Sampo Group

Annual Report 2011
Associated Company Nordea Bank Ab
Holding in 2011

Life Insurance in 2011

Mandatum Life Group consists of Mandatum Life, a wholly-owned subsidiary of Sampo plc, operating in Finland, and its subsidiary Mandatum Life Insurance Baltic SE, which has the form of a European company and is headquartered in Estonia. It operates in the other Baltic countries through branches.

Results, Life Insurance, 2011
EURm 2011 2010 Change, %

Premiums written

849

1,111

-24

Net income from investments

-41

645

-

Other operating income

2 0 -

Claims incurred

-922

-844

9

Change in liabilities for inv. and ins. contracts

348

-678

-

Staff costs

-38 -35 7

Other operating expenses

-53 -49 8

Finance costs

-8 -8 4

Profit before taxes

137 142 -3
  2011 2010 Change

Expense ratio, %

111.6

112.1

-0.5

Return on equity, %

-11.7

36.2

-47.9

Average number of staff (FTE)

521

470

51


Profit before taxes in Sampo Group’s life insurance operations remained on previous year’s level despite the challenging investment markets in 2011 and amounted to EUR 137 million (142). The record high premium income of 2010 was not achieved but premiums amounted to EUR 849 million which is the second highest level in the history of the Group.

Net investment income, excluding income on unit-linked contracts, amounted to EUR 255 million (312). Net income from unit-linked investments was EUR -296 million (333). In 2011 fair value reserve decreased EUR 222 million amounting to EUR 214 million. Return on equity (RoE) in life insurance was -11.7 per cent (36.2).

Mandatum Life Group’s investment assets, excluding the assets of EUR 3.1 billion (3.1) covering unit-linked liabilities, amounted to EUR 5.4 billion (6.0) at market values as at 31 December 2011.

Return on investments in 2011 was -1.4 per cent (11.1). At the end of December 2011 duration of fixed income assets was 1.8 years (2.7) and average maturity 2.3 years. Fixed income running yield was 5.4 per cent (5.2).

Mandatum Life Group’s solvency margin amounted to EUR 1,049 million (1,339) as at 31 December 2011. Mandatum Life’s solvency ratio was 20.9 (25.8). Total technical reserves in the balance sheet of Mandatum Life Group were EUR 7.3 billion (7.5). Unit-linked reserves accounted for 42 per cent (41) of the total technical reserves, i.e. EUR 3.1 billion (3.1).

In the Finnish operations, the total return for policyholders on with-profit technical provisions in 2011 was 2.5 – 4.5 per cent, depending on the class of insurance. In addition to the guarantee, customer bonuses varying from 0 to 2.5 per cent depending on the guaranteed interest on policies were paid. Technical reserves of the parent company Mandatum Life contain bonuses of EUR 6.3 million (1.4) for the year 2011.

Majority of Mandatum Life’s traditional policies carry a guaranteed interest of 3.5 per cent. Individual policies sold in Finland before 1999 carry a guaranteed interest of 4.5 per cent. The discount rate for these policies has been lowered to 3.5 per cent and subsequently technical reserves have been supplemented with EUR 79 million (86). In addition, EUR 29 million has been reserved to lower the interest rate of all with-profit liabilities to 2.75 per cent in 2012. This supplement decreases the minimum requirement for investment yield to 2.75 per cent for 2012. All in all, Mandatum Life has increased its technical reserves with EUR 108 million (147) due to low level of interest rates.

Risk result was exceptionally high at EUR 25 million (23). Expense result for the Group’s life insurance segment developed in 2011 favorably and rose to EUR 10 million (8) for 2011. The result of the unit linked business, EUR 6.2 million (2.0) is included in the expense result.

Mandatum Life Group’s premium income on own account amounted to EUR 849 million (1,111). Premiums in the main focus area of unit-linked insurance decreased to EUR 649 million (843). The share of unit-linked premiums remained at 76 per cent (76) of total premiums. Premium income from the Baltic countries was EUR 41 million (60).

Mandatum Life’s overall market share in Finland rose to 24.9 per cent (22.1). Market share in the focus area, unit-linked business, remained high and was 26.8 per cent (28.2). Market share in the Baltic countries amounted to 15 per cent (20).

In Finland Mandatum Life expanded its operations to cover personnel fund management and pension fund management services in 2011. This widens further the company’s services in the area of staff remuneration and pension solution.

One of the cornerstones for Mandatum Life is the co-operation with Sampo Bank. In the summer of 2011 the two companies agreed to prolong the existing sales agreement for at least the next five years. As a consequence Mandatum Life can continue to invest into new product solutions for the bank channel. First results were launched already during the autumn 2011.

Associated Company Nordea Bank Ab
Holding in 2011