Sampo Group's Interim Report for January - March 2014 SAMPO

SAMPO PLC           INTERIM REPORT                   7 May 2014 at 9.30 am SAMPO GROUP'S INTERIM REPORT FOR JANUARY - MARCH 2014 Sampo Group's profit before taxes for January - March 2014 rose to EUR 396 million (370). The total comprehensive income for the period, taking changes in the market value of assets into account, decreased to EUR 374 million (490). * Earnings per share was EUR 0.63 (0.57) and mark-to-market EPS amounted to EUR 0.66 per share (0.88). The return on equity for the Group was 13.7 per cent for the period (19.1). * Net asset value per share on 31 March 2014 rose to EUR 24.06 (22.15) and the fair value reserve after tax on the Group level strengthened to EUR 1,026 million (960). * The combined ratio of the P&C insurance operations for January - March 2014 improved to 90.3 per cent (90.9) which is the best ever first quarter combined ratio in If's history. The profit before taxes amounted to EUR 194 million (204). Comprehensive income for the period decreased to EUR 209 million (279) and return on equity was 27.5 per cent (39.2). * Nordea is accounted for as an associated company and Sampo's share of Nordea's profit for January - March 2014 was EUR 170 million (162). * Profit before taxes for the life insurance operations amounted to EUR 37 million (36). The interest rate used to discount with profit liabilities in 2014 was lowered to 2 per cent and the rate used in 2015 to 2.25 per cent. The comprehensive income decreased to EUR 18 million (66). The return on equity at market value was 6.1 per cent (22.4). KEY FIGURES 1-3/2014 1-3/2013 Change, % EURm Profit before taxes 396 370 7   P&C insurance 194 204 -5   Associate (Nordea) 170 162 5   Life insurance 37 36 4   Holding (excl. Nordea) -4 -30 -87 Profit for the period 351 320 9       Change Earnings per share, EUR 0.63 0.57 0.06 EPS (incl. change in FVR) EUR 0.66 0.88 -0.22 NAV per share, EUR  *) 24.06 22.15 1.91 Average number of staff (FTE) 6,731 6,787 -56 Group solvency ratio, %  *) 182.9 184.4 -1.5 RoE, % 13.7 19.1 -5.4 *) comparison figure from 31.12.2013 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 2013 unless otherwise stated. The average EUR-SEK exchange rate used for income statement items for January - March 2014 is 8.8598 and the end of period exchange rate used for balance sheet items is 8.9483.  For January - March 2013 the corresponding exchange rates used were 8.4955 and 8.3553, respectively. 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 decreased to EUR 194 million (204) for January - March 2014. Combined ratio amounted to 90.3 per cent (90.9). Risk ratio decreased 0.1 percentage points and cost ratio 0.5 percentage points. EUR 6 million (14) was released from technical reserves relating to prior year claims. Return on equity (RoE) decreased to 27.5 per cent (39.2) and fair value reserve on 31 March 2014 increased from the end of 2013 to EUR 548 million (472). Topdanmark's profit contribution for the first quarter of 2014 was EUR 11 million (16). On 31 March 2014 If P&C held 31,476,920 Topdanmark shares, corresponding to over 25 per cent of all shares. All Topdanmark shares held by Sampo Group are concentrated in If P&C Insurance Holding Ltd (publ). Due to the mild winter the frequencies were generally low. Combined ratio for business area Industrial was negatively impacted by two large property claims in Sweden. All in all the negative effect from large claims was more than 7 percentage points in the combined ratio for business area Industrial. The development in Denmark was benign because of fewer large claims and improved cost efficiency. In business area Baltic the mild winter decreased claims frequency. All in all large claims costs for the whole If Group did not deviate from the expected in January-March 2014. Gross written premiums decreased EUR 1,714 million (1,775) because of the currency movements. Adjusted for currency, premiums rose 1.7 per cent. All business areas except business area Industrial had positive growth. Cost ratio improved to 22.8 per cent (23.3) and expense ratio improved 0.2 percentage points to 16.8 per cent. On 31 March 2014 the total investment assets of If P&C amounted to EUR 11.9 billion (11.7). Net income from investments amounted to EUR 81 million (92). Investment return mark-to-market for January-March 2014 was 1.7 per cent (1.4). Duration for interest bearing assets was 1.2 years (1.3) and average maturity 2.2 years (2.3). Fixed income running yield was 2.8 per cent (3.4). Associated company Nordea Bank AB On 31 March 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 7.78 per share. The closing price as at end of March 2014 was EUR 10.26. Nordea is accounted as an associated company in Sampo Group's accounts. The following text is based on Nordea's January - March 2014 interim report on 29 April 2014. Net interest income was down 2 per cent compared to the previous quarter to EUR 1,362 million, mainly due to two less banking days in the first quarter compared to the previous one. In local currencies, net interest income was down 1 per cent. Net fee and commission income was unchanged compared to the previous quarter at EUR 704 million, with a maintained stable and strong contribution from savings and investments and with an increase in lending-related commissions. The net result from items at fair value increased 23 per cent from the previous quarter to EUR 411 million. Total expenses amounted to EUR 1,237 million, down 3 per cent from the previous quarter in local currencies, mainly due to seasonality. Cost-efficiency measures have proceeded according to plan in the first quarter. An annualised gross reduction in total expenses of EUR 45 million has been conducted in the first quarter and EUR 255 million from the beginning of 2013. Net loan loss provisions were EUR 158 million in the continuing operations and the loan loss ratio was 18 basis points (EUR 180 million or 21 basis points in the previous quarter). Operating profit was up 10 per cent for the continuing operations to EUR 1,106 million. Net profit from the total operations was largely unchanged at EUR 831 million. The Group's fully loaded Basel III Common equity tier 1 (CET1) capital ratio increased to 14.6 per cent at the end of the first quarter from 13.9 per cent at the end of the fourth quarter, following strong profit generation and the advanced IRB approval for the Nordic corporate portfolio. Further information on Nordea Bank AB and its January - March 2014 result is available at www.nordea.com. Life insurance Profit before taxes in life insurance for January-March 2014 amounted to EUR 37 million (36). The interest rate used to discount all with profit liabilities in 2014 was lowered to 2 per cent and the discount rate for 2015 to 2.25 per cent. The amount used to lower the discount rate was increased by EUR 12 million in the first quarter of 2014. All in all, Mandatum Life has increased its technical reserves with a total of EUR 158 million due to low level of interest rates. Return on equity (RoE) amounted to 6.1 per cent (22.4). The total comprehensive income for the period, taking changes in the market value of assets into account, was EUR 18 million (66). Premium income decreased 7 per cent to EUR 244 million (262) and the overall market share in Finland dropped to 15.8 per cent (18.2). Investment return mark-to-market for the first quarter of 2014 was 1.1 per cent (2.3). The fair value reserve decreased to EUR 480 million (492). At the end of March 2014 the duration of fixed income assets was 1.8 years (1.8) and average maturity 2.1 years (2.2). Fixed income running yield was 3.7 per cent (4.4) as a result of lower reinvestment yields. The expense result continued to develop favorably in the first quarter of 2014 and rose to EUR 4 million (1). The risk result decreased to EUR 4 million (7) in the same period. On 19 March 2014 Mandatum Life Insurance Company and Suomi Mutual Life Assurance Company announced that they have agreed on the transfer of Suomi Mutual's with- profit group pension portfolio to Mandatum Life. The portfolio transfer is scheduled to take place on 30 December 2014. The final amount of transferred assets will be established in connection with the transfer, but it is estimated to have been around EUR 1.3 billion on 31 December 2013. The transfer requires the approval of both companies' Annual General Meetings and the consent of the Financial Supervisory Authority. The Annual General Meetings of Mandatum Life and Suomi Mutual will be held on 7 May 2014. Holding The segment's profit before taxes amounted to EUR 166 million (132), of which EUR 170 million (162) comes from Sampo's share of Nordea's January - March 2014 profit. The segment, excluding share of Nordea's profit, reported a loss of EUR 4 million (-30). The decrease in finance costs was due to the depreciation of Swedish krona and lower swap rates. Sampo plc's debt financing on 31 March 2014 amounted to EUR 2,009 million (2,027) and interest bearing assets to EUR 1,176 million (980). Interest bearing assets include bank accounts and EUR 352 million of hybrid capital issued by the subsidiaries and associates. During the first quarter of 2014 the net debt decreased EUR 216 million to EUR 833 million (1,048). The net debt was further reduced when Nordea dividend was received on 1 April 2014. Gross debt to Sampo plc's equity was 27 per cent (29). As at 31 March 2014 financial liabilities in Sampo plc's balance sheet consisted of issued senior bonds and notes of EUR 1,711 million (1,720) and EUR 298 million (308) of outstanding CPs issued. The average interest on Sampo plc's debt as of 31 March 2014 was 2.24 per cent (2.26). OUTLOOK Outlook for the rest of 2014 Sampo Group's business areas are expected to report good operating results for 2014. However, the mark-to-market results are, particularly in life insurance, highly dependent on capital market developments. The 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 2014 and achieve a combined ratio of 89 - 92 per cent. 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 and insurance risks that can be quantified by financial measurement techniques. Currently their quantified contributions to the Group's Economic Capital - used as an internal basis for capital needs - represent normal levels of 33 per cent, 45 per cent and 10 per cent, respectively. Uncertainties in the form of major unforeseen events or structural changes in the business environment may have an immediate impact on the Group's profitability or long term impact how business shall be conducted. Identification of uncertainties is easier than estimation of their probabilities, timing and potential outcomes. One of the latest examples is tension in Crimea which started as an unforeseen event leading to increased volatility at financial markets, but can potentially have also longer term impacts on business environment.  Sampo Group has no direct exposures to the region. 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 Maria Silander, Press Officer, tel. +358 10 516 0031 Conference call Sampo will today arrange a conference call for investors and analysts at 4 pm Finnish time (2 pm UK time). The call is held in English. Please call +44 (0)20 7660 2077, +46 (0)8 5199 9350, +1 855 269 2605 or +358 (0)9 8171 0461. Please be ready to state the conference title 'Sampo's Interim Report Q1/2014'. 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 - June 2014 on 13 August 2014. Distribution: NASDAQ OMX Helsinki The principal media Financial Supervisory Authority www.sampo.com [HUG#1783299]