Sampo Group's results for January - March 2015

SAMPO PLC                   INTERIM REPORT                7 May 2015 at 9.30 am

SAMPO GROUP'S RESULTS FOR JANUARY - MARCH 2015

Sampo Group's profit before taxes for January - March 2015 rose to EUR 487 million (396). The total comprehensive income for the period, taking changes in the market value of assets into account, increased to EUR 701 million (374).

• Earnings per share amounted to EUR 0.78 (0.63) and mark-to-market EPS to EUR 1.25 per share (0.66). The return on equity for the Group was 24.8 per cent (13.7).
• Net asset value per share on 31 March 2015 was EUR 27.02 (24.06) and the fair value reserve after tax on the Group level increased to EUR 1,289 million (1,017).
• P&C insurance operations achieved its best-ever first quarter combined ratio, which amounted to 89.2 per cent (90.3). The profit before taxes increased to EUR 200 million (194). Comprehensive income for the period increased to EUR 265 million (209) and return on equity was 35.1 per cent (27.5).
• The Board of If's Swedish subsidiary has today made a decision to amend the existing pension system in If Norway. As a result of the decision there will be a non-recurring positive effect of approximately EUR 155 million in Sampo Group's second quarter 2015 results. The Board of If's Finnish subsidiary has at the same time made a decision to lower the discount rate used in discounting annuities in Finland from 2.0 per cent to 1.5 per cent. The lowering takes place in the second quarter of 2015 and will increase technical reserves by approx. EUR 110 million.
• Nordea is accounted for as an associated company and Sampo's share of Nordea's profit for January - March 2015 amounted to EUR 223 million (170).
• Profit before taxes for the life insurance operations amounted to EUR 39 million (37). The interest rate used to discount with profit liabilities in 2016 was lowered to 2.25 per cent. The interest rate used in 2015 is 2.00 per cent. The comprehensive income increased to EUR 171 million (18). The return on equity at market value was 50.3 per cent (6.1).

*) comparison figure from 31.12.2014

Income statement items are compared on a year-on-year basis whereas comparison figures for balance sheet items are from 31 December 2014 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.

BUSINESS AREAS

P&C insurance

Profit before taxes for P&C insurance increased to EUR 200 million (194) for January - March 2015. Combined ratio improved to 89.2 per cent (90.3) and risk ratio to 66.6 per cent (67.5). EUR 3 million (6) was released from technical reserves relating to prior year claims. Topdanmark's profit contribution for the first quarter of 2015 was EUR 12 million (11).

Technical result amounted to EUR 124 million (124). In business area Private, technical result amounted to EUR 72 million (76), in Commercial EUR 30 million (33), in Industrial EUR 13 million (7) and in the Baltic business area EUR 5 million (5). Insurance margin (technical result in relation to net premiums earned) improved to 11.6 per cent (11.1). Swedish discount rate used to discount the annuity reserves decreased 0.73 percentage points from the end of 2014 to -0.15 per cent by the end of March 2015. This affected the Swedish result by EUR -51 million in January-March 2015.

Return on equity (RoE) increased to 35.1 per cent (27.5) and fair value reserve on 31 March 2015 increased from the end of 2014 to EUR 627 million (507).

Gross written premiums decreased to EUR 1,669 million (1,714). Adjusted for currency, premiums decreased 0.4 per cent. Growth was positive in business areas Private and Baltic, and slightly negative in business areas Commercial and Industrial. Cost ratio improved to 22.6 per cent (22.8) and expense ratio remained at 16.8 per cent (16.8).

On 31 March 2015 the total investment assets of If P&C amounted to EUR 11.8 billion (11.5), of which fixed income investments constituted 77 per cent (75), money market 9 per cent (13) and equity 13 per cent (12). Net income from investments amounted to EUR 79 million (81). Investment return mark-to-market for January-March 2015 was 2.0 per cent (1.7). Duration for interest bearing assets was 0.9 years (1.0) and average maturity 2.4 years (2.4). Fixed income running yield was 2.2 per cent (2.8).

Norwegian statutory and occupational pension systems have gone through substantial changes during the last few years. In order to adapt to changed pension conditions and to reduce the pension liability risk, the Board of Directors of If P&C Insurance Ltd (publ), If's Swedish insurance subsidiary, has today decided to amend the Norwegian collective occupational pension scheme for its own employees with effect from 1 January 2016. Employees currently covered by the defined benefit pension scheme and born in 1958 or later will be transferred to a defined contribution pension scheme. In connection with the transition to the defined contribution pension scheme the employees and all current pensioners will receive a paid-up policy for their rights. As a result of the decision there will be a non-recurring positive financial effect amounting to about EUR 155 million in Sampo Group's second quarter 2015 results. In addition the predictability and stability of future pension costs in the profit and loss account and other comprehensive income increases significantly.

The Board of Directors of If P&C Insurance Company Ltd, If's Finnish insurance subsidiary has today decided to lower the interest rate used to discount Finnish annuity reserves from 2.0 per cent to 1.5 per cent. The decision will increase claims reserve related to annuities by approximately EUR 110 million. This will take place in the second quarter of 2015 and be reflected in the results by increasing the risk and claims ratio correspondingly.

All in all, the above decisions will impact the Sampo Group's operating profit positively by approximately EUR 45 million in the second quarter of 2015 (i.e. the net effect due to changes in the pension schemes and the lowering of discount rates) but have no cash flow effects.

Associated company Nordea Bank AB

On 31 March 2015 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 7.85 per share. The closing price as at end of March 2015 was EUR 11.34.

Net interest income decreased 4 per cent in local currencies (-5 per cent in EUR) from previous quarter to EUR 1,288 million, mainly due to lower net interest income in the business areas following pressure on deposit margins.

Net fee and commission income remained at a solid level in the first quarter at EUR 757 million, unchanged in local currencies from the seasonally strong fourth quarter (-1 per cent in EUR).

Total expenses in the first quarter amounted to EUR 1,184 million, down 3 per cent in local currencies (-4 per cent in EUR) from the previous quarter.

Net loan loss provisions were EUR 122 million and the loan loss ratio was 14 basis points (EUR 129 million, 15 basis points in the previous quarter).

Operating profit was up 23 per cent in local currencies (+22 per cent in EUR), to EUR 1,408 million for the continuing operations. Net profit from the continuing operations increased 23 per cent from the previous quarter to EUR 1,082 million. Return on equity was 14.3 per cent, up 2.5 percentage points from the previous quarter.

The Group's fully loaded Basel III common equity tier 1 (CET1) capital ratio decreased to 15.6 per cent at the end of the first quarter 2015 from 15.7 per cent at the end of the fourth quarter 2014. The CET1 capital ratio was negatively affected by 20 basis points due to currency effects, countered by strong profit generation and the continuous focus on capital management.

The AGM on 19 March 2015 decided on a dividend of EUR 0.62 per share, corresponding to a payout ratio of 70 per cent of net profit (adjusted for an impairment charge of EUR 344 million).

Further information on Nordea Bank AB and its January - March 2015 result is available at www.nordea.com.

Life insurance

Profit before taxes in life insurance for January-March 2015 amounted to EUR 39 million (37). The interest rate used to discount all with profit liabilities in 2016 was lowered to 2.25 per cent. The interest rate used for 2015 is 2 per cent. Return on equity (RoE) rose to 50.3 per cent (6.1). The total comprehensive income for the period, taking changes in the market value of assets into account, increased to EUR 171 million (18) after tax.

Premium income rose to a record high EUR 377 million (244) and the overall market share in Finland to 18.4 per cent (15.8). The unit-linked reserves were at an all-time high of EUR 5.9 billion (5.3) at the end of March 2015.

The assets covering Mandatum Life's original with profit liabilities amounted to EUR 5.5 billion (5.3) at market values. 37 per cent (32) of the assets are in fixed income instruments, 17 per cent (23) in money market, 31 per cent (30) in equities, 4 per cent (5) in private equity and 10 per cent (10) in other investments. The investment return mark-to-market for January - March 2015 was 4.2 per cent (1.1), the duration of fixed income assets at the end of March 2015 was 1.7 years (1.6) and average maturity 2.2 years (1.9). Fixed income running yield was 3.4 per cent (3.7).

The assets covering the segregated fund amounted to EUR 1.3 billion (1.3), of which 50 per cent (48) was in fixed income, 28 per cent (33) in money market, 11 per cent (8) in equities, 3 per cent (3) in private equity and 8 per cent (8) in others. Segregated fund's investment return mark-to-market for January - March 2015 was 3.2 per cent. At the end of March 2015 the duration of fixed income assets was 2.3 years and average maturity 2.6 years. Fixed income running yield was 0.9 per cent.

Holding

The segment's profit before taxes amounted to EUR 249 million (166), of which EUR 223 million (170) comes from Sampo's share of Nordea's January - March 2015 profit. The segment, excluding share of Nordea's profit, reported a pre-tax profit of EUR 26 million (-4). Net investment income increased significantly due to equity and currency gains. The increase in finance costs was due to the appreciation of Swedish krona.

Sampo plc's debt financing on 31 March 2015 amounted to EUR 2,171 million (2,192) and interest bearing assets to EUR 1,837 million (1,233). Interest bearing assets include bank accounts, EUR 501 million of hybrid capital issued by the subsidiaries and associates and 21 million of other fixed income instruments. During the first quarter of 2015 the net debt decreased to EUR 334 million (960). Gross debt to Sampo plc's equity was 28 per cent (31).

As at 31 March 2015 financial liabilities in Sampo plc's balance sheet consisted of issued senior bonds and notes of EUR 1,873 million (1,888) and EUR 298 million (305) of outstanding CPs issued. The average interest, net of interest rate swaps, on Sampo plc's debt as of 31 March 2015 was 1.65 per cent (1.74).

OUTLOOK

Outlook for the rest of 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 very low interest rate level also creates a challenging environment for reinvestment in fixed income assets.

The P&C insurance operations are expected to reach their long-term combined ratio target of below 95 per cent in 2015 and achieve a combined ratio of 88 - 91 per cent excluding the effect of the Norwegian pension reform and the change in discount rate for Finnish annuities.

Nordea's contribution to the Group's profit is expected to be significant.

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, 45 per cent, 11 per cent and 9 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. These external drivers may have also long-term impact on how 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
Essi Nikitin, IR Manager, tel. +358 10 516 0066
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 +44 (0)20 3194 0552, +1 8557 161 597, +46 (0)8 5664 2702 or +358 (0)9 8171 0495.

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 Interim Report for January - June 2015 on 12 August 2015.

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