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Acquisition costs

Hankintakulut

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

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.

Asset and liability management risk (ALM risk)

Taseriskit

The company is exposed to ALM risks  (also called as balance sheet risks) 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.

The cash flows of insurance liabilities are modelled estimates and therefore uncertain in relation to both their timing and amount. This uncertainty is central source of ALM risk as well.

Assumed reinsurance

Tuleva jälleenvakuutus

Reinsurance business received from another insurance company.

Available-for-sale assets (AFS)

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 (IFRS).

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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 extreme or exceptional events, such as natural catastrophes, where the pricing and setting of provisioning assumptions include significant uncertainty. These events may lead to significant deviations between actual claims and the total expected claims resulting into a loss or adverse changes in the value of insurance liabilities.

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. In other cases the liabilities are insurance liabilities.

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

One of the most significant key figures in P&C insurance describing the efficiency of operations. It is calculated as the sum of loss ratio and expense ratio. Combined ratio is 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 9 May 2018.

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

Concentration risks arise when the company’s risk exposures are not diversified enough and as a result of this for instance an individual large claim or financial market event may 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.

Consolidated Group SCR

Ryhmän konsolidoitu SCR

Solvency capital requirement calculated for the Solvency II regulated group. In Sampo's case, this group consists of Sampo plc, Mandatum Life, Topdanmark and If P&C.

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

The risk that a counterparty is unable to fulfill its obligations. In case of counterparty default risk (also called as counterparty risk), final loss depends on the positive mark-to-market value of derivatives or reinsurance recovables at the time of default, the collaterals received, and on the recovery rate. 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).

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 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.

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:

Eligible own funds

Hyväksyttävä oma varallisuus

The own funds that are eligible for covering the regulatory capital requirements (Solvency II).

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:

 

Excess of assets over liabilities

Ylijäämä, jonka verran varat ovat velkoja suuremmat

The excess of assets over liabilities as reported in the Solvency II balance sheet. Value of the assets minus liabilities. This corresponds with equity in the IFRS balance sheet with most important differences being in the valuation of technical provisions and investment assets and treatment of intangible assets.

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 (kuluriski)

Expense risk arises from the fact that the timing and/or the amount of expenses related to management of insurance policies 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

Konsernin vakavaraisuus

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

Calculation formula:

Group solvency capital requirement (Group SCR)

Ryhmän SCR

The Group solvency capital requirement is the sum of the consolidated Group SCR and the SCR for entities included with deduction and aggregation method (mainly Nordea in Sampo Group) (Solvency II).

Group solvency ratio

Konsernin vakavaraisuussuhde

Group's own funds in relation to the minimum requirement set by the regulators. Regulators 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 (P&C Insurance). Further information: 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. Further information: Partial internal model

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 the amount credited to policies based on guaranteed interest and possible bonuses (life insurance).

Issuer risk

Liikkeeseenlaskijariski

The risk that an issuer is unable to fulfill its obligations. When the 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 higher spread and respectively as a lower market value of security before the event of default has occurred. In essence, credit spread is the market price of default 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.

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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 consolidated Group SCR

Ryhmän kosolidoitu vähimmäis-SCR

Minimum solvency capital requirement calculated for the Solvency II regulated group. In Sampo's case, this group consists of Sampo plc, Mandatum Life, Topdanmark and If P&C.

Minimum requirements for own funds

Omien varojen vähimmäismäärä

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

Minimum solvency capital requirement (Minimum SCR)

Vähimmäisvakavaraisuuspääomavaatimus (Vähimmäis-SCR)

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

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

Expenses related to the acquisition or renewal of insurance contracts plus corporate administration costs in property and casualty insurance.

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. 

Own funds

Oma varallisuus

An undertaking's own funds consist of basic own funds and ancillary own funds. The basic own funds consist of ordinary share capital, reconciliation reserve and some other items such as subordinated liabilities and deferred tax assets. There are no ancillary own funds in Sampo Group (Solvency II).

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Ratio of eligible own funds to Group SCR

Hyväksyttävän oman varallisuuden ja ryhmän SCR:n suhdeluku

Solvency ratio calculated as the total eligible own funds divided by Group SCR, including other financial sectors and undertakings treated according to deduction and aggregation method. Solvency ratio for the whole group (Solvency II).

Reconciliation reserve

Täsmäytyserä

The total reconciliation reserve is Own funds item, which results mainly from excess of assets over liabilities deducted e.g. by foreseeable dividends and other distributions (Solvency II).

Regular premium

Jatkuvamaksuinen

Several regular premiums are paid in regular premium insurance.

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 terminology).

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

Total comprehensive income is calculated adding together profit and other comprehensive income (OCI) for the period after taxes. 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 eligible own funds to meet the Group SCR

Ryhmän SCR:n täyttämiseksi hyväksyttävä oma varallisuus yhteensä

The total eligible own funds, including the own funds from the other financial sectors (Nordea) and from the undertakings included via deduction and aggregation method, to meet the Group SCR (Solvency II).

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 rules

Siirtymäsäännös

Solvency II capital requirement calculation rules have not yet come into full force due to transitional rules (also known as transitional measures) developed by the financial supervisory authorities.

The relevant transitional rules for Sampo Group are related to the calculation of technical provisions and the equity risk. The application of the former requires approval from the authorities whereas the latter may be applied at the company’s own discretion. Mandatum Life applies both of the mentioned rules, If applies only the transitional rule on equity risk and Topdanmark applies neither.

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Valuation differences

Arvostuserot

Difference between fair value and book value of investments.

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.