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Capitalization at Group level

The adjusted solvency capital of Sampo Group’s insurance subsidiaries increased during the year due to result and positive changes in fair value reserves. This growth was partly offset by lower interest rates and respective changes in liability side adjustment and, in addition, due to paid dividends. The changes in subsidiaries’ risk exposures and hence in economic capital were modest. At Sampo Group level Nordea’s and Sampo plc’s figures are taken into account as well when adjusted solvency capital and economic capital figures are calculated. At Group level the amount of adjusted solvency capital increased more than economic capital and hence capitalization can be considered stronger than year ago. The development of capitalization in Sampo Group within the internal and regulatory perspectives during the year 2012 is shown in the figure Development of capitalization, If P&C, Mandatum Life and Sampo Group, 31 December 2011–31 December 2012.

Development of Capitalization
If P&C, 31 December 2011–31 December 2012

Development of Capitalization
Mandatum Life, 31 December 2011–31 December 2012

Development of Capitalization
Sampo Group, 31 December 2011–31 December 2012

Updates and refinements are frequently done to the models and assumptions used for calculating the economic capital. Thus, the economic capital figures may not be fully comparable between years.

The figure Breakdown of capitalization, Sampo Group, 31 December 2012 shows the contributions of the different business areas including Nordea to Sampo Group’s total economic capital as well as the diversification effect included in the calculation of Group’s economic capital. The figure also shows the amount of adjusted solvency capital at Group level comprising Solvency I capital and other items absorbing losses. In internal assessments, adjusted solvency capital is compared to economic capital, and Solvency I capital is compared to the regulatory capital requirement when regulatory capitalization is under consideration.

Sampo Group’s economic capital increased during the year and amounted to EUR 4,560 million at the end of 2012 (EUR 4,374 million in 2011). The amount of adjusted solvency capital at Group level increased during the year to EUR 8,197 million (EUR 7,262 million in 2011) due to strong results and positive changes in fair value reserves. Lower interest rates and respective decreases in the liability side adjustments of subsidiaries contributed negatively to adjusted solvency capital. The adjusted solvency capital exceeded the economic capital by EUR 3,637 million (EUR 2,888 million in 2011) and capitalization by internal measures is strong.

Breakdown of Capitalization 
Sampo Group, 31 December 2012

Regulatory solvency capital amounted to EUR 8,125 million in Sampo Group at the end of year 2012.

Nordea is included in the calculation of Sampo Group’s economic capital by adding Sampo Group’s share of the economic capital reported by Nordea, converted into the 99.5 per cent confidence level. At year end, the risks arising from Nordea constitute the largest single component in Sampo Group’s economic capital. The correlations between risk types and business areas, and thereby indirectly the amount of diversification, are defined by Sampo plc at Sampo Group level.

Regulatory Solvency Capital at Group Level

Sampo Group reports its Group solvency quarterly to the Finnish supervisory authorities monitoring the Group. The calculation of Group solvency according to the Act on the Supervision of Financial and Insurance Conglomerates (1193/2004) is broken down in the table Group solvency, 31 December 2012 and 31 December 2011.

Group Solvency
31 December 2012 and 31 December 2011
EURm

31 Dec 2012

31 Dec 2011

Group capital

10,113

8,920
Sectoral items 1,285 1,091

Valuation differences and deferred taxes

435 380

Topdanmark

-165

-141

Subordinated loans

212 200

Share of Nordea's capital not included in Group capital

803 653

Intangibles and other deductables

-3,274

-3,217

Intangibles (insurance companies)

-771 -745

Intangibles (Nordea)

-1,314 -1,314

Equalisation provision (Finland)

-309 -317

Other

-124 -169

Planned dividends for the current period

-756 -672

Solvency capital, total

8,125

6,794

Minimum requirements for solvency capital, total

4,767

4,902

     
Group solvency

3,358

1,892

Group solvency ratio

(solvency capital % of minimum requirement)

170%

139%

Sampo Group’s consolidated capital position was strong. The Group’s solvency ratio was 170 per cent (139 per cent in 2011).