Capitalization at Subsidiary level
The split of economic capital by risk type and the adjusted solvency capital in If P&C and Mandatum Life is depicted in the figure Breakdown of capitalization, If P&C and Mandatum Life, 31 December 2012. Regulatory capital requirement is presented in the same figure.
In If P&C, economic capital increased to EUR 1,613 million (EUR 1,460 million at the end of 2011), while in Mandatum Life, economic capital increased to EUR 1,110 million (EUR 1,046 million at the end of 2011). Market risk is still the most significant risk for both If P&C and Mandatum Life and it has increased in both companies compared to the year 2011. Underwriting risk decreased in If P&C during the year to EUR 620 million (EUR 677 million at the end of 2011) and insurance risk increased in Mandatum Life to EUR 362 million (EUR 345 million at the end of 2011).
If P&C’s share of Topdanmark’s regulatory solvency requirement of EUR 105 million as at the end of year 2012 is included in the economic capital.
Breakdown of Capitalization
If P&C, 31 December 2012
Breakdown of Capitalization
Mandatum Life, 31 December 2012
The amount of adjusted solvency capital exceeded the economic capital in If P&C, whereas in Mandatum Life, the adjusted solvency capital was slightly below the economic capital. During the year, the amount of adjusted solvency capital in If P&C increased to EUR 3,090 million (EUR 2,854 million at the end of 2011), and in Mandatum Life, adjusted solvency capital increased to EUR 1,076 million (EUR 925 million at the end of 2011). In both companies, good result and positive change in fair value reserve were strengthening capitalization which was partly offset by changes in liability side adjustments due to lower interest rates.
Regulatory Solvency Assessment
Subsidiaries’ solvency is reported to the local supervisory authorities. In If P&C, regulatory solvency capital was 3.6 times regulatory capital requirement and the respective figure for Mandatum Life was 6.3 at the end of year 2012. Regulatory solvency capital, which is used to assess the solvency of an insurance company, is not calculated for the parent company Sampo plc.
Regulatory solvency capital of If P&C increased to EUR 3,101 million (EUR 2,698 million in 2011) while the regulatory capital requirement was EUR 859 million (EUR 841 million in 2011). Regulatory solvency capital of Mandatum Life Group increased to EUR 1,402 million (EUR 1,041 million in 2011) while the regulatory capital requirement was EUR 222 million (EUR 226 million in 2011).
Rating Agency Criteria
If P&C is rated by Moody’s and Standard & Poor’s (S&P) and Sampo plc by Moody’s. The Group’s main rating objective is to retain at least a single A rating for If P&C. The data for S&P rating model is updated regularly by If P&C. Sampo Group is in a continuous dialogue with the rating agencies and therefore has a good understanding of the opinions of agencies.
As a result of the continuous work with risk management issues, If P&C’s ERM (Enterprise Risk Management) was graded ‘strong’ by S&P in February 2011.