Sampo Group's results for January - June 2013 SAMPO

SAMPO PLC          STOCK EXCHANGE RELEASE          7 August 2013 at 9.30 am Sampo Group's results for January - June 2013 BORING IS GOOD Sampo Group's profit before taxes for the first half of 2013 amounted to EUR 825 million (813). The total comprehensive income for the period, taking changes in the market value of assets into account, decreased to EUR 579 million (846) largely because of the depreciation of Swedish krona and the decrease in the market value of investment assets. * Earnings per share rose to EUR 1.27 (1.24) and mark-to-market EPS was EUR 1.03 per share (1.51). The return on equity for the Group amounted to 11.6 per cent for the period (18.9). * Net asset value per share on 30 June 2013 was EUR 19.27 (17.38). The fair value reserve after tax on the Group level decreased to EUR 710 million (749). * P&C insurance operations reported an excellent combined ratio of 88.8 per cent (88.8) for the first half of 2013, despite the lowering of the interest rate used to discount the Finnish annuity reserves to 2.5 per cent. The profit before taxes was EUR 473 million (452). Mark-to-market result decreased to EUR 312 million (434) and return on equity was 21.7 per cent (35.8). * Nordea is accounted for as an associated company and Sampo's share of Nordea's profit for the first half of 2013 was EUR 319 million (326). * Profit before taxes for the life insurance operations rose to EUR 69 million (65). The interest rate used to discount with profit liabilities was lowered and consequently all with profit policies are discounted with 2.5 per cent in 2013 and 2014. The mark-to-market result decreased to EUR 25 million (105). The return on equity at market value was 4.6 per cent (23.0). KEY FIGURES 1-6/ 1-6/ Change, 4-6/ 4-6/ Change, EURm 2013 2012 % 2013 2012 % Profit before taxes 825 813 1 455 444 3   P&C insurance 473 452 5 270 254 6   Associate (Nordea) 319 326 -2 157 168 -7   Life insurance 69 65 7 33 32 5   Holding (excl. Nordea) -34 -29 16 -4 -10 -57 Profit for the period 710 696 2 390 375 4       Change     Change Earnings per share, EUR 1.27 1.24 0.03 0.70 0.67 0.03 EPS (incl. change in FVR) EUR 1.03 1.51 -0.48 0.16 0.33 -0.18 NAV per share, EUR  *) 19.27 17.38 1.89 - - - Average number of staff (FTE) 6,827 6,833 -6 - - - Group solvency ratio, %  *) 179.2 170.4 8.8 - - - RoE, % 11.6 18.9 -7.3 - - - *) comparison figure from 31.12.2012 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 2012 unless otherwise stated. Due to the adoption of the revised accounting standard IAS 19 on Employee benefits, the comparison figures for 2012 have been restated and differ from the earlier published figures. The changes concern directly the P&C insurance segment but are consequently reflected in the consolidated items as well. The average EUR-SEK exchange rate used for income statement items for January - June 2013 is 8.5302 and the end of period exchange rate used for balance sheet items is 8.7773. 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. Second quarter 2013 in brief Sampo Group's profit before taxes for the second quarter 2013 increased 3 per cent to EUR 455 million (444). Earnings per share amounted to EUR 0.70 (0.67). Mark-to-market earnings per share were EUR 0.16 (0.33). The dividend of EUR 1.35 per share paid in April 2013 and the decrease in Nordea's share price explain the drop in net asset value per share in the second quarter of 2013 to EUR 19.27 from EUR 21.03 at the end of March 2013. Combined ratio in the P&C operation continued to be excellent at 86.7 per cent (85.9) for the second quarter. Profit before taxes increased to EUR 270 million (254). Share of the profits of the associated company Topdanmark amounted to EUR 18 million (16). The second quarter results are burdened by the EUR 75 million used to lower the interest rates used to discount the Finnish annuity reserves. On the other hand the interest rate used to discount the Swedish annuities rose decreasing the reserves by EUR 37 million. Sampo's share of Nordea's second quarter 2013 net profit amounted to EUR 157 million (168). Total expenses in Nordea have now been unchanged for 11 consecutive quarters. Core tier one capital ratio improved to 14.0 per cent. Profit before taxes for the life insurance operations amounted to EUR 33 million (32). Premiums written increased 23 per cent to EUR 288 million (234). The interest rate used for discounting all with profit liabilities was lowered to 2.5 per cent for 2014. The discount rate for 2013 was already earlier lowered to 2.5 per cent. BUSINESS AREAS P&C insurance Profit before taxes for P&C insurance amounted to EUR 473 million (452) for the first half of 2013. Combined ratio remained unchanged at 88.8 per cent (88.8). EUR 39 million (81) was released from technical reserves relating to prior year claims. Technical result was EUR 292 million (295) the lower allocated investment income burdening the result. Technical result improved in all business areas except Baltic, amounting to EUR 181 million (180) for Private, EUR 79 million (72) for Commercial and EUR 14 million (12) for business area Industrial. The technical result for business area Baltic decreased to EUR 7 million (11). Insurance margin (technical result in relation to net premiums earned) amounted to 12.9 per cent (13.8). Return on equity (RoE) decreased to 21.7 per cent (35.8) due to the lower investment returns. Fair value reserve on 30 June 2013 decreased from the end of 2012 to EUR 351 million (364). Topdanmark's profit contribution for January-June 2013 was EUR 34 million (28). At the end of June 2013 If P&C held altogether 31,476,920 Topdanmark shares, corresponding to over 25 per cent of all shares. The increase in the number of shares held is due to the 1:10 share split that Topdanmark conducted with effect from 13 March 2013. All Topdanmark shares held by Sampo Group have as of 18 June 2013 been concentrated in If P&C Insurance Holding Ltd (publ). The 1.8 percentage point increase in the risk ratio of business area Private in the second quarter of 2013 is explained by the flooding in Norway and the lowering of annuity discount rates in Finland. The significant improvement in the Swedish combined ratio is due to fewer large claims and the increase in the interest rate used to discount annuity reserves corresponding to an effect of EUR 37 million. In Finland the technical reserves increased EUR 75 million as a result of the lowering of the interest rate used to discount the annuity reserves from 3.0 per cent to 2.5 per cent.  In Denmark risk ratio improved significantly as the comparison period contains significant large claims. All in all large claims costs for January-June 2013 were EUR 5 million lower than expected. At the end of June 2013 the total investment assets of If P&C amounted to EUR 11.7 billion (11.7). Duration for interest bearing assets was 1.2 years (1.3) and average maturity 2.3 years (2.5). Fixed income running yield was 3.1 per cent (3.8). Associated company Nordea Bank On 30 June 2013 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 7.69 per share. The closing price as at end of June 2013 was EUR 8.55. Nordea is accounted as an associated company in Sampo Group's accounts. Total income was largely unchanged compared to the first half year of 2012. Operating profit was also unchanged compared to the same period last year. Risk- adjusted profit increased by 2 per cent compared to the preceding year. Net interest income decreased 1 per cent compared to the same period last year. Lending volumes were down 2 per cent excluding reversed repurchase agreements in local currencies and corporate lending margins were higher, while deposit margins have decreased from 2012. Net fee and commission income increased 8 per cent and the net result from items at fair value decreased by 10 per cent compared to the same period last year. Total expenses were down 1 per cent compared to the first half year of 2012 in local currencies when excluding performance-related salaries and profit-sharing, i.e. with the cost definition for the cost target in the financial plan. Staff costs were down 2 per cent in local currencies when excluding performance- related salaries and profit-sharing. Net loan loss provisions decreased to EUR 384 million for the continued operations, corresponding to a loan loss ratio of 23 basis points (24 basis points last year). Net profit increased in the continued operations 1 per cent to EUR 1,583 million. Net profit in the total operations was down 2 per cent to EUR 1,567 million. The Group's core tier 1 capital ratio, excluding transition rules, was 14.0 per cent at the end of the second quarter, a strengthening of 0.8 percentage point from the end of the previous quarter. The tier 1 capital ratio excluding transition rules increased 0.8 percentage point to 14.8 per cent. The total capital ratio excluding transition rules increased 0.9 percentage point to 17.4 per cent. Improved core tier 1 capital ratio has been achieved by RWA efficiency initiatives and strong profit generation. Life insurance Profit before taxes in life insurance for January-June 2013 amounted to EUR 69 million (65). The interest rate used to discount all with profit liabilities in 2014 was lowered to 2.5 per cent. The discount rate for 2013 has already earlier been lowered to 2.5 per cent. All in all, Mandatum Life has increased its technical reserves with a total of EUR 125 million due to low level of interest rates. Return on equity (RoE) decreased to 4.6 per cent (23.0). The total comprehensive income for the period, taking changes in the market value of assets into account, decreased to EUR 25 million (105), because of the drop in the market value of assets in the second quarter of 2013. Excluding the assets of EUR 4.2 billion (3.8) covering unit-linked liabilities, Mandatum Life Group's investment assets on 30 June 2013 amounted to EUR 5.3 billion (5.5) at market values. Mandatum Life's solvency position is strong and Mandatum Life Group's solvency ratio as at 30 June 2013 was 26.1 (27.7). The small decrease is due to the dividend of EUR 100 million paid in April 2013 to Sampo plc. Mandatum Life's capital requirement is to a very large degree related to with profit technical reserves and the investments covering these reserves. The with profit reserves are expected to continue to annually decrease by roughly EUR 200 million for the next five years. This will decrease the required capital and contributed to company's ability to pay a dividend. Mandatum Life Group's total technical reserves amounted to EUR 8.1 billion (7.9), of which unit-linked reserves accounted for EUR 4.1 billion (3.8) and the continuously declining with profit reserves for EUR 4.0 billion (4.1). The unit- linked reserves reached an all-time high and their share of total technical reserves was 51 per cent (48). Holding The segment's profit before taxes amounted to EUR 285 million (297), of which EUR 319 million (326) relates to Sampo's share of Nordea's January - June 2013 profit. The segment, excluding share of Nordea's profit, reported a loss of EUR 34 million (-29). Sampo plc's debt financing on 30 June 2013 amounted to EUR 2,090 million (2,162) and interest bearing assets including bank accounts to EUR 521 million (1,048). During the first half of 2013 the net debt increased EUR 456 million to EUR 1,569 million (1,113). The increase was mainly due to the dividend of EUR 756 million Sampo plc paid in April 2013. Gross debt to Sampo plc's equity was 33 per cent (32). As at 30 June 2013 financial liabilities in Sampo plc's balance sheet consisted of issued senior bonds and notes of EUR 1,783 million (1,710) and EUR 307 million (451) of outstanding CPs issued. The average interest on Sampo plc's debt as of 30 June 2013 was 2.29 per cent (2.33). On 28 May 2013 Sampo plc issued two senior unsecured floating rate notes of SEK 2,000 million maturing on 28 May 2015 and 29 May 2018, respectively. Simultaneously Sampo plc bought back SEK 3,391 million of SEK 4,000 million notes maturing 16.9.2013. Outlook for the rest of 2013 Sampo Group's business areas are expected to report good operating results for 2013. 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 2013 and achieve a combined ratio of 88 - 91 per cent. Nordea's contribution to the Group's profit is expected to be significant. The 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. As a financial group the major sources of profitability and its variation for Sampo Group are market, credit and insurance risks. Their contributions to the Group's Economic Capital - used as an internal basis for capital needs - currently represent normal levels of 32 per cent, 45 per cent and 12 per cent, respectively. Major unforeseen events or abrupt structural changes in the business environment may impact the profitability of Sampo Group or they can affect Group's ability to conduct its business activities. For example the continuing political and financial crises in Europe combined with slow growth may escalate in ways that can affect Group's activities unfavourably. This is, however, mitigated by the fact that Sampo Group companies have no direct investment exposures in sovereigns under pressure and have small exposure to banking sector outside the Nordic 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 Press Conference and Conference Call Sampo will today arrange a Finnish-language press conference (Savoy, Eteläesplanadi 14, Helsinki), at 12.30 pm Finnish time. 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 7162 0077 or +1 334 323 6201. Please be ready to state the ID number 934057 and title 'Sampo'. 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. Interim Report for January-September 2013 Sampo will publish the third quarter 2013 interim report on 5 November 2013. Distribution: NASDAQ OMX Helsinki The principal media Financial Supervisory Authority www.sampo.com [HUG#1721595]