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Group Level Risk Considerations

As a general principle, the subsidiaries are managed independently from each other. However, it has been deemed pertinent to assess certain risk and capitalization issues also at Group level, i.e. concentration risks arising from exposures, correlations of Group companies’ profitability and the effect on Group wide capitalization, liquidity management and Group structure.

Concentration Risks

With respect to the underwriting businesses carried out in the subsidiary companies, it has been established that If P&C and Mandatum Life are operating mostly in different lines of business and hence their underwriting risks are different. There are no material risk concentrations under normal course of business and, consequently, business lines as such are contributing diversification benefits rather than concentration of risks. The most material common risk factor is life expectancy in Finland that is affecting both companies’ technical provisions. On the other hand, both subsidiaries have significant investment portfolios and, thus, are potentially threatened with investment related concentration risks (for example large combined exposures).

At the Group level, large exposures are managed and monitored in several ways. Firstly, concentration risk is proactively managed through effective differentiation in asset selection. Mandatum Life’s direct investments are mainly denominated in euro and in companies geographically located in Finland and selectively in other countries, whereas, If P&C has the major part of its direct investments denominated in Scandinavian currencies and in the respective countries. Investments managed by external asset managers, on their behalf, are selected for both companies by the same members of Sampo Group’s investment team and the funds are mostly allocated to areas outside the Nordic countries. Consequently, the risk of unidentified or unwanted concentrations is relatively low. Furthermore, concentrations at Group level are actively monitored and, if deemed necessary, further managed by deploying Group level exposure restrictions, for instance by industries or individual issuers.

On company level, investment risk concentrations are monitored and controlled by the ICC in If P&C and the ALCO in Mandatum Life, which have been established as independent parties from investment operations. Total group exposures are monitored and controlled at Group level by Sampo Group’s Chief Investment Officer, Sampo Group’s Chief Risk Officer and Sampo Group’s Audit Committee.

Concentrations by sectors, asset classes and rating are illustrated in table Credit exposures by sectors, asset classes and rating, If P&C, Mandatum Life and Sampo Group, 31 December 2012 in Credit Risk section. Nordic financial sector is the largest concentration at Sampo Group level. Conversely, the significance of public sector bonds is minor and Sampo Group does not have investments in government bonds of the distressed countries.

Fixed income investments in financial and public sector are shown, respectively, in the tables Fixed income investments in financial sector, Sampo Group, 31 December 2012 and Fixed income investments in public sector, Sampo Group, 31 December 2012. In terms of financial sector, most of the investments are in the Nordic countries, and covered bonds and short-term money market investments have a major emphasis. The public sector figures include government bonds, government guaranteed bonds and other public sector investments.

Fixed Income Investments in Financial Sector
Sampo Group, 31 December 2012
  Covered bonds Money market
senior debt
subordinated debt
Total, EURm  %
Sweden  2,988  850  1,286  215  5,339  56% 
 Finland 243  1,232  190  28  1,693  18% 
 Norway 491  648  117  1,256  13% 
 Denmark 88  13  165  139  405  4% 
 United States   74  119  201  2% 
 France 72  95  17  184  2% 
 Switzerland     99  11  110  1% 
 Netherlands   102    102  1% 
 Germany 10  66    76  1% 
 United Kingdom     40  42  0% 
 Austria 34      35  0% 
 Estonia   23    23  0% 
 Luxembourg 11        11  0% 
 Belgium     10  0% 
 Russia       0% 
 Jersey       0% 
 Italy       0% 
 Latvia       0% 
Total 3,939 2,201 2,815 548 9,502 100%


Fixed Income Investments in Public Sector
Sampo Group, 31 December 2012
  Governments Government
Public sector,
Total market
value, EURm 
Sweden 16 54 239 309
Finland 12 56 82 150
Norway   27 102 129
Germany   78   78
Denmark   14 28 41
Netherlands 17     17
Other 3   0 3
Total 48 229 451 727

The largest exposures by individual counterparties are presented in the table Largest individual exposures by issuer and by asset class, Sampo Group, 31 December 2012.  

Largest Individual Exposures by Issuer and by Asset Class
Sampo Group, 31 December 2012



Total fair value


% of total investment assets

Cash & short-term fixed income

Long-term fixed income, total

Long-term fixed income:
Government guaranteed

Long-term fixed income: Covered bonds

Long-term fixed income: Senior bonds

Long-term fixed income: Tier 1 and
Tier 2


Uncolla-teralized deri-

Svenska Handelsbanken


7% 562 705 0 575 128 3 0 0

Nordea Bank


7% 201 1,033 0 704 302 27 0 4

Danske Bank

1,151 6% 638 505 0 109 252 143 0 7

Skandinaviska Enskilda Banken

1,105 6% 342 762 0 403 259 100 0 2


1,056 6% 6 1,050 54 727 232 37 0 0


539 3% 0 539 0 186 304 49 0 0


512 3% 0 512 0 301 156 56 0 0

OP Pohjola

454 2% 361 92 0 0 82 11 0 0
Landshypotek 365 2% 0 365 0 325 35 5 0 0


226 1% 0 148 0 0 148 0 78 0
Total top 10 exposures 7,913 44% 2,110 5,712 54 3,330 1,898 431 78 13




Total investment assets



Furthermore, largest exposures of direct equity as well as high yield and non-rated fixed income investments are broken down in the tables Ten largest direct equity investments, Sampo Group, 31 December 2012 and Ten largest direct high yield and non-rated fixed income investments, Sampo Group, 31 December 2012.

Ten Largest Direct Equity Investments
Sampo Group, 31 December 2012 

Top 10 equity investments

Total fair value, EURm

% of total direct equity investments


90 6%


 84 5%


78 5%


75 5%


72 5%


70 4%


65 4%


59 4%

Hennes & Mauritz

57 4%


49 3%

Total top 10 exposures

700 44%

Other direct equity investments



Total direct equity investments



Ten Largest Direct High Yield and Non-rated Fixed Income Investments
Sampo Group, 31 December 2012

Largest direct high yield and non-rated fixed income investments


Total fair value, EURm

% of total direct fixed income investments


BB+ 194 1%

Stora Enso

BB 158 1%


BB 112 1%

A P Moller - Maersk

NR 94 1%

Neste Oil

NR 76 1%

Wilh. Wilhelmsen

NR 57 0%


NR 56 0%


NR 54 0%

Aker Solutions

BB 52 0%


NR 52


Total top 10 exposures

  906 6%

Other direct fixed income investments




Total direct fixed income investments




Correlations of Profitability and Capital Positions

Direct concentration risks may arise in Sampo Group due to large exposures in investment assets. A more general Group level concentration risk arises when the Group companies’ profitability and/or capital positions react similarly to general economic development, i.e. the correlation between general economic development and the profitability of different subsidiaries is more or less analogous. This type of concentration risk can be analyzed indirectly based on profits. From that perspective, especially Nordea’s, which is Sampo plc’s associated company, result has created clear diversification benefits, in particular when analyzed vis á vis with If P&C and Mandatum Life. The historical correlation between If P&C’s and Nordea’s, as well as Mandatum Life’s and Nordea’s, quarterly profits since 2005 is very low. Sampo Group is also forecasting profits based on common scenarios for all the companies.

The historical correlations of quarterly profits between If P&C, Mandatum Life and Nordea are depicted in the figure Correlations of quarterly reported profits, If P&C, Mandatum Life and Nordea, 1 January 2005–31 December 2012.

Correlations of Quarterly Reported Profits
If P&C, Mandatum Life and Nordea, 1 January 2005–31 December 2012
 If P&C Mandatum Life Nordea
If P&C  1    
Mandatum Life 0.87  1  
Nordea 0.21 0.15  1

Because of favorable profit correlations between the companies and relatively low volatilities of If P&C’s and Nordea’s profits, the profit development has been quite stable at Group level and, from that point of view, there is no pressure to maintain large capital buffers over the Group level economic capital. However, the Board of Directors of Sampo plc has set an internal target that the adjusted solvency capital amount has to exceed the sum of the companies’ economic capital, excluding the diversification effects between companies.


Liquidity risk is managed at company level and the Group companies maintain liquidity buffers that are considered to be adequate in their businesses. In the subsidiaries, the adequacy of liquidity buffers is dependent on expected net outflows of insurance cash flows. In the parent company, the adequacy of liquidity buffers is dependent on potential strategic arrangements and in general Sampo plc prefers to have strong liquidity. In the normal course of business, the subsidiaries do not invest in Sampo plc’s debt instruments. However, a general prohibition to intra-Group asset transactions has not been deemed necessary and, thus, subsidiaries are allowed to invest in the parent company’s debt instruments and sell assets to each other at market prices, especially when this is justified by business opportunities. Thus, during possible market stresses these options are available to a certain extent as well. In Mandatum Life, there are investments in Sampo plc’s debt instruments related to unit-linked policies.

Corporate Structure Related Risks

The structure of Sampo Group, both legal and reporting structure – parent company, two subsidiaries and the associated companies – is simple, straightforward and transparent. The structure as such effectively mitigates any risks related to complex structures. Structural simplicity and transparency together with a limited amount of intercompany exposures within Sampo Group (i.e. direct and/or indirect claims between different companies excluding normal course of business transactions with Nordea) and diligently managed capitalization of subsidiaries also effectively protects Group companies from contagion risks.