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Notes to the Group’s financial statements

31 Employee benefits
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Employee benefits
               
Sampo has defined benefit plans in P&C insurance business in Sweden and Norway.
               
In addition to statutory retirement pension insurance, the Group has certain voluntary defined benefit plans. The voluntary defined benefit plans are intra-Group and included in the insurance liabilities of Mandatum Life. The amount is negligible and they have no material impact on the Group profit or loss or equity.
               
Employee benefit obligations of P&C Insurance 31 Dec.
               
EURm   2008 2009 2010 2011 2012
  Present value of estimated pension obligation   390 424 458 577 565
  Fair value of plan assets   220 272 326 347 392
  Net obligation/liability   170 152 132 230 174
  Net cumulative unrecognised            
  actuarial gains/losses   -94 -67 -46 -151 -113
  Net pension obligation recognised in the balance sheet   76 85 85 79 60
  Provision for social security   17 19 20 19 16
  Provision for pensions 31 Dec.   92 104 105 98 76
               
IAS 19 Employee benefits is applied in the accounting for the defined benefit plans from the beginning of the financial year 2005.
               
Pension obligations, and the pension cost accrued during the fiscal period, are calculated using actuarial methods. Earned pension rights are calculated on a straight-line basis during the employment period. The calculation of pension obligations is based on anticipated future pension payments and includes assumptions regarding mortality, employee turnover and salary growth. The nominally calculated liability is discounted to present value using an interest rate based on the current market rate and adjusted to take into account the duration of the company’s pension obligations. The discount rate is based on liquid covered mortgage bonds issued by mortgage institutions. After deducting plan assets, a net asset or liability is entered in the balance sheet. The net obligation reported in the closing balance pertained to defined-benefit pension plans for employees in Sweden and Norway. The pension benefits arising in the other countries covered by the Group’s operations are classified as defined contribution plans.
               
The Norwegian pension rules and regulations are undergoing a material change. As part of the efforts to gradually adapt to these changes, a significant portion of If's early retirement plan has been phased out, resulting a considerable revenue pertaining to prior-year service.
               
The following actuarial assumptions have been used for the calculation of defined benefit pension plans in Sweden and Norway:
             
               
        Sweden
31 Dec.
2012
Sweden
31 Dec.
2011
Norway
31 Dec.
2012
Norway
31 Dec.
2011
  Discount interest rate     3.50 % 3.75 % 4.00 % 2.75 %
  Anticipated return     - 3.00 % - 3.75 %
  Future pay increases     3.00 % 3.00 % 3.75 % 3.75 %
  Price inflation     2.00 % 2.00 % 2.25 % 2.25 %
               
The expected rate of return on the plan assets has been calculated based on the following division of investment assets:  
  Debt instruments     40 % 43 % 53 % 64 %
  Equity instruments     29 % 34 % 18 % 15 %
  Property     10 % 11 % 15 % 17 %
  Other     21 % 12 % 14 % 4 %
               
      2012     2011  
EURm Funded plans Unfunded plans Total Funded plans Unfunded plans Total
Analysis of the employee benefit obligation            
  Present value of estimated pension obligation 516 50 565 506 71 577
  Fair value of plan assets 392 - 392 347 - 347
  Net obligation/liability 124 50 174 159 71 230
  Net cumulative unrecognised actuarial gains/losses -105 -9 -113 -138 -13 -151
  Net pension obligation recognised in the balance sheet 19 41 60 21 58 79
               
Recognised in Income Statement
               
EURm   2008 2009 2010 2011 2012
  Current service cost   15 15 14 14 18
  Interest cost   17 17 19 19 18
  Expected rate of return on plan assets at the begninning of the year -13 -13 -14 -16 -13
  Actuarial gains (-) or losses (+) recognised during the financial year 5 5 2 1 8
  Losses (+) or gains (-) on curtailments and settlements   1 1 0 1 1
  Costs pertaining to prior-year service   - - - - -20
  Pension costs   26 26 22 19 11
               
Analysis of the change in net liability recognised in the balance sheet
               
EURm   2008 2009 2010 2011 2012
  Pension obligations:            
  At the beginning of the year   406 390 424 458 577
  Earned during the financial year   14 14 14 14 18
  Interest cost   18 17 19 19 18
  Actuarial gains or losses   41 -42 -19 100 -37
  Losses or gains on curtailments and settlements   1 1 0 1 1
  Costs pertaining to prior-year service   - - - - -20
  Exchange differences on foreign plans   -79 32 35 3 29
  Benefits paid   -12 11 -16 -18 -20
  Defined benefit plans at 31 Dec.   390 424 458 577 565
               
  Reconciliation of plan assets:            
  At the beginning of the year   255 220 272 326 347
  Expected return on assets   13 13 15 16 13
  Actuarial gains or losses   -17 -7 2 -6 1
  Contributions   21 23 24 21 28
  Exchange differences on foreign plans   -44 32 23 2 18
  Benefits paid   -8 -9 -11 -13 -15
  Plan assets at 31 Dec.   220 272 326 347 392
               
               
Other short-term employee benefits
There are other short-term staff incentive programmes in the Group, the terms of which vary according to country, business area or company. Benefits are recognised in the profit or loss for the year they arise from. An estimated amount of these short-term incentives, social security costs included, for 2012 is EURm 62.