Sampo Group's results for January - March 2017

SAMPO PLC               INTERIM STATEMENT           11 May 2017 at 9.30 am

SAMPO GROUP'S RESULTS FOR JANUARY - MARCH 2017

Sampo Group's profit before taxes for January - March 2017 amounted to EUR 430 million (416). The total comprehensive income for the period, taking changes in the market value of assets into account, rose to EUR 557 million (204).

• Earnings per share increased to EUR 0.68 (0.65). Mark-to-market earnings per share were EUR 0.99 (0.36). The return on equity (RoE) for the Group was 18.4 per cent (7.1) for January - March 2017. Net asset value per share on 31 March 2017 amounted to EUR 26.67 (24.86).
• The Annual General Meeting held on 27 April 2017 decided to pay a dividend of EUR 2.30 per share (2.15). The dividend was paid on 9 May 2017.
• Profit before taxes for the P&C insurance segment amounted to EUR 202 million (216). Combined ratio for January - March 2017 was 87.4 per cent (83.0). Excluding one-off items the combined ratio for the comparison period January - March 2016 was 89.8 per cent. Return on equity was 37.5 per cent (15.3). The contribution of Topdanmark's net profit for the first quarter of 2017 increased to EUR 21 million (5).
• Sampo's share of Nordea's net profit for the first quarter of 2017 amounted to EUR 171 million (159). Nordea's return on equity was 10.3 per cent (10.2). Core Tier 1 ratio (excluding transition rules) strengthened to 18.8 per cent (18.4). In segment reporting the share of Nordea's profit is included in the segment 'Holding'.
• Profit before taxes in life insurance operations amounted to EUR 54 million (53). Return on equity rose to 24.3 per cent (-4.4). Premium income on own account decreased to EUR 229 million (244).

*) comparison figure from 31.12.2016

The figures in this report are not audited. Income statement items are compared on a year-on-year basis and comparison figures for balance sheet items are from 31 December 2016 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.

BUSINESS AREAS

P&C insurance

Profit before taxes for January - March 2017 for the P&C insurance segment amounted to EUR 202 million (216). The total comprehensive income for the period after tax reflecting the changes in market values of assets rose to EUR 268 million (114). Combined ratio was 87.4 per cent (83.0) and risk ratio to 65.4 per cent (60.7). Excluding the non-recurring reserve release, combined ratio for the comparison period would have been 89.8 per cent.

Net releases from technical reserves relating to prior year claims were EUR 17 million (88) in January - March 2017. In the first quarter of 2017 the discount rate used to discount Finnish annuities was lowered by 0.3 percentage points to 1.2 per cent. This impacted the combined ratio negatively with 6.7 percentage points. The impact was, however, to a large extent offset by higher reserve releases in other areas compared to same period last year.

Technical result decreased to EUR 140 million (184). Insurance margin (technical result in relation to net premiums earned) amounted to 13.2 per cent (17.5).

The lowering of the discount rate for annuities in Finland had a negative impact on the Finnish country specific result and also on all the business areas excluding Baltic. The combined ratio for Finland increased by 30 percentage points due to the change. The release from the Swedish MTPL reserves affected both the Swedish country specific result and the Private and Commercial business area results positively in the comparison period. The combined ratio for Norway benefited from higher reserve releases. Large claims all in all were EUR 10 million worse than expected in the first quarter of 2017.

Swedish discount rate used to discount the annuity reserves remained at the same level as at the end of 2016.

Gross written premiums increased to EUR 1,643 million (1,616) in January - March 2017. Adjusted for currency, premium growth was 0.2 per cent. Growth was positive in business areas Private and Baltic, and negative in business areas Commercial and Industrial.

Cost ratio improved to 22.0 per cent (22.3) and expense ratio to 16.3 per cent (16.9).

On 31 March 2017, the total investment assets of If P&C amounted to EUR 12.3 billion (12.2), of which fixed income investments constituted 82 per cent (79), money market 5 per cent (8) and equity 13 per cent (13). Net income from investments amounted to EUR 52 million (36). Investment return marked-to-market for the first quarter of 2017 was 1.5 per cent (-0.2). Duration for interest bearing assets was 1.5 years (1.4) and average maturity 3.0 years (2.8). Fixed income running yield without taking into account the FX hedging cost as at 31 March 2017 was 1.7 per cent (1.8).

Reserve ratios remained stable at 165 per cent (165) of net written premiums and 234 per cent (238) of claims paid. If P&C's solvency position is described in the section Solvency.

Associated company Nordea Bank AB

On 31 March 2017 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 8.40 per share. The closing price as at 31 March 2017 was EUR 10.73.

Income momentum has improved and total income is up by 6 per cent in local currencies compared to the first quarter of 2016, mainly driven by net fee and commission income. Net fee and commission income increased 12 per cent both in local currencies and in euros from the previous year.

Operating profit was up 8 per cent in local currencies (10 per cent in euros) from the prior year excluding non-recurring items.

Net interest income was unchanged in local currencies (up 2 per cent in euros) from 2016. Average lending volumes in business areas in local currencies were unchanged from the first quarter of 2016 while deposits volumes were up 1 per cent.

Net result from items at fair value increased 17 per cent in local currencies (13 per cent in euros) from 2016.

Costs are up 5 per cent in local currencies (6 per cent in euros) compared to the first quarter of 2016 mainly driven by Group projects, Compliance and Risk. Total expenses amounted to EUR 1,246 million. Staff costs were up 7 per cent in local currencies excluding non-recurring items.

Credit quality is solid. Net loan loss provisions increased to EUR 113 million, corresponding to a loan loss ratio of 14 bps (13 bps for first quarter 2016).

Net profit increased 6 per cent in local currencies (8 per cent in euros) to EUR 844 million. Currency fluctuations had an increasing effect of 1 per cent on income and expenses as well as on loan and deposit volumes compared to a year ago.

The capital position continues to strengthen and the Common Equity Tier 1 ratio increased to 18.8 per cent at the end of the first quarter 2017 compared to 18.4 per cent at the end of 2016. REA increased EUR 0.4 billion. The main drivers were increased REA calculated under the standardised approach and changes to credit quality in the corporate and institution portfolios. This was somewhat offset by decreased market risk.

Further information on Nordea Bank AB and its January - March 2017 result is available at www.nordea.com.

Life insurance

Profit before taxes in life insurance operations for January - March 2017 amounted to EUR 54 million (53). The total comprehensive income for the period after tax reflecting the changes in market values of assets rose to EUR 85 million (-14). Return on equity was 24.3 per cent (-4.4).

Net investment income, excluding income on unit-linked contracts, amounted to EUR 97 million (78). Net income from unit-linked contracts was EUR 213 million (-143). In the first quarter of 2017 fair value reserve increased to EUR 636 million (596).

Mandatum Life Group's total technical reserves increased to EUR 11.4 billion (11.3). Unit-linked reserves rose to a record high of EUR 6.6 billion (6.4) at the end of the first quarter of 2017, which corresponds to 58 per cent (57) of total technical reserves. In the first quarter of 2017 with profit reserves amounted to EUR 4.8 billion (4.8). Reserves related to the higher guarantees of 4.5 and 3.5 per cent decreased by EUR 54 million to EUR 2.8 billion in January - March 2017.

Mandatum Life has all in all supplemented its technical reserves with a total of EUR 284 million (273) due to low level of interest rates. The figure does not take into account the reserves relating to the segregated fund. The discount rate used for the rest of 2017 and 2018 is 0.25 per cent. For 2019 the rate is 1.25 per cent. Discount rate applied for the segregated fund is 0.50 per cent.

At the end of March 2017 Mandatum Life Group's investment assets, excluding the assets of EUR 6.6 billion (6.5) covering unit-linked liabilities, amounted to EUR 6.6 billion (6.6) at market values.

The assets covering Mandatum Life's original with profit liabilities on 31 March 2017 amounted to EUR 5.4 billion (5.4) at market values. 48 per cent (41) of the assets are in fixed income instruments, 6 per cent (14) in money market, 31 per cent (30) in equities and 15 per cent (15) in alternative investments. The investment return marked-to-market for January - March 2017 was 2.6 per cent (-0.1). The duration of fixed income assets at the end of March 2017 was 2.5 years (1.9) and average maturity 2.8 years (2.3). Fixed income running yield without taking into account the FX hedging cost was 3.3 per cent (3.5).

The assets covering the segregated fund amounted to EUR 1.2 billion (1.2), of which 76 per cent (75) was in fixed income, 8 per cent (10) in money market, 9 per cent (8) in equities and 7 per cent (7) in alternative investments. Segregated fund's investment return marked-to-market for January - March 2017 was 0.9 per cent (0.7). At the end of March 2017 the duration of fixed income assets was 2.7 years (2.4) and average maturity 3.6 years (3.5). Fixed income (incl. money market) running yield without taking into account the FX hedging cost was 2.0 per cent (1.9).

Mandatum Life's solvency position is described in the section Solvency.

The expense result for life insurance segment was best-ever in the first quarter and amounted to EUR 8 million (3). Risk result amounted to EUR 8 million (5).

Mandatum Life Group's premium income on own account amounted to EUR 229 million (244) in the first quarter of 2017.

Holding

Holding segment's profit before taxes for January - March 2017 amounted to EUR 174 million (148), of which EUR 171 million (159) relates to Sampo's share of Nordea's first quarter 2017 profit. Segment's profit excluding Nordea was EUR 3 million (-12).

Sampo plc's holding in Nordea Bank was booked in the consolidated balance sheet at EUR 7.2 billion. The market value of the holding was EUR 9.2 billion, i.e. EUR 10.73 per share, at 31 March 2017.

Sampo plc holds 41,997,070 Topdanmark shares, which correspond to 46.7 per cent of all shares in Topdanmark and 49.3 per cent of all votes. The market value of the holding was EUR 998 million and the book value on the Group accounts was EUR 616 million at 31 March 2017.

In addition the assets on Sampo plc's balance sheet included holdings in subsidiaries for EUR 2.4 billion (2.4).

OTHER DEVELOPMENTS

Annual General Meeting

The Annual General Meeting of Sampo plc, held on 27 April 2017, decided to distribute a dividend of EUR 2.30 per share for 2016. The dividend was paid on 9 May 2017. The Annual General Meeting adopted the financial accounts for 2016 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: Christian Clausen, Jannica Fagerholm, Adine Grate Axén, Veli-Matti Mattila, Risto Murto, Eira Palin-Lehtinen, Per Arthur Sørlie and Björn Wahlroos. 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 (Chairman), Christian Clausen, Adine Grate Axén and Per Arthur Sørlie to the Audit Committee.

All the Board members have been determined to be independent of the company and of the major shareholders under the rules of the Finnish Corporate Governance Code 2015. The curriculum vitaes of the Board Members are available at www.sampo.com/board.

The Annual General Meeting decided to pay the following fees to the members of the Board of Directors until the close of the 2018 Annual General Meeting the Chairman of the Board will be paid an annual fee of EUR 175,000, the Vice Chairperson of the Board and the Chairperson of the Audit Committee will be paid EUR 115,000, the members of the Audit Committee will be paid EUR 96,000 and the other members of the Board of Directors will be paid EUR 90,000 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. Kristina Sandin, APA, will act as the principally responsible auditor.

Based on the proposal made by a shareholder and the Board of Directors, the AGM made the decision on the forfeiture of the share certificates that were still in the joint account and the rights carried by the shares. The decision does not apply to shares whose transfer into the book-entry system has been validly requested by 27 April 2017 at 2 pm and whose request for conversion after the conversion period will be finalized by 31 October 2017. The company's Board of Directors will cancel the treasury shares to be held by the company as a result of the forfeiture. Approximately 98.9 per cent of the votes cast at the AGM were in favor of the proposal for the forfeiture of the share certificates that were still in the joint account and the rights carried by the shares.

There were 3,105 shareholders represented at the beginning of the meeting holding altogether 373,911,948 shares and 378,711,948 votes in the company.

The minutes of the Annual General Meeting will be available for viewing at www.sampo.com/agm and at Sampo plc's head office at Fabianinkatu 27, Helsinki, Finland, on 11 May 2017 at the latest.

Shares and share capital

The Annual General Meeting held on 27 April 2017 authorized the Board to repurchase a maximum of 50,000,000 Sampo A shares. The maximum price to be paid will be highest market price quoted during the authorization period. The authorization will be valid until the close of the next Annual General Meeting, nevertheless not more than 18 months after AGM's decision. Sampo plc did not repurchase its own shares during the first quarter of 2017. At the end of March 2017, neither Sampo plc nor its Group companies held any Sampo A shares.

Sampo's Annual General Meeting held on 27 April 2017 decided to forfeit the rights carried by the shares in the joint book-entry account (for details see section Annual General Meeting). The number of shares on the joint account on 28 April 2017 amounted to 5,951,580.

Internal dividends

Mandatum Life paid a dividend of EUR 125 million to Sampo plc on 22 March 2017. If P&C normally pays its dividend towards the end of the calendar year.

On 16 March 2017 Nordea Bank AB's Annual General Meeting decided on a dividend of EUR 0.65 per share. Sampo plc's share of total dividends amounts to EUR 559 million. The dividend was paid on 27 March 2017.

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 when calculating their solvency requirements and eligible own funds at Group level.

On 31 March 2017 If P&C Group's Solvency II capital requirement under standard model amounted to EUR 1,980 million (1,942) and own funds to EUR 4,253 million (3,822). Solvency ratio was 215 per cent (197).

Mandatum Life's solvency ratio with transitional measures strengthened to 181 per cent (160) due to higher interest rates and good investment performance. This is the strongest Solvency II ratio Mandatum Life has reported. Own funds of EUR 2,107 million (1,893) exceed Solvency Capital Requirement (SCR) of EUR 1,163 million (1,182) by EUR 944 million. Without transitional measures, own funds would have amounted to EUR 1,663 and the solvency capital requirement EUR 1,393 million leading to a solvency ratio of 119 per cent.

Group's conglomerate solvency ratio (own funds in relation to minimum requirements for own funds) was 159 per cent (154) as at 31 March 2017.

Group solvency is also calculated by Solvency II rules. More information on this method is available at the Risk Management section of the Annual Report 2016. The requirements calculated with the two methods differ very little from one another.

More information on Sampo Group's capital policy is available at the Risk Management section of the Annual Report 2016.

Debt financing

Sampo plc's debt financing on 31 March 2017 amounted to EUR 2,932 million (3,548) and interest bearing assets to EUR 2,112 million (2,104). Interest bearing assets include bank accounts, fixed income instruments and EUR 640 million (637) of hybrid capital and subordinated debt instruments issued by the subsidiaries and associated companies. Altogether, excluding cash and equivalents, the fixed income instruments yield over 5 per cent.

At the end of the first quarter of 2017 the interest bearing net debt amounted to EUR 820 million (1,443). The net debt calculation takes into account interest bearing assets and liabilities. Gross debt to Sampo plc's equity was 36 per cent (47) and financial leverage 26 per cent (32).

On 27 February 2017 Sampo plc repaid EUR 500 million senior notes maturing on that date.

On 31 March 2017 financial liabilities in Sampo plc's balance sheet consisted of issued senior bonds and notes of EUR 2,399 million (2,877) and EUR 534 million (671) of CPs issued. The average interest, net of interest rate swaps, on Sampo plc's debt as of 31 March 2017 was 0.96 per cent (1.38).

More information on Sampo Group's outstanding debt issues is available at www.sampo.com/debtfinancing.

OUTLOOK

Outlook for 2017

Sampo Group's business areas are expected to report good operating results for 2017.

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 87 - 90 per cent for the full-year 2017.

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
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)330 336 9105, +46 (0)8 5033 6574, +1 719 325 4746 or +358 (0)9 7479 0361. The conference code is 7569563.

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-Year Financial Report for January - June 2017 on 9 August 2017.

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