Sampo Group's Interim Report for January-September 2015

SAMPO PLC             INTERIM REPORT            5 November 2015 at 9:30 am

Sampo Group's Interim Report for January-September 2015

Sampo Group's profit before taxes for January - September 2015 amounted to EUR 1,475 million (1,313). The total comprehensive income for the period, taking changes in the market value of assets into account, decreased to EUR 1,031 million (1,099).

• Earnings per share rose to EUR 2.31 (2.05). Marked-to-market EPS decreased to EUR 1.84 per share (1.96). The return on equity (RoE) for the Group was 12.6 per cent (13.6). Net asset value per share on 30 September 2015 amounted to EUR 22.77 (22.63). The fair value reserve after tax on the Group level decreased to EUR 831 million (1,017).
• Profit before taxes for the P&C insurance operations increased to EUR 756 million (711). Combined ratio improved to 84.6 per cent (87.8) with a positive impact of 1.5 percentage points by the non-recurring items booked in the second quarter of 2015. Excluding the non-recurring items, combined ratio for January - September 2015 was 86.1 per cent. Comprehensive income for the period decreased to EUR 434 million (532) and return on equity was 18.6 per cent (22.2).
• Sampo's share of the profit of its associated company Nordea for January - September 2015 amounted to EUR 577 million (501). Nordea's operating profit was up 13 per cent in local currencies and 11 per cent in euros from last year excluding non-recurring items and its fully loaded Basel III Common equity tier 1 (CET1) capital ratio rose to 16.3 per cent at the end of the third quarter. Credit quality remains solid and loan loss ratio amounted to 13 basis points.
• Profit before taxes for the life insurance operations was EUR 132 million (112). In the third quarter of 2015 the discount rate reserve was extended to cover 2018. The rates used for 2015, 2016, 2017 and 2018 are now 1.0 per cent, 1.25 per cent, 1.5 per cent and 3.0 per cent, respectively. The comprehensive income decreased to EUR 50 million (103). Return on equity decreased to 5.3 per cent (10.8).

KEY FIGURES

*) comparison figure from 31 December 2014

The figures in this report are not audited. 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.

THIRD QUARTER 2015 IN BRIEF

Sampo Group's profit before taxes for the third quarter 2015 amounted to EUR 460 million (452). Earnings per share was stable at EUR 0.71 (0.71). Marked-to-market earnings per share decreased to EUR -0.21 (0.55).

Net asset value per share decreased EUR 2.24 during the third quarter of 2015 and was EUR 22.77. The decrease is due to the negative development of the valuation difference of Nordea holding corresponding to EUR 2.11 in Sampo's net asset value per share and the weak capital market development in general.

P&C operations achieved a third quarter combined ratio of 83.8 per cent (86.9). Profit before taxes increased to EUR 245 million (228). Share of the profits of the associated company Topdanmark amounted to EUR 13 million (18).

Sampo's share of Nordea's third quarter 2015 net profit amounted to EUR 159 million (192).

Profit before taxes for the life insurance operations was EUR 52 million (40). Premiums written decreased 14 per cent to EUR 162 million from EUR 188 million at the corresponding period a year ago.

CHANGE IN REPORTING PRACTICES AS OF 1 JANUARY 2016

The Finnish Parliament has passed changes to the Securities Markets Act implementing the amendments to the Transparency Directive. The changes will enter into force on 26 November 2015. After the amendments have entered into force listed companies no longer have an obligation to publish quarterly reports for the first and the third quarter. The companies only have to publish a yearly and a half-yearly report.

The Nasdaq Helsinki stock exchange is also introducing corresponding changes to their rules. Sampo Group has decided on a new reporting policy that better takes the special features of its operations, industry practices and investor expectations into account. For more details see Sampo Group's Disclosure Policy updated by the Board of Directors on 5 November 2015 and available at www.sampo.com/governance/disclosure-policy.

As of 2016 Sampo Group's first and third quarter reports will be published in an abridged format. Investor information will not be weakened by the change and the consistency in reporting will not suffer.

BUSINESS AREAS

P&C insurance

Profit before taxes for the P&C insurance operations increased to EUR 756 million (711) in January - September 2015. Combined ratio improved to 84.6 per cent (87.8) while risk ratio deteriorated to 67.1 per cent (65.4), impacted by the two non-recurring items; lowering of the annuities discount rate in Finland and the Norwegian pension reform, booked in the second quarter of 2015. Excluding the non-recurring items, combined ratio for January - September 2015 was 86.1 per cent. Topdanmark's profit contribution for January - September 2015 was EUR 37 million (44).

Technical reserves relating to prior year claims were strengthened by EUR 83 million in January - September 2015 (EUR 18 million released in the comparison period) explained by the discount rate changes of EUR 112 million. Return on equity (RoE) decreased to 18.6 per cent (22.2) and the fair value reserve on 30 September 2015 to EUR 390 million (507).Technical result amounted to EUR 522 million (441). Insurance margin (technical result in relation to net premiums earned) improved to 16.0 per cent (13.1).

The lowering of the annuities discount rate in Finland during the second quarter affected all business areas' results in Finland negatively and weakened the Finnish country specific result substantially in January - September 2015. In Sweden, risk ratio improved by 10.1 percentage points supported by a positive large claims outcome compared to the previous year. Swedish discount rate used to discount the annuity reserves decreased 1 basis point to 0.40 per cent by the end of September and had a EUR 1 million negative effect on the Swedish result in the third quarter of 2015. Total large claims ended up EUR 6 million better than expected.

Gross written premiums decreased to EUR 3,659 million (3,724). Adjusted for currency, premium growth was slightly positive. Growth was positive in business areas Private and Baltic, and negative in business areas Commercial and Industrial.

Cost ratio improved to 17.6 per cent (22.5) and expense ratio to 11.8 per cent (16.6), both impacted by the positive effect of the non-recurring reform of the pension system in If Norway booked in the second quarter of 2015. Excluding the non-recurring item the cost ratio was 22.3 per cent and expense ratio 16.5 per cent.

On 30 September 2015, the total investment assets of If P&C amounted to EUR 11.5 billion (11.5), of which fixed income investments constituted 74 per cent (75), money market 14 per cent (13) and equity 12 per cent (12). Net income from investments amounted to EUR 234 million (278). Investment return marked-to-market for January-September 2015 was 0.9 per cent (3.6). Duration for interest bearing assets was 1.0 year (1.0) and average maturity 2.6 years (2.4). Fixed income running yield was 1.8 per cent (2.5).

Associated company Nordea Bank AB

On 30 September 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 8.24 per share. The closing price at the end of September 2015 was EUR 9.91. Nordea is accounted as an associated company in Sampo Group's accounts.

Nordea's deposit margins continue to be under pressure and lending growth remains low. In January-September 2015, net interest income was down 4 per cent in local currencies and 6 per cent in euros from last year.

Operating profit was up 13 per cent in local currencies and 11 per cent in euros from last year excluding non-recurring items. Cost/income ratio was down 3.1 percentage points to 46.4 per cent. Total income was up 4 per cent in local currencies and 2 per cent in euros from last year.

Total expenses were down 2 per cent in local currencies and 4 per cent in euros from previous year excluding non-recurring items.

Net loan loss provisions decreased to EUR 337 million, corresponding to a loan loss ratio of 13 bps (15 bps for the first nine months 2014).

Net profit increased 15 per cent both in local currencies and in euros and totalled EUR 2,814 million. Currency fluctuations had a reducing effect of 2 percentage points on income and expenses and approx. -3 percentage points on loan and deposit volumes compared to first nine months of 2014.

Nordea continues to see a good inflow in savings and investment operations, despite declining asset prices. Assets under management are up EUR 19 billion or 7 per cent compared to twelve months ago, fully driven by strong inflow.

The Group's Basel III Common equity tier 1 (CET1) capital ratio increased to 16.3 per cent at the end of the third quarter 2015 from 16.0 per cent at the end of the second quarter 2015. The CET1 capital ratio was negatively affected by currency effects in the CET1 capital, offset by strong profit generation and lower risk exposure amount. The tier 1 capital ratio increased to 18.2 per cent and the total capital ratio increased from 20.7 per cent to 21.3 per cent.

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

Life insurance

Profit before taxes in life insurance for January-September 2015 amounted to EUR 132 million (112). In the third quarter of 2015 the discount rate reserve was extended to cover 2018, which had a negative profit impact of EUR 13 million in the third quarter. The rates used for 2015, 2016, 2017 and 2018 are thus 1.0 per cent, 1.25 per cent, 1.5 per cent and 3.0 per cent, respectively. All in all, Mandatum Life has increased its technical reserves with a total of EUR 224 million (135) due to low level of interest rates. The figure does not take into account the reserves of EUR 232 million relating to the segregated fund.

Return on equity (RoE) decreased to 5.3 per cent (10.8) mostly as a consequence of increases in the discount rate reserves. The total comprehensive income for the period, taking changes in the market value of assets into account, decreased to EUR 50 million (103) after tax. The fair value reserve amounted to EUR 450 million (508).

Premium income in January - September 2015 rose 9 per cent to EUR 838 million (772). The overall market share in Finland amounted to 17.3 per cent (17.4). The expense result for January - September of 2015 rose to an all-time high and was EUR 20 million (15). Risk result amounted to EUR 15 million (13).

The unit-linked reserves amounted to EUR 5.6 billion (5.3) at the end of September 2015, down EUR 0.3 billion from the record level at the end of March 2015 because of the difficult capital market conditions. Net investment income from unit-linked investments was EUR 23 million (258).

The with profit reserves decreased to EUR 5.0 billion (5.1), of which the original Mandatum Life with profit reserves constituted EUR 3.8 billion (3.8) and the segregated fund EUR 1.2 billion (1.2). The amount of higher guarantee with profit reserves (3.5 and 4.5 per cent) continued to decrease according to plan, i.e. EUR 154 million in the first three quarters of 2015 but the increase in the reserves for decreased discount rate kept the overall reserves almost unchanged.

The assets covering Mandatum Life's original with profit liabilities on 30 September 2015 amounted to EUR 5.3 billion (5.3) at market values. 45 per cent (32) of the assets are in fixed income instruments, 10 per cent (23) in money market, 29 per cent (30) in equities and 16 per cent (15) in alternative investments. The investment return marked-to-market for January - September 2015 was 3.7 per cent (3.9). The duration of fixed income assets at the end of September 2015 was 2.0 years (1.6) and average maturity 2.7 years (1.9). Fixed income running yield was 3.2 per cent (3.5).

The assets covering the segregated fund amounted to EUR 1.2 billion (1.3), of which 69 per cent (48) was in fixed income, 11 per cent (33) in money market, 10 per cent (8) in equities and 10 per cent (11) in alternative investments. Segregated fund's investment return marked-to-market for January - September 2015 was 2.3 per cent. At the end of September 2015 the duration of fixed income assets was 2.1 years and average maturity 3.6 years. Fixed income running yield was 1.3 per cent.

Holding

The segment's profit before taxes amounted in January - September 2015 to EUR 589 million (491), of which EUR 577 million (501) comes from Sampo's share of Nordea's January - September 2015 profit. The segment, excluding share of Nordea's profit, reported a pre-tax profit of EUR 12 million (-10). Swedish krona exchange rate changes affected the profit positively in the third quarter by EUR 11 million and for January - September 2015 the effect of all currency changes together was EUR 24 million.

Sampo plc's debt financing on 30 September 2015 amounted to EUR 2,284 million (2,192) and interest bearing assets to EUR 630 million (1,233). Interest bearing assets include bank accounts, EUR 503 million of hybrid capital and subordinated debt instruments issued by the subsidiaries and associates and EUR 21 million of other fixed income instruments. During January - September 2015 the net debt increased to EUR 1,654 million (960). The net debt calculation only takes into account interest bearing assets and liabilities. Gross debt to Sampo plc's equity was 35 per cent (31) and financial leverage 26 per cent (24).

As at 30 September 2015 financial liabilities in Sampo plc's balance sheet consisted of issued senior bonds and notes of EUR 1,984 million (1,888) and EUR 300 million (305) of outstanding CPs issued. The average interest, net of interest rate swaps, on Sampo plc's debt as of 30 September 2015 was 1.52 per cent (1.74).

GROUP SOLVENCY

Sampo Group is regarded as a financial and insurance conglomerate according to the Act on the Supervision of Financial and Insurance Conglomerates (2004/699). The Act is based on Directive 2002/87/EC of the European Parliament and of the Council on the supplementary supervision of credit institutions, insurance undertakings and investment. The Act will be amended as of 1 January 2016 to correspond to the solvency rules - Solvency II and Basel III.

Insurance operations in Sampo Group are in different phases with regard to solvency II process.

Mandatum Life will use a standard model for Solvency II calculations. The company received an approval from Finnish FSA on 11 August 2015 to use transitional measures on technical provisions. At the end of September 2015 after transitional measures, the estimated own funds (OF) of EUR 1,860 million exceed Solvency Capital Requirement (SCR) of EUR 1,189 and coverage ratio is strong at 156 per cent. Without transitional measures on technical reserves the coverage ratio would have been 100 per cent.

If P&C Group has over a number of years used its internal economic capital model to estimate the amount of capital needed to cover its risks. Since 2011 development of internal model has been conducted as part of the so called pre-application process with authorities to correspond to the extent possible to Solvency II requirements. As a result If P&C Group aims to use a partial internal model for Solvency II to calculate its external SCR. An application for the approval of the model was submitted to the authorities in June 2015.

The approval process will not be finalized before 1 January 2016. If P&C Group will use a standard model for Solvency II as of 1 January 2016 and then switch to the partial internal model once it has been approved by the authorities. The standard model has roughly a EUR 460 million higher capital requirement than the partial internal model. However, If P&C Group has an A rating from S&P which will continue to require significantly more capital and therefore the use of standard model has no practical implications on the Group's capital position. On 30 September 2015 If P&C Group's Solvency II capital requirement under standard model would have been EUR 2,136 million and own funds of EUR 3,650 million. Calculated with the partial internal model figures would have been EUR 1,676 million and EUR 3,830 million, respectively.

OUTLOOK

Outlook for the rest of 2015

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

However, the marked-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 full-year combined ratio of 86 - 88 per cent excluding the positive total 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 mainly through its separately managed major business units. Parent Company Sampo plc's contribution to risks is minor. Major risks affecting the Group's profitability and its variation are market, credit, insurance and operational risks which are quantified independently by the major business units.

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 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, +1 855 716 1597, +46 (0)8 566 42 702 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 Full-Year Report for 2015 on 10 February 2016.

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