Equity and Spread Risks

Most of Sampo Group’s investments in fixed income securities and listed equities are tradable and hence subject to daily mark-to-market valuation. Moreover, Sampo Group has also some illiquid investments – loan instruments and private equity – for which market prices are not frequently available, but whose fair values  can change adversely when the financial strength or future prospects of the issuer deteriorates or the value of collaterals decreases.

Exposures in Fixed Income and Equity Instruments

Exposures in fixed income and equity instruments are shown in the tables Exposures by Sectors, Asset Classes and Rating, If P&C, Mandatum Life and Sampo Group, 31 December 2016. The tables also include counterparty risk exposures relating to reinsurance and derivative transactions. Counterparty default risks are described in more detail in section Counterparty Default Risks. Due to differences in the reporting treatment of derivatives, the figures in the table are not fully comparable with other tables in this annual report.

Exposures by Sectors, Asset Classes and Rating If P&C, 31 December 2016
EURm AAA AA+
- AA-		 A+
- A-		 BBB+
- BBB-		 BB+
- C		 D Non-
rated		 Fixed
income
total		 Listed
equities		 Other Counter-
party
risk		 Total Change
31 Dec 2015
Basic Industry 0 0 20 38 26 0 37 120 40 0 0 160 11
Capital Goods 0 23 64 48 0 0 21 156 541 0 0 698 100
Consumer Products 0 126 176 184 33 0 64 582 386 0 0 968 206
Energy 0 45 96 0 41 0 231 413 9 0 0 421 86
Financial Institutions 0 1,234 1,371 380 55 0 38 3,078 35 0 1 3,114 -268
Governments 123 0 0 0 0 0 0 123 0 0 0 123 -19
Government Guaranteed 78 78 0 0 0 0 0 156 0 0 0 156 -2
Health Care 7 0 42 30 0 0 8 86 57 0 0 143 52
Insurance 0 0 41 61 4 0 5 111 0 0 106 217 30
Media 0 0 2 0 0 0 33 35 0 0 0 35 14
Packaging 0 0 0 0 0 0 6 6 0 0 0 6 0
Public Sector, Other 781 171 0 0 0 0 0 952 0 0 0 952 -127
Real Estate 0 6 58 32 0 0 485 581 0 22 0 603 110
Services 0 0 0 67 101 0 21 189 0 0 0 189 73
Technology and Electronics 0 38 21 0 0 0 38 97 7 0 0 104 40
Telecommunications 0 0 80 27 0 0 42 149 62 0 0 211 18
Transportation 0 107 51 55 11 0 144 368 11 0 0 379 73
Utilities 0 0 0 327 51 0 62 441 0 0 0 441 87
Others 0 15 0 0 0 0 0 15 0 1 0 17 14
Asset-backed Securities 0 0 0 0 0 0 0 0 0 0 0 0 0
Covered Bonds 2,873 94 0 0 0 0 0 2,967 0 0 0 2,967 315
Funds 0 0 0 0 0 0 0 0 380 22 0 402 -21
Clearing House 0 0 0 0 0 0 0 0 0 0 0 0 0
Total 3,861 1,938 2,022 1,249 322 0 1,234 10,625 1,526 44 108 12,303 792
Change 31 Dec 2015 153 -302 370 457 41 0 53 772 28 -2 -5 792

Exposures by Sectors, Asset Classes and Rating Mandatum Life, 31 December 2016
EURm AAA AA+
- AA-		 A+
- A-		 BBB+
- BBB-		 BB+
- C		 D Non-
rated		 Fixed
income
total		 Listed
equities		 Other Counter-
party
risk		 Total Change
31 Dec 2015
Basic Industry 0 0 0 2 81 0 35 118 151 0 0 269 -43
Capital Goods 0 10 39 7 5 0 69 129 143 0 0 272 -34
Consumer Products 0 49 135 87 46 0 10 327 258 0 0 584 8
Energy 0 33 19 0 14 0 8 74 6 0 0 80 -35
Financial Institutions 0 682 962 316 51 0 0 2,012 27 1 22 2,062 161
Governments 18 0 0 0 0 0 0 18 0 0 0 18 -12
Government Guaranteed 0 0 0 0 0 0 0 0 0 0 0 0 0
Health Care 0 15 24 4 45 0 51 139 50 0 0 189 -19
Insurance 0 0 1 49 0 0 6 56 3 20 0 78 24
Media 0 0 9 0 12 0 21 42 0 0 0 42 -17
Packaging 0 0 0 0 61 0 7 68 1 0 0 68 -17
Public Sector, Other 0 27 44 0 0 0 0 70 0 0 0 70 2
Real Estate 0 0 0 26 0 0 55 81 0 230 0 311 -16
Services 0 0 0 26 66 0 58 151 80 0 0 231 1
Technology and Electronics 4 6 15 30 7 0 20 81 151 0 0 232 47
Telecommunications 0 0 7 16 40 0 16 79 29 0 0 108 13
Transportation 0 0 0 2 12 0 5 20 24 0 0 44 9
Utilities 0 2 1 140 23 0 0 166 0 0 0 166 2
Others 0 0 0 0 19 0 2 21 0 58 0 79 -3
Asset-backed Securities 0 0 0 0 0 0 0 0 0 0 0 0 0
Covered Bonds 154 12 0 11 0 0 0 178 0 0 0 178 -20
Funds 0 0 0 0 0 0 108 108 816 598 0 1,521 -117
Clearing House 0 0 0 0 0 0 0 0 0 0 5 5 5
Total 177 836 1,256 716 483 0 471 3,938 1,737 907 27 6,609 -61
Change 31 Dec 2015 -31 103 56 187 -319 0 -3 -7 5 -85 25 -61

Exposures by Sectors, Asset Classes and Rating Sampo Group, 31 December 2016
EURm AAA AA+
- AA-		 A+
- A-		 BBB+
- BBB-		 BB+
- C		 D Non-
rated		 Fixed
income
total		 Listed
equities		 Other Counter-
party
risk		 Total Change
31 Dec 2015
Basic Industry 0 0 20 40 107 0 72 239 191 0 0 429 -32
Capital Goods 0 32 103 55 5 0 90 285 685 0 0 970 57
Consumer Products 0 176 311 271 78 0 74 909 643 0 0 1,553 214
Energy 0 78 115 0 55 0 239 487 15 0 0 502 51
Financial Institutions 0 3,128 2,561 959 106 0 38 6,793 98 1 24 6,917 508
Governments 141 0 0 0 0 0 0 141 0 0 0 141 -30
Government Guaranteed 78 78 0 0 0 0 0 156 0 0 0 156 -2
Health Care 7 15 66 34 45 0 59 225 107 0 0 438 35
Insurance 0 0 42 110 4 0 100 256 3 37 106 295 54
Media 0 0 11 0 12 0 54 77 0 0 0 77 -2
Packaging 0 0 0 0 61 0 12 73 1 0 0 74 -17
Public Sector, Other 781 198 44 0 0 0 0 1,022 0 0 0 1,022 -124
Real Estate 0 6 58 58 0 0 541 663 0 253 0 916 94
Services 0 0 0 93 168 0 79 340 109 0 0 449 81
Technology and Electronics 4 44 36 30 7 0 58 178 158 0 0 336 87
Telecommunications 0 0 87 43 40 0 58 228 90 0 0 318 31
Transportation 0 107 51 57 23 0 169 407 35 0 0 442 90
Utilities 0 2 1 467 75 0 62 607 0 0 0 607 88
Others 0 15 0 0 19 0 2 36 0 59 0 96 11
Asset-backed Securities 0 0 0 0 0 0 0 0 0 0 0 0 0
Covered Bonds 3,027 107 0 11 0 0 0 3,145 0 0 0 3,145 295
Funds 0 0 0 0 0 0 108 108 1,217 622 0 1,946 -118
Clearing House 0 0 0 0 0 0 0 0 0 0 5 5 5
Total 4,038 3,986 3,505 2,228 805 0 1,813 16,375 3,351 973 135 20,833 1,375
Change 31 Dec 2015 122 687 240 699 -277 0 55 1,526 -80 -88 16 1,375

The largest holdings are in financial institutions and covered bonds. Most of these investments are in the Nordic countries as can be seen in the table Fixed Income Investments in Financial Sector, Sampo Group, 31 December 2016. These exposures increased by EUR 965 million during 2016.

Fixed Income Investments in Financial Sector Sampo Group, 31 December 2016
EURm Covered bonds Cash and money market securities Long-term senior debt Long-term subordinated debt Total %
Sweden 1,998 352 798 458 3,606 36.3%
Finland 132 2,207 251 6 2,596 26.1%
Norway 651 396 224 1,272 12.8%
Denmark 207 7 312 71 597 6.0%
United States 5 356 361 3.6%
United Kingdom 12 282 24 2 321 3.2%
France 22 194 62 14 292 2.9%
Canada 72 142 214 2.2%
Netherlands 0 201 201 2.0%
Switzerland 178 11 189 1.9%
Iceland 91 91 0.9%
Germany 19 6 52 0 78 0.8%
Australia 19 28 48 0.5%
Guernsey 28 28 0.3%
Estonia 23 23 0.2%
Luxembourg 11 11 0.1%
Cayman Islands 7 7 0.1%
Italy 5 5 0.1%
Latvia 0 0 0.0%
Total 3,145 3,083 2,924 786 9,938 100.0%

The public sector exposure includes government bonds, government guaranteed bonds and other public sector investments as shown in the table Fixed Income Investments in Public Sector, Sampo Group, 31 December 2016. The public sector has had a relatively minor role in Sampo Group’s portfolios and these exposures have been mainly in the Nordic countries.

Fixed Income Investments in Public Sector Sampo Group, 31 December 2016
EURm Governments Government guaranteed Public sector,
other		 Total market
value
Sweden 100 679 779
Norway 250 250
Finland 78 75 153
Germany 67 67
United States 41 41
Japan 19 19
Denmark 11 11
Total 141 156 1,022 1,319

The exposures in non-investment grade fixed income instruments are significant, because a relatively small number of Nordic companies are rated; further, of rated companies many have a rating lower than triple-B (high yield). The largest high-yield and non-rated fixed income investment exposures are presented in the table Ten Largest Direct High Yield and Non-rated Fixed Income Investments, Sampo Group, 31 December 2016.

Ten Largest Direct High Yield and Non-Rated Fixed Income Investments Sampo Group, 31 December 2016
Largest direct high yield and non-rated fixed income investments Rating Total fair value, EURm % of total direct fixed income investments
High Street Shopping NR 127 0.8%
Teollisuuden Voima BB+ 125 0.8%
Topdanmark NR 89 0.5%
Eksportfinans BB- 60 0.4%
IVG Polar NR 57 0.4%
Sponda NR 53 0.3%
Nassa Midco B 50 0.3%
Storebrand BB+ 49 0.3%
Aker NR 46 0.3%
YIT NR 45 0.3%
Total top 10 exposures 702 4.3%
Other direct fixed income investments 15,565 95.7%
Total direct fixed income investments 16,267 100.0%

The listed equity investments of Sampo Group totaled EUR 3,352 million (3,431) at the end of year 2016. At the end of year 2016, the listed equity exposure of If P&C was EUR 1,527 million (1,498). The proportion of listed equities in If P&C’s investment portfolio was 12.5 per cent. In Mandatum Life, the listed equity exposure was EUR 1,737 million (1,732) at the end of year 2016 and the proportion of listed equities was 26.4 per cent of the investment portfolio.

A breakdown of the listed equity exposures of Sampo Group by geographical regions is shown in the figure Breakdown of Listed Equity Investments by Geographical Regions, Sampo Group, If P&C and Mandatum Life, 31 December 2016.

Breakdown of Listed Equity Investments by Geographical Regions Sampo Group, 31 December 2016, total EUR 3,352 million
Breakdown of Listed Equity Investments by Geographical Regions If P&C, 31 December 2016, total EUR 1,527 million
Breakdown of Listed Equity Investments by Geographical Regions Mandatum Life, 31 December 2016, total EUR 1,737 million

The geographical core of Sampo Group’s equity investments is in the Nordic companies. The proportion of Nordic companies’ equities corresponds to 55 per cent of the total equity portfolio. This is in line with Sampo Group’s investment strategy of focusing on Nordic companies. Moreover, Group’s insurance liabilities are mostly denominated in euro or the Nordic currencies. In the long run the proportion of investments outside of the Nordic countries has gradually increased, because the amount of companies issuing securities in the Nordic countries is limited and from a strategic point of view other geographical areas have recently provided interesting investment opportunities.

The sector allocation of direct listed equity investments in Sampo Group is presented in the tables Exposures by Sectors, Asset Classes and Rating, If P&C, Mandatum Life and Sampo Group, 31 December 2016. The largest allocations are to capital goods, consumer products and basic industry. Listed equity investments made through mutual funds and ETF investments accounted for 36.3 per cent of the entire equity portfolio.

Furthermore, the largest direct listed equity exposures are presented in the table Ten Largest Direct Listed Equity Investments, Sampo Group, 31 December 2016.

Ten Largest Direct Listed Equity Investments Sampo Group, 31 December 2016
Top 10 listed equity investments Total fair value, EURm % of total direct equity investments
Nobia 157 7.4%
Veidekke 127 5.9%
Volvo 110 5.1%
Amer Sports 96 4.5%
Hennes & Mauritz 94 4.4%
ABB 89 4.1%
UPM-Kymmene 86 4.0%
Sandvik 65 3.0%
TeliaSonera 62 2.9%
Husqvarna 60 2.8%
Total top 10 exposures 946 44.3%
Other direct equity investments 1,190 55.7%
Total direct equity investments 2,136 100.0%

In addition, Sampo Group’s largest listed equity holdings are disclosed in the Notes to the Financial Statements (Note 41).

The largest exposures by individual issuers and counterparties are presented in the table Largest Exposures by Issuer and by Asset Class, Sampo Group, 31 December 2016.

Largest Exposures by Issuer and Asset Class Sampo Group, 31 December 2016
EURm
Counterparty		 Total fair value % of total investment assets Cash & short-term fixed income Long-term
fixed
income, total		 Long-term
fixed
income:
Government guaranteed		 Long-term
fixed
income:
Covered bonds		 Long-term
fixed
income:
Senior bonds		 Long-term
fixed
income:
Tier 1 and
Tier 2		 Equities Uncollateralized
derivatives
Nordea Bank 2,307 11% 1,214 1,081 0 652 109 320 0 12
Danske Bank 1,060 5% 645 405 0 101 255 49 0 9
Skandinaviska Enskilda Banken 1,021 5% 553 466 0 235 159 72 0 2
Svenska Handelsbanken 872 4% 150 721 0 620 86 15 0 0
DnB 599 3% 0 599 0 252 234 114 0 0
Sweden 557 3% 0 557 0 0 557 0 0 0
BNP Paribas 549 3% 477 72 0 0 62 10 0 0
Swedbank 520 3% 1 518 0 295 211 13 0 0
Norway 411 2% 44 367 0 0 257 110 0 0
Landshypotek 216 1% 0 216 0 194 0 22 0 0
Total Top 10 Exposures 8,110 39% 3,085 5,002 0 2,348 1,930 724 0 23
Other 12,617 61%
Total investment assets 20,727 100%