Sampo Group

Annual Report 2011
P&C Insurance in 2011
Life Insurance in 2011

Associated Company Nordea Bank Ab

Nordea, the largest bank in the Nordic region, has around 11 million customers and is among the ten largest universal banks in Europe in terms of total market capitalization. In Sampo Group’s reporting Nordea is treated as an associated company and is included in the segment Holding. On 31 December 2011 Sampo plc held 860,440,497 Nordea shares corresponding to a holding of 21.3 per cent. The average price paid per share amounted to EUR 6.46 and the book value in the Group accounts was EUR 7.27 per share. The closing price as at 31 December 2011 was EUR 5.98.

The following text is based on Nordea’s full-year 2011 result release published on 24 January 2012.

2011 showed continued high total income, up 2 per cent compared to 2010. Net interest income increased 6 per cent compared to last year. Lending volumes increased 7 per cent and deposit volumes 8 per cent. Lending spreads and deposit spreads have increased from last year.

Net fee and commission income continued to increase strongly, up 11 per cent compared to 2010. Net result from items at fair value decreased by 17 per cent compared to last year. The customer-driven capital markets operations continued to be strong, while results from Capital Markets unallocated income decreased. Income under the equity method was EUR 42 million and other income was EUR 91 million.

Total expenses increased 8 per cent compared to last year. Staff costs increased 12 per cent. In local currencies and excluding restructuring costs, total expenses increased 3 per cent and staff costs increased 5 per cent.

Net loan losses decreased 16 per to EUR 735 million, compared to last year, corresponding to a loan loss ratio of 23 basis points (31 basis points last year).

Operating profit decreased 3 per cent compared to last year. Net profit decreased 1 per cent from last year to EUR 2,634 million. Risk-adjusted profit increased 4 per cent compared to last year to EUR 2,714 million.

Total lending, including reversed repurchase agreements, was EUR 337 billion, up 1 per cent compared to the previous quarter. Overall, the credit quality in the loan portfolio remained solid in the fourth quarter, with positive migration in the loan portfolio. Improvements in credit quality resulted in a reduction of risk-weighted assets (RWA) of approx. EUR 4.7 billion or 2.5 per cent. The impaired loans ratio decreased to 139 basis points of total loans, due to higher total loan volumes. Total impaired loans gross increased by 5 per cent from the previous quarter. The provisioning ratio decreased compared to the end of the third quarter to 45 per cent.

The Group’s core tier 1 capital ratio, excluding transition rules, was 11.2 per cent at the end of the fourth quarter and was strengthened by 0.2 percentage points from the previous quarter. Improved capital ratios have been achieved by strong profit generation and a modest increase in risk-weighted assets (RWA). With the adoption of the CRD III amendment, new risk types under the internal approach have been introduced. For Nordea this includes additional capital charge for stressed VaR, incremental and comprehensive risk. The total CRD III impact was an increase of EUR 4.0 billion in market risk RWA. This was partly offset by continued improvement in credit quality and RWA optimisation activities. The total impact from improved credit quality affected RWA with a reduction by 2.5 per cent.

RWA were EUR 185.2 billion excluding transition rules, up EUR 2.2 billion or 1.2 per cent compared to the previous quarter and were at the same level as at the end of 2010.

The core tier 1 ratio excluding transition rules under Basel II was 11.2 per cent. The capital base of EUR 24.8 billion exceeds the capital requirements including transition rules by EUR 6.9 billion and excluding transition rules by EUR 10.0 billion. The tier 1 capital of EUR 22.6 billion exceeds the Pillar 1 capital requirements (excluding transitions rules) by EUR 7.8 billion.

Nordea is preparing for the new regulatory standards that will increase the capital requirements. The impact of these changes will be moderate and are carefully monitored to support our customers and shareholders in the best possible way. Nordea is well prepared to meet the new Basel capital requirements.

The average funding cost for long-term funding was largely unchanged in the fourth quarter. Nordea issued approx. EUR 4.0 billion of long-term funding in the fourth quarter, of which approx. EUR 2.7 billion represented issuance of Swedish, Norwegian and Finnish covered bonds in the domestic and international markets. The portion of long-term funding of total funding was at the end of the fourth quarter approx. 64 per cent (64 per cent at the end of the previous quarter).

The Board of Directors proposes to the AGM a dividend of EUR 0.26 per share (EUR 0.29). This corresponds to a payout ratio of 40 per cent of net profit, which is in line with the dividend policy. Total proposed dividend amounts to EUR 1,048 million.

For more information on Nordea Bank Ab and its result release for 2011, see www.nordea.com.


P&C Insurance in 2011
Life Insurance in 2011