portfolio market risks. Further information: Credit risk,  Market risk.

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Market capitalisation

Osakekannan markkina-arvo

Market value of the company.

Calculation formula:

Market risks

Markkinariskit

Market risks refer to fluctuations in the financial results and capital base caused by changes in market values of financial assets and liabilities as well as by changes in the economic value of insurance liabilities.

The changes in market values and economic values are caused by movements in underlying market variables such as interest rates, inflation, foreign exchange rates, credit spreads and share prices. Furthermore, market risks include also risk of worsening market liquidity in terms of widening bid-ask spreads and the risk of unexpected changes in repayment schedules of assets. In both cases the market value of financial instruments in investment portfolio can change.

Minimum capital requirement (MCR)

Minimipääomavaade / vähimmäispääomavaatimus (MCR)

Under the Solvency II regime the capital level representing the final threshold that triggers ultimate supervisory measures in the event that it is breached.

Minimum requirements for own funds

Omien varojen vaatimukset

The sum of own funds in all Group companies calculated according to sectoral rules.

Minimum solvency margin

Toimintapääoman vähimmäismäärä

Regulator has given instructions to calculate minimum solvency margin, which insurance company has to exceed.

Morbidity risk

Työkyvyttömyysriski

The risk of having to pay more morbidity benefits than expected when pricing the policies.

Mortality risk

Kuolevuusriski

The risk of having to pay more mortality benefits than expected when pricing the policies.

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Operating expenses

Liikekulut

Operating expenses include expenses for the acquisition, management, administrative and investment management of insurance conracts and also commissions on reinsurance ceded.

Operating expenses in insurance operations

Toimintakulut

Sum of operating expenses and claims adjustment expenses in property and casualty insurance company.

Operational risks

Operatiiviset riskit

Operational risk refers to the risk of loss arising from inadequate or failed processes or systems, from personnel, or from external events. The definition includes legal risks but excludes risks resulting from strategic decisions.

The risks may realise for instance as a consequence of internal misconduct, external misconduct, insufficient HR management, insufficiencies in operating policies, damage to physical property, interruption of activities and system failures, and defects in the operating process. 

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Regular premium

Jatkuvamaksuinen

Several regular premiums are paid in regular premium insurance.

Regulatory solvency capital

Viranomaislaskennan vakavaraisuuspääoma

Amount of capital calculated according to regulations which the group has against risks/capital requirement.

Calculation formula:

Reinsurance

Jälleenvakuutus

Insurance company doesn't bear all the insurance risks by itself and therefore company buys insurance cover for part of its risks from another insurance company.

Reinsurers' share

Jälleenvakuuttajan osuus

Insurer has bought reinsurance cover from reinsurer, and reinsurer is liable for the part of insurer's paid claims and provision for claims outstanding that corresponds to the bought reinsurance.

Reputational risk

Maineriski

Reputational risk refers to the risk that adverse publicity regarding the company’s business practices or associations, whether accurate or not, causes a loss of confidence in the integrity of the institution.

Reputational risk is often a consequence of a materialized operational risk or compliance risk and realizes often as a deterioration of reputation amongst customers and other stakeholders.

Reserve risk

Korvausvastuuriski

Reserve risk only relates to incurred claims, i.e. existing claims, and originates from claim sizes being greater than expected, differences in timing of claims payments from expected, and differences in claims frequency from those expected.

As a result technical provisions are not sufficient to cover the cost for already incurred claims and there is a loss or adverse changes in the value of insurance liabilities.

Retention

Omapidätys

That part of the insurance business for which the insurance company assumes the risk and which is thus not reinsured with other companies. (Property and casualty insurance terminology.)

Return on assets (RoA)

Kokonaispääoman tuotto (RoA)

Return on Assets (RoA) indicates how much return the company generates to assets invested in the company, i.e. both equity and liabilities. RoA may vary substantially depending on the industry and the amount of tied-up assets. Therefore RoA comparisons between different industries are not necessarily relevant.

Calculation formula for Return on assets (at fair values):

Return on capital at risk

Riskisopeutetun pääoman tuotto

Return on capital at risk = Average profit on operations for the period / average Sampo Group Economic Capital

Return on equity (RoE)

Oman pääoman tuotto (RoE)

Return on equity (RoE) indicates how much return the company is able to generate for the money shareholders have invested (simplified formula: profit after tax/average equity during the year). The more liabilities company has in relation to equity, the more sensitive RoE is to variations in profit. RoE is useful for comparing profitability in companies on the same branch.

Calculation formula for Return on equity (at fair values):

Risk life policy

Riskihenkivakuutus

Policy for insured's death cover.

Risk policy

Riskivakuutus

Policy covering different risks such as death, permanent disability, medical cover, and accident.

Risk ratio

Riskisuhde

In property and casualty insurance, ratio of claims incurred (claims adjustment expenses are excluded) and premiums earned, expressed as a percentage. Risk ratio shows how well the insurance company has succeeded in pricing the insurance risk. The lower the ratio, the better.

Calculation formula:

  

Risk result

Riskiliikkeen tulos

Risk premiums charged by life insurance company less the risk benefits paid/to be paid to beneficiaries.

Risk selection

Vastuunvalinta

The insurer's selection of the type of risks to be included in his portfolio. Risk selection is of major importance to an insurance company, in part because it facilitates, to the extent possible, a balanced business, which normally has a favorable impact on operating results.

Run-off result

Run-off-tulos

P&C company's profit or a loss that arises when claims originating from a prior year are either finally settled or revalued.

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Technical provisions

Vastuuvelka

Provisions for unearned premiums, unexpired risks and claims outstanding.

Technical result

Vakuutustekninen tulos

Company’s result before return on investment, other income, costs and taxes (P&C insurance company).

Technical result before the transfer of return of allocated investment return

Vakuutustekninen tulos ennen sijoitustoiminnan nettotuotto-osuuden siirtoa

Item in the technical accounts comprising premiums earned less claims and operating costs (P&C insurance terminology).

Total comprehensive income

Kauden laaja tulos

Calculation formula:

 

OCI includes changes in exchange differences, available-for-sale financial assets, cash flow hedges, share of associate's other comprehensive income as well as actuarial gains and losses from defined pension plans.

Total investment return

Sijoitusten kokonaistuotto

Sum total of direct return and realized and unrealized changes in value expressed as a percentage of the fair value of investment assets.

The daily time weighted method has been used to calculate the return on active investments. The monthly time weighted method has been used to calculate return on properties and other investments. The return has been calculated using the calculation methods used internally for the evaluation of asset management.

Total technical reserves on own account

Vastuuvelka omalla vastuulla

Liabilites for insurance and investment contracts after reinsurers' share.

Transfer of liability

Vastuunsiirto

Transfer of insurance portfolio from insurance company/pension fund into another insurance company.

Transitional measure

Siirtymäsäännös

Solvency II term, which in Sampo's context refers to either Transitional measure on Technical provision or Equity risk. For technical provisions this means that (until 2032) the book value of liabilities can be used instead of Solvency II (market consistent) liability and for equity risk a lower risk charge can be applied until 2023 in SCR calculations.

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Valuation differences

Arvostuserot

Difference between fair value and book value of investments.

Value of in-force-business

Voimassa olevan vakuutuskannan arvo

Value of existing life policies. This value is calculated considering all the income and expenses from these policies until termination.

Variable compensation

Muuttuva palkitseminen

Variable compensation in Sampo Group can be divided into two main groups, which are a) variable compensations based on the contribution to the company's profitability and b) variable compensations linked to committing employees to the Group.