Group CEO's Review
Excellent Results Without Any Outside Assistance
The uncertainty brought on by the excessive debt levels of the public sector continued to frustrate the capital markets throughout 2012. Interest rates fell as central banks eased their monetary policy. Short-term interest rates on US and German government bonds turned negative, the popularity of credit-risk investments increased, and the corporate bond interest rates fell even below companies' dividend yields.
Even though the irresponsible amassing of debt by the public sector is the main reason behind Europe’s problems, the financial sector was burdened with increased regulation and the imposition of a banking tax in many countries, as well as other new tax levies enforced on it. Tax activists at the EU level continued with preparations for a financial transaction tax, despite the fact that it is commonly accepted that the tax will restrict economic growth and hinder job creation.
Best Ever Combined Ratio
2012 proved to be a historically good year for Sampo Group’s P&C operations. The technical result of If P&C Insurance improved further and the combined ratio of 89.3 per cent was the best in the company’s history. Our uncompromising focus on risk selection and underwriting laid the ground for this excellent result. The premium income of If P&C Insurance also developed positively, reaching EUR 4,441 million.
Among the most noteworthy events that took place in our P&C insurance operations during the year was the acquisition of the Finnish business of the Danish insurance company Tryg. This transaction is expected to be closed in the spring of 2013. Another important event was the cooperation agreement signed with Nordea that will begin offering If insurances in Finland, Sweden and the Baltics from the summer of 2013. If P&C’s holding in Topdanmark increased to 25.4 per cent of all shares, excluding the shares that are held by Topdanmark itself.
In 2012, Sampo’s associated company Nordea had more customers, more capital, and recorded a better result than ever before. Nordea has set an ROE target of 15 per cent under normal interest rate levels and with a Core Tier 1 capital ratio of above 13 per cent.
Nordea’s starting point is strong as the Group’s historical earnings development has proven to be one of the most stable in the European banking sector. This is due to both economies of scale and diversification as its operations cover all Nordic countries. The efficiency program to improve Nordea's cost efficiency and capital position is well on track. Nordea is already among the top performers in each market where it operates.
Sampo’s share of Nordea’s net profit for 2012 was EUR 653 million. According to Nordea’s dividend proposal, in spring 2013, Sampo will receive EUR 293 million from Nordea in dividends.
Life Insurance Premiums Grew by 15 Per Cent
In 2012, the premium income of Mandatum Life grew by 15 per cent to EUR 977 million, which meant that it almost reached the company’s record figures of 2010. This was an extremely good achievement considering the prevailing market situation. To a large extent, the growth in premium income can be attributed to the smooth sales cooperation with Danske Bank.
Despite the uncertainty in the investment environment, Sampo Group’s investment results were excellent in 2012, with both equities and the bond portfolio yielding good returns.
Dividend Proposal of EUR 1.35 per Share
Sampo is known as a dividend stock. To this end, in accordance with our dividend policy, we will distribute more than half of our net profit to our shareholders in spring 2013. Sampo’s Board of Directors proposes that a dividend of EUR 1.35 per share be paid for 2012.
Sampo’s share price increased by 27 per cent in 2012, and it reached its highest value in Sampo’s 25-year history as a listed company in March 2013. We are the only financial group with P&C insurance and banking operations that cover all of the Nordic countries and which has a leading market position in all of the business areas. This creates a strong foundation for successful operations also in 2013.
Group CEO and President