Capital Market Day - Sampo.com by wuxiangyu

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									Capital Market Day
          London
          L d
        27 May 2010
      d President Kari Stadigh
CEO and P id t K i St di h
         The best financial assets in the Nordic area
                           by h i
                         - b choice

                   Market             High              Low             High
                   position         consumer          volatility        RoE
                                     content                          (average
                                                                    2005 – 2009)
                  ~20% of the     > 50% of the        c/r above
      If P&C      Nordic P&C      premiums from     95% only once      23.5%
                   insurance      private persons     in the last
                     market                          24 quarters
                  ~25% of the     ~45% of the        Annual PTP
      Mandatum     Finnish life   premiums from     over EUR 120       21.4%
      Life         Insurance      private persons      million
                     market
                   The largest      10 million        Standard
      Nordea         financial      household        deviation of      17.4%
                 services group     customers         PTP ~21
                 in the Nordics                              2006
                                                    MEUR in 2006-
                                                      Q1/2010
27 May 2010                                                                        2
                  i h    k d       k      fi
                 High marked-to-market profits




              2006   2007   2008   2009   Q1/09   Q1/10


27 May 2010                                               3
                          l        h        ll i    high
              Net asset value per share at all-time hi h




27 May 2010                                                4
              Significant growth in earnings per share




27 May 2010                                              5
              Sampo Group's investment allocation
                               h
                       31 March 2010
                                      17.8
                            Total EUR 17 8 billion

                                   Hedge Funds
                                               Real Estate
                    Private Equity
                             q y       1%
                                                  1%
                         1%
                                           Money
                   Equity                  Market
                   16 %                    13 %




                                                             Bonds
                                                             68 %
                                                                                    plc,
                                                              Investments of Sampo plc
                                                              Mandatum Life and If P&C

27 May 2010                                                                                6
                     P&C insurance
Profit b f   taxes and MTM profit 200 –Q1/10, EUR
P fit before t       d         fit 2005 Q1/10 EURm




 27 May 2010                                    7
         bl     bi d i development i If P&C
      Stable combined ratio d l    in f




27 May 2010                                   8
             di      i       l d l i        /
      Extraordinary winter related claims Q1/2010




27 May 2010                                         9
                        Life insurance
   Profit b f   t       d           fit    Q /    EURm
   P fit before taxes and MTM profit 2005 –Q1/10, EUR




27 May 2010
                                                         10
        if               fi by
       Life Insurance profit b components, EURm
                                                                        Q1/2010                       Q1/2009
    Net investment income                                                  214.0                            50.0
       - Transferred to expense result                                        -3.9                          -2.2
       - Return on unit-linked policies                                   -140.4                            16.7
       - Return on with-profit policies*                                    -38.3                          -34.6
    INVESTMENT RESULT                                                        31.4
                                                                             31 4                           30.0
                                                                                                            30 0
    EXPENSE RESULT**                                                          -1.1                          -3.1
    RISK RESULT                                                                5.1                           3.6
    OTHERS                                                                     0.4                          -3.8
    PROFIT BEFORE TAXES                                                      35.8                           26.8
      Change in the market value of
    investments                                                            144.3                           -70.4

    PROFIT AT MARKET VALUES                                                180.0                           -43.7
                                    *Includes guaranteed interest, bonuses and change in the reserves of the above items
                                    **result of unit-linked business EURm -1,2

27 May 2010                                                                                                                11
             d      if               i        h
          Mandatum Life – Strong premium growth




27 May 2010
                                                  12
                      Development of Sampo Group’s
                              Nordea stake
 Millions of shares
 Milli     f h

     900         On 31 March 2010 Sampo plc held 818 million shares                                              19.8% 20.1%       20.3%
                 in Nordea, corresponding to a holding of 20.3 %.                                      18 2%
                                                                                                       18.2%




                                                                                                                                       0
                                                                                                                                   818,0
                                                                                                                           809,4
                                                                                                                   800,0
                 Average purchase price was €6.39 per share and the




                                                                                                         734,2
                 total investment EUR 5.2 billion.
     600
                                                                                              15.5%

                                                                                     12.2%




                                                                                                 2,4
                                                               10.3% 11.1%
                                                    9 6% 10.3%




                                                                                               402
                                                    9.6%
     300




                                                                                      318,4
                                           7.6%




                                                                             287,8
                                                             266,9


                                                                     266,9
                                                     249,6



                     1.7% 3.1%
                                             96,3




                                   3.7%
              0.4%
                                            19




                     43,9
                     43 9
                                    97,2
                            81,1




              11,2
        0




27 May 2010
                                                                                                                                           13
                  d ’         i      fi has low volatility
               Nordea’s operating profit h l      l ili

                          S    ’ h       f Nordea's   ti      fit
                          Sampo’s share of N d ' operating profit
EURm
                                             Standard deviation 20.6
250,0
                          215
                                196         198
200,0               189               181         189 194
              173                                           179 179 172                             178
                                                                              169 166 169
                                                                          158
150,0
150 0
                                                                                              120

100,0

 50,0

    ,
   0,0



                                                                       Sampo s
                                                                       Sampo’s Nordea shares, million
                                                                       Sampo plc      817.97
                                                                       Total Nordea 4,037.42
27 May 2010                                                                                               14
                   Outlook for th  t f
                   O tl k f the rest of 2010

           Sampo Group is expected to report a good result for 2010 with a
         • S       G     i        t dt           t        d  lt f    ith
           continuing good profitability of its insurance operations
           supported by the share of Nordea’s p
             pp        y                           profit.
         • If P&C is expected to reach its long-term combined ratio target
           of below 95 per cent in 2010 despite the difficult winter
           conditions in the first quarter of 2010. Profit is expected to
           remain on a very good level. The macro economic situation will
           continue to dampen the premium growth but has a limited impact
           on profitability.
         • Mandatum Life’s marked-to-market p o t is highly depe de t o
             a datu      e s a ed to a et profit s g y dependent on
           capital markets and is expected to remain good. Reported profit
           is foreseen to reach year 2009 level. The company seeks further
           growth          nit linked ol mes
           gro th in the unit-linked volumes.
27 May 2010
                                                                             15
Q1/2010 in Figures
 Capital Market Day, L d
 C it l M k t D      London
         27 May 2010
 Group CFO Peter Johansson
 G         P t J h
              Sampo Group profit before taxes
                                h
                  January-March 2010




                                                *) excl. Nordea
27 May 2010                                                       2
              Nordea’s book value on Sampo Group
                        lid d balance sheet
                  consolidated b l      h

    Nordea in Sampo’s B/S                                        EURm

   Acquisition price                                            5,225.8
   Share of Nordea’s net profit (EUR 643m)                        130.3
   Depreciation                                                    -8.3
   Deferred tax                                                     2.2
   Dividends                                                     -204.5
   Share of Nordea’s other comprehensive income (EUR 205m)         41.5
   Share of Nordea’s other changes in equity (EUR 53m)             11.2
   Share of Nordea’s goodwill change (EUR 70m)                    -14.2

   Total                                                        5,184.1

                                                         EUR 6.34/share
27 May 2010                                                               3
                    Sampo Group’s net asset value
                                  h
                          31 March 2010

     EURm
     10 000                                                              9,046
                                   Nordea at FV    813
                                                              -321
       8 000

       6 000                                      5,184
                                                  5 184
                                                                         9,046
       4 000
                                  882
       2 000
                    2,488
              0
                  P&C insur.   Life insur.        Nordea   Plc & elim.   Sampo
                                                                             p
                                                                         Group


27 May 2010                                                                      4
              Fair value reserve development
         by            d       l           h
         b segment and asset class, 31 March 2010


  EURm          Fixed     Equity     Derivatives       Deferred              FVR net
               income                 held for          taxes
                                      trading
  P&C            179.8      142.3                             -84.3               237.8
  insurance
  Life           164.2      252.5           9.7             -110.9                315.5
  insurance
  H ldi
  Holding          -0.1       -2.8                               0.8                 -2.2

  Sampo          344.5
                 344 5      370 4
                            370.4           9.7
                                            97               188.8
                                                            -188 8                535 7
                                                                                  535.7
  Group*)
                                           *) Eliminations included and figures after tax




27 May 2010                                                                                 5
                            l             h
              Sampo Group solvency 31 March 2010

                     6,977              Group solvency ratio        168%
        EURm
                                        Basel II                    181%

         6 000

                                3,968     3,645
                                           ,
         4 500                                                 Solvency capital
                                 50
                                            50                 Plc
                                                               Nordea
         3 000
                                3 212
                                3,212                          Life
                                          2,907
                                                               P&C
         1 500
                                 231       231
                                 668       668
              0
                  Group      Minimum    Minimum
                  Solvency               Basel II


27 May 2010                                                                       6
                  Group economic capital and solvency,
                                   h
                            31 March 2010
    EURm
                                                  If’s subloan not included in
                                                                                   7,565
                                                  adjusted group capital             97
     7 500                                                                           276
                                                  Liability side adjustments,
                                                  If and Mandatum Life               215


     6 000
                                                                                                 Excess capital
                                                                                                     3.5
                                                                                                 EUR 3 5 bn

     4 500                                     576
                                  2,311                                            6,977
                                                                                    ,
     3 000

                                                               4,024
                           996
     1 500
                   1,293
              0
                   P&C     Life
                           Lif    N d
                                  Nordea   Di
                                           Diversification
                                                 ifi ti       Group EC
                                                              G                   Adj G
                                                                                  Adj. Group
                                                                                 Solv. Capital

27 May 2010                                                                                                 7
              Fixed income allocation by sector
                                      h
                Sampo Group, 31 March 2010
                           Total     14 4 bn
                           T t l EUR 14.4 b

                                          Money Market
                                             15%
               Corporate
                 29%




                                                   Banks
                                                    22%




              Government
                 13%

                                 C     d Bonds
                                 Covered B d
                                     21%

27 May 2010                                                8
                                  P&C insurance
 Profit b f   taxes and MTM profit 2005 –Q1/10, EUR
 P fit before t       d        fit       Q /    EURm

                         Profit before taxes
                         MTM profit, Q1/09 and Q1/10 comprehensive result
      1 500




                                                            1,353
      1 200

         900
                  800


                         730




         600




                                                        4
                                                      644
                                          549
                                 534




         300




                                                                    144


                                                                               125
                                                                                      08
                                                                    1




                                                                                     30
                                                -19
                                                  9




                                                                          69
              0
                  2005   2006    2007     2008        2009          Q1/09 Q1/10
       -300
27 May 2010                                                                                9
                    Life insurance
   Profit b f   t       d        fit       Q /    EURm
   P fit before taxes and MTM profit 2005 –Q1/10, EUR




27 May 2010                                              10
                 Embedded Value f M d t    Life
                 E b dd d V l for Mandatum Lif


              EURm                               2009    2008

              Net Asset Value                     756     204

              PVFP of Mandatum Life               538     565

              Cost of capital                    -147    -150

              Value of in-force business (VIF)    391     415

              Embedded Value of Mandatum Life    1,147    619




27 May 2010                                                     11
                                            31.12.2009
                           Breakdown of VIF 31 12 2009

                                                                             Cost f
                                                                             C t of                                      VIF % of
      Mandatum Life                                                    PVFP solvency                  VIF       Reserves   res.
      Individual pension                                                  218             -41           178        2121      8,4 %
                 With-profit **
                 With     fit                                              89             -33
                                                                                           33            56        1474      3,8 %
                 Unit-linked                                              129              -8           121         646     18,8 %
      Group pension                                                        98             -82            16        2650      0,6 %
                 With-profit
                 With profit **                                            81             -78
                                                                                           78             3        2466      0,1
                                                                                                                             01%
                 Unit-linked                                               17              -4            13         183      7,3 %
      Individual life+capital redemption op.                              178             -16           162        1871      8,7 %
                 With-profit
                 With-profit*, **                                         147             -14           134         442     30,3
                                                                                                                            30 3 %
                 Unit-linked ***                                           31              -2            28        1429      2,0 %
      Group life and Assumed reinsurance                                   44              -8            35          30    116,2 %

      T t l
      Total                                                               538           -147
                                                                                         147            391        6671      5,9
                                                                                                                             59%
      * includes also individual risk policies
      ** PVFP includes the impact of supplementary reserves on VIF, respectively EUR 60, 8, 8 and 76 million.
          At 31.12.2008 the total impact was EUR 91 million.
          Includes Wealth
      *** I l d W l h M anagement



27 May 2010                                                                                                                         12
           l         i l      l         i for f
         Solvency capital & solvency ratio f If P&C
                                                                                 %
     EURm
                                                                                 100 %

    3 000
                            88%                                                  80 %
                                                                          83%
                                      74%                        77%
                     70%                        71%
    2 000                                              66%                       60 %

              54%
                                                                                 40 %
    1 000
                                                                                 20 %


          0                                                                      0%
              2003   2004   2005     2006       2007   2008      2009    Q1/10

                       Solvency capital (lhs)          Solvency ratio (rhs)


27 May 2010                                                                              13
          Solvency of M d t
          S l                  Life Group, EUR
                    f Mandatum Lif G       EURm

                                                        Q1/2010    2009
          Solvency capital
             Capital and reserves                          871      738
             Dividend payment                                0        0
             Subordinated capital                          100      100
             Unrealised gains                               16       15
             Deferred taxes from Fair Value Reserve        111       74
             Deferred taxes on profit brought forward       15       17
              Other items                                   -14     -14
              Total                                       1,099     930
          Technical provisions
             Technical provisions on own account
                       p                                   ,
                                                          7,113     ,
                                                                   6,786
             - 75% of t/p in unit linked insurance       -1,984   -1,769
             Total                                        5,129    5,017

          Solvency ratio % of technical reserves           21.4    18.5

27 May 2010
                                                                           14
    P&C developments


Torbjörn Magnusson, CEO of If P&C
– Performance update

– The Nordic P&C market

– Business initiatives




                          2
Extremely stable performance over time
              GWP (BnSEK)                               Technical result (BnSEK)

                                        41,3
                                  ,
                                39,0                       5,1      ,
                                                                   5,2     5,3       ,
                                                                                    5,2
   36,8    37,2       37 8
                      37,8                      4,8
                                                48




   2005    2006      2007       2008    2009    2005      2006    2007    2008     2009



                   Cost ratio                                Combined ratio

                                                                          91,8%    92,1%
                                                90,5%
                                                90 5%     89 9%
                                                          89,9%   90,6%
                                                                  90 6%

   24,3%   24,0%                        24,1%
                     23,7%      23,7%




   2005    2006      2007       2008    2009    2005      2006    2007    2008     2009
                                                                                           3
Highlights Q1 2010




 –   Strong marked-to-market result

 –   Financial performance well in line with
     long term targets


 –   Focus on business initiatives




                                               4
                                                                   EXAMPLE SWEDEN

Record winter in 2009/2010

                        Temperature               Consecutive days with snow cover

                    g
               Average          Latest as cold       g    period
                                                  Longest p                     g
                                                                   Latest as long or
               2009/10         or colder winter      2009/10        longer period


Lund           -1,7°C             1995/96            65 days           1981/82


Gothenburg     -3,2°C             1984/85            95 days           1969/70


Stockholm      -4,6°C             1986/87           105 days           1984/85


Luleå          -12,0°C            1993/94           145 days           2008/09




Source: SMHI
                                                                                       5
If total - Q1 result



     MSEK                    3M-10    3M-09    % change    2009
     GWP                     15 006   15 563     -3,6%    41 295
     Technical result           673    1 152    -41,5%     5 184
     Investment result        1 312    1 267     3,6%
                                                 3 6%      4 793
     Operating result         1 257    1 593    -21,1%     6 901
     Result for the period      929    1 191    -22,0%     5 201

     Risk ratio              74,8%    70,7%               68,0%
     Cost ratio              23,5%    23,5%               24,1%
     Combined ratio          98,2%    94,2%               92,1%

     RoE full tax            37,6%    14,1%               50,1%




                                                                   6
Results by Business Area
               Private                      Commercial

                            99,6%
       94,8%                                             97,6%
                 92,5%              95,6%
                                              92,6%




       3M-09     2009       3M-10


               Industrial                   Baltic & Russia


                                                         99,7%
                                                         99 7%

       92,8%                94,0%
                 90,7%                        91,7%
                                    89,1%




                                                                 7
Results by Country
               Sweden                    Norway

                                                   107,5%

       95,3%     95,2%   94,6%   99,6%

                                           92,0%




               Finland                   Denmark
                                                   110,2%

       90,0%
                 88,5%
                                           93,7%

                         82 7%
                         82,7%   85,6%
                                 85 6%



                                                            8
– Performance update

– The Nordic P&C market

– Business initiatives




                          9
        Market growth and profitability

                              GWP                                                 CAGR                 Average CoR
                              2009, Bn SEK                                        2004-2009            Leading P&C companies 2004-2009

                                                                                                115%

          Denmark *                          66                                        3,6
                                                                                                110%


                                                                                                105%

            Sweden                         58                                          0,8
                                                                                                100%


                                                                                                95%
             Norway                      50                                            4,0 **
                                                                                                90%


                                                                                                85%
             Finland                  36                                               2,4
                                                                                                80%
                                                                                                         2003    2004    2005   2006    2007     2008   2009

* GWP and CAGR based on figures for 2008                                                                        Sweden     Norway      Finland     Denmark
** Growth affected by previously not reporting companies added to statistics in 2009
Source: National insurance associations, company reports                                                                                                       10
Market shares by country

Norway (2009)                                                                         Finland (2009)
                                                                   GWP, MSEK
Gjensidige                        28%                                                     j
                                                                                      Pohjola           28%
If                                27%                                                 If                25%
                                                              If               41,3
TrygVesta                         17%                                                 Tapiola           19%
Sparebank 1                       10%                 TrygVesta                       Fennia            10%
                                                                       26,2


                                                RSA Scand (NWP)      19,9


                                                      Gje s d ge
                                                      Gjensidige     19 7
                                                                     19,7
                                                                                      Baltics (2009)
 Denmark (2008)
                                                                                      Codan            19%
 Tryg                               21%
                                                                                      If               14%
 Topdanmark                         18%                 Sweden
                                                        S eden (2009)                 BTA              14%
 Codan                              14%                 Länsförsäkringar      31%     Ergo             12%
 Alm. Brand                         10%                 If                    19%
 If                                  5%                    ygg
                                                        Trygg-Hansa           17%
                                                        Folksam               15%

Source: National insurance associations statistics
GWP, average exchange rates for 2009 applied
                                                                                                              11
Insurers seeking synergies
Nordic expansions and new entrants



                                                                                                                    Acquisitions 2009/10

                                                                                                                   TrygVesta/Moderna

                    Market Entry
                                                                                                                   Gjensidige/Nordicia
                   2009                   Entry through
                                          acquisition 2007                                                         Trygg-Hansa/Sveland
       P&C Private March 2008
                                                                                                                    p
                                                                                                                    Sparebank1/ Skandia
                                                                                                                    Lifeline Norway
                                         Commercial 2008

                                                                                                                   Marine portfolio
                                                                                                                    Codan / TrygVesta
                                                                                                                   Gjensidige / Nykredit
                                                              Brand change from Hansabanke 2008
                            Corporate                        Stated entry in Latvia during 2009
                           market 2008



                                                                  Acquisition 2006/2008 all Baltic countries
                                                                               2006/2008,
                                                                 Acquisition of Nordicia in 2009




                                                                                                                                            12
                                                                      Companies        Companies
                                                                      with more        with less than

Industry consolidation                                                than 10%         10%


       share,
Market share Percent



                  7
                                  14      17     19     17     17
                                                                      40          37




                 93
                                  86      83     81     83     83
                                                                      60          63




              2002             2008       2002   2008   2002   2008   2002        2008




Source: National insurance associations
                                                                                                        13
       Claims inflation and interest rate development

    Building cost index, change from last year, Dec                             Interest rate development


    10,0%


      8,0%


      6,0%


      4,0%


      2,0%


      0,0%
                  2004          2005         2006   2007       2008      2009
     -2,0%

                                    BCI Norway             BCI Finland
                                    BCI Sweden             BCI Denmark




Source: Official statistic agencies, Norges bank
                                                                                                            14
Finnish workers compensation


Salary index development                                                           Unemployment rate
Total gross salaries all industries, change to previous year
%
14                                                                                                            9,6%    9,3%
12                                                                                                     8 2%
                                                                                                       8,2%
10                                                                                    6,9%   6,4%
 8
 6
 4
 2
 0
      1999

             2000

                    2001

                           2002

                                  2003

                                         2004

                                                2005

                                                       2006

                                                              2007

                                                                     2008

                                                                            2009

-2
                                                                                      2007   2008      2009   2010e   2011e
-4
-6




 Source: Statistikcentralen Finland, Nordea Economic outlook May 2010                                                         15
      Car markets starting to recover
                             New car registrations*   New car registrations*
                             2009, YoY change         Jan-Mar 2010, YoY change



                   Sweden           -16%                      35 %




                   Norway             -11%                      57 %




                   Finland             -35%           -1 %




                   Denmark              -25%
                                         25%                 22 %


* Passenger cars
Source: ACEA
                                                                                 16
– Performance update

– The Nordic P&C market

– Business initiatives




                          17
Strategic focus areas


                        Selective
                         growth




        Customer                    Operational
         focus                      excellence



                                                  18
  Major business wins

                    2008 – S-Group in Finland                                        2009 – Volkswagen Group Sverige

    Insurance                                                               Market
    penetration                                                             share*

                                                                                                                                                     21,4%


                                                                                10,8%
                                                                                                     5,7%
                                                                                                                           3,7%
                                                                                                                                            1,0%

        6/2008        12/2008        12/2009
                                                                                  VW                  Audi                Skoda             SEAT     Total*




                            d    i    i S d
                  2009 – trade unions in Sweden                                            B i
                                                                                           Business i i i i     D     k
                                                                                                    initiatives Denmark
    Number of
    members                                                                    Insurance penetration of new cars sold

                                                                                                                                  Peugeot
                                                                                                                                  dealers
        1 600 000



                        500 000
                                        230 000      180 000   120 000
                                                                                                                                             10,3%            12,6%
                                                                                                                        6,8%
                                                                                                                           %
                                                                                            4,1%
           LO           Unionen     Lärarförbunden    SKTF      Sveriges
                                                               ingenjörer        2006                        2007                   2008              2009



*Total new car registrations, Sweden, 2009                                                                                                                            19
 Intensified efforts in used car market



Expansion into online partnerships                                 Split national passenger car park

                                                                   Model year, total market split, Norway, Q3
                                                                   2009

 “Marketing effort                                                 1999 or
      2010”              Used car warranty                          older
                         and Try-On offer for
                         car insurance

                                                                        to
                                                                   2000 t
                                                                    2004


                                                                   2005 or
                                                                    newer
Car insurance offer with Used car warranty and   Discounted car
exact quote to logged-in Try-On offer for car    insurance offer
members                  insurance
                                                                             0%    20 %      40 %      60 %




                                                                                                                20
   Continued expansion in personal risk and EB

               Growth in private personal risk
               Annual premiums, new products*


1 000                                                                                                                           Focus areas

  800    
                                                                                                                                – Partnerships
  600    
                                                                                                                                – Group
  400    
                                                                                                                                – New products
  200    

     ‐
                   2005             2006            2007            2008            2009




*The first new private personal lines products were launched in January 2005, including accident, child, disability and life.
                                                                                                                                                 21
 Business initiatives in Denmark




Car alliances        Internet      Personal




                                              22
Leading Nordic insurer on the internet
       g
Creating customer value in sales, service and claims




                                                           y
                                                       – Key focus area

                                                       – Integrated Nordic platform
                      ,
          Online sales,
                                                       – Early mover in leveraging
          service and claims
                                                         new technology




                                                                                      23
  Sales and service on internet


 Sold objects on If.xx                   Growth share of claims reported on internet
 indexed development, 2007 base year     Private, Motor & Property


160 %

                                                     96%
140 %
                                         78%

120 %
                                                                       40%   43%         45%

100 %                                                             26%            25%
                                                                                             22%
                                             15%          12%

80 %
          2007        2008        2009     Change Norway
                                         Sweden number of objects reported online 2009 vs. 2008, %
                                                              Finland Denmark               Total
                                           Share of total claims 2009, %




                                                                                                     24
If’s long term financial targets




               Return on Equity    Combined ratio

                   > 17,5 %            < 95 %




                                                    25
Relax, we'll help you.




                         26
Solvency II and Reserve Discounting


     Torbjörn Magnusson, CEO of If P&C
– Solvency II

– Reserve discounting




                        2
                                                Solvency II

                  Pillar 1:                         Pillar 2:                           Pillar 3:

              Quantitative capital          Qualitative requirements             Disclosure requirements
                 requirements                  Supervisory Review             Public information
        Technical provisions            Principles for internal control,
                                                                              Transparency
        Minimum capital requirement      risk management and corporate
                                          gov.                                Regulatory reporting
         (MCR)
                                         Supervisory review process SRP      IFRS, IAIS, EU-legislation
        Solvency Capital Requirement
         (SCR)                           Own risk and solvency
        Investment rules                 assessment ORSA

                                            New focus for supervisors            More pressure from capital
          Market-consistent valuation                                                    markets
                                         Maximum level of harmonisation
          Validation f i t   l   d l
          V lid ti of internal models                                                          from rating
                                                                                 More pressure f
                                                     ‘Use test’                          agencies


If Internal preparation
       Working with consistent             Continuous process                 Relevant information to
        improvements of If's internal        with internal policies              shareholders, financial
        model                                and procedures                      information to investors,
       Participation in Quantitative                                            analysts and brokers
        Impact Studies
       Improve data quality
                                                                                                              3
 Solvency II regulatory timeline
                                                                                                 CEIOPS’ final
                                                                                                 Level 3 Guidelines
                       CEIOPS’ Advice on                  COM adoption of                        (Dec 2011 Draft March 2011)
                       Level 2 Implementing               Level 2 Implementing   EIOPC’
                       Measures to COM                    Measures               final opinion
                       (Oct and Jan 2010)                 (Dec 2010)             on L     l
                                                                                     Level 2
                                                                                                                   Solvency II
    Level 1                                                                      (Oct 2011)
                                                                                                                   full implementation
    Directive Adopted
                                                                                                                   (31 October 2012)
    (June 2009)




                2009                          2010                         2011                                 2012


                                                QIS 5
                                                (1 Aug - 31 Oct 2010)
                                                (Groups 15 Nov 2010)     QIS 5 final report
                                                                         (April 2011)




QIS = Quantitative Impact Study
EIOPC = COM: finance ministers


                                                                                                                                         4
Current issues in the Solvency II programme




                                                  Data and
Own funds – treatment   Calculation of group
                                               Documentation
 of security reserves        solvency
                                                requirements




   Internal model –
                             Reporting
   requirements for                              Timelines
                           requirements
                               i      t
       approval




                                                               5
Solvency capital in If P&C

mEUR

4 000                                                                                         100%
                                                                               83%            90%     Minimum requirement
             74%                                               77%
                              71%                                                             80%      capital ratio expected to
3 000                                         66%                                             70%      increased in Solvency II
                                                                                              60%      compared SI
2 000                                                                                         50%
                                                                                              40%

1 000
                                                                                              30%     H           ti is
                                                                                                       However rating i
                                                                                              20%      expected to continued be
                                                                                              10%      the predominant driving
   0                                                                                          0%       factor on capitalization
              2006            2007            2008             2009           3M-10

                        Solvency Capital                     Solvency Ratio



        Calculation solvency ratio: Shareholder's Equity including unrealized gains/losses on
        investment assets minus deferred tax asset plus deferred tax liability and subordinated
        loans, in relation to Net Written Premiums (rolling 12)

                                                                                                                                   6
– Solvency II

– Reserve discounting




                        7
Total technical reserves in If

           Net technical reserves
           31 Dec 2009 SEK 83bn


          Discounted reserves,           Unearned premium reserve,
          SEK 19bn                       SEK 17bn




                                               ,
                    Undiscounted claims reserve,
                    SEK 47bn




                                                                     8
Tail data

            Average duration of technical provisions
            Years, Dec 2009

        12


        10


            8
                                                         Weighted average duration: 5.4 years
            6


            4


            2


            0
                 Motor      Workers'     Liability       Accident      Property       Cargo
                          Compensation


                            Sweden   Norway    Finland    Denmark

                                                                                                9
Discounting effects on balance sheet

      Balance sheet                    Balance sheet with discounted
                                       technical reserves




     Assets        Liabilities
                   Li biliti              Assets         Liabilities


                                                           q y
                                                          Equity
                      Equity

  Discounting effects on balance sheet

       Increased reported equity in the Balance sheet
       Regulatory solvency ratio remains unchanged



                                                                       10
Interest rate sensitivity and combined ratio discount effect


   Quarterly weighted average        Discount effect on C/R
   discount rate, Percent            Percentage points


   6.0%
   5.0%
                                            44
                                            4,4
   4.0%                                                       3,5
   3.0%
   2.0%
   1 0%
   1.0%
   0.0%
           Q1     Q2    Q3      Q4         2008               2009
                2008   2009




                                                                     11
Comparing If to TrygVesta


  2008                      2009
           ratio
  Combined ratio, net                ratio
                            Combined ratio, net




                                                  12
Discounting of reserves
                   Today, If P&C does not practice discounted reserves as accounting standard (with
                    the exception of annuities)

 Summary           Continuous trend towards current value reportings (accounting standards  IAS,
                                                                   g (          g
                    IFRS )

                   Changed definition and standpoint of the regulatory capital requirements of each
                    company (Regulatory standpoint  Solvency II)



                   Internal preparation work for adoption to both new IFRS and SII standards ongoing

                   Reported equity in the B/S increases, regulatory solvency ratio remains unchanged
 Effect on If
                                                                          3,5% points
                    Discounting effect on If C/R is estimated to be around 3 5%-points in 2009

                   Sensitivity to change in discount rate on combined ratio is approximately 1%-point




                                                                                                         13
        Large claims



Torbjörn Magnusson, CEO of If P&C
2
3
4
Insurance result volatility affected by large claims

    Quarterly combined ratio standard deviation       
           BA Industrial and  BA Private
           BA Industrial and BA Private                  Commercial and Industrial area
                                                         • occur stochastically,
                                                         • often takes time settle,
                                                         • significant impact on result
                                                            volatility


                                                         Private area
                                                         • occur more seasonal,
                                                         • easier to fast and more
                                                             accurate assess,
                                                         • less significant impact relative
               BA Private        BA Industrial               to Corporate lines




                                                                                              5
Large claims reserves - Industrial




                                         CAR           Large claims constitute ≈ 40%-
                                         IBNR          45% of total reserves in
                                         Case          Industrial
                                         Premium res




Large claims reserves   Total reserves




                                                                                        6
Large claims affect run-off results
- Illustrative example Industrial business area


Claims cost development ‐ actual claim
             c/y                      p/y effect
                                                                                    Example

                                                                                    Actual claims cost
                                                                                       d d
                                                                                    ended 8% l        than
                                                                                                lower th
                                                                Payments            reflected in claims
                                                                Reported incurred   cost c/y 2006 resulting
                                                                                    in a run-off ga
                                                                                          u o gain
                                                                                    corresponding to 8%
                                                                                    of original claims cost
        01




                           01




                                        01




                                                           01
2006‐01‐0




                   2007‐01‐0




                                2008‐01‐0




                                                   2009‐01‐0
Normalised large claims costs

  Estimated large losses per LoB                      Large claims development

                                                      −   Historical data
                                          Property
                                          Liability   −   Inflation adjustment
                                          Cargo
                                          EB          −   Mean and frequency development
                                          Motor

                                                      −   Portfolio management; rate
                                                          development, changes in exposure
                                                          and portfolio mix
                                                              p


 Normalised large claim cost per month,
 roughly SEK 200m


                                                                                           8
     Country diversification effect

                                 No. of countries where large claims result is 
                                        better/worse than normalised
4

3                                                                                                                                                                                                                  Not in any single
                                                                                                                                                                                                                   quarter during the five
2
                                                                                                                                                                                                                   year period 2005-2009,
1                                                                                                                                                                                                                  have all countries
0
                                                                                                                                                                                          Better than normalised   simultaneously shown
                                                                                                                                                                                          Worse than normalised
                                                                                                                                                                                          Worse than normalised    better or worse than
‐1
                                                                                                                                                                                                                   normalised large claims
‐2

 3
‐3

‐4
      200 Q1
               200 Q2
                        200 Q3
                                 200 Q4
                                          200 Q1
                                                   200 Q2
                                                            200 Q3
                                                                     200 Q4
                                                                              200 Q1
                                                                                       200 Q2
                                                                                                200 Q3
                                                                                                         200 Q4
                                                                                                                  200 Q1
                                                                                                                           200 Q2
                                                                                                                                    200 Q3
                                                                                                                                             200 Q4
                                                                                                                                                      200 Q1
                                                                                                                                                               200 Q2
                                                                                                                                                                        200 Q3
                                                                                                                                                                                 200 Q4
        05 ‐
                 05 ‐
                          05 ‐
                                   05 ‐
                                            06 ‐
                                                     06 ‐
                                                              06 ‐
                                                                       06 ‐
                                                                                07 ‐
                                                                                         07 ‐
                                                                                                  07 ‐
                                                                                                           07 ‐
                                                                                                                    08 ‐
                                                                                                                             08 ‐
                                                                                                                                      08 ‐
                                                                                                                                               08 ‐
                                                                                                                                                        09 ‐
                                                                                                                                                                 09 ‐
                                                                                                                                                                          09 ‐
                                                                                                                                                                                   09 ‐




                                                                                                                                                                                                                                             9
Reinsurance

 − Nordic wide reinsurance programme since 2003 largely unchanged

 − Reinsurance coverage and retention levels optimizing risk, capital
   requirement and cost

 − If core treaties carry retention levels (2009) between SEK 100m and
   200m and SEK 200m per event

 − Facultative reinsurance used on individual risk or to provide capacity
                            y          y    g
   above what is provided by core treaty programs




                                                                            10
Summary - large claims in P&C insurance

 ─ Large claims affect the volatility in results short-term significantly (both
   related to current and prior years)

 ─ Normalised, If expects roughly SEK 200m each month

 ─ Long-term, large claims cost follows rate development, exposure and
   portfolio mix

 ─ Reinsurance protects against excess losses




                                                                                  11
   Closing Remarks
     Capital Market Day, L d
     C it l M k t D      London
             27 May 2010

Chairman of the Board Björn Wahlroos
       Government d bt and d fi it / GDP in 2009,%
       G        t debt d deficit         i     9%
140                    -0.5                                                                                                                                          0
                                 -2.2
         -2.7                                                                                                                                                        -2
120                                                                           -3.4                -3.3

                                                     -5.3                                                                                               -5.3         -4
100                                                                                                                                -6.0
                                                                                                                                   -6 0
                                                                                                                         -7.5                                        -6
 80
                                                                                                             -9.4                                                    -8
 60                                         -11.2
                                            -11 2
                                                                                         -11.5                                                                       -10
                                                                                                                                                                      10
 40
                                                                                                                                              -13.6
                                                                                                                                                                     -12
                                                                    -14.3




                                                                                                                                                 5,1


                                                                                                                                                           5,8
 20                                                                                                                                                                  -14
               ,6


                          ,3




                                               ,2


                                                        ,9




                                                                                 ,5


                                                                                            ,1


                                                                                                     ,2


                                                                                                                ,8


                                                                                                                            ,6


                                                                                                                                      ,7


                                                                                                                                               115


                                                                                                                                                         115
             41,


                        42,




                                             53,


                                                      60,




                                                                               66,


                                                                                          68,


                                                                                                   73,


                                                                                                              76,


                                                                                                                          77,


                                                                                                                                    96,
                                  44




                                                                     64
   0                                                                                                                                                                 -16
                mark

                          eden




                                                                               Austria




                                                                                                                            ance




                                                                                                                                                 eece
                                                                    Ireland




                                                                                          UK




                                                                                                                 tugal




                                                                                                                                       gium
                                  Finland

                                             Spain




                                                                                                      many




                                                                                                                                                         Italy
                                                             ands
             Denm




                                                                                                                                    Belg
                                                                                                   Germ




                                                                                                                          Fra




                                                                                                                                               Gre
                                                      Netherla
                        Swe




                                                                                                              Port
                             Government debt, % of GDP, lhs
                             G        t d bt     f GDP lh                                        G        t d fi it     f GDP h
                                                                                                 Government deficit, % of GDP, rhs
Source:IMF
                                                                                                                                                                 2
27 May 2010
 Country experiences with l
 C   t        i                 fiscal dj t   t
                      ith large fi l adjustments
              25   Of which revenue increase                                           16
                   Of which Primary Expenditure Reduction                              14
              20   Length (years)
                                                                                       12

              15                                                                       10




                                                                                           Years
                                                                                       8




                                                                                           Y
              10                                                                       6

                                                                                       4
              5
                                                                                       2

              0                                                                        0




                                                            Source: Nordea Economic Outlook May 2010, IMF
27 May 2010                                                                                         3
    Consolidated foreign claims of European banks
                         by
         PIIGS exposure b country, USD b  bn
 1000                                              Portugal USD 242bn
                                                   Portugal,                               Ireland,
                                                                                           Ireland USD 607 bn
   900                          859
                                                   Italy, USD,1,064 bn                     Greece, USD 272 bn
                                                   Spain, USD 852 bn
   800
                                         733                                                                 Portugal       05
                                                                                                                            0.5
   700                                                                                                       Ireland        1.2
                                                                                                             Italy          2.2
   600
                                                                                                             Greece         0.6
   500                                                                                                 433   Spain          25
                                                                                                                            2.5

   400
   300                                                                          257

   200                 162                                                                 154   144
                                                            95
   100        48
                                                                     71               51
                                                  1.0
                                                                                                             7
      0




      Source: SG 10.5.2010, BIS March 2010, data for Q3/2009, Finland Q1/2010

27 May 2010                                                                                                             4
              World S&P 1200 Bank and Insurance
                              pre-Lehman
               Market Caps at pre Lehman levels
                               3500                                                              3500


                               3000                                                              3000
                                        S&P 1200
                                        World Banks
                                        World,
                               2500                                                              2500
                          s)




                               2000                                                              2000
              USD (billions




                                                                                                         billions
                               1500                                                              1500
                                       S&P 1200
                                       World, I
                                       W ld Insurance
                               1000                                                              1000


                                500                                                               500


                                  0                                                                  0
                                      2003   2004   2005   2006   2007   2008   2009    2010

                                                                                   Source: Reuters EcoWin

27 May 2010                                                                                                         5
               The path of mistrust on counterparties
                      3-month TED spreads at pre-Lehman levels*
                            Bear Stearns        Lehman Brothers           Greece in crisis
                      500   h d f d
                            hedge funds        files for Chapter
                                               fil f Ch t 11                                        500
                              collapse        bankruptcy protection
                      450                                                                           450
                                                          USA
                      400                                                                           400

                      350                                                                           350

                      300                                                                           300
                bsp




                      250                                                                           250

                      200                                                                           200

                      150                                                                           150

                      100                                                                           100
                                                                         Euro
                       50                                                area                        50

                       0                                                                               0
                               2007               2008            2009            2010
              * LIBOR/EURIBOR rates less TB                                        Source: Reuters EcoWin


27 May 2010                                                                                                 6
         10 Year Government Bond yield spreads
                    i à i Germany
                   vis-à-vis G
                     Basis points
              1000                                                      1000

              900                                                         900

              800                                                         800

              700                                                         700

              600                                                         600

              500                                                         500
                                                   Greece
              400                                                         400

              300                                                         300
                                                   Ireland
              200                                  Portugal               200
                                                   Spain
              100                                  Italy                  100
                                                   Great Britain
                                                   France
                0                                  Finland                   0

              -100                                                      -100
                                    2008   2009   2010

                                                         Source: Reuters EcoWin
27 May 2010                                                                       7
                                                       s
                                                   bps spread




27 May 2010
                                                     0
                                                   100
                                                   200
                                                   300
                                                   400
                                                   500
                                                   600
                                                   700
                                                   800
                                                   900
                                                  1000
                                                  1100
                                                  1200
                                                  1300
                                        May-07    1400
                                        Jun-07
                                         Jul-07
                                        Aug-07
                                        Sep-07
                                                                It



                                        Oct-07
                                        Nov-07
                                        Dec-07
                                        Jan-08
                                        Feb-08
                                        Mar-08
                                                                Itraxx E




                                        Apr-08
                                        May-08
                                        Jun-08




              iTRAXX Europe Crossover
                                         Jul-08
                                        Aug-08
                                        Sep-08
                                        Oct-08
                                        Nov-08
                                        Dec-08
                                        Jan-09
                                        Feb-09
                                        Mar-09
              iTRAXX Europe             Apr-09
                                        May-09
                                        Jun-09
                                         Jul-09
                                        Aug-09
                                        Sep-09
                                        Oct-09
                                                                                           d
                                                                       Europe 5 y CDS spread




                                        Nov-09
                                        Dec-09
                                        Jan-10
                                        Feb-10
                                        Mar-10
                                        Apr-10
              iTRAXX Europe HiVol




                                        May-10
                                        Jun-10
8
                                         i     its lid
                                 EUR continues i slide
                    1.1.2007=100, log.scale
                    1 1 2007 100 l       l
              132                                                                    132
                                                         EUR/SEK
              126                                                                    126
                                              EUR/USD
              120                                                                    120
              114                                                                    114
              109                                                                    109
              103                                                                    103
              98                                                                      98
              94                                                                      94
                                               EUR/JPY
              89                                                                      89
              85                                                                      85
              81                                                                      81
              77                                                                      77
              74                                                                      74
              70                                                                      70
                            2007                 2008      2009    2010

                                                                    Source: Reuters EcoWin


27 May 2010                                                                                  9
   Closing Remarks
     Capital Market Day, L d
     C it l M k t D      London
             27 May 2010

Chairman of the Board Björn Wahlroos

								
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