Sampo Oyj · OMXHEX:SAMPO
Sampo Oyj — Investor Day (May 2007)
70 slides from Sampo Oyj's investor day presentation, May 29, 2007
Slide 1: Sampo Capital Markets Day, London, May 29th 2007
May 29th SAMPO CAPITAL MARKETS DAY 2007 LONDON
Slide 2: Agenda Today
AGENDA TODAY • 11.15-12.00 Lunch • 12.00-12.30 Capital Issues -Group CFO, Peter Johansson • 12.30-13.00 Developments in P&C Insurance, -President of If P&C, Torbjörn Magnusson • 13.00-13.30 Update on Life Insurance -President of Sampo Life, Petri Niemisvirta • 13.30-13.45 Coffee Break • 13.45-14.00
Slide 3: Capital Issues
CAPITAL ISSUES Capital Markets Day Group CFO Peter Johansson May 29,2007
Slide 4: Group Profit Before Taxes January–March 2007
GROUP PROFIT BEFORE TAXES JANUARY – MARCH 2007 EUR m 3 129 3 000 2 859 2 000 1 000 339 133 169 128 100 97 -19 1 0 P&C LIFE HOLDING DISCONT. SAMPO INSURANCE INSURANCE COMPANY OPERATIONS GROUP -1 000 Q1/2006 Q1/2007 29 May 2007 2
Slide 5: Group Net Asset Value March 2007
GROUP NET ASSET VALUE 31 MARCH 2007 EUR m 9 000 7 500 6 000 4 952 4 500 8 224 3 000 1 050 1 500 2 221 0 P&C Life Sampo plc Group (incl. eliminations) 29 May 2007 3
Slide 6: Sampo Group NAV 2001 - 1Q2007
SAMPO GROUP NAV 2001 - 1Q2007, EUR m Sampo Group (no dividends and share buybacks) 11500 Sampo Group Sampo plc net leverage 11159 Sampo plc net NAV Life Insurance P&C Insurance 8500 Banking and Inv. Services 8224 4952 5500 913 964 952 736 1050 486 324 3150 243 712 450 645320 635397 2595 2500 2135 22
Slide 7: Sampo Group Solvency Capital March 2007
SAMPO GROUP SOLVENCY CAPITAL 31 MARCH 2007 EUR m 9219 9000 1008 1744 8211 7475 6000 3000 876 237 639 0 Group Capital Sectoral items GW and other Group´s own P&C Life included in own deductions from funds total Regulatory minimum funds own funds 29 May 2007 5
Slide 8: The Revised Economic Capital Framework
THE REVISED ECONOMIC CAPITAL FRAMEWORK Revised/new Economic Capital As before Insurance risk Market risk Credit risk Operational risk Based on internal stochastic EC model, Internal stochastic Future solvency as previously / future solvency requirements requirements Enhanced calculations to include
Slide 9: Group Economic Capital Revised Methodology
GROUP ECONOMIC CAPITAL REVISED METHODOLOGY 12/2005 3419 12/2006 3 148 3 000 12/2006 new * 2768 3/2007 new 2695 2 000 1690 1638 1580 1 502 1173 1140 1 000 840 781 474 382 366 180 0 P&C Life Holding Sampo Group (incl. diversification effect) * Revised methodology • Sampo Group solvency capital as of Q
Slide 10: Group Economic Capital and Solvency 1Q2007 According to Solvency II
GROUP ECONOMIC CAPITAL AND SOLVENCY 1Q2007 ACCORDING TO SOLVENCY II EUR m 9 000 8,653 Sampo Life 578 IF 600 7,475 6 000 Excess capital and buffers Sampo Group 5885 366 3 000 1140 2,768 376 1638 0 P&C Insurance Life Insurance Holding Diversification Group Economic Adjusted Group 8 Capital Solvency Ca
Slide 11: Economic Capital March 2007 - P&C Insurance
ECONOMIC CAPITAL 31 MARCH, 2007 EURm P&C Insurance 3 500 3,136 Liability side 3 000 adj. 600 2 500 2723 LOB 225 diversification 203 2 000 762 1 638 1 500 504 1 000 953 500 0 Insurance risk Market risk Credit risk Operative risk Diversification If P&C Adjusted Solvency Capital 29 May 2007 9
Slide 12: If Capital Adequacy Ratio March 2007
IF CAPITAL ADEQUACY RATIO 31 MARCH, 2007 33% of non- Non-life EUR m reserve life loss reserve 50% of non-life Intangibles, adjustments discount DAC EUR 1= SEK 9,3462 3500 DTA and Investment other value risk Security adjustments 3375 reserve 245 34 DTL 23 3096 3000 742 Credit Capital loans 228 risk 3
Slide 13: Economic Capital March 2007 - Life Insurance
ECONOMIC CAPITAL 31 MARCH, 2007 Life Insurance EUR m 1,716 26 1400 105 - Liability side 226 adj. 578 1200 1,140 - 218 1138 1,002 1000 800 600 400 200 0 Market risk Insurance Credit risk Operative risk Diversification Sampo Life Adjusted risk Solvency 29 May Capital 2007 11
Slide 14: Sampo Life Solvency Capital Requirement by Risk Type
SAMPO LIFE SOLVENCY CAPITAL REQUIREMENT BY RISK TYPE 31.3.2006 Credit risk Operational risk 8% 73 % Life Insurance risk Market risk 2% 17 % Market Insurance risk risk 2 %2 % 10 % 11 % 39 11 % % 6% 57 2% % 60 % Interest rate Equity Mortality Longevity 29 May 2007 Morbidity 12 Property Currency Disabi
Slide 15: Capital Issues
CAPITAL ISSUES Group CFO Peter Johansson May 29,2007
Slide 16: Underwriting culture and selective growth
Underwriting culture and selective growth Torbjörn Magnusson, CEO of If 1
Slide 17: Nordic insurance markets
Nordic insurance markets Norway 2007 Q1 Finland 2006 Gjensidige 32% If 28% If 30% Pohjola 26% GWP 2006, SEK bn Vesta 18% Tapiola 19% Sparebank 1 10% If 37,2 Fennia 10% Tryg 20,2 Vesta Codan 19,8 Baltic region 2006 Denmark 2005 Codan 22% Tryg 21% If 16% Topdanmark 20% Ergo 16% Codan 13% Sweden 2006 Q
Slide 18: If Result Q1 - 2007
If Result Q1 - 2007 MSEK Q1 - 07 Q1 - 06 Change (%) GWP 13 989 14 063 -0.5% NPE 8 531 8 602 -0.8% Claims -5 973 -6 060 -1.4% Total Costs -2 031 -2 049 -0.9% U/W Result 527 493 6.8% All. inv. return and other tech. inc. and exp. 433 377 14.8% Technical Result 960 871 10.3% Investment result 1 220 966
Slide 19: Results per Business Area
Results per Business Area Private Industrial 95,1% 93,4% 93,5% 93,8% 91,2% 89,6% Q1-06 12M-06 Q1-07 Q1-06 12M-06 Q1-07 Commercial Baltic & Russia 94,9% 94,8% 109,9 % 90,8% 95,5% 93,0% Q1-06 12M-06 Q1-07 Q1-06 12M-06 Q1-07 4
Slide 20: Claims frequency development BA Private 2004 - Q1 2007
Claims frequency development BA Private 2004 - Q1 2007 Index 2004 = 100 Sweden Frequency 2004- Q1 2007 Finland Frequency 2004- Q1 2007 120 120 110 Property 110 Motor Motor 100 100 Property 90 90 80 80 2004 2005 2006 R12 Q1 2007 2004 2005 2006 R12 Q1 2007 Norway Frequency 2004- Q1 2007 Denmark Freque
Slide 21: Inflation development in focus
Inflation development in focus Norway Consumer Price Index JAE* (CPI) CPI Sw eden Sweden Consumer Price Index (CPI) 4 4 4,0% 3,5% 3,0% 3 3 2,5% 2,0% 2 2 1,5% 1,0% 0,5% 1 1 0,0% -0,5% 0 0 -1,0% jan- jan- jan- jan- jan- jan- jan- jan- jan- 2005 2006 2007 2008 2009 2010 00 01 02 03 04 05 06 07 08 30% 5
Slide 22: Pan-Nordic projects
Pan-Nordic projects Projects completed On-going projects If Plus - Nordic loyalty and Automated claims - system retention concept for Private supporting increased automation customers of claims handling Launch of personal risk products Piloting of a common base system in all Nordic countries
Slide 23: Selected closed business deals from 2006 (Alliance partners)
Selected closed business deals from 2006 - (Alliance partners) Name Country Comments Branded KIA SE Subaru SE car insurance Citroen SE BMW MC NO Branded motorbike insurance BMW FI GM FI, DK Opel, Saab and Chevrolet (DK) Veho FI Branded car dealer insurance Used car
Slide 24: Customer Satisfaction Index (by EPSI)
Customer Satisfaction Index (by EPSI) Summary Sweden & Norway Customer Satisfaction Index PRIVATE by EPSI Customer Satisfaction Index COMMERCIAL by EPSI 75 75 70 69,3 69,4 70 68,9 70 66,7 66,9 65,9 65,9 66,1 65,8 65,4 64,8 64,6 64,6 65 63,4 65 63,9 62,9 62,8 CSI_2004 CSI_2004 60,1 59,9 CSI_2005 59 5
Slide 25: Baltic region & Russia
Baltic region & Russia If Baltic Baltic region Non-life, GWP Growth R12 Continued high growth in Baltic countries 35% 30% 25% Increased pan-Baltic synergies within 20% 15% Baltic organization 10% 5% 0% 3M- 9M- 2005 3M- 6M- 9M- 2006 3M- 05 05 06 06 06 07 If Russia Russian Non-life, Premiums $m
Slide 26: Underwriting culture and selective growth
Underwriting culture and selective growth Active portfolio management Efficiency gains building on Nordic platform Customer satisfaction Selective growth in Baltic region and Russia as well as personal risk segment Unwavering underwriting culture 11
Slide 27: Sampo Life
Sampo Capital Market Day, May 29, 2007 Sampo Life Petri Niemisvirta, President, Head of Life Insurance 1 Sampo Life - Capital Market Day, May 29, 2007 - Presentation.ppt
Slide 28: Unit linked savings (Finland)
Unit linked savings (Finland) Growth 27 % 1 796 EUR 1 412 EUR million 951 EUR million million 31.3.2005 31.3.2006 31.3.2007 2 Sampo Life - Capital Market Day, May 29, 2007 - Presentation.ppt
Slide 29: Risk life premiums written (Finland)
Risk life premiums written (Finland) Growth 17 % 12,1 9,4 10,3 EUR million EUR million EUR million Q1/2005 Q1/2006 Q1/2007 3 Sampo Life - Capital Market Day, May 29, 2007 - Presentation.ppt
Slide 30: Value of new business (Finland)
Value of new business (Finland) Growth 33 % 24 EUR million 18 EUR 10 EUR million million 2004 2005 2006 4 Sampo Life - Capital Market Day, May 29, 2007 - Presentation.ppt
Slide 31: Sampo Bank performing well in life sales after Danske Bank acquisition
Sampo Bank performing well in life sales also after acquisition by Danske Bank (Finland) Number of new life policies sold by Sampo Bank 10 153 9 964 7 691 Q1/2005 Q1/2006 Q1/2007 5 Sampo Life - Capital Market Day, May 29, 2007 - Presentation.ppt
Slide 32: Profit by components (Group)
Profit by components (Group) 249 EUR million 32 EUR million 14 EUR million Investment result Expense result Risk result & others 6 Sampo Life - Capital Market Day, May 29, 2007 - Presentation.ppt
Slide 33: Strong investment performance throughout the years
Strong investment performance throughout the years % Sampo Life Industry Avergae (Excluding Sampo) 14,0 11,8 12,0 11 10,0 9,5 9,4 8,3 8,0 7,6 7,2 6,1 6,0 4,0 2,0 0,0 2003 2004 2005 2006 7 Sampo Life - Capital Market Day, May 29, 2007 - Presentation.ppt
Slide 34: Profit development excluding investment result
Profit development excluding investment result (Group) Risk life and others Expense result Growth 33 % Growth 27 % 32 EUR million 14 EUR 24 11 million EUR EUR million million 2005 2006 2005 2006 8 Sampo Life - Capital Market Day, May 29, 2007 - Presentation.ppt
Slide 35: Swedish motor insurance
Swedish motor insurance Sampo CMD 29 May Mats Nordenskjöld 1 MN 070529
Slide 36: Swedish motor insurance: agenda for the new government
Swedish motor insurance ON THE AGENDA FOR THE NEW GOVERNMENT Full privatization of Motor Third Party Liability insurance Currently public sector takes care of major part of the loss of income compensation, medical treatment and rehabilitation after a traffic accident Proposed privatization of the
Slide 37: Extended Motor Third Party Liability insurance - History
Extended Motor Third Party Liability insurance - History 1996 Report from the Swedish Insurance Federation 2002 Personal injury committee SOU 2002:1 - No change of system 2005 New discussion from the political "alliance" (the opposition) and later that year concrete proposals as part of their progra
Slide 38: The Swedish social insurance system today
The Swedish social insurance system today Interface public - private – Personal/social insurance a "layered" solution — Individual/private insurance — Collective agreements — Social/public insurance 4 MN 070529
Slide 39: Traffic accidents today – involved parties and compensation
Traffic accidents today – involved parties and compensation – The insurance companies - Motor TPL insurance, based on "No Fault" principle – The employer - Short term sick leave - sick pay (14days) - Collective agreement insurance – Social insurance - Social insurance agency - Sickness benefit - Lon
Slide 40: Traffic accidents - Motor TPL insurance
Traffic accidents - Motor TPL insurance Compensation MTPL - Loss of income - difference method - the income situation without an accident? - Costs - medical examination - physiotherapy - Non financial claim - pain and suffer - medical disablement - special inconvenience 6 MN 070529
Slide 41: Traffic accidents – number and costs
Traffic accidents – number and costs – Ca 44 000 personal injury claims per annum – 50-60 % whiplash related claims – 10-20 % serious injuries with long term disability – Recent trend (1-2 years) = reduced number of accidents – The insurance industry's claims cost for MTPL 2005: SEK 8,7 billion wher
Slide 42: Extended Motor TPL insurance - partly privatized sickness and disability insurance
Extended Motor TPL insurance - partly privatized sickness and disability insurance – Objective - Fewer and less costly claims – The insurance industry assumes the primary responsibility for: - Loss of income: - sickness benefit - long term disability - disability pension - Work related rehabilitatio
Slide 43: Extended MTPL - P&C insurance market
Extended MTPL - P&C insurance market The size of the market - Today's MTPL market premium: SEK 11 billion - Motor hull premium: SEK 12 billion - The extended system result in an additional premium volume of at least SEK 9 billion = > Premium rate increase of 80% on MTPL or 40% on total Motor - Motor
Slide 44: Premium tax 1 July 2007
Premium tax 1 July 2007 – 32% tax on motor TPL insurance from 1st of July 2007 - Tax to be collected by the insurance companies – The tax purpose is to finance the "reserve" of already occurred claims and claims that will occur prior to the reform – Implications - The average Motor TPL insurance bec
Slide 45: What happens now and onwards?
What happens now and onwards? – Parliament decision regarding premium tax 30 May 2007 – Premium tax implementation 1 July 2007 – Committee directive regarding Extended MTPL insurance presented 4 April 2007. Committee requested to be finalized 30 April 2008 – Government bill and decision in parliamen
Slide 46: Solvency II
Sampo Capital Markets Day 29 May 2007 SOLVENCY II Knut Arne Alsaker, Group Chief Risk Officer
Slide 47: Solvency II is a new regulatory framework
SOLVENCY II IS A NEW REGULATORY FRAMEWORK Background Purpose and scope Current solvency requirements too Unify regulations simple Enhance quantitative measures Solvency I not linked to actual risk exposure Improve overall risk management Different regulations across EEA Transparency and market disci
Slide 48: The framework is based on three pillars
THE FRAMEWORK IS BASED ON THREE PILLARS Solvency II Pillar I Pillar II Pillar III Capital Supervisory Disclosure requirements review requirements Solvency II / Knut-Arne Alsaker, CRO 29 May 2007 3
Slide 49: Risk modelling is an important management information tool
Solvency II RISK MODELLING IS AN IMPORTANT Pillar I Pillar II Pillar III Supervisory Disclosure MANAGEMENT INFORMATION TOOL Capital requirements review requirements Usability of our Risk Model Insurance Risk Market Risk Credit Risk Operational Risk Risk Aggregation and Business Decisions Overall Ris
Slide 50: SII capital requirement should be aligned with risk based capital
Solvency II SII CAPITAL REQUIREMENT SHOULD BE Pillar I Pillar II Pillar III Supervisory Disclosure ALIGNED WITH RISK BASED CAPITAL Capital requirements review requirements Q1 2007 MEUR MEUR MEUR 3 500 3 323 2 000 10 000 8 653 Asset and 600 1 800 1 716 9 000 3 000 liability adj Asset and Asset and 11
Slide 51: Risk management objectives should be linked to business objectives
Solvency II RISK MANAGEMENT OBJECTIVES SHOULD Pillar I Pillar II Pillar III BE LINKED TO BUSINESS OBJECTIVES Capital Supervisory Disclosure requirements review requirements Key objectives of the risk risk management process: • Ensure capital adequacy in relation to the risks inherent in business act
Slide 52: Creating one common risk management platform
Solvency II CREATING ONE COMMON RISK Pillar I Pillar II Pillar III MANAGEMENT PLATFORM Capital Supervisory Disclosure requirements review requirements • Overall framework for risk management work • Describes principles for handling of each risk type • Includes action plans for developing the RM fram
Slide 53: Focus on transparency
Solvency II Pillar I Pillar II Pillar III FOCUS ON TRANSPARENCY Capital Supervisory Disclosure requirements review requirements Examples of Sampo group Sampo Group has received the disclosures: "Risk Transparency Award" of Ernst & Young for 2005 annual report. . is k r ency R a ra nsp 005 T 2 wa rd
Slide 54: Important issues in the Solvency II project
IMPORTANT ISSUES IN THE SOLVENCY II PROJECT Group/large companies Other • Group supervision • Eligible capital – home supervision vs group supervision • Internal models • Capital requirements – Approval process – legal entities vs. branch offices – group vs. solo • Close dialogue with regulators wil
Slide 55: So far the following has been done within the Sampo Group
Solvency II SO FAR THE FOLLOWING HAS BEEN Pillar I Pillar II Pillar III DONE WITHIN THE SAMPO GROUP Capital Supervisory Disclosure requirements review requirements 9 Participated in the Quantitative Impact Studies True risk profile Diversification 9 Given feedback on consultative papers etc. through
Slide 56: Timetable for implementation of Solvency II
TIMETABLE FOR IMPLEMENTATION OF SOLVENCY II 2002 2003 2004 2005 2006 2007 2008 2009 2010 Solvency I Decision KPMG report Implementation Solvency II Directive European (recommending Commission European Council & the 3 pillar approach) Parliament Member States Decision to start Answers to Calls for ad
Slide 57: Sampo Life in the Baltic countries
Sampo Capital Market Day, 29.5.2007 Sampo Life in the Baltic countries Minna Kohmo, Senior Vice President, SE Sampo Life Insurance Baltic
Slide 58: GDP Growth and Life Insurance Penetration Rate
GDP Growth and Life Insurance Penetration Rate Estonia Latvia Lithuania Population (millions) 1.3 2.3 3.5 ESTONIA GDP Growth (3 years, 2004-2006), % 45.6 % 45.5 % 32.4 % Average GDP Growth Per Annum (2004-2006), % 10.0 % 10.1 % 7.2 % GDP/capita (2006), USD 17 800 12 700 15 100 LATVIA Currency Kroon
Slide 59: Growth of Baltic Life Market - Premiums Written
Growth of Baltic Life Market - Premiums Written Since 2001 Estonia 467 % Latvia* Lithuania 387 % Total Baltic 367 % 320 % 252 % 231 % 230 % 212 % 153 % 131 % 136 % 126 % 95 % 95 % 62 % 55 % 50 % 38 % 25 % 27 % 2002 2003 2004 2005 2006 Estonia Latvia* Lithuania Total Baltic Average Growth Per Annum (
Slide 60: Products within the Baltic Life Market
Products within the Baltic Life Market • Main products Total market Baltics Health – Savings products insuranceOther Term life 4 % 1% 2% – Term life • loan insurance With profit 35 % Unit linked 58 % • Health insurance excluded from the total market figure measurement since it is more of a non-life
Slide 61: Sampo Life – Remarkably Strong Premium and AUM Development
Sampo Life – Remarkably Strong Premium and AUM Development SE Sampo Life - Premium and AUM -Growth Faster than Market- 2004-2006, m EUR SE Sampo Life vs. Markets Premium Growth in 2006 74 105 % 86 % 82 % 71 % 38 37 56 % 21 19 43 % 12 36 % 22 % Premium AUM 2004 2005 2006 Lithuania Latvia Estonia Tota
Slide 62: Key Players in Baltic Life Market
Key Players in Baltic Life Market Market s hare, % Nr of countries 2004 2005 2006 repres ented 1 Hansabank 39 % 39 % 36 % 3 2 SEB 19 % 23 % 27 % 3 3 Sampo 9% 12 % 15 % 3 4 ERGO 14 % 12 % 9% 3 5 Commercial Union 5% 5% 5% 1 6 Seesam Life 5% 5% 4% 3 7 Codan* 6% 2% 1% 1 8 Bonum publicum 1% 1% 1% 1 9 PZU
Slide 63: Market Share Winners and Losers 2004-2006
Market Share Winners and Loosers 2004-2006 Baltic Life Insurance Market 2004-2006 5% 4% 3% Change in market share 2% 1% 0% ERGO AIG Life SEB* publicum Seesam Sampo Baltikums Commercial PZU Hansabank Codan Bonum -1 % Life Union -2 % -3 % -4 % -5 % 2004 2005 2006 * In 2005 SEB bough life insurance com
Slide 64: Sampo Life - Sales by Distribution Channel
Sampo Life - Sales by Distribution Channel • Multi distribution channel Sales by Distribution Channel 2006 framework – Sampo Bank 6% – Own sales force – If P&C – Brokers 33 % – Other partners 61 % • Prominent sales through bank assurance partner Sampo Bank Own sales Partners and Brokers Sampo Bank
Slide 65: Summary
Summary Strong growth expected to continue in life business
Slide 66: Capital Markets Day 2007 London
CAPITAL MARKETS DAY 2007 May 29th, 2007 LONDON GROUP CEO AND PRESIDENT BJÖRN WAHLROOS
Slide 67: Sampo Group posted record high Q1-result
SAMPO GROUP POSTED RECORD HIGH Q1-RESULT BREAKDOWN OF Q1/2007 PRE-TAX PROFIT EXCLUDING DISCONTINUED GROUP PRE-TAX PROFIT OPERATIONS 270 EURm 3,129 EURm (vs. 242 EURm in Q1/2006) (vs. 339 EURm in Q1/2006) 169 100 1 1 100 169 P&C insurance 169 EURm Life insurance 100 EURm Holding company 1 EURm Discon
Slide 68: Sampo is a significant investor in the Nordic region
SAMPO IS A SIGNIFICANT INVESTOR IN THE NORDIC REGION INVESTMENT ASSETS OF SELECTED NORDIC INVESTORS 31 DECEMBER 2006 Varma AP2 AP3 Ilmarinen AP1 AP4 Sampo* Folksam Investor Industrivärden Kinnevik 0 5 10 15 20 25 30 EURm * Sampo Group’s investment assets 31 March 2007 after the closing of Sampo Bank
Slide 69: Capital situation
CAPITAL SITUATION CAPITAL IN EXCESS OF THE REQUIRED ECONOMIC CAPITAL Varma HOLDING COMPANY OPERATING SUBSIDIARIES AP2 ∼AP34.5 EUR bn + ∼ 1.0 EUR bn Ilmarinen AP1 AP4 Sampo* SAMPO GROUP = Folksam ∼ 5.5 EUR bn Investor Industrivärden Kinnevik 0 5 10 15 20 25 30 29 May, 2007 4
Slide 70: Capital Markets Day 2007 London
CAPITAL MARKETS DAY 2007 May 29th, 2007 LONDON GROUP CEO AND PRESIDENT BJÖRN WAHLROOS