Sampo Group’s Online Annual Report 2012 and Sampo’s video ‘25 Years as a Listed Company’ have been granted the international Red Dot Communication Design 2013 Awards.

Red Dot design award winner 2013

Risk Management in 2012

Sampo Group companies operate in business areas where profit generation based on risk taking and active management of risks is a key component of earnings logic. Core competencies to manage the balance between risks, capitalization, liquidity and profitability in these business areas can be summarized as follows:

1) Appropriate selection and pricing of insurance risks

  •  Insurance risks are selected carefully and priced reflecting the inherent risk levels
  • Insurance products are developed proactively

2) Effective management of insurance exposures

  •  Diversification is sought actively
  • Reinsurance is used effectively to reduce exposures

3) Careful selection and execution of investment transactions

  • Risk/reward ratios of separate investments are analyzed carefully
  • Transactions are executed effectively at right time

4) Effective management of investment portfolios and balance sheet

  • Balance between expected returns and risks in investment portfolios and the balance sheet are optimized, taking into account the features of insurance liabilities, solvency, regulatory asset coverage rules and rating requirements

5) Effective Management of Consequential Risks

  • Credit and liquidity risks are managed by selecting counterparties carefully, using risk mitigation techniques and increasing diversification
  • High quality and cost efficient business processes are maintained and continuity of operations is planned and recovery is ensured 

As a diverse financial institution, Sampo Group is exposed to a variety of different risks, both financial and non-financial. The most significant risk arising from the operations of the insurance subsidiaries in 2012 was market risk.

The main market risks of Sampo Group during 2012 were equity, interest rate, credit spread and currency risks.

During 2012, Sampo Group’s insurance risk profile remained relatively stable. In Mandatum Life longevity risk is still the most critical biometric risk and most of it arises from the with-profit group pension portfolio. In If P&C the most material insurance risk is reserve risk, which to a large extent is driven by long-tailed business such as workers’ compensation and motor third party liability.

On the Group level, the most significant risks were market risk and credit risk, due to Sampo plc’s holding in Nordea, the business activities of which in banking result in credit risk being a key risk.

One of the most important objectives of risk management in Sampo Group is to ensure the adequacy of the available capital in relation to the risks arising from the business activities and operating environment, as well as to ensure that expected returns are in balance with risk taking. Various activities within this area were conducted and related procedures fine-tuned continuously during 2012 in different parts of the organization.

A more detailed description of Sampo Group’s risk management organization and activities is available in the Risk Management section of the 2012 Annual Report.