Sampo Oyj · OMXHEX:SAMPO
Sampo Oyj — Investor Day (2017)
15 slides from Sampo Oyj's investor day presentation, 2017
Slide 1: If's Internal Model
IF’S INTERNAL MODEL Daniel Rufelt Head of Capital Management
Slide 2: Agenda
AGENDA • Overview of If’s Internal Model. • Differences to the Solvency II Standard Formula. • Insurance risk diversification. • Impact on the solvency position for If Sweden.
Slide 3: Internal Model Overview
INTERNAL MODEL OVERVIEW • A stochastic model for the aggregated risk within If. • Covers insurance risk and market risk, bottom-up approach. • In full use within If since 2003. • Approved for Solvency II SCR for Insurance risk in If Sweden. • Recognized by Standard & Poor’s in the rating assessment.
Slide 4: Internal Model Overview
INTERNAL MODEL OVERVIEW Asset Economic Scenarios exposure data Balance sheet data Investment Capitalization Insurance Policy parameters Internal Model Historical data, Financial exposure data plans Reinsurance Profit Programme Targets Natural catastrophe models • A combination of internal methods an
Slide 5: Insurance Risk in the Internal Model
INSURANCE RISK IN THE INTERNAL MODEL Internal Model Insurance Market risk risk Premium Catastrophe Inflation Reserve risk risk risk risk Attritional Large claims claims • Based on actuarial methods, historical data and expert judgement. • Premium risk: New accident year risk split into frequency cla
Slide 6: Insurance Risk Example: Attritional Claims
INSURANCE RISK EXAMPLE: ATTRITIONAL CLAIMS • Analysis of historical claims data, both frequencies and severities. 60% 50% Covers both random risk and systematic 40% Random risk • Volatility risk. 30% Systematic risk 20% Total risk 10% • Appropriately reflects the impact of both 0% parameter uncertai
Slide 7: Insurance Risk Example: Large Claims
INSURANCE RISK EXAMPLE: LARGE CLAIMS • Analysis of historical claims data, including effects of claims inflation and exposure changes. • Discussions with business experts. • Back-testing of the model compared to realised outcomes. • Simulation of individual claims in the Internal Model, applying rei
Slide 8: Internal Model Use: Capital Allocation
INTERNAL MODEL USE: CAPITAL ALLOCATION Allocation of Calculation of Internal Model capital CR targets Operating Result 1,2 1 0,8 0,6 0,4 0,2 0 -15 -10 -5 0 5 10 15 20 Required Return on CR-target Allocated Capital Simulations of profit Allocate capital to Calculate CR-targets and loss LoBs/BAs ‘Back
Slide 9: Internal Model Use: Reinsurance Analysis
INTERNAL MODEL USE: REINSURANCE ANALYSIS 80 70 55 60 40 25 20 0 • Economic value of core reinsurance is Recoveries RI Premium EC Saving Economic value -20 compared for different alternatives. -40 -60 -80 -100 • The main focus is to evaluate and -100 -120 optimize the core reinsurance, including rete
Slide 10: Differences to the Solvency II Standard Formula
DIFFERENCES TO THE SOLVENCY II STANDARD FORMULA • Simulation of all possible outcomes instead of specific scenarios. • Bottom-up model based on If’s historical data and not generic EU data. • Overly prudent calibration avoided. • Appropriate recognition of diversification, including geographical. At
Slide 11: Differences to the Solvency II Standard Formula
DIFFERENCES TO THE SOLVENCY II STANDARD FORMULA • The main driver for the lower insurance risk is differences in diversification effects, but also differences in calibration per line of business. • The Standard Formula market risk include the effect of the equity transitional measure.
Slide 12: Insurance Risk Diversification
50% 60% 70% 80% 90% 100% 110% 120% 130% 140% 150% 2004 Q1 2004 Q2 2004 Q3 2004 Q4 2005 Q1 2005 Q2 2005 Q3 2005 Q4 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 Sweden 2008 Q4 2009 Q1 2009 Q2 2009 Q3 Norway 2009 Q4 2010 Q1 size and reinsurance protections. 20
Slide 13: If Sweden Solvency Impact, Q2 2017
IF SWEDEN SOLVENCY IMPACT, Q2 2017 IF SWEDEN SOLVENCY II, Q1 2017 MEUR Solvency ratio, 2017 Q2 3 000 209% 159% 2 514 2 383 2 500 2 000 1 495 1 500 1 204 1 000 500 0 PIM Own Funds PIM SCR SF Own Funds SF SCR • The Partial Internal Model application for Insurance risk for If Sweden was approved in Nov
Slide 14: If Group – Solvency Ratio Stresses
IF GROUP – SOLVENCY RATIO STRESSES Estimation of stress impact on Solvency II solvency ratio Standard Formula with Economic Capital transitional equity measures Solvency II -30% -100 bps +100 bps 1 in 10y 1 in 10y +100 bps Solvency II -30% -100 bps +100 bps 1 in 10y 1 in 10y +100 bps ratio Equity In
Slide 15: Summary of the If Internal Model
SUMMARY OF THE IF INTERNAL MODEL • An aggregated risk model covering insurance risk and market risk, utilized for assessing capitalization, allocating capital and for optimization. • The insurance risk diversification provides a stable basis for low volatility. • The Internal Model has a positive im