Sampo Group Results for 2014

SAMPO PLC    FINANCIAL STATEMENT RELEASE    11 February 2015 at 9.30 am

Sampo Group Results for 2014

Sampo Group's profit before taxes for 2014 amounted to EUR 1,759 million (1,668). Total comprehensive income for the period, taking changes in the market value of assets into account, decreased to EUR 1,179 million (1,425) largely as a result of weakened Swedish and Norwegian kronas.

• Earnings per share were EUR 2.75 (2.59). Mark-to-market earnings per share were EUR 2.11 (2.54). The return on equity for the Group decreased to 10.9 per cent for 2014 (13.8) mainly due to the negative currency rate development. Net asset value per share at the end of 2014 increased to EUR 22.63 (22.15).
• The Board proposes to the Annual General Meeting to be held on 16 April 2015 a dividend of EUR 1.95 per share (1.65) and an authorization to repurchase a maximum of 50 million Sampo A shares. The proposed dividend payment amounts in total to EUR 1,092 million (924).
• The profit before taxes for the P&C insurance amounted to EUR 931 million (929). Combined ratio for the full year 2014 was the best ever in If P&C's history and amounted to 87.7 per cent (88.1). Return on equity (RoE) decreased to 18.1 per cent (24.4). Adjusted for currency gross written premiums grew 1.7 per cent. The contribution of Topdanmark's net profit for 2014 amounted to EUR 53 million (52).
• Sampo's share of Nordea's net profit for 2014 amounted to EUR 680 million (635). Nordea's RoE was 11.5 per cent (11.0) and core Tier 1 ratio (excluding transition rules) strengthened to 15.7 per cent (13.9). In segment reporting the share of Nordea's profit is included in the segment 'Holding'. Nordea's Board of Directors proposes to the AGM 2015 a dividend of EUR 0.62 per share (0.43). If the AGM approves the Board's dividend proposal, Sampo plc will receive a dividend of EUR 533 million from Nordea on 30 March 2015.
• Life insurance operations reported for 2014 profit before taxes of EUR 163 million (153). Return on equity (RoE) amounted to 11.4 per cent (18.3). Premium income on own account increased 4 per cent to EUR 1,105 million (1,063) and premiums from unit-linked policies reached an all-time high EUR 961 million (909).

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.

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.

Exchange rates used in reporting

FOURTH QUARTER 2014 IN BRIEF

Sampo Group's profit before taxes for the fourth quarter of 2014 was EUR 447 million (440). Earnings per share amounted to EUR 0.70 (0.71). Mark-to-market earnings per share were EUR 0.14 (0.56). The decrease is largely explained by the weakening of the Swedish krona. The currency effect comes through comprehensive income from If P&C and Nordea. Net asset value per share increased to EUR 22.63 (22.15).

The combined ratio in the P&C insurance operation in the fourth quarter amounted to 87.1 per cent (87.9) and was the best ever for fourth quarter. Profit before taxes decreased to EUR 219 million (230). Share of the profits of the associated company Topdanmark amounted to EUR 9 million (10).

Sampo's share of Nordea's fourth quarter 2014 net profit amounted to EUR 179 million (157). Nordea's Group core tier 1 capital ratio, excluding transition rules, rose to 15.7 per cent (13.9) at the end of the year.

Profit before taxes for the life insurance operations amounted to EUR 50 million (49). Premiums written increased significantly and amounted to EUR 333 million (275). Transfer of Suomi Mutual's group pension insurance portfolio was completed on 30 December 2014.

BUSINESS AREAS

P&C insurance

The strong focus on underwriting and cost efficiency continued in the P&C insurance segment also in 2014 and the profit before taxes for the segment rose to EUR 931 million (929). Combined ratio for the full year 2014 was the best ever in If P&C's history and amounted to 87.7 per cent (88.1). EUR 2 million (79) was released from technical reserves relating to prior year claims. The contribution of Topdanmark's net profit amounted to EUR 53 million (52).  

Technical result decreased to EUR 588 million (601) for the full year 2014, due to the weakening of Norwegian and Swedish kronas and the lower interest rates. Technical result for Private business area decreased to EUR 349 million (360) and for business area Commercial to EUR 153 million (166). Technical result for Industrial and Baltics increased to EUR 51 million (43) and EUR 17 million (15), respectively. Insurance margin (technical result in relation to net premiums earned) remained stable at 13.2 per cent (13.3).

Return on equity (RoE) decreased to 18.1 per cent (24.4). Fair value reserve for If P&C rose to EUR 507 million (472) at the end of December 2014.

Gross written premiums decreased to EUR 4,634 million (4,768) as a result of the weakened Norwegian and Swedish kronas. Adjusted for currency premiums increased 1.7 per cent. Premiums grew in all business areas except Industrial. In Private gross written premiums adjusted for currency increased 3.2 per cent, in Commercial 0.2 per cent and in the Baltic operations by 4.9 per cent. Gross written premiums in Industrial decreased by 2.6 per cent.

Cost ratio improved to 22.5 per cent (22.8) and expense ratio to 16.7 per cent (16.8) as a result of the adoption of continuous cost efficiency measures.

At the end of December 2014 the total investment assets of If P&C amounted to EUR 11.5 billion (11.7). Net income from investments decreased to EUR 353 million (368). Investment return mark-to-market for 2014 was 4.1 per cent (5.0). Duration for interest bearing assets was 1.0 year (1.3) and average maturity 2.4 years (2.3). Fixed income running yield as at 31 December 2014 was 2.4 per cent (2.9).

Associated company Nordea Bank AB

On 31 December 2014 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 8.21 per share. The closing price as at 30 December 2014 was EUR 9.68.

Nordea's Board of Directors proposes to the AGM 2015 a dividend of EUR 0.62 per share (0.43). The Board's ambition is to continue increasing the pay-out ratio for 2015, while maintaining a strong capital base. If the AGM approves the Board's dividend proposal, Sampo plc will receive a dividend of EUR 533 million from Nordea on 30 March 2015.

Total income was up 2 per cent in local currencies (largely unchanged in EUR) compared to last year, excluding nonrecurring items, and operating profit was up 12 per cent in local currencies (+9 per cent in EUR) compared to last year excluding non-recurring items.

Total expenses were down 1 per cent in local currencies (-4 per cent in EUR) compared to 2013 excluding impairment charge and restructuring costs. Staff costs were up 3 per cent in local currencies (largely unchanged in EUR) excluding restructuring costs. In local currencies and excluding non-recurring items and variable pay, costs were down by 2.2 per cent. Total expenses in the full year 2014 excluding the restructuring costs and the charge for impairment of intangible assets were EUR 4,832 million.

Net loan loss provisions decreased to EUR 534 million, corresponding to a loan loss ratio of 15 basis points (21 basis points last year).

Net profit including non-recurring items increased 9 per cent in local currencies (+7 per cent in EUR) to EUR 3,332 million and net profit as basis for dividend distribution increased 17 per cent in local currencies (+15 per cent in EUR) to EUR 3,593 million.

The impact from currency fluctuations was a reducing effect of 3 percentage points on income and expenses and approx. -3 percentage points on loan and deposit volumes compared to a year ago.

The Group's fully loaded Basel III Common equity tier 1 (CET1) capital ratio increased to 15.7 per cent at the end of the fourth quarter from 15.6 per cent at the end of the third quarter, following strong profit generation and the continuous focus on capital management. The CET1 capital ratio was negatively affected by 10 basis points due to currency effects. The tier 1 capital ratio increased to 17.6 per cent and the total capital ratio increased 0.4 percentage points to 20.7 per cent.

For more information on Nordea Bank AB and its results for 2014, see www.nordea.com.

Life insurance

On 30 December 2014 Mandatum Life received Suomi Mutual's with profit group pension portfolio. The portfolio comprises approximately 2,300 policies and 34,000 members. The amount of transferred assets and liabilities was EUR 1,337 million. Technical provisions include longevity and expense supplements totaling EUR 108 million. Due to the special features of the received portfolio, technical provisions excluding the longevity and expense supplements and related assets have been segregated from the rest of Mandatum Life's balance sheet. Unless otherwise stated the information on technical provisions and the assets covering the provisions at the end of 2014 include the segregated group pension portfolio. The segregated group pension portfolio did not impact the profit and loss statement in 2014.

Life insurance operations reported for 2014 profit before taxes of EUR 163 million (153). The total comprehensive income for the period reflecting the changes in market values of assets was EUR 149 million (220). Return on equity (RoE) amounted to 11.4 per cent (18.3).

Mandatum Life Group's investment assets, excluding the assets of EUR 5.3 billion (4.6) covering unit-linked liabilities, amounted to EUR 6.6 billion (5.5) at market values as at 31 December 2014.

Mark-to-market return on investments in 2014 was 4.6 per cent (7.1). At the end of December 2014 duration of fixed income assets, excluding the segregated portfolio, was 1.6 years (1.8) and average maturity 1.9 years (2.2). Fixed income running yield was 3.1 per cent (3.7). For the segregated portfolio the duration was 2.4 years and average maturity 1.9 years.

Mandatum Life Group's solvency margin clearly exceeded Solvency I requirements and the solvency capital amounted to EUR 1,463 million (1,403) as at 31 December 2014. The solvency ratio was 22.9 per cent (27.6). The decrease in solvency ratio based on Solvency I requirements was due to the portfolio transfer from Suomi Mutual.

The expense result for life insurance segment continued to develop favorably and increased to EUR 19 million (14). Risk result remained almost unchanged at EUR 23 million (24).

Mandatum Life Group's premium income on own account increased 4 per cent to EUR 1,105 million (1,063). Main sales channels, Danske Bank and Mandatum's own Wealth Management unit, performed well and premiums from unit linked policies reached an all-time high EUR 961 million (909). Premium income from the Baltic countries amounted to EUR 40 million (32). Mandatum Life's market share in Finland was 17.9 per cent both overall and in unit-linked. A year earlier the market shares were 19.3 and 19.2 per cent, respectively. Market share in the Baltic countries was 11 per cent (10).

Holding

Holding segment's profit before taxes amounted to EUR 669 million (589), of which EUR 680 million (635) relates to Sampo's share of Nordea's 2014 profit. Segment's profit excluding Nordea was EUR -12 million (-45). The finance costs reduced significantly because the average running cost of debt, net of swaps, decreased by 0.50 per cent and the weakening of Swedish krona decreased the value of debt.

OUTLOOK

Outlook for 2015

Sampo Group's business areas are expected to report good operating results for 2015.

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 2015 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, insurance and operational risks that can be quantified in most of the cases by financial measurement techniques based on historical data. 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, 44 per cent, 11 per cent and 10 per cent, respectively.

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. They both may have also long-term impact on how business shall be conducted.

DIVIDEND PROPOSAL

According to Sampo plc's dividend policy, total annual dividends paid shall be at least 50 per cent of the 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 6,908,853,083.44, of which profit for the financial year was EUR 1,049,724,795.16.

The Board proposes to the Annual General Meeting a dividend of EUR 1.95 per share to company's 560,000,000 shares. The dividends to be paid are EUR 1,092,000,000.00 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 20 April 2015. The Board proposes that the dividend be paid on 28 April 2015.

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

Essi Nikitin, IR Manager, tel. +358 10 516 0066

Maria Silander, Communications Manager, tel. +358 10 516 0031

Press Conference and Conference Call

Sampo will today arrange a Finnish-language press conference at Savoy (Eteläesplanadi 14, 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)203 194 0550, +1 855 269 2605, +46 (0)8 5199 9355 or +358 (0)9 8171 0465. The title for the conference is 'Sampo Group's Results for 2014'.

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

Sampo will publish the Interim Report for January - March 2015 on 7 May 2015.

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