Annual Report 2008
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Annual Report 2008
Contents
White Mountains Insurance Group
Comments from the President and CEO
Board of Directors’ Report
Income Statement - Group
Balance Sheet - Group
Change in shareholders’ equity - Group
Cash flow Statement - Group
Income Statement – Parent Company
Balance Sheet - Parent Company
Change in shareholders’ equity – Parent Company
Cash flow Statement – Parent Company
Performance analysis – Parent Company
Note 1 Accounting Principles
Note 2 Information on risks
Note 3 Premium income
Note 4 Claims incurred for own account
Note 5 Operating costs
Note 6 Investment income
Note 7 Unrealised gains on investment
Note 8 Investment expenses and charges
Note 9 Unrealised losses on investments
Note 10 Net profit or net loss per category
of financial instrument
Note 11 Taxes
Note 12 Intangible assets
Note 13 Land and buildings
Note 14 Shares and participations in group companies
Note 15 Shares and participations in associated companies
Note 16 Investment in shares and participations
Note 17 Bonds and other interest-bearing securirites
Note 18 Other financial assets
Note 19 Debtors arising out of direct insurance
and other debtors
Note 20 Categories of financial assets and liabilities
and their fair values
Note 21 Tangible assets
Note 22 Deferred acquisition costs
Note 23 Untaxed reserves
Note 24 Provisions for unearned premiums
Note 25 Claims outstanding
Note 26 Equalisation provision
Note 27 Claims handling provision
Note 28 Pensions provisions and similar items
Note 29 Tax provisions
Note 30 Creditors, direct insurance and other creditors
Note 31 Derivatives with negative values
Note 32 Contingent liabilities and commitments
Note 33 Associated parties
Note 34 Average number of employees, salaries
and other remuneration
Note 35 Fees and reimbursement to auditors
Note 36 Operational leasing
Note 37 Class analysis
The Board of Directors’ and the President’s signatures
Audit report
Definitions
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2
Annual Report 2008
White Mountains
– our owners
White Mountains Re Group, Ltd.
(White Mountains Re) is a Bermuda holding
company whose operating companies offer
capacity for most property, casualty, acci-
dent & health, marine, and aviation expo-
sures. Its principal operating companies are:
White Mountains Reinsurance Company
of America, a U.S.-based international mul-
tiline reinsurance company that employs a
conservative strategy with specialized under-
writing expertise, a diversified portfolio, and
strong operational discipline.
Sirius International Insurance Corpora-
tion, a Swedish-based international reinsurer
that focuses mainly on property and other
short-tailed lines. WMRe Sirius is the largest
reinsurance company in Scandinavia and a
leading reinsurer in Europe.
White Mountains Re Bermuda Ltd.,
a Bermuda-based Class 4 property and casu-
alty reinsurer that writes a portfolio
of third party property catastrophe reinsur-
ance and provides reinsurance capacity
for its sister reinsurers, WMRe America
and WMRe Sirius.
White Mountains Insurance Group, Ltd.
(White Mountains or the Company) is a
financial services holding company with
primary business interests in property and
casualty insurance and reinsurance. The
Company’s corporate headquarters and
its registered office are located in Hamilton,
Bermuda and its principal executive
office is located in Hanover, New Hampshire.
The Company conducts its business through:
WHITE MOUNTAINS RE – global reinsur-
ance.
ONEBEACON – specialty and segmented
commercial and personal property and
casualty primary insurance. OneBeacon’s
common shares are listed on the New
York Stock Exchange under the symbol
“OB”. White Mountains holds a 75%
interest in OneBeacon.
ESURANCE – personal auto insurance
directly marketed and underwritten on the
internet.
WHITE MOUNTAINS ADVISORS – invest-
ment management with $25.8 billion of
assets under management.
White Mountains’ common shares are
listed on the New York Stock Exchange and
the Bermuda Stock Exchange under the sym-
bol “WTM”. Market capitalization as of
December 31, 2008 was approximately
$2.4 billion.
As of December 31, 2008, White Moun-
tains reported total assets of $15.9 billion,
shareholders’ equity of $2.9 billion, and ad-
justed GAAP book value per
share NGM of $353.
.
1
Annual Report 2008
"Once again, my sincere thanks to all those who make our continued success
possible: to our hard-working and skilled staff for all their efforts and to our
brokers and customers for their continued support."
2
Annual Report 2008
Comments from the
President and CEO
Stability and resilience were the themes
despite some very significant losses.
of 2008. We successfully navigated
Unsurprisingly, Hurricane Ike topped
our way through a terrible year for the
the list, costing us around $25 million
world’s financial system, enhancing our
net ($28 million gross). This made it our
profitability at the same time as reaching
third highest loss ever, and there were
out to new customers.
others. We were heavily exposed to
In all the attention paid to the dif-
hailstorms in Slovenia, for example, and
ficulties of the banks, some people have
also to extreme cold weather conditions
overlooked the fact that it was also a big
in parts of China. Despite these events,
year for natural catastrophes. The total
all classes of business made an under-
cost to insurers and reinsurers is esti-
writing profit.
mated to have been around $50 billion, a
The fact that we managed to im-
figure only previously exceeded in 2005.
prove on last year’s excellent results
Add in the soft renewal season at the
reflected the lower number of minor
start of 2008, with prices falling in most
losses. Above all, though, we were
of classes of business, and it was always
again able to release funds from prior
going to be a challenging year.
years. At Sirius we take a conserva-
I am, therefore, pleased to report that
tive view of our loss reserves, and it is
Sirius International was able to deliver a
normal for us to see them run off at a
slightly improved performance, recording
profit. This year our claims development
its second highest profits ever. We have
was especially favourable.
now achieved positive underwriting re-
Although 2008 was a grim year for
sults for each of the past seven years – in
investment returns globally, even here
bad times as well as good. As I have said
we achieved a profit of $42 million: ex-
before, it is this consistency that enables
cellent under the circumstances if mod-
us to provide our customers with a mean-
est by historical standards. Like the rest
ingful, long-term commitment.
of the market we saw our equities fall
Our combined ratio of 87% (88% in
in value, but this movement was offset
2007) is certain, yet again, to be one of
by our holdings in the United States and
the best in our industry. It came about
the sharp rise in the dollar.
3
Annual Report 2008
4
g ö r a n t h o r s t e n s s o n
p r e s i d e n t & c e o
Annual Report 2008
Our security ratings were confirmed
trend. It is worth noting that increased
during the year: A (Excellent) from A.M.
line sizes and a growing reputation in
Best; A3 from Moody’s; and A- (Strong)
the market have enabled us to lead more
from Standard & Poor’s. Noting “the com-
business. We expect this trend to con-
pany’s outperformance of its peers over
tinue. In January 2009 we were pleased to
an extended period,” S&P predicted that
open a new branch office in Australia, in
Sirius would prove more resilient than
order to better serve our clients.
most during the economic downturn.
Once again, my sincere thanks to all
Looking ahead, the market has
those who make our continued success
stopped softening and is moving upwards
possible: to our hard-working and skilled
in some areas. At the 2008/2009 renewal
staff for all their efforts and to our bro-
we saw rate rises on United States busi-
kers and customers for their continued
ness and in those programs that had re-
support. Whatever 2009 may bring to the
cently experienced high loss ratios. After
wider economy, we look forward to being
writing slightly less premium in 2008 in
of continued service.
response to worsening market conditions,
we anticipate a resumption in our upward
At a glance
2008
2007
Net premium income
$858 million
$858 million
Claims net of reinsurance
$560 million
$505 million
Combined Ratio
87%
88%
Investment income
$42 million
$61 million
Income before tax (group)
$127 million
$132 million
Solvency capital (group)
$1,343 million
$1,617 million
Solvency capital (group)
SEK 10,455 million SEK 10,399 million
g ö r a n t h o r s t e n s s o n
p r e s i d e n t & c e o
5
Annual Report 2008
Board of Directors’ Report
Sirius International Insurance Corporation
Catastrophic events worth noting during
(publ)
2008 are the snowstorm in China, in Janua-
Corporate Identity Number: 516401-8136
ry, the storm Emma in March, hailstorms in
Slovenia and Germany during the summer
The Board of Directors and the President
and Hurricane Ike, which hit the American
of Sirius International Insurance Corpora-
East Coast in September. Together, these
tion (publ) (Sirius International) hereby
events are expected to result in claims
submit the company’s annual report for
totalling approximately MSEK 600 for own
2008.
General information
concerning the company
account, and refer primarily to the class
of business, Property. Except for these
claims, the claims frequency and the allo-
cation between the classes of business are
Sirius International is active in internatio-
in line with expected results. As regards
nal insurance and reinsurance. Sirius Inter-
the reinsurance business, in total, 2008 is
national was established in 1989.
seen as one of the years with the highest
Insurance operations commenced in
claims frequency occurring during the last
1945 in Sirius Insurance Company Ltd. In
20 years.
1989, the reinsurance activities were trans-
Gross premium income for the Group
ferred to Sirius International. Sirius Inter-
amounted to MSEK 6,683 (2007: MSEK
national has been the Parent Company of
6,652) and MSEK 6,683 (2007: MSEK 6,652)
the Sirius Group since 1992.
for the Parent Company. Premium income
for own account for the Group totalled
The development, results and position of
MSEK 5,602 (2007: MSEK 5,810) and for the
the company
Parent Company MSEK 5,602 (2007: MSEK
The financial year 2008 was yet another of
5,810). The insurance operating results of
the best years for Sirius in terms of the re-
the Group amounted to MSEK 928 (2007:
sults of the insurance operations, in spite a
MSEK 972) and for the Parent Company
somewhat higher level of claims frequency
MSEK 923 (2007: MSEK 998).
compared with the previous year. Contri-
It is worth noting that all of the branch
buting factors have included the continued
offices, with the exception of the agency
favourable results of the run-off portfo-
in Hamburg, which was hit by claims for
lios from previous years and a satisfactory
the hailstorms mentioned above, recorded
premium rate level on the active insurance
a combined ratio below 100%, as did all
portfolio. The positive run-off results of
active classes of insurance. The combined
the previous years’ portfolios is due to the
ratio was 87% (2007: 88%) for the Group
adjustments of the reserve levels which
and 87% (2007: 88%) for the Parent Compa-
were made after internal and external
ny. The return on deployed capital in the
technical reviews were undertaken earlier
insurance operations amounted to 16%
in the year.
The volatility on the financial markets
6
Annual Report 2008
during the autumn with dramatic collapses
national (WMI), and now owns a total of
in the world's stock markets has had a ne-
22% of the company. The shareholding in
gative impact on the company's investment
WMI is reported according to capital equity
results. It is principally the equity portfolio
method and is classified as an investment
that has been impacted by significant reali-
in an associated company. Furthermore,
sed and unrealised losses, as a result of the
the Company has acquired, through the
global recession. The Company has had no
subsidiary in The Netherlands, approxima-
exposure against bonds with inferior credit
tely 6% of the fellow subsidiary OneBeacon
ratings (Subprime Debt) and, therefore,
Insurance Group (OBI.) The classification,
the amount of incurred and expected los-
valuation and reporting as regards OBI is
ses in the bond portfolio are insignificant.
based on the rules for financial instruments
The substantial reductions in interest rates
listed in active markets as approximately
which have been carried out by the majo-
25% of OBI is listed on the New York Stock
rity of the central banks during the year
Exchange (NYSE).
have positively affected the increase in
Sirius International Holdings (NL) BV,
value of the bond portfolio. Furthermore,
Amsterdam, The Netherlands, has received
the Company's continued, strategic policy
a capital contribution of MUSD 100.
regarding currency exposure to, primarily,
Other events regarding changes in the
the USD has provided significant realised
Group’s structure are described primarily
and unrealised currency rate gains.
under the section “Ownership”.
The investment results, as presented
in the Income Statement of the Group,
Ownership
amounted to a profit of MSEK 94 (2007:
Sirius International is a wholly owned sub-
MSEK 208) before allocation of interest
sidiary of Sirius Insurance Holding Sweden
to the insurance operations. If unreali-
AB (Corporate Identity Number 556635-
sed fluctuations in the value of the bond
9724), Stockholm, Sweden, which is ultima-
portfolio, which is recorded directly in
tely owned by White Mountains Insurance
equity, are included, then the investment
Group Ltd, Bermuda.
result amounted to a profit of MSEK 213,
In June 2008, the company Sirius Inter-
which is equivalent to a total yield of 2%.
national Holdings (NL) BV, Amsterdam, The
Calculation of investment yield and to-
Netherlands, was acquired.
tal yield is made in accordance with the
At year-end, the Group consists of
recommendations of the Swedish Financial
Sirius International Insurance Corporation
Supervisory Authority. The Group has,
(publ) with the subsidiaries Sirius Belgium
during the year, decreased the share of
Réassurances S.A. (in liquidation), Liège,
equities in the investment portfolio from
Belgium, Sirius Rückversicherungs Service
approximately 25% at the beginning of the
GmbH, Hamburg, Germany, and Sirius In-
year to approximately 23% at the end of
ternational Holdings (NL) BV, Amsterdam,
the year, including investments in associa-
The Netherlands.
ted companies and deposits from compa-
In addition, Sirius International has six
nies which have ceded reinsurance. During
branch offices outside of Sweden. These
the year, Sirius International acquired an
include the branch office in London, Great
additional 5% of White Mountains Inter-
Britain - Sirius International Insurance Cor-
7
Annual Report 2008
poration (publ) UK Branch; the branch of-
Information on risks
fice in Zurich, Switzerland - Sirius Interna-
Please refer to Note 1, Accounting princip-
tional Insurance Corporation (publ), Stock-
les and Note 2, Information on risks.
holm, Zurich Branch; the branch office in
Singapore - Sirius International Insurance
Financial instruments and risk management
Corporation (publ) (Asia Branch), Singa-
Please refer to Note 1 Accounting principle
pore; the branch office in Liège, Belgium
and Note 2 Information on risks.
- Sirius International Insurance Corporation
(publ), Belgian Branch; the branch office
Salaries and other remuneration to senior
in Copenhagen, Denmark, Sirius Interna-
members of the management
tional Danish Branch, filial af Sirius Inter-
Please refer to Note 34, Average number
national Försäkringsaktiebolag (publ) and
of employees, salaries and other remune-
in Hamburg, Germany. The operation in
ration.
Germany is conducted through the agency
Sirius Rückversicherungs Service GmbH,
Insurance contracts with no significant
which operates on behalf of Sirius Interna-
insurance risk
tional.
The Company has only a few insurance
Additionally, Sirius International has
contracts with no significant insurance risk.
applied for and received permission to
These contracts are classified as investment
establish a branch office in Australia,
contracts. Please refer to Note 1, Accoun-
where the operations are planned to
ting principles.
commence during the first half year 2009.
During 2001, a voluntary liquidation
Expectations concerning future developments
of Sirius Belgium Réassurances S.A., Liège,
The underlying profitability of the insuran-
Belgium, was commenced as the company
ce operations is positive in spite of increa-
is no longer in active operation. The liqui-
sing competition and the diversified invest-
dation has not been completed, due to a
ment portfolio is expected to contribute to
tax dispute.
a stable return on investments. However,
the continued increased competition requi-
Major events occurring during the financial
res discipline in pricing and underwriting,
year or after the closing day
continued efficiency improvements and a
As per January 21, 2009 a restructuring
well-balanced risk relationship between
has taken place within the White Moun-
insurance operations and investments in
tains International Group, of which Sirius
order to secure long-term profitability.
International owns approximately 28.2%.
For 2009, Sirius International’s objective
This restructuring is considered to have no
is to achieve a combined ratio lower than
impact on Sirius International's holding.
94% and an underwriting return on capital
(UROC) of 12%.
8
Five-year Summary
Annual Report 2008
GROUP
(MSEK)
Net premium income
Net premiums earned
Other technical income
Allocated interest
Net claims incurred
Net operating expenses
Insurance operating result
Investment operating result
Other expenses
Net income for the year
Net technical provisions
Market value on investment assets
Insurance operating result
Claims ratio
Cost ratio
Combined ratio
Investment result
Investment yield
Total yield
Solvency capital
Shareholders’ equity
Deferred tax on untaxed reserves
Deferred tax other
Deferred tax on reserve for unrealised capital gains
Excess/under values on investment assets
- Other investment assets
Total solvency capital
Solvency ratio
Capital base 3)
Required solvency capital
Group-based values 4)
Capital base
Solvency requirement
PARENT COMPANy
(MSEK)
Net premium income
Net premiums earned
Allocated interest
Net claims incurred
Net operating expenses
IInsurance operating result
Investment operating result
Other expenses
Net income for the year
Net technical provisions
Market value on investment assets
Insurance operating result
Claims ratio
Cost ratio
Combined ratio
Investment result
IInvestment yield
Total yield
Solvency capital
Shareholders’ equity
Untaxed reserves
Deferred tax other
Deferred tax on Reserve on reserve for unrealised capital gains
Excess/under values on investment assets
- Other investment assets
Total solvency capital
Solvency ratio
Capital base
Required solvency capital
2008
2007
1)
2006
2)
2005
2)
2004
5 602
5 822
0
168
-3 659
- 1 403
928
-74
-27
695
7 992
16 743
63%
24%
87%
3%
2%
8 017
2 420
0
18
5 810
6 019
10
259
-3 471
-1 845
972
-51
-27
577
7 257
5 898
5
149
-3 046
-1 927
1 079
84
-35
669
4 877
4 988
-12
130
-3 463
-1 618
26
692
-35
541
4 781
4 608
5
173
-2 663
-1 805
316
597
-35
651
7 001
15 508
8 774
17 881
8 824
18 862
8 907
14 957
58%
30%
88%
6%
2%
7 833
2 581
0
-15
51%
33%
84%
3%
1%
7 468
2 430
0
-5
69%
32%
102%
4%
5%
7 268
2 094
0
4
58%
39%
97%
3%
6%
6 616
2 081
-26
44
0
0
0
-2
65
10 455
187%
10 013
956
10 399
179%
9 764
956
9 893
136%
9 628
1 154
9 364
192%
8 324
792
8 780
184%
8 040
1 302
17 236
2 566
18 482
2 369
2008
2007
1)
2006
2)
2005
2)
2004
5 602
5 822
168
-3 659
-1 408
923
106
-17
738
5 810
6 019
258
-3 418
-1 861
998
153
-17
430
7 245
5 886
149
-2807
-1916
1 312
329
-25
227
4 713
4 739
130
-3165
-1543
161
511
-25
553
3 768
3 765
164
-1973
-1536
421
-109
-25
-70
7 993
16 882
7 001
15 508
7 340
15 314
7 159
14 431
4 588
11 774
63%
24%
87%
3%
2%
57%
31%
88%
5%
3%
1 295
9 197
1 136
9 217
18
-15
0
10 510
0
10 338
188%
9 968
956
178%
9 776
956
48%
32%
80%
3%
3%
1 093
8 680
0
-14
0
9 759
135%
9 560
1 105
67%
33%
99%
4%
5%
1 077
7 408
0
0
28
8 513
181%
8 210
724
52%
41%
93%
3%
2%
785
7 433
0
44
83
8 345
198%
7 876
722
1) For the comparison year 2006 the figures have been recalculated according to legally restricted IFRS
2) For the comparison years 2005 and 2004 the figures have not been recalculated according to legally restricted IFRS.
3) Includes Sirius International with subsidiaries.
4) Includes WM Re Ltd Group.
9
Annual Report 2008
Proposed Appropriation of Earnings
For 2008, the Parent Company recorded a
result before appropriations and taxes of
MSEK 1,012 (2007: MSEK 1,134). Net in-
come for the year amounted to a profit of
MSEK 738 (2007: MSEK 430). As of
December 31 2008 retained earnings in the
Group amounted to MSEK 439.
At the disposal of the General Meeting
of the Shareholders of the Parent Company
Sirius International:
Retained earnings
Unrestricted reserves
Dividend paid, resolved by the meeting
of the shareholders
Group contribution
Net income for the year
Total
The Board of Directors and the President
propose that the amount shall be appro-
priated as follows (TKR):
SEK in
thousands
372,559
49,345
-330,000
-335,084
738,207
495,027
- Dividends to owners
- Retained earnings
Total
295,000
200,027
495,027
The company’s financial position does not
Regarding the company’s and the Group’s
reflect any other view than that the com-
results and financial position, please refer
pany can be expected to fulfil its obliga-
to the attached income statements and ba-
tions in the short-term, as well as in the
lance sheets, cash flow analyses, report on
long-term. It is the opinion of the Board
changes in shareholders' equity and
of Directors that the solvency capital of
accompanying notes.
the company as it has been reported in the
annual report is adequate in relation to the
scope and risks of the operations.
10
Annual Report 2008
Income Statement – Group
January 1 - December 31
(MSEK)
TEChNICAL ACCOUNT FOR INSURANCE OPERATIONS
Earned premiums, for own account
Gross premium income
Ceded reinsurance premiums
Change in the gross provision for unearned premiums
Change in the provision for unearned premiums,
Reinsurers´ share
Total earned premiums, for own account
Allocated investment return transferred from the
non-technical account
Other technical income, for own account
Claims incurred, for own account
Claims paid
- Gross amount
- Claims handling expenses
- Reinsurers’ share
Claims paid, for own account
Change in the provision for claims, for own account
- Gross amount
- Reinsurers’ share
Total claims incurred, for own account
Change in other technical provisions, for own account
- Gross amount
Total other claims incurred, for own account
Operating costs
Operating profit/loss of technical account
NON-TEChNICAL ACCOUNT
Balance of technical account
Investment income/expenses
- Investment income
- Unrealized gains/losses
- Investment expenses and charges
Investment income allocated to the technical account
Total investment income/expenses
Goodwill depreciation
Result before appropriations and taxes
Taxes
Net income for the year
Note
2008
2007
3
3
4
5
4
5
6
7, 9
8
11
6,683
-1,081
156
64
5,822
168
0
6,652
-842
120
89
6,019
259
10
-4,080
-3,714
-241
561
-163
423
-3,760
-3,454
-2,992
3,090
-3,662
-71
44
-3,481
3
3
10
10
-1,403
928
-1,845
972
928
972
1,386
1,136
-729
-563
-168
-74
-27
827
-132
695
-5
-923
-259
-51
-27
894
-317
577
11
Annual Report 2008
Balance Sheet - Group
December 31
ASSETS
Intangible assets
Goodwill
Capitalized software
Total intangible assets
Investment assets
Land and buildings
Total land and buildings
Investments in associated companies
Shares and participations in associated companies
Total investments in associated companies
Other financial investments
Shares and participations
Bonds and other interest bearing securities
Other financial assets
Total other financial investments
Note
2008
2007
12
13
15
16, 20
17, 20
18, 20
291
1
292
4
4
2,101
2,101
1,745
8,782
0
10,527
318
0
318
5
5
1,652
1,652
2,196
7,662
2
9,860
Deposits with cedents
1,716
1,268
Reinsurers’ share of technical provisions
Provisions for unearned premiums
Claims outstanding
Total reinsurers’ share of technical provisions
Debtors
Debtors arising out of direct insurance operations
Debtors arising out of reinsurance operations
Other debtors
Total debtors
Other assets
Tangible assets
Cash and bank balance
Total other assets
Prepayments and accrued income
Accrued interest
Deferred acquisition costs
Other prepayments and accrued income
Total prepayments and accrued income
TOTAL ASSETS
12
24
25
19
19
21
385
4,588
4,973
37
1,252
842
2,131
16
2,454
2,470
254
1,107
1,361
30
991
654
1,675
17
2,723
2,740
170
166
22
441
464
18
629
11
641
24,843
19,520
Annual Report 2008
December 31
Note
2008
2007
ShAREhOLDERS’ EQUITy, PROVISIONS AND LIABILITIES
Shareholders’ equity
Share capital (8 million shares of nom. Value SEK 100)
Fair value reserve
Restricted reserves
Retained earnings
Net income for the year
Total shareholders’ equity
Technical provisions
Provisions for unearned premiums
Claims outstanding
Equalization provision
Claims handling provision
Total technical provisions
Provisions for other risks and expenses
Pension provisions
Tax provisions
Total provisions for other risks and expenses
Deposits received from reinsurers
Creditors
Creditors arising out of direct insurance operations
Creditors arising out of reinsurance operations
Derivatives
Other creditors
Total creditors
Accrued expenses and deferred income
Accrued expenses and deferred income
Total accrued expenses and deferred income
TOTAL ShAREhOLDERS’ EQUITy,
PROVISIONS AND LIABILITIES
Pledged assets
Contingent liabilities
800
49
6,778
-305
695
8,017
2,343
10,507
3
113
800
-37
6,637
-144
577
7,833
2,061
6,219
5
77
12,966
8,362
15
2,848
2,863
13
2,841
2,854
59
36
25
245
0
546
816
122
122
23
17
1
301
342
93
93
24
25
26
27
28
29
30
31
30
24,843
19,520
32
32
8,527
79
7,714
76
13
Annual Report 2008
Change in shareholders´equity for the Group
Restricted equity
Non-restricted equity
Total
Group
(MSEK)
Amount 1 January 2008
Transfer of net result from previous year
Translation differences for the year
Transfer to fair value reserve
Change of untaxed reserves
Net profit/loss for the year
Group contribution provided
Dividend paid2)
Amount 31 December 2008
Share
Other
Fair value
brought
loss for
Capital
Reserves
reserve
forward
the year
Profit/loss
Net profit/
800
6,637
-37
0
0
0
0
0
0
0
0
0
0
141
0
0
0
800
6,778
0
0
86
0
0
0
0
49
-144
577
68
0
-141
0
-335
-330
-305
577
- 577
0
0
0
695
0
0
Total
equity
7,833
0
68
86
0
695
-335
-330
695
8,017
Amount 1 January 2007
800
6,250
- 50
-202
670
7,468
Transfer of net result from previous year
Translation difference for sale of subsidiary
Translation difference for the year
Acquisition of subsidiary 1)
Sale of subsidiary
Transfer from fair value reserve net previous year
Transfer to fair value reserve
Tax effect of transfer from fair value reserve previous year
Tax effect of transfer to fair value reserve
Transfer to untaxed reserves
Net profit/loss for the year
Group contribution provided
Dividend paid
Amount 31 December 2007
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
387
0
0
0
0
0
0
0
0
69
-52
-19
15
0
0
0
0
800
6,637
-37
670
158
1
6
-3
0
0
0
0
-387
0
-152
-235
-144
-670
0
0
0
0
0
0
0
0
0
577
0
0
577
0
158
1
6
-3
69
-52
-19
15
0
577
-152
-235
7,833
1) The subsidiary Sirius International Holdings (NL) B.V. has been acquired during the year.
2) During the year dividends have been provided to the Parent Company Fund American Holdings AB.
14
Annual Report 2008
ShARE CAPITAL
Specified in number of shares, SEK
Issued per 1 January
Issued per 31 December
2008
2007
8,000,000
8,000,000
8,000,000
8,000,000
Per 31 December 2008, registered share capital comprised of 8,000,000 (8,000,000) ordinary shares.
The shares have a quotient value of SEK 100 (100).
TRANSLATION DIFFERENCE
Opening translation difference
Change for the year
Closing translation difference
UNTAxED RESERVES
Equity portion of untaxed reserves
Opening equity portion of untaxed reserves
Change for the year
Closing equity portion of untaxed reserves
FAIR VALUE RESERVE
Fair value reserve before tax
Opening fair value reserve
Change for the year
Closing fair value reserve
Tax on fair value reserve
Opening tax on fair value reserve
Change for the year
Closing tax on fair value reserve
Fair value reserve after tax
Opening fair value reserve
Change for the year
Closing fair value reserve
PROFIT/LOSS BROUGhT FORWARD
Opening profit/loss brought forward
Transfer of net result from previous year
Translation difference for the year
Transfer to restricted reserves
Bought/sold subsidiaries, net
Dividend paid
Group contribution provided 72% - equity portion
Closing profit/loss brought forward
NET PROFIT/LOSS FOR ThE yEAR
Net profit/loss for the year
2008
7
68
75
6,637
141
6,778
-52
119
67
15
-33
-18
-37
86
49
-144
577
68
-141
0
-335
-330
-305
695
2007
-152
159
7
6,250
387
6,637
-69
17
-52
19
-4
15
-50
13
-37
-202
670
159
-387
3
-235
-152
-144
577
15
Annual Report 2008
Cash flow statement for the Group
2008
2007
OPERATING ACTIVITIES
Profit/loss before tax 1)
Adjustment for non-cash items
Income tax paid
Cash flow from current operations before
changes in assets and liabilities
Change in land and buildings
Change in financial investments
Change in other operating receivables
Change in other operating liabilities
Cash flow from operating activities
INVESTING ACTIVITIES
Net investment in tangible assets
Acquisition of subsidiaries, net impact on liquidity
Disposal of subsidiaries, purchase price received
Disposal of subsidiaries, cash and cash equivalents disposed of
Cash flow from investing activities
FINANCING ACTIVITIES
Loans taken
Repayment of loans
Dividends paid
Group contributions paid
Cash flow from financing activities
Cash flow for the year
Cash and cash equivalents at beginning of year
Cash flow for the year
Cash and cash equivalents at end of year 2)
1) Of which
Interest received
Dividends received
Total
2) The following sub-components are included
in cash and cash equivalents:
Cash and bank balances
Current investments, equivalent to cash and cash equivalents
Total
827
94
-193
728
1
-997
-4,399
4,885
278
-6
0
0
0
-6
0
0
-330
-211
-541
- 269
2,723
-269
2,454
455
52
507
272
2,182
2,454
894
198
-83
1,009
2
-517
1,712
-2,870
1,673
-4
2
414
-537
-125
414
-414
-235
-242
-477
-1,266
3,989
-1,266
2,723
614
435
1,049
229
2,494
2,723
16
Annual Report 2008
Income Statement – Parent Company
January 1 - December 31
(MSEK)
TEChNICAL ACCOUNT FOR INSURANCE OPERATIONS
Earned premiums, for own account
Gross premium income
Ceded reinsurance premiums
Change in the gross provision for unearned premiums
Change in provision for unearned premiums, reinsurers’ share
Total earned premium, for own account
Allocated investment return transferred from
the non-technical account
Claims incurred, for own account
Claims paid
- Gross amount
- Claims handling expenses
- Reinsurers’ share
Claims paid, for own account
Change in the provision for claims, for own account
- Gross amount
- Reinsurers’ share
Total claims incurred, for own account
Change in other technical provisions, for own account
- Gross amount
Total claims incurred, for own account
Note
2008
2007
3
3
4
5
4
6,683
-1,081
156
64
5,822
6,652
-842
120
89
6,019
168
258
-4,080
-3,693
-241
561
-163
423
-3,760
-3,433
-2,992
3,090
-3,662
3
3
-44
44
-3,433
15
15
-1,861
998
Operating costs
Operating profit/loss of technical account
5
-1,408
923
NON-TEChNICAL ACCOUNT
Balance of technical account
Investment income/expenses
- Investment income
- Unrealised gains/losses
- Investment expenses and charges
Investment income allocated to the technical account
Total investment income/expenses
Goodwill depreciation
Result before appropriations and taxes
Appropriations
Change of excess depreciation on intangible assets
Result before taxes
Taxes
Net income for the year
6
7, 9
8
11
923
998
1,053
-450
-329
-168
106
-17
1,012
0
19
1,031
-293
738
1,016
9
-614
-258
153
-17
1,134
-537
0
597
-167
430
17
Annual Report 2008
Balance Sheet - Parent Company
December 31
(MSEK)
ASSETS
Intangible assets
Goodwill
Other intangible assets
Total intangible assets
Investment assets
Land and buildings
Total land and buildings
Investments in group companies and associated companies
Shares and participations in group companies
Shares and participations in associated companies
Total investments in group companies
and associated companies
Other financial investments
Shares and participations
Bonds and other interest-bearing securities
Other financial assets
Total financial investments
Deposits with cedents
Reinsurers’ share of technical provisions
Provisions for unearned premiums
Claims outstanding
Total reinsurers’ share of technical provisions
Debtors
Debtors arising out of direct insurance operations
Debtors arising out of reinsurance operations
Other debtors
Total debtors
Other assets
Tangible assets
Cash and bank balance
Total other assets
Prepayments and accrued income
Accrued interest
Deferred acquisition costs
Other prepayments and accrued income
Total prepayments and accrued income
Note
2008
2007
12
13
14
15
16, 20
17, 20
18, 20
24
25
19
19
21
22
229
1
230
4
4
246
0
246
5
5
656
2,058
13
1,673
2,714
1,686
1,294
8,782
0
10,076
2,191
7,662
2
9,855
1,716
1,267
385
4,588
4,973
37
1,252
814
2,103
15
2,431
2,446
169
441
18
628
254
1,107
1,361
30
992
630
1,652
15
2,720
2,735
165
464
11
640
TOTAL ASSETS
24,890
19,447
18
Annual Report 2008
December 31
Note
2008
2007
ShAREhOLDERS’ EQUITy, PROVISIONS AND LIABILITIES
Shareholders’ equity
Share capital (8 million shares of nom. value SEK 100)
Fair value reserve
Retained earnings
Net income for the year
Total shareholders’ equity
Untaxed reserves
Excess depreciations on intangible assets
Safety reserve
Total untaxed reserves
Technical provisions
Provisions for unearned premiums
Claims outstanding
Equalization provision
Claims handling provision
Total technical provisions
Provisions for other risks and expenses
Tax provisions
Total provisions for other risks and expenses
Deposits received from reinsurers
Creditors
Creditors arising out of direct insurance operations
Creditors arising out of reinsurance operations
Derivatives
Other creditors
Total creditors
Accrued expenses and deferred income
Accrued expenses and deferred income
Total accrued expenses and deferred income
TOTAL ShAREhOLDERS’ EQUITy,
PROVISIONS AND LIABILITIES
Pledged assets
Contingent liabilities
23
24
25
26
27
29
30
31
30
800
49
-292
738
800
-37
-57
430
1,295
1,136
61
9,136
9,197
2,343
10,507
3
113
81
9,136
9,217
2,061
6,219
5
77
12,966
8,362
427
427
59
25
245
0
554
824
122
122
257
257
35
23
17
1
306
347
93
93
24,890
19,447
32
32
8,527
79
7,714
76
19
Annual Report 2008
Change in shareholders´ equity - Parent Company
(MSEK)
Amount 1 January 2008
Transfer of net result from previous year
Change in fair value reserve
Group contribution provided 2)
Dividend paid 1)
Net profit/loss for the year
Amount 31 December 2008
Amount 1 January 2007
Transfer of net result from previous year
Change in fair value reserve
Group contribution provided - equity portion
Dividend paid
Net profit/loss for the year
Amount 31 December 2007
Non-restricted equity
Total
Restricted
equity
Share
Capital
800
0
0
0
0
0
800
Profit/loss
Net profit/
Fair value
brought
loss for
reserve
forward
the year
-37
0
86
0
0
0
49
-57
430
0
-335
-330
0
-292
103
227
0
-152
-235
0
-57
430
-430
0
0
0
738
738
227
-227
0
0
0
430
430
800
-37
0
0
0
0
0
0
0
0
0
0
800
-37
Total
equity
1,136
0
86
-335
-330
738
1,295
1,093
0
0
-152
-235
430
1,136
1) During the year, dividends have been provided to the Parent Company Fund American Holdings AB.
2) Group contributions have been provided to Fund American Holdings AB and Sirius Insurance Holding Sweden AB.
20
Annual Report 2008
ShARE CAPITAL
Specified in number of shares, SEK
Issued per 1 January
Issued per 31 December
2008
2007
8,000,000
8,000,000
8,000,000
8,000,000
Per 31 December 2008, registered share capital comprised of 8,000,000 (8,000,000) ordinary shares.
The shares have a quotient value of SEK 100 (100).
FAIR VALUE RESERVE
Opening fair value reserve
Change for the year
Closing fair value reserve
Tax on fair value reserve
Opening tax on fair value reserve
Change for the year
Closing tax on fair value reserve
Fair value reserve, net
Opening fair value reserve
Change for the year
Closing fair value reserve after tax
PROFIT/LOSS BROUGhT FORWARD
Opening profit/loss brought forward
Transfer of net result from previous year
Dividend paid
Group contribution provided 72% - equity portion
Closing profit/loss brought forward
NET PROFIT/LOSS FOR ThE yEAR
Net profit/loss for the year
2008
2007
-52
119
67
15
-33
-18
-37
86
49
-57
430
-330
-335
-292
738
-51
-1
-52
14
1
15
-37
0
-37
103
227
-235
-152
-57
430
21
Annual Report 2008
Cash flow statement for the Parent Company
OPERATING ACTIVITIES
Profit/loss before tax 1)
Adjustment for non-cash items
Income tax paid
Cash flow from current operations before
changes in assets and liabilities
Change in land and buildings
Change in financial investments
Change in other operating receivables
Change in other operating liabilities
Cash flow from operating activities
INVESTING ACTIVITIES
Net investment in tangible assets
Acquisition of subsidiaries, net impact on liquidity
Disposal of subsidiaries, net impact on liquidity
Cash flow from investing activities
FINANCING ACTIVITIES
Shareholders' contribution paid
Loans taken
Repayment of loans
Dividends paid
Group contributions paid
Cash flow from financing activities
Cash flow for the year
Cash and cash equivalents at beginning of year
Cash flow for the year
Cash and cash equivalents at end of year 2)
1) Of which
Interest received
Interest paid
Dividends received
Total
2) The following sub-components are included
in cash and cash equivalents:
Cash and bank balances
Current investments, equivalent to cash and cash equivalents
Total
22
2008
2007
1,031
4
-178
597
561
-89
857
1,069
1
-487
-4,349
4,880
902
-7
0
0
-7
-643
0
0
-330
-211
-1,184
-289
2,720
-289
2,431
419
0
34
453
448
1,983
2,431
2
-771
-50
-334
-84
-9
-414
414
-9
-282
414
-414
-234
-242
-758
-851
3,571
-851
2,720
585
0
435
1,020
968
1,752
2,720
Annual Report 2008
Performance analysis, Parent Company
Analysis of Insurance Result
(MSEK)
Direct Swedish
Direct Swedish
Direct
Assumed
risks, credit
risks, aviation
foreign risks
reinsurance
Total
Technical result insurance operations
Premiums earned, for own account
Allocated investment return transferred from the
non-technical account
Claims incurred, for own account)
Operating costs
Change of equalisation provision
Technical result of insurance operations
Of which results from prior years 1)
Technical provisions
Unearned premiums and remaining risks
Outstanding claims
Equalisation provision
Claims adjustment provision
Total technical provisions
Reinsurer´s share of technical provisions
Unearned premiums and remaining risks
Outstanding claims
Total technical provisions, reinsurer´s share
Premiums earned, for own account
Gross premium income
Ceded reinsurance premium
Change in gross provision for unearned premiums
Reinsurer´s share of change in unearned premiums
Premiums earned, for own account
Claims incurred, for own account
Claims paid
Gross amount
Reinsurer´s share
Claims handling expenses
Change in provision for outstanding claims
Gross amount
Reinsurer´s share
Claims incurred, for own account
1) Defined as results from underwriting year 2007 and prior.
2
8
1
0
11
11
0
0
0
0
0
0
0
-80
0
82
0
2
0
0
0
8
0
8
1
0
0
0
1
1
0
0
0
0
0
0
0
1
0
0
0
1
0
0
0
0
0
0
497
5,322
5 822
13
-356
-251
3
-94
155
-3,314
-1,158
0
1,005
-60
852
168
-3,662
-1,408
3
923
804
-375
-353
-3
-4
-1,968
-10,154
0
-109
-2,343
-10,507
-3
-113
-735
-12,231
-12,966
77
63
140
635
-144
19
-13
497
-445
98
-20
22
-11
-356
308
4,525
4,833
6,127
-937
55
77
385
4,588
4,973
6,683
-1,081
156
64
5,322
5,822
-3,635
-4,080
463
-221
-3,022
3,101
-3,314
561
-241
-2,992
3,090
-3,662
23
Note 1 • Accounting Principles
General information
This annual report was issued per 31 December 2008 and refers to Sirius
International Insurance Corporation (publ), both the Group and the Parent
Company, which is an insurance company with its registered offices in
Stockholm.
The address of the head office is Birger Jarlsgatan 57B, Stockholm and
the Corporate Identity Number is 516401-8136.
Compliance with standards and law
The Company's annual report/consolidated accounts have been prepa-
red in accordance with the Swedish Act on Annual Accounts in Insurance
Companies (ÅRFL), as well as the Swedish Financial Supervisory Authority's
regulations and general advice on Annual Reports in Insurance Companies
(FFFS 2008:26) and the Swedish Financial Accounting Standards Council's
recommendation RFR 2. The insurance company applies so-called legally
restricted IFRS (IFRS as restricted by Swedish legislation), which refers
to international accounting standards adopted for application with the
limitations implied by RFR 2 and FFFS 2008:26. This entails that all IFRS and
statements approved by the EU are applied to the extent that this is possible
within the framework of Swedish law and with regard to the relation between
accounting and taxation.
The Parent Company applies the same accounting principles as the
Group, save for the exceptions described in the section on the Parent
Company’s accounting principles.
Assumptions in the preparation of the
Company’s financial reports
The Company’s functional currency is the Swedish krona (SEK) and the
financial reports are presented in Swedish kronor. Unless otherwise stated,
all amounts are rounded to the nearest million. Assets and liabilities are
recorded at acquisition cost, with the exception of certain financial assets
and liabilities which are valued at fair value. Financial assets and liabilities
valued at fair value consist of derivative instruments, financial assets clas-
sified as financial assets valued at fair value via the income statement or as
available-for-sale financial assets.
Assessments and estimates in the financial reports
The preparation of financial statements in conformity with IFRS requires the
Company’s management to make assessments and estimates, as well as as-
sumptions impacting the application of the accounting principles and the re-
corded values of assets, liabilities, income and expenses. These estimates
and assumptions are based on historical experience and a number of other
factors considered reasonable in the current situation. The results of these
estimates and assumptions are, subsequently, used to assess the recorded
values of assets and liabilities which are not otherwise clearly apparent
from other sources. Actual outcome can deviate from these estimates and
assessments.
Estimates and assumptions are reviewed on a regular basis. Changes
in estimates are recorded in the period in which the change is made if the
change only affects that period, or the period in which the change is made
as well as future periods, if such change affects both current and future
periods.
Insurance contracts and financial instruments
According to IFRS 4, contracts transferring significant insurance risk should
be classified as insurance. The Company has made the assessment that
insurance risk in excess of five percent should be deemed significant and
the contract is thus classified as insurance.
All agreements which legally can be considered insurance contracts have
been subject to assessment regarding whether they signify a transfer of
significant insurance risk, so that they can also be presented as insurance
contracts in the accounts. In the case of certain agreements which are a
combination of risk and savings, the Company has been obligated to under-
take an assessment of the contracts which can be considered to signify a
transfer of significant insurance risk. The amount of the insurance risk has
been assessed through a consideration of whether there exists one or more
scenarios with commercial implications in which the insurance company
would be liable to pay significant further benefits in excess of the amount
which would have been paid had the insured event never occurred.
Certain contracts include an option for the contract holder to insure
themselves in the future. The Company does not consider such options, in
themselves, to constitute a material insurance risk.
Classification of financial assets and liabilities
The Company’s accounting principles provide detailed definitions of the
manner in which assets and liabilities should be classified into different
categories:
The classification of financial assets and liabilities held for trade
presumes that these correspond to the description of financial assets and
liabilities held for trade in the accounting principles.
Financial assets and liabilities that the Company has initially chosen to
value at fair value via the income statement under the presumption that the
criteria of the accounting principles have been fulfilled.
Classification of financial assets as investments held to maturity under
the presumption that Company has the expressed intention and capacity
to hold the assets until maturity in accordance with what is stated in the
accounting principles.
Important sources of uncertainty in estimates
The Company makes assessments and estimates forming the basis for the
valuation of certain assets and liabilities. These assessments and valuations
are made on an ongoing basis and are based on previous experience and
future expected outcomes.
Technical provisions
The Company’s accounting principles for insurance contracts are described
below. The Company’s most critical accounting estimate concerns insu-
rance technical provisions. This estimate is based on historical experience
and other relevant factors considered as reasonable. Even if the applied
methods and employed parameters are assessed as correct, future outco-
mes may deviate from the expected value.
The process applied for the determination of central assumptions, for-
ming the basis for the valuation of the provisions, is described in Note 2.
Determination of fair value of financial instruments
The valuation methods described below have been applied in the valuation of
financial assets and liabilities for which there is no observable market price.
There may be some uncertainty as regards the observed market price for
financial instruments with limited liquidity. Such instruments may, therefore,
require further assessments, depending on the uncertainty of the market
situation.
Company management has discussed the development, selection and
disclosure of significant accounting principles and estimates of the Group
and of the Parent Company, as well as discussing the application of these
principles and estimates. The specified accounting principles have been
consistently applied to all periods presented in the financial reports, unless
stated otherwise below.
Approval
The annual accounts were approved for publication by the Board of Direc-
tors on 9 March 2009. The income statement and balance sheet will be
adopted at the General Meeting held in the spring of 2009.
Changed accounting principles
No changes to the accounting principles have been made during the year.
24
Changes to standards, statements and interpretations
A number of standards, statements and interpretations have been published
in connection with the preparation of the Company’s annual report per 31
December 2008 but have not yet come into force. In addition, certain stan-
dards, statements and interpretations currently in force have been changed,
and certain standards, statements and interpretations have come into force
during 2008. Below follows a summary and a preliminary assessment of
the effect these standards, statements and interpretations may have on the
Company’s financial reports. Changes other than those given below are not
deemed relevant to the Company, alternatively are not expected to affect
the Group’s financial reports.
IAS 39 (Amendment) and IFRS 7 (Amendment), “Reclassification of
Financial Instruments” (applies from 1 July 2008). The amendment to IAS
39 enables companies to, under certain circumstances, reclassify financial
assets available for sale. The amendment is not obligatory. The Group has
not applied the amendments made to IAS 39 and IFRS 7.
IAS 1 (Revised) “Presentation of Financial Statements” (applies from 1
January 2009). The revised standard will prohibit the presentation of income
and cost items (i.e. “changes in shareholders' equity exclusive of transac-
tions with shareholders”) in the report on changes in shareholders' equity
and will, instead, require such “changes in shareholders' equity exclusive of
transactions with shareholders” to be presented in a separate report to that
presenting changes in shareholders' equity involving transactions with sha-
reholders. The Group will apply IAS 1 (amendment) as of 1 January 2009.
Consolidation principles
Subsidiaries
Subsidiaries are companies in which the Parent Company has a controlling
influence. The term “controlling influence” refers to the direct or indirect
right to formulate a company’s financial and operative strategies with the
intention of receiving financial benefit. Subsidiaries are reported according
to the purchase accounting method. This method implies that the acquisition
of subsidiaries is considered to be a transaction through which the Group
indirectly acquires the subsidiary’s assets and takes over its liabilities and
contingent liabilities.
The Group acquisition value is determined through an acquisition
analysis concurrent with the acquisition. In the case of business acquisitions
in which the acquisition cost exceeds the net value of the acquired assets
and assumed liabilities and contingent liabilities, the difference is recorded
as goodwill. When the difference is negative, this is recorded directly in the
income statement.
Subsidiaries’ financial reports are included in the consolidated accounts
from the date of acquisition until the date upon which the controlling
influence ceases.
Associated companies
Associated companies are those companies in which the Group has a
significant, but not controlling, influence over the operational and financial
administration, usually through the holding of participations between 20%
and 50% of the number of votes. From the point in time when the significant
influence is acquired, participations in associated companies are recorded
in the consolidated accounts according to the equity method. The equity
method implies that the value of the shares in the associated company,
reported in the Group, corresponds to the Group’s share of the associated
companies’ equity and Group goodwill and any other remaining amount of
positive or negative group adjustment in consolidation. In the consolidated
income statement, the Group’s share of the associated companies’ net
profit/loss after tax and minority interest adjusted for any amortisation,
impairment or reversals of acquired surplus or deficit values, are recorded
as “Participations in associated companies”. Dividends received from the
associated company reduce the recorded value of the investment.
When the Group’s share of reported losses in an associated company
exceeds the book value of the Group’s participations in the company, the
value of the participations is reduced to zero. The equity method is applied
up to the point in time when the significant influence ceases.
Transactions eliminated on consolidation
Receivables and liabilities, income and expenses, and unrealised gains
and losses arising on internal transactions between Group companies are
eliminated in their entirety when the consolidated financial statements
are prepared. Unrealised gains arising from transactions with associated
companies are eliminated in an amount corresponding to the Group’s partici-
pating interest in the company. Unrealised losses are eliminated in the same
manner as unrealised gains, but only to the extent there is no impairment
requirement.
Foreign currency
Transactions in foreign currency
Transactions in foreign currency are translated to the functional currency at
the exchange rate prevailing on transaction date. The Company’s functional
currency is the Swedish krona and the closing rate on the balance sheet
date has been used in the valuation of assets and liabilities in foreign cur-
rency. Exchange rate fluctuations are recorded net in the income statement
on the lines, Investment, income or Investment, expenses.
Closing rates for the most important currencies
USD 7.78
EUR 10.88
GBP 11.40
Financial reports of foreign operations
Assets and liabilities in foreign operations, including goodwill and other
Group surplus and deficit values, are translated from the functional currency
of the foreign operation to the Group’s reporting currency, Swedish kronor,
at the exchange rate prevailing on the balance sheet date. Income and
expenses in foreign operations are translated into Swedish kronor at an
average rate that approximates the exchange rates prevailing at the date of
the respective transactions. Translation differences arising in the currency
translation of foreign operations are recorded directly against shareholders'
equity in a translation reserve.
Net investments in foreign operations
Translation differences arising in the translation of foreign net investments
and the associated effects of the hedging of net investments are recorded
directly in the translation reserve in shareholders' equity. Upon disposal of
a foreign operation, accumulated translation differences attributable to the
operation, less any currency hedging, are realised in the Group’s income
statement.
Insurance contracts
Insurance contracts are recorded and valued in the income statement and
balance sheet in accordance with their financial substance as opposed
to their legal form, in the event that these differ. Contracts transferring
material insurance risks from the policyholder to the Company and whereby
the Company agrees to compensate the policyholder or other beneficiary in
the event that a pre-agreed insured event occurs are recorded as insurance
contracts. Investment contracts are contracts which do not transfer any
material insurance risk from the policyholder to the Company. The Company
has issued a policy entailing a mandatory test of whether sufficient insuran-
ce risk exists in signed contracts for classification as insurance contracts.
This test builds upon definitions in accordance with IFRS 4. For contracts
or groups of contracts classified as insurance contracts, recording and
valuation are carried out in accordance with previously applied principles.
For contracts or groups of contracts which are not classified as insurance
contracts, recording and valuation are conducted according to IAS 39,
Financial Instruments or according to IAS 18, Revenue.
Recording of insurance contracts
Revenue recognition/Premium income
The total gross premiums for direct insurance and assumed reinsurance
25
paid or credited to the Company, for insurance contracts in which the
insurance period commenced prior to the close of the financial year, are
recorded as premium income. Reinstatement premiums (premiums for rein-
stating the coverage following a claim) and premiums for insurance periods
not commencing until after the close of the financial year, are also recorded
as premium income if, according to contract, they fall due for payment
during the financial year.
The term gross premium refers to the contractual premiums for the
entire insurance period. Renewal premiums that are not confirmed by
the policyholder and premiums for newly signed insurance contracts are
recognised in the amounts expected to flow to the Company. Cancellations
reduce premium income, as soon as the amount is known. Additional
premiums are recognised in the amount estimated to flow to the Company.
Premium revenue corresponds to the portion of premium income that has
been earned. Unearned premiums are allocated to Provision for unearned
premiums.
Technical provisions
Technical provisions consist of the Provisions for unearned premiums and
unexpired risks, Provisions for outstanding claims, Equalisation provisions
and Claims adjustment provisions.
Provision for unearned premiums and unexpired risks
In the balance sheet, this provision consists of amounts corresponding to
the Company’s liability for claims, administrative expenses and other costs
during the remainder of the contract period for policies in force. By “policies
in force” is meant insurance policies in accordance with established
contracts regardless of whether these policies refer, entirely or partly, to
subsequent insurance periods. In calculating these provisions, an estimate
is made of anticipated expenses for any claims that may occur during the
remaining terms of these insurance policies, as well as administrative
expenses for this period. The estimation of costs is based on the Company’s
own experience and consideration is also made for both the observed and
the forecasted development of relevant costs.
Unexpired risk refers to the risk that the insurance contract’s claims and
expenses cannot be covered by unearned and expected premium revenue
after the close of the financial year.
For insurance policies with premiums paid for multiple years, the provisi-
on for unearned premiums is calculated on the basis of a careful estimation
both of the Company’s liability for contracts in force and of the expected
payment patterns. Provisions for unearned premiums are estimated with the
help of the unearned portion of the premium for policies in force, generally
using a pro rata temporis calculation in accordance with the insurance
contract’s terms and conditions over the contract period in relation to the
insurance coverage for the period. If the premium level for policies in force
is considered insufficient, a provision is made for unexpired risks.
The period’s change in provisions for unearned premiums and unexpired
risks is recorded in the income statement. Changes that can be explained by
the translation of balance sheet provisions at the exchange rate prevailing
on balance sheet date are recorded as exchange gains or losses under the
Non-technical account.
reserves to the exchange rate prevailing on balance sheet date are recorded
as exchange gains or losses under the Non-technical account.
Embedded derivatives in insurance contracts
The Company does not individually value embedded derivatives that can be
defined as insurance contracts or options to repurchase insurance contracts,
either on the basis of a fixed amount, or on the basis of a fixed amount and
interest rate.
Equalisation provision
The amount of this provision is calculated as 150% of the highest net
premium revenue for class 14, credit insurance, with equivalent reinsurance,
during the five most recent financial years. Provisions for each financial year
are equivalent to 75 % of the technical insurance surplus in the credit insu-
rance operations. The period’s change in equalisation provision is recorded in
the income statement.
Claims adjustment provision
The amount of this provision is based on outstanding claims, including
IBNR, for certain specific years. The provision is equal to 4% of outstanding
amounts. The period’s change in the claims adjustment provision is recorded
in the income statement within the items Claims handling expenses and
Operating costs.
Provision adequacy testing
The Company’s applied accounting and valuation principles for the balance
sheet items Deferred acquisition costs, Provisions for unearned premiums
and Unexpired risks automatically entail testing of whether the provisions are
sufficient with regard to expected future cash flows.
Deferred acquisition costs for insurance contracts
The term acquisition costs refers to operating costs varying with and directly
or indirectly constituting the acquisition or renewal of insurance contracts.
Deferred acquisition costs are only recorded for insurance contracts deemed
to generate a margin at least covering the acquisition costs. Sirius only
records deferred acquisition costs to agents and ceding companies.
Deferred acquisition costs are normally amortised over a period of 12
months in a manner corresponding to the earning pattern of the premium
for the insurance policy in question. The asset is tested for impairment
each quarter to ensure that the contracts are deemed to generate a margin
that, as a minimum, covers the value of the asset. Other costs for insurance
contracts are recorded as costs when they arise.
Operating costs
All operating costs are allocated in the income statement according to their
functional nature, claims adjustment, administration, commission and profit
shares in ceded reinsurance, investment expenses and in certain cases,
other technical costs. Changes in technical provisions for insurance contracts
are recorded in the income statement under each heading. Payments to poli-
cyholders, due to insurance contracts or incurred claims, during the financial
year, are recorded as claims paid, regardless of when the claim was incurred.
Provision for outstanding claims
This balance sheet item comprises of estimated undiscounted cash flows
relating to final costs for settlement of all claims resulting from events
occurring before the close of the financial year, with deduction of those
amounts that have already been paid, on the basis of receipt of claims
payment advices. This amount also includes estimated undiscounted cash
flows regarding future operating costs for the settlement of incurred but, as
of balance sheet date, outstanding claims, as well as refunds that are due
for payment.
The provision for incurred but not reported claims (IBNR) includes expen-
ses for incurred but, to date, unknown claims. This amount is an estimate
based on historic experience of the outcome of claims.
The income statement records the change in outstanding claims for the
period. Changes that can be explained by the translation of balance sheet
Ceded reinsurance
Amounts paid out during the financial year or amounts recorded as liabilities
to insurance companies that have accepted reinsurance in accordance with
signed reinsurance contracts, including portfolio premiums, are recorded
as premiums for ceded reinsurance. These premiums are expensed so that
costs are allocated to the corresponding period of the insurance cover.
Deductions are made for amounts credited due to portfolio transfers or a
change in the reinsurer’s share of proportional reinsurance contracts.
The reinsurer’s share of technical provisions corresponds to the
reinsurer’s liability for technical provisions according to contract. The Com-
pany assesses any required impairment for assets referring to reinsurance
contracts biannually. If the recoverable amount is lower than the carrying
amount of the asset, the asset is impaired to the recoverable amount and the
impairment is recorded in the income statement.
26
Reporting of investment return
Investment income allocated to the technical account
Investment return is transferred from the non-technical account to the techni-
cal account on the basis of average technical provisions for the Company’s
own account, less deductions for net receivables in insurance operations.
This capital base is allocated per currency. The transferred investment
return is calculated on the basis of an interest rate per currency equivalent to
the actual total yield from the investment assets belonging to the insurance
operations. The average interest rate for 2008 amounted to 2.83%.
reversed within the foreseeable future are not considered either. The valua-
tion of deferred tax is based on the extent to which underlying assets and
liabilities are expected to be realised or settled. Deferred tax is calculated
with the application of the tax rates and regulations that have been enacted
or practically enacted as per balance sheet date.
Deferred tax assets regarding deductible temporary differences and
losses carry-forward are recorded only to the extent that they are likely to
be utilised. The value of deferred tax assets is reduced when it is no longer
considered likely that they can be utilised.
Applied interest rates
%
EUR
GBP
SEK
USD
2008
2007
6.22%
3.73%
8.03%
0.93%
3.88%
5.21%
2.86%
6.46%
Investment, income
The item Investment, income refers to yield from investment assets and
comprises rental income from land and buildings, dividends from shares and
participations, including dividends from shares in Group companies and as-
sociated companies, interest income, net foreign exchange gains, reversed
impairments and net capital gains.
Investment expenses and charges
Charges on investment assets are recorded under the item Investment ex-
penses and charges. The item comprises operating costs for land and buil-
dings, asset management costs, interest expenses, net foreign exchange
losses, depreciations and impairments and net capital losses.
Changes in realised and unrealised gains and losses
For investment assets valued at acquisition value, capital gain comprises
the positive difference between sale price and book value. For investment
assets valued at fair value, a capital gain is the positive difference between
sale price and acquisition value. For interest-bearing securities, acquisition
value is the amortised cost value and, for other investment assets, it is the
historical acquisition value. At the sale of investment assets, previously
unrealised changes in value are recognised as adjustment entries under the
item Unrealised profits from investment items or Unrealised losses from
investment items, as appropriate. Capital gains from assets other than
investment assets are recorded as Other income.
Unrealised gains and losses are recorded net per asset class. Changes
due to exchange rate fluctuations are recorded as exchange rate gains or
exchange rate losses under the item Investment income/expenses.
Taxes
Income tax
Income taxes consist of current tax and deferred tax. Income taxes are
recorded in the income statement, except when the underlying transaction
is recorded directly against shareholders' equity, whereupon the pertaining
tax effect is recorded in shareholders' equity.
Current tax is tax to be paid or received regarding the current year, with
application of the tax rates which have been enacted or practically enacted
at balance sheet date, which also includes the adjustment of current tax
referring to previous periods.
Deferred tax is calculated according to the balance sheet method on the
basis of temporary differences between the book values of assets and
liabilities and their tax values. Temporary differences are not considered as
regards the differences arising at the initial recording of goodwill and the
initial recording of assets and liabilities that are not business acquisitions
and which did not affect either net profit/loss or taxable profit/loss at the
transaction date. Furthermore, temporary differences referring to participa-
tions in subsidiaries or associated companies that are not expected to be
Intangible assets
Goodwill
Goodwill represents the difference between the acquisition value in the bu-
siness acquisition and the fair value of acquired assets, assumed liabilities
and contingent liabilities.
Goodwill and other intangible assets with indeterminable economic lives
are amortised in accordance with the Swedish Annual Accounts Act. This
usually entails amortisation over five years. In certain cases, the amortisa-
tion period may be longer than five years.
Regarding goodwill arising from the purchase of the net assets of
businesses acquired before 1 January 2004, the Company has chosen not
to apply IFRS retroactively following the transition to IFRS. Instead, the car-
rying amount at this date consists of the Company’s acquisition cost, after
impairment testing.
Other intangible assets
Other separately acquired intangible assets acquired by the Company are
recorded at acquisition value less accrued amortisation (see below) and
impairment.
Amortisation method
Amortisation is recognised in the income statement on a straight-line basis
over the intangible asset’s calculated useful life. This useful life is reasses-
sed annually. Amortisable intangible assets are amortised from the date on
which they become available for use. The calculated useful lives are:
• goodwill
• capitalised development expenditure
• goodwill arising from the purchase of
the net assets of businesses
• other intangible assets
20 years
5 years
20 years
5 years
Amortisation deviating from plan is recognised as an appropriation under
the heading Difference between book amortisation and amortisation ac-
cording to plan.
Land and buildings
Investment properties are recorded at acquisition value less a deduction
for accumulated depreciation and any impairment, with an addition for ap-
preciation, if applicable.
Financial instruments
Financial instruments recorded in the balance sheet include, on the asset
side, shares and other equity instruments, loan receivables and interest-
bearing securities as well as derivatives. Where appropriate, derivatives
with negative market value are included among liabilities and shareholders'
equity.
Acquisitions and disposals of financial assets are recorded on trade date,
the date upon which the Company commits to acquire or dispose of the
asset.
Classification and valuation
Financial instruments which are not derivatives are initially recorded at
acquisition value corresponding to the fair value of the instrument plus
transaction costs, except in the case of instruments belonging to the
category Financial assets recorded at fair value via the income statement,
27
which are recorded at fair value exclusive of transaction costs. A financial
instrument is classified when it is initially reported, based upon the purpose
for which the instrument was acquired. This classification determines the
manner in which the financial instrument will be valued after initial recording,
as described below.
Derivative instruments are recorded at fair value both initially and on an
ongoing basis. Changes in fair value are recorded in the manner described
below.
Financial assets valued at fair value via the income statement
This category consists of two sub-groups: financial assets available for
sale and other financial assets that the Company had initially chosen to be
placed into this category (according to the so-called Fair Value Option).
Financial instruments in this category are continually valued at fair value,
with changes in value recorded in the income statement. The first sub-group
includes derivatives with a positive fair value, except for derivatives that
are identified as, and deemed effective hedging instruments. The second
sub-group consists of financial investments in equity instruments, except for
shares in subsidiaries or associated companies.
Calculation of fair value
The following summarises the methods and assumptions primarily used to
establish the fair value of the financial instruments shown in the table above.
Financial instruments listed on an active market
For financial instruments listed on an active market, fair value is determined
on the basis of the asset’s listed bid rate at balance sheet date, with no
added transaction costs (e.g. commission) at the time of acquisition. A
financial instrument is considered to be listed in an active market if listed pri-
ces are easily accessible on a stock exchange, with a trader, broker, trade
association, company supplying current price information or supervisory
authority and these prices represent actual and regularly occurring market
transactions under business-like conditions. Possible future transaction
costs from a disposal are not considered. These instruments are included
in the balance sheet items Shares and participations, Bonds and other
interest-bearing securities and Other financial assets. Derivative transac-
tions with a negative market value are recorded on the liability side of the
balance sheet under the heading Derivatives. The predominant proportion
of the Company’s financial instruments has been assigned a fair value with
prices quoted on an active market.
Financial instruments not listed on an active market
If the market for a financial instrument is not active, the Company establis-
hes the fair value by means of various valuation techniques. As far as is
possible, the valuation methods employed are based on market data, while
company-specific information is used to the least degree possible. The
Company regularly calibrates valuation methods and tests their validity by
comparing the outcome of the valuation methods with prices from obser-
vable current market transactions in the same instrument. These valuation
methods are used solely for the Company’s investments in private equity
companies and hedge funds.
The total effect in the Income Statement from financial instruments
valued at fair value in the balance sheet by using valuation techniques based
on assumptions that are neither supported by the prices from observable
current market transactions in the same instruments, nor based on available
observable market information, amounted to MSEK -190, while the recorded
value per balance sheet date of 31 December 2008 amounted to MSEK 376.
Loans receivable and accounts receivable
Loans receivable and accounts receivable are non-derivative financial assets
which are not listed on an active market and with fixed or determinable
payments. These assets are valued at amortised cost. Amortised cost
is determined on the basis of the effective rate calculated at the time of
acquisition. Accounts receivables and loans outstanding are reported in the
amounts which are expected to be received, that is, after deductions for
bad debt losses.
held-to-maturity investments
Held-to-maturity investments are financial assets comprising interest-bea-
ring securities with determined or determinable payments and determined
durations which the Company has the expressed intent and ability to hold to
maturity. Assets in this category are valued at amortised cost.
Available-for-sale financial assets
The category available-for-sale financial assets includes financial assets not
classified in any other category or financial assets that the Company has
initially chosen to classify in this category. The holding of bonds and other
interest-bearing securities is recorded here. Assets in this category are
continuously valued at fair value with changes in value recorded in share-
holders' equity, except for changes in value due to impairment or to foreign
exchange rate differences on monetary items recorded in the income sta-
tement. Furthermore, interest on interest-bearing instruments is recorded
in accordance with the effective interest method in the income statement.
As regards these instruments, any transaction costs will be included in the
acquisition value when initially reported, and will, thereafter, be assessed on
an ongoing basis at fair value, to be included in the reserve item at fair value
until that point in time the instruments in question mature or are sold. At
disposal of the assets, the accumulated profit/loss, previously recorded in
the shareholders' equity section, is recorded in the income statement.
A long-term approach forms the basis for investments in this category,
where the yield granted by these instruments at the time of investment is of
significance for which investments shall be made.
Other financial liabilities
Borrowings and other financial liabilities, for example, accounts payable, are
included in this category. These liabilities are valued at amortised cost.
Financial guarantees
Financial guarantee agreements are recorded as insurance contracts in ac-
cordance with the accounting principles described in the section Accounting
of insurance contracts, above.
Write-downs of financial instruments
Impairment testing of financial assets
At each reporting date, the Company assesses whether there exists any
objective evidence indicating that a financial asset or group of assets
requires impairment as a consequence of one or several events occurring
after the asset is reported for the first time and that these loss-making
events have an impact on the estimated future cash flows from the asset or
group of assets. If there is objective evidence indicating that an impairment
requirement may exist, the assets in question are considered to be doubtful.
Objective evidence is constituted both of observable conditions which have
arisen and which have a negative impact on the possibility of recovering the
acquisition cost, and of significant or extended reductions of the fair value
of a financial investment classified as an available-for-sale financial asset.
During an impairment of an equity instrument classified as an available-
for-sale financial asset, previously reported accumulated profit or loss in the
shareholders' equity section is recorded in the income statement.
The reported value after impairment of assets belonging to the cate-
gories held-for-maturity investments and loans receivable and accounts
receivable, which are recorded at amortised cost, are estimated as the cur-
rent value of future cash flows discounted by the effective interest rate app-
licable when the asset was first recorded. Assets with a short duration are
not discounted. An impairment loss is recognised in the income statement.
Reversal of impairment
An impairment is reversed if an indication exists both that the impairment
requirement no longer exists and that a change has taken place in the as-
sumptions forming the basis of the estimation of the impaired amount.
The impairment of held-for-maturity investments or loans receivable and
accounts receivable, recorded at amortised cost, is reversed if a later
increase of the recoverable amount can be objectively related to an event
28
occurring after the impairment has been performed.
The impairment of interest-bearing instruments, classified as available-
for-sale financial assets, is reversed over the income statement if fair value
increases and this increase can objectively be related to an event occurring
after the impairment was carried out.
Leased assets
All lease agreements are classified and recorded in the Group and Parent
Company as operational leases.
In operational leasing, the leasing fee is expensed over the duration of the
lease, on the basis of the benefit received, which can differ from the amount
paid as a leasing fee during the year.
Tangible assets
Tangible assets are recorded at acquisition value after deduction for
accumulated depreciation and any impairment, with a supplement for any
appreciation. In disposal or sale, gains and losses are recorded net in
operating cost. Depreciation takes place systematically over the estimated
useful lives of the assets.
Estimated useful lives:
equipment such as cars, furniture and computer equipment 3 - 10 years
Depreciation of tangible and amortisation of intangible assets
Impairment testing of tangible and intangible assets and
participations in subsidiaries and associated companies.
The reported values of the assets are tested on each balance sheet date. If
any indication of an impairment requirement exists, the asset's recoverable
amount is estimated in accordance with IAS 36.
An impairment loss is recognised when the reported value of an asset or
cash-generating unit exceeds its recoverable amount. An impairment loss
is recognised in the income statement. The impairment of assets related to
a cash-generating unit is primarily allocated to goodwill. The proportional
impairment of other assets included in the unit is subsequently performed.
The recoverable amount is the highest of fair value less selling expenses
and value in use. In the calculation of value in use, future cash flow is
discounted by a discount factor that considers the risk-free interest rate and
the risk associated with the specific asset.
Reversal of impairment
An impairment is reversed if an indication exists both that the impairment
requirement no longer exists and that a change has taken place in the as-
sumptions forming the basis of the estimation of the recoverable amount.
However, the impairment of goodwill is never reversed. A reverse is only
performed to the degree that the asset's reported value after reversal does
not exceed the reported value that should have been reported, with deduc-
tion for depreciation or amortisation when appropriate, if no impairment had
been carried out.
Share capital
Dividends
Dividends are recorded as liabilities after approval of the dividend by the
General Meeting of Shareholders.
Other provisions
A provision is recognised in the balance sheet when the Company has an
existing legal or constructive obligation as a result of past events, when it
is likely that an outflow of resources will be required to settle the obligation
and when the amount can be estimated reliably. In cases in which the date of
payment has a material effect, the amount of the provision is calculated via
the discounting of the expected future cash flow to an interest rate before
taxes which reflects the relevant market assessments of the effect of the
time value of money and, if applicable, the risks associated with the liability.
Pensions and similar commitments
The Company's pension plans for contracted occupational pensions are
safeguarded via insurance contracts.
The pension plan for the Company’s employees has been assessed as both
a defined benefit and a defined contribution plan. The Company’s commit-
ments regarding contributions to defined contribution plans are recorded as
expenses in the income statement at the rate they are earned by employees
through the performance of services to the Company over a period.
In addition to the contracted occupational pensions safeguarded via
insurance, the Company has also signed separate agreements with certain
employees ensuring that these employees may terminate their service at an
earlier age than 65 years of age, although no earlier than 64 years of age
for an increased amount of compensation than granted by the collectively
agreed pension benefits.
Employees in Germany are covered by a defined benefit plan in which
pension obligations are entered as a liability in the Company's balance
sheet.
held-for-sale assets and discontinued operations
Classification as a discontinued operation takes place upon disposal or
at an earlier point in time if and when the operation meets the criteria for
classification as held-for-sale. A disposal group which is to be discontinued
can also qualify for classification as a discontinued operation. Sirius lacks
such assets.
Contingent liabilities
A contingent liability is recognised when there is a possible obligation which
arises from past events and whose existence is solely confirmed by one or
more uncertain future events, or when there is a commitment which is not
recorded as an liability or provision due to the fact that it is unlikely that an
outflow of resources will be required.
Parent Company's accounting principles
The Parent Company's annual report has been prepared in accordance with
the Swedish Act on Annual Accounts in Insurance Companies (ÅRFL), the
Swedish Financial Supervisory Authority's regulations and general advice
concerning insurance companies (FFFS 2008:26) and the Swedish Financial
Accounting Standards Council's recommendation RFR2, Accounting for
Legal Entities.
Changed accounting principles
The Parent Company's changed accounting principles have been recorded
in accordance with the provisions of IAS 8, but taking consideration of the
special transitional regulations in RFR 2. This implies that the changed ac-
counting principles are recorded with retroactive effect.
Differences between accounting principles in the
Group and the Parent Company
The differences between the accounting principles in the Group and the
Parent Company are presented below. The accounting principles stated
below for the Parent Company have been consistently applied for all periods
presented in the Parent Company’s financial statements, unless stated
otherwise.
Subsidiaries and associated companies
The Parent Company records participations in subsidiaries and associates
according to the cost method. Only dividends which have been received
are recognised as income, provided that such dividends derive from profits
earned subsequent to the acquisition. Dividend amounts exceeding this
earned profit are considered as repayment of the investment and reduce the
carrying value of the participations.
29
Anticipated dividends
Anticipated dividends from subsidiaries are recorded in those cases in which
the Parent Company has the sole right to make decisions regarding the
amount of the dividend and the Parent Company has reached a decision on
the dividend's amount before the Parent Company has published its financial
statements.
Taxes
Untaxed reserves are recorded in the Parent Company including deferred
income tax liabilities. However, untaxed reserves in the consolidated ac-
counts are allocated between deferred income tax liabilities and sharehol-
ders' equity.
Appropriations and untaxed reserves
Appropriations and untaxed reserves are only recorded in the Parent Com-
pany and not in the Group.
Taxation legislation in Sweden gives companies the option of decreasing
taxable income for the year by making provisions to untaxed reserves. When
applicable, untaxed reserves are set off against fiscal loss deductions or be-
come subject to taxation upon resolution. In accordance with Swedish prac-
tice, changes in untaxed reserves are recorded in the income statement.
Provisions made to untaxed reserves are recorded in the income statement
under the heading Appropriations. The accumulated value of the provisions
is recorded in the balance sheet under the heading Untaxed Reserves.
A total of 26.3 percent (28) of the untaxed reserves can be considered
as a deferred tax liability and 73.7 percent (72) as shareholders' equity. The
deferred tax liabilities can be described as an interest-free liability with a
non-defined duration. In the group accounts, 26.3 percent (28) of the un-
taxed reserves can be allocated to deferred tax liabilities and 73.7 percent
(72) to shareholders' equity. In an assessment of financial strength, the
total value of the untaxed reserves is considered risk capital, as any losses
can be covered, to a large extent, by the dissolution of untaxed reserves
without taxes becoming payable. The largest item attributable to untaxed
reserves refers to the safety reserve. The safety reserve forms a collective
security-conditioned reinforcement of the technical provisions. Accessibility
is limited to loss coverage and otherwise requires official authorisation.
Group contributions and shareholders’ contributions
for legal entities
The Company reports group contributions and shareholders' contributions
in accordance with the statements of the Emerging Issues Task Force of
the Swedish Financial Accounting Standards Council (UFR2). Shareholders’
contributions are recorded directly against shareholders' equity in the
receiving entity and in shares and participations in the entity providing the
contribution, to the extent that no impairment is required. Group contribu-
tions are recorded according to their financial significance. This implies that
group contributions provided and received for the purpose of minimising the
Group’s total taxes are recorded directly against retained earnings, with a
deduction for the current tax effects of the contribution.
Group contributions which can be seen as the equivalent of a dividend
are reported as a dividend. This implies that group contributions received
and their current tax effects are recorded in the income statement. Group
contributions provided and their current tax effects are recorded directly
against retained earnings.
In the receiving entity, group contributions which can be seen as the
equivalent of a shareholders' contribution are directly recorded in retained
earnings, with consideration for current tax effects. The contributor
records the group contribution and its current tax effects as investments in
participations in the Group company, to the extent that impairments are not
required.
30
Risk management infrastructure
The risk management processes within Sirius risk are supported by a risk
management infrastructure consisting of the Board of Sirius, various risk
committees, risk management functions, risk control functions, policies and
procedures, risk models and reporting routines. This is described in further
detail in the risk sections below.
The Board of Sirius is ultimately responsible for the Sirius risk manage-
ment strategy, risk tolerance and policies.
Sirius´ Management is directly responsible for all ERM activities, and in
order to discharge this responsibility, Sirius works through different risk
committees in carrying out certain duties.
The Sirius Group Risk Management function is responsible for the coordi-
nation, monitoring, internal control and compliance of all risk areas.
Internal Audit fulfils an important role in the independent evaluation of
risk management and control systems. This includes evaluating the reliabi-
lity of reporting, effectiveness and efficiency of operations, and compliance
with laws and regulations.
Sirius’ owner is listed in the US and, consequently, is required by the Sar-
banes-Oxley Act, Section 404, to express an opinion on the effectiveness of
internal control over financial reporting executed during the year. As part of
this assessment, a thorough documentation and evaluation of all processes
and controls leading up to the annual report have been undertaken. This
work has enabled Sirius to demonstrate compliance with the requirements
of the act.
Insurance risk management
Goals, principles and methods
A clear focus on managing insurance risks is vital for Sirius’ continued
success. These risks are managed mainly by evaluating the degree of gross
and net risk after retrocession Sirius is willing to assume.
The goal for all underwriting is to maximize profitability for each selec-
ted risk level. The anticipated profitability of each contract which is entered
into shall comprise the basic grounds for decision making regarding all
underwriting. Other guiding principles include diversification, strong ac-
cumulation controls and an active use of reinsurance in order to adjust risks
to acceptable levels.
Sirius divides insurance risk management into two principal areas;
underwriting risk and reserve risk.
Underwriting risk
Underwriting risk refers to premium and accumulation assessment, which is
defined as premium risk and catastrophe risk, respectively. The underwri-
ting risk assessment is performed by underwriters on each individual risk
and the Chief Underwriting Officer is ultimately responsible for managing
these risks.
The insurance premiums for assumed business are to cover expected
losses and expenses as well as provide a reasonable return on capital.
The premium risk is therefore associated with any possible level of losses
deviating from expected levels. The premium risk is generally managed
through the application of pricing models and underwriting procedures, but
also through a reduction in under-priced business, or through declining to
accept such business.
If a larger, catastrophic event occurs, impacting simultaneously a large
number of cedants, this may result in a single loss that could wipe out the
expected annual profit, or, even consume a portion of the solvency capital.
This catastrophic risk is generally managed with the assistance of underwri-
ting methods and tools which monitor and control the company’s total risks,
both gross and net. Catastrophe risk is also managed by the effective use
of retrocession.
In order to ensure consistency in the underwriting process, all under-
writing within Sirius complies with specific routines. Detailed Underwriting
Guidelines comprise the framework for all risk acceptances, and these
guidelines contain sections regarding, for example, Limits, Underwriting
Authorities and Restricted Business. A Four-Eyes Underwriting System, that
is, a system in which at least two individuals participate in each decision, is
31
Note 2 • Information on risks
Risk management
The company’s risk management – also referred to as Enterprise risk
management, ERM – is at the heart of Sirius’ thinking. Sirius defines ERM
as the discipline by which Sirius assesses, controls, exploits, finances and
monitors risks from all sources for the purpose of increasing Sirius’ short-
and long-term value to Sirius stakeholders.
ERM is, in essence, an ongoing process with the objective of creating a
risk management culture that emanates from top management and which
permeates throughout the entire organization. The management’s role is to
communicate, implement, monitor and nurture this culture.
The objectives of Sirius’ work with ERM are:
• Secure existing high profitability through better risk management.
• Obtain better information for strategic management decisions.
• Demonstrate strong risk management vis à vis rating agencies and other
interested parties.
• Provide stakeholders with transparent risk management
information.
• Comply with Solvency II requirements.
Risk strategy and the company’s risk appetite
Risk strategy and risk appetite comprise the foundation of the risk manage-
ment processes and risk management infrastructure. Sirius' risk strategy
and risk appetite have been established by the Sirius Board which aims to
secure a balance between risk, return and capital requirements. As part of
the planning process, strategic limits are explicitly discussed and specified.
The strategic risk appetite is expressed either in quantitative terms – for
example an aggregate risk limit for storms in Europe – or in qualitative
terms – for example in relation to operational risk.
From these overall risk appetite statements, operational limits are suc-
cessively applied at detail level throughout the organization in the form of
operational risk limits, maximum risk exposure, retrocession limits, foreign
exchange exposure limits, maximum equity exposure in the investment
portfolio, etc.
As part of the ERM culture, Sirius embraces the following qualitative
principles:
• Controlled/moderate risk taking and adequate capitalization.
• All insurance transactions are to yield positive technical results.
• Active use of retrocession as part of business and capital planning.
• Strive for diversification.
• Strong accumulation control.
• Strong and independent risk control functions.
• Inspire and motivate employees to further develop their risk
management capabilities.
applied for the majority of all business. The Guidelines are updated continu-
ously and reviewed annually.
There are several levels of control functions, as well as technical
systems, which are in place to monitor and ensure that policies and
procedures are followed. An underwriting control group reports to the Chief
Underwriting Officer. This group focuses in detail on the manner in which
the underwriting takes place and the underwriters follow these policies and
procedures. Another group monitors the underwriting system, in which all
contracts are registered, and ensures that the system is used correctly and
that the data is accurate. Finally, internal audit and Group risk management
also monitor and supervise the other control groups to ensure that suf-
ficient controls are being undertaken.
Sensitivity to risks attributable to insurance agreements
Within the insurance operations, property insurance (wind, flooding, and
earthquakes) constitutes the company’s greatest risk. In order to manage
this catastrophe risk, and the resulting accumulated risks, the company uti-
lizes a number of different models. Within the Property Insurance, the area
with the highest level of catastrophe risk, the company utilizes a system
linked to the underwriting system. In this system, all business is registe-
red and the company’s exposure is measured via a number of predefined
catastrophe scenarios.
The total exposure limits per country are also registered. The primary
tools, however, are the so-called catastrophe models which the company
has at its disposal via licensing agreements with AIR and RMS. Based on
these models, reports and analyses can be produced on a regular basis
demonstrating the various degrees of likelihood of estimated claims.
Everything from average claims per year to claims that are only expected to
occur once every 10,000 years can be estimated using these models. Aside
from the possibility of modeling single events, aggregate claims are also
modeled. Different levels of claims can also be modeled to varying degrees
of likelihood, from expected claims per year, to the worst level of annual
claims in 10,000 years.
Sensitivity analyses are undertaken based on a comparison of claims
estimated by various models, but also through changes to the assumptions
applied by the different models, such as, return periods.
Concentrations and sensitivity analysis
The table below shows a summary of the manner in which the company
analyses catastrophe risks, divided by geographical area and return peri-
ods. The figures show the situation as per 31 July 2008, when the company
experienced its highest level of exposure during 2008.
Sensitivity analysis – losses divided by geographical
area and return periods (MSEK)
Global - Gross
Global - Net
Europe - Gross
Europe - Net
Once per
Once per
100 years
250 years
3,351
2,042
2,617
1,399
4,206
2,599
3,399
1,848
Through the use of these simulation models, the company can obtain an
estimation of catastrophe risk, both prior to and after retrocession. The lar-
gest single catastrophe risk in the current portfolio is a storm (“windstorm”)
in Europe. An estimation of the maximum loss an individual windstorm
in Europe, expected to occur only once every 250 years, can result, ac-
cording to the table above, in an estimated net loss of MSEK 1,848 (gross
claims MSEK 3,399). In order to estimate how claims of this size affect
solvency capital, the company makes an estimation of the so-called net
financial impact, which is based on the estimated net claims adjusted for
the reinstatement premium (premium to reinstate cover after a loss) from
the covered clients and from the profit from other lines of business and
areas. The deficit is then compared to the solvency capital in order to find
whether the losses in relation to solvency capital are acceptable in relation
to the company’s risk tolerance.
Within the area Aviation reinsurance, the company applies another
licensed third-party model, ALPS, in which the exposure per airline company
can be followed on-line. Within the insurance class Accidents, the company
has a model which it has developed itself.
Reserve risk
The reserving risk, i.e. the risk that insurance technical provisions will be
insufficient to settle incurred and future claims, is foremost handled by
actuarial methods and a careful continuous review of reported claims. Risks
are also limited by reinsurance.
Provisions are made to obtain a correct balance sheet and match
revenues and costs with the period in which they emerged. The amount of
the provision shall correspond to the amount that is required to fulfill all
expected obligations and reflect the best knowledge available to Sirius.
Acknowledged and appropriate methods are used in these estimations.
Sirius supports its decisions on provisions by a combination of several
actuarial methods, such as the Chain Ladder method, the Bornhuetter-
Ferguson method and the Benktander method. A combination of bench-
marks and underwriting judgment is used for the most recent years. The
provisions are further annually reviewed by independent actuaries.
Regarding run-off results and claims development from previous years
please refer to Note 4 Claims incurred and Note 25 Claims Outstanding,
where a specification of claims costs and expenses relating to the current
year, respectively prior years is made.
Objectives, principles and methods for managing financial risks
In the company’s operation various types of financial risks arise, such as
market risks, credit risks, liquidity risks and operational risks. In order to
limit and control the risk taking in the operations, Sirius’ Board of Directors
has, as ultimately responsible for the internal control in the company, deter-
mined guidelines and instructions for the financial operations.
The overall investment objective is to achieve consistent positive returns
and to maximize long-term after-tax return on invested assets within
prudent levels of risk, through a diversified portfolio of high-quality fixed
income and equity investments.
Sirius makes an important distinction between Policyholder Funds Invest-
ments and Owners’ Funds Investments. Policyholder Funds are defined as
policyholder liabilities plus statutory minimum capital and surplus, less
policyholder assets. Policyholder liabilities are Net Technical Reserves as
defined by The Swedish Financial Supervisory Authority.
As regards Policyholder Funds Investments, at least 95 percent shall
be invested in fixed income securities at all times. Furthermore, at least 80
percent of the fixed income portfolio must be creditworthy and liquid; i.e.
consisting of securities with high credit ratings (investment grade).
To limit concentration risk (the risk of large losses) the guidelines also
include size limits, industry limits and rating limits.
The balance of Sirius' investable assets (Owners' Funds Investments)
may utilize a mixture of fixed income, equity and private investments with a
focus on maximizing total return and preserving capital.
Market risk
Market risk is the risk that an actual value on current or future cash flows
from a financial instrument varies due to changes in market prices and due
to changes in their respective volatilities. There are three types of market
risk: interest rate risk, currency risk and other price risk, primarily
equity risk.
The company’s investment operations during 2008 amounted to a return
32
Annual Report 2008
of 2 percent, expressed in SEK. The duration in the portfolio with interest-
bearing investments decreased during the year to 1.55 years. During the
year, the percentage of equities in the investment portfolio decreased to
approximately 26 percent. The table below shows the investment assets di-
vided by class of asset, excluding deposits in companies that are reinsured
by Sirius.
Investment assets, division by class of asset
Bonds and other interest-bearing securities
Shares and participations in associated companies
Shares and participations
- whereof venture capital companies
Cash and bank balances
Total
58.23%
13.93%
11.57%
1.54%
16.27%
100%
Below, the company’s exposure and sensitivity to respective market risk
is described. The descriptions are made on the basis of the company’s
reporting of the Traffic Light model to the Swedish Financial Supervisory
Authority as per 31 December 2008 with its sensitivity analyses in the form
of stress tests and subsequent capital requirements.
Interest rate risk
The company is exposed to the risk that the market value on its fixed-
interest assets decreases as market interest rates increase, or alternati-
vely, that the market value increases as the interest rates decreases. The
level of interest rate risk, or price risk, increases with the asset’s duration.
The following table illustrates, in absolute figures, the company’s exposure
to interest rate risk in accordance with the Traffic Light model as per 31
December 2008.
Investment assets, interest rate risk according to the Traffic Light model
Exposure
Scenario, Corresponding
requirements
requirements
(MSEK)
stress test
basis points
(MSEK)
(MSEK)
Capital
Reduced
capital
Nominal interest rate risk in SEK
Nominal interest rate risk in EUR
Nominal interest rate risk in USD
and other currencies
Total
4,312
1,557
2,822
8,691
30%
25%
30%
-
74
74
66
-
60
17
39
116
36
10
24
70
33
Annual Report 2008
Equity risk
The equity risk is the risk that the market value of an equity will decrease
as a result of factors related to the external economic climate and factors
related specifically to the company in question. Equity risks are mainly miti-
gated by a diversification of the share portfolio. The table below shows the
equity risk in accordance with the Traffic Light model as per 31 December
2008.
Investment assets, equity risk according to the Traffic Light model
Capital
Reduced
capital
Exposure
Scenario,
requirements
requirements
(MSEK)
stress test
(MSEK)
(MSEK)
Swedish shares and participations
Foreign shares and participations
Foreign associated companies
Total
-
1,294
2,714
4,008
-
35%
35%
-
453
950
1,403
-
274
575
849
Currency risk
Currency risk arises if assets and liabilities in the same foreign currency
vary in amounts. Sirius’ total net currency exposure is divided into two
categories, exposure related to Policyholders Funds, which is matched with
the corresponding assets, and exposure related Owner’s Funds. Sirius’
net Policyholders Funds exposure for currency risk is marginal as the
company’s strategy for managing currency risk is to match net insurance
debts in foreign currency with corresponding assets. The company’s total
net exposure for currency risk, i.e. including both Policyholder and Owners
Funds, before and after any hedging by derivative is shown in the table
below.
Exchange rate exposure – Group
(MSEK)
USD
EUR
GBP
Other
Shares and participations
Bonds and other interest-bearing securities
Other financial investment assets
Other assets and liabilities, net
Total assets
Technical provisions, net
Total liabilities and provisions
Net exposure before financial
hedging with derivatives
Nominal value currency forwards
Net exposure after financial
3,376
2,894
914
2,059
9,243
5,271
5,271
3,972
0
107
1,849
263
498
2,717
1,769
1,769
948
0
hedging with derivatives
3,972
948
20
90
76
-2
184
156
156
28
0
28
0
0
49
60
109
91
91
18
0
18
A general unfavorable change of 25 basis points, alternatively 10 percent
unfavorable change, in the respective foreign currencies toward SEK has
been calculated to affect the company’s equity and results as shown in
the table below. The analysis below assumes that the changes in exchange
rates do not affect other risk parameters, such as interest rates. The
sensitivity analysis takes into consideration existing financial hedges with
currency related derivatives.
Sensitivity analysis per currency
USD
EUR
GBP
Other
Total
Change 25 basis points
Change 10%
128
398
22
96
1
3
-
2
151
499
34
Annual Report 2008
Credit risk
Credit risk, or counterparty risk, refers to the risk that the company will not
receive agreed payment and/or will make a loss due to the counterparty’s
inability to fulfill its obligations. A substantial portion of the credit risk to
which the company is exposed, arises as a result of established reinsurance
agreements.
Credit risk in investment management
The company’s policy in the investment management is to allow only invest-
ments in securities with very high credit quality. The credit/counterparty
risk in this part of the operations is therefore assessed to be relatively
limited, except for the price effects on securities arising due to increases
in credit risk spreads as a result of the turbulence in the credit and financial
markets, a phenomenon which was clearly manifested during 2008.
The table below shows the exposure of Sirius’ investment assets divided
per class of asset.
Maximum exposure (MSEK) - Group
Bonds & other interest-bearing assets
- Governments
- Swedish mortgage institutions
- Other issuers
Shares & participations
Total
8,782
5,704
455
2,623
1,745
10,527
The figures below show fixed income investments and equity investments
per geographical area and credit rating classes. Fixed income investments
are also presented per sector.
Group and/or parent company
Credit quality on classes of financial assets, %
AAA
AA
Bonds and other interest-bearing securities
Swedish government
Swedish mortgage institutions
Foreign governments
Other foreign issuers
79
100
100
86
44
4
0
0
9
6
A
5
0
0
5
9
BB
BBB
Total
1
0
0
0
4
11
0
0
0
37
100
100
100
100
100
Equity investments, divided by geographical area
Interest-bearing investments, divided by geographical areas
Western Europe
North America
Scandinavia
Asia
Eastern Europe
Other
Total
27.18%
71.12%
0%
1.70%
0%
0%
100%
Western Europe
North America
Scandinavia
Other
Total
Interest-bearing investments, divided by sector
Governments
Swedish mortgage institutions
Other Swedish issuers
Other foreign issuers
Total
22.81%
34.28%
41.95%
0.96%
100%
64.95%
5.18%
1.18%
28.69%
100%
35
Annual Report 2008
Credit risk on receivables with reinsurers
The credit risk resulting from reinsurance ceded by Sirius can be divided
into two separate components; reinsurers’ share of technical provisions
as recorded on an ongoing basis under assets in the balance sheet, and
the potential exposure that would emerge in the event of large claims on
insurance portfolio, for example, in the case of a severe European wind-
storm. An event like this would trigger major portions of Sirius’ purchased
reinsurance cover.
To manage the risk of reinsurer insolvency, Sirius’ Security Commit-
tee assigns and monitors ratings of all counterparties according to Sirius
internal rating scale and reinsurance analysis model. For each rating there
is a corresponding maximum limit for the total exposure per reinsurer and
per program.
If a retrocessionaire’s credit worthiness deteriorates into unacceptable
status (in bankruptcy, liquidation, insolvent run-off scheme of arrangement,
or is, by other reasons, deemed to be unable or unwilling to honor its
obligations), the counterparty is classified as an IDC company (Insolvent or
Doubtful Company). Counterparties which are classified as IDC companies
are regularly monitored by the company’s Credit Control Committee. For
IDC companies, a provision is made to a credit risk reserve, which is esta-
blished based on the company’s Bad Debt Reserving Policy.
The credit risk reserve for these bad debts amounted, as per 31 Decem-
ber 2008, to MSEK 73.
Receivables regarding both direct insurance as well as assumed
reinsurance are followed up on a monthly basis and outwards reinsurance
is followed-up on a quarterly basis. Outstanding receivables are analyzed
on the basis of the length of time that has passed since the due date with
the following distribution: From up to 1 month, 2-3 months, 4-6 months, 7-9
months, 10-12 months and over 1 year. These analyses comprise the basis
for various collection activities, as does the supporting documentation
regarding the assessment of the counterparty’s credit risk status and any
write-down requirements. At the end of 2008, total outstanding receivables
exceeding 1 year past-due amounted to MSEK 90. If IDC companies are
excluded, this amount corresponds to MSEK 56. Outstanding receivables
for IDC companies are included in the credit risk reserve mentioned above.
In accordance with Sirius’ policy for write-downs of receivables outstanding
for more than 1 year, there is a specific reserve for counterparties which
are not classified as IDC companies which totals MSEK 23.
Reinsurers’ share of technical reserves consists of outstanding claims
including IBNR reserves, as well as a provision for unearned premiums and
remaining risks. The total amount as per 31 December 2008, was MSEK
4,973. The credit rating distribution for this exposure is shown in the table
below.
Credit Rating: Standard & Poor's
MSEK Percentage
154
0
20
92
208
17
152
0
462
216
24
3.1
0
0.4
1.9
4.2
0.3
3.1
0
9.3
4.3
0.5
3,628
4,973
72.9
100.0
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB or lower
Fully collateralized
Special approval
Internal reinsurance
Total
36
The item Internal reinsurance above, refers to the majority of ceded reinsu-
rance to White Mountains Life Re. This receivable is 100% guaranteed with
investment assets. Except for the credit exposure above, reported as an
asset in the balance sheet, significant credit losses can potentially arise for
large claims. Such credit losses can arise if two different events occur at
the same time, that is, if a large catastrophe event occurs at the same time
as a reinsurer to which Sirius has ceded business defaults.
The table below describes the assumed liabilities (excluding costs for
reinstatements) and the distribution of credit ratings for Sirius’ 2008
Retrocession Program.
Credit rating:
Standard & Poor’s
Assumed
liabilities
MSEK Percentage
AA+
AA
AA-
A+
A
A-
BBB+
Fully collateralized
BBB of lower
Special approval
Total
0
191
469
684
23
751
0
125
44
80
0
8.1
19.8
28.9
1.0
31.7
0
5.3
1.8
3.4
2,367
100.0
Liquidity risk
Liquidity risk is the risk that the company will have difficulties fulfilling
payment obligations, mainly those related to insurance liabilities. Liquidity
risk can also be expressed as the risk of loss or impaired earning potential
as a result of the company not being able to fulfill payment obligations
in due time. Liquidity risks arise as assets and debts including derivates
instruments have different durations.
The company’s strategy for dealing with liquidity risk aims to, in the
greatest extent possible, match expected payments and receipts of
payment (so called asset-liability management, ALM). This is accomplished
through advanced liquidity analysis of financial assets and insurance liabili-
ties. At the end of 2008, the duration of interest-bearing investment assets
was 1.55 years and the duration of insurance liabilities was 1.81 years.
The liquidity is monitored continuously and stress tests are performed for
different scenarios. The company’s claims payment capabilities are further
strengthened with its high portion of cash and bank deposits of the total
investment assets,
The cash flow analysis also provides an illustration of the company’s
liquidity situation.
Operational risks
Operational risk refers to the risk that errors or deficiencies in administra-
tive routines will lead to unexpected financial and reputational losses. These
can be caused by such aspects as insufficient internal control or defective
systems or technical equipment. The risk of internal or external irregula-
rities is included in the operational risk. Operational risks are mitigated
through internal control. The maintenance of satisfactory internal control is
a continuous process in the company and includes, among other things:
• requirements for the existence of appropriate routines and instructions,
• clearly defined segregation of duties, roles and responsibilities for
employees,
• IT support with integral mechanical reconciliations and controls,
• authority systems,
• internal information and reporting system, among other things, to meet
management’s requirements for information regarding, for example, risk
exposure, and
• information security.
Annual Report 2008
Sirius Group's Risk Management department performs, on a
regular basis, internal governance and control reviews, using a
self assessment approach based on interviews with process ow-
ners. The identified risks (including all risk types) are classified
according to probability of occurrence and severity. The result of
the review is presented and discussed with the management of
Sirius and suitable actions are decided.
In addition, compliance with the Sarbanes-Oxley Act compri-
ses an important aspect of internal control.
Sirius has prepared plans for the continuity of its operations
in the event of various catastrophe scenarios, a so-called
Business Continuity Plan. These plans are tested regularly and
updated for changing conditions. An important aspect of Sirius’
catastrophe planning is its fully integrated branch office network
which enables Sirius to conduct its operations from any office
without delay.
Solvency and capital requirements
The new Swedish solvency regulation, the so-called Traffic Light
system, takes into account the company’s risks in the areas
financial risks, insurance risk and operating expense risk. The
model results in a total capital net requirement which is compa-
red to a so called buffer capital in order to asses the company’s
capital strength. The table below shows the result in accordance
with the Traffic Light model as per 31 December 2008.
Total capital requirement according
to the Traffic Light model
Total capital net requirement
Capital buffer
Surplus
MSEK
2,622
10,925
8,303
Credit rating
The financial strength of Sirius International has been rated by
Standard & Poor’s, A M Best and Moody’s.
Credit rating as per 31 December 2008
Credit rating
Outlook
S&P's
A M Best
Moody’s
A-
Stable
A
Stable
A3
Stable
37
Annual Report 2008
Note 3 • Premium income
Premium income, geographical allocation
Group
Parent Company
2008
2007
2008
2007
Direct insurance, Sweden
Direct insurance, other EEA
Direct insurance, other countries
Premiums for accepted reinsurance
Premium income before ceded reinsurance
Premium for ceded reinsurance
Premium income after ceded reinsurance
-79
106
529
6,127
6,683
-1,081
5,602
0
208
502
5,942
6,652
-842
5,810
-79
106
529
6,127
6,683
-1,081
5,602
0
208
502
5,942
6,652
-842
5,810
Note 4 • Claims incurred for own account
Claims incurred for the year´s operations
2008
2007
Group
Gross
Ceded
Net
Gross
Ceded
Net
Claims paid
Loss portfolios
Change in provision for incurred and reported claims
Change in provision for incurred but not reported claims (IBNR)
Claims handling expenses
-1,531
45
-1,284
-843
-241
Total claims incurred for the year’s operations
-3 854
99
9
165
55
0
328
2008
-1,432
54
-1,119
-788
-241
-3,526
-1,461
44
-1,066
-1,096
-163
-3,742
Group
-1,316
44
-891
-992
-163
-3,318
145
0
175
104
0
424
2007
Claims incurred for previous year’s operations
Gross
Ceded
Net
Gross
Ceded
Net
Claims paid
Loss portfolios
Change in provision for incurred and reported claims
-2,518
-76
995
Change in provision for incurred but not reported claims (IBNR)
-1,860
Total claims incurred for the previous year’s operations -3,459
380
73
-273
3,143
3,323
-2,138
-3
722
1,283
-136
-2,225
-72
1,134
957
-206
264
14
-243
8
43
-1,961
-58
891
965
-163
Total claims incurred
-7,313
3,651
-3,662
-3,948
467
-3,481
2008
2007
Group
Gross
Ceded
Net
Gross
Ceded
Net
-4,049
-31
-241
-4,321
479
82
0
561
2008
-3,570
51
-241
-3,760
-3,686
-28
-163
-3,877
Group
409
14
0
423
2007
Gross
Ceded
Net
Gross
Ceded
-289
-2,703
-2,992
-108
3,198
3,090
-397
495
98
68
-139
-71
-68
112
44
-3,277
-14
-163
-3,454
Net
0
-27
-27
Total claims paid
Claims paid
Loss portfolios
Claims handling expenses
Total claims paid
Change in Provision for outstanding claims
Change in provision for incurred and reported claims
Change in provision for incurred but not reported claims (IBNR)
Total
38
Annual Report 2008
Claims incurred for the year´s operations
Gross
Ceded
Net
Gross
Ceded
Net
2008
2007
Parent Company
Claims paid
Loss portfolios
Change in provision for incurred and reported claims
Change in provision for incurred but not reported claims (IBNR)
Claims handling expenses
-1,531
45
-1,284
-843
-241
Total claims incurred for the year´s operations
-3,854
99
9
165
55
0
328
2008
-1,432
54
-1,119
-788
-241
-3,526
-1,439
44
-1,065
-1,074
-163
-3,697
Parent Company
-1,294
44
-890
-970
-163
-3,273
145
0
175
104
0
424
2007
Claims incurred for previous year’s operations
Gross
Ceded
Net
Gross
Ceded
Net
Claims paid
Loss portfolios
Change in provision for incurred and reported claims
-2,518
-76
995
Change in provision for incurred but not reported claims (IBNR)
-1,860
Total claims incurred for previous year's operations
-3,459
380
73
-273
3,143
3,323
-2,138
-3
722
1,283
-136
-2,226
-72
1,138
957
-203
264
14
-243
8
43
-1,962
-58
895
965
-160
Total claims incurred
-7,313
3,651
-3,662
-3,086
274
-2,812
Total claims paid
Claims paid
Loss portfolios
Claims handling expenses
Paid claims
Change in Provision for outstanding claims
2008
2007
Parent Company
Gross
Ceded
Net
Gross
Ceded
Net
-4,049
-31
-241
-4,321
479
82
0
561
2008
-3,570
51
-241
-3,760
-3,665
-28
-163
-3,856
Parent Company
-3,250
-14
-163
-3,433
409
14
0
423
2007
Gross
Ceded
Net
Gross
Ceded
Net
Change in provision for incurred and reported claims
Change in provision for incurred but not reported claims (IBNR)
Total
-289
-2,703
-2,992
-108
3,198
3,090
-397
495
98
73
-117
-44
-68
112
44
5
-5
0
39
Annual Report 2008
Note 5 • Operating costs
Specification of income statement item operating costs
Group
Parent Company
2008
2007
2008
2007
Acquisition costs
-1,239
-1,621
-1,239
-1,620
Change in prepaid acquisition costs (+/–)
Administrative expenses
Provisions and profit shares in ceded reinsurance (–)
-100
-260
196
-83
-238
97
-100
-265
196
-83
-255
97
Total
-1,403
-1,845
-1,408
-1,861
Other operating costs
Group
Parent Company
2008
2007
2008
2007
Claims handling expenses included in claims paid
Costs for treasury management included in Return on capital, costs
Costs for property management included in Return on capital, net
Other operating costs
Total operating costs
-241
-45
-2
-1,403
-1,691
-163
-44
-2
-1,845
-2,054
-241
-45
-1
-1,408
-1,695
-163
-42
-2
-1,861
-2,068
Total operating costs by type
Direct and indirect personnel costs
Premises costs
Depreciation/Amortisation
Other expenses related to operations
Total
Group
Parent Company
2008
2007
2008
2007
-318
-46
-7
-1,320
-1,691
-290
-34
-7
-1,723
-2 054
-305
-44
-7
-1,339
-1,695
-285
-33
-7
-1,743
-2,068
Note 6 • Investment, income
Dividend income from:
Swedish shares and participations
Foreign shares and participations
Interest income
Bonds and other interest-bearing securities
Other interest income
- of which from financial assets not valued at fair value
with changes in value reported in the income statement
Exchange rate profit (net)
Capital gains and reversed write-downs (net)
Foreign shares
Interest-bearing securities
Property
Group
Parent Company
2008
2007
2008
2007
2
48
339
85
85
913
0
0
0
415
16
449
115
115
0
133
8
0
2
33
338
85
85
595
0
0
0
415
16
371
115
115
0
94
5
0
Total return on capital, income
1,386
1,136
1,053
1,016
40
Annual Report 2008
Note 7 • Unrealised gains on investments
Group
Parent Company
2008
2007
2008
2007
Swedish shares and participations
Foreign shares and participations
Derivatives
Total unrealised gains on investments
2
167
1
170
0
121
2
123
2
167
1
170
0
135
2
137
Note 8 • Investment expenses and charges
Operating expenses for land and buildings
Asset management costs
Interest expenses
Other interest expenses
- of which from financial assets not valued at fair value
with changes in value reported in the income statement
Capital losses on foreign exchange, net
Swedish shares and participations
Foreign shares and participations
Subsidiaries & associated companies
Bonds and other interest-bearing securities
Group
Parent Company
2008
2007
2008
2007
-2
-49
-2
-2
0
-4
-259
-232
-15
-2
-44
-1
-1
-116
-1
0
-348
0
-2
-49
-2
-2
0
-4
-258
0
-15
-2
-42
-2
-2
-102
-1
0
-54
0
Write-down of investment assets
0
-411
0
-411
Total
-563
-923
-329
-614
Note 9 • Unrealised losses on investments
Group
Parent Company
2008
2007
2008
2007
Swedish shares and participations
Foreign shares and participations
Derivatives, forward exchange agreements
Total unrealised losses on investments
-8
-889
-1
-899
-2
-125
0
-128
-8
-610
-1
-620
-2
-125
-1
-128
41
Annual Report 2008
Note 10 • Net profit or net loss per category of financial instrument
Group
Financial assets
Financial assets
identified as
items valued
at fair value in
Available-for-
the income
sale financial
statement
instruments
Total
Shares and participations
Bonds and other interest-bearing securities
Total
-1,222
0
1,222
0
527
527
-1,222
527
-695
Parent Company
Financial assets
Financial assets
identified as
items valued
at fair value in
Available-for-
the income
sale financial
statement
instruments
Total
Shares and participations
Bonds and other interest-bearing securities
Total
-710
0
-710
0
527
527
-710
527
-183
Note 11 • Taxes
Group
Parent Company
2008
2007
2008
2007
Current tax expense (-) [/tax revenue (+)]
Current tax expenses(-) [/tax revenue]
Tax adjustment attributable to previous years
Deferred tax expense (-) [/tax revenue (+)]
Deferred tax regarding temporary differences
Total reported tax expense
-341
278
-69
-132
-211
23
-129
-317
-338
278
-233
-293
-211
25
19
-167
Tax adjustment attributable to previous years includes MSEK 299 regarding a tax credit for foreign taxes which has been reclassified from deferred tax regarding
temporary differences by MSEK -299.
42
Annual Report 2008
Reconciliation of effective tax
Reconciliation of effective income tax for the Group and Parent Company with the Swedish income tax rate
as follows:
Group
Parent Company
2008
2007
2008
2007
Tax according to applicable tax rate for the Parent Company
Non-deductible expenses
Non-taxable income
Utilisation of previously non-capitalised loss carry-forward
Tax regarding previous years
Other
-28,0%
-8,6%
7,6%
0
-5,5%
18,6%
-28,0%
-15,3%
5,5%
0,9%
0,9%
0,5%
-28,0%
-0,1%
4,4%
0
-4,5%
-0,2%
-28,0%
-22,9%
19,6%
1,3%
1,3%
0,7%
Reported effective tax
-15,9%
-35,5%
-28,4%
-28,0%
"Other" refers mainly to the effect of the change in the tax rate in Sweden for income year 2009 to 26.3% Profit before tax
for the Parent Company refers to profit after transfer to safety reserve. The total provision for 2008 amounts to 0 (537).
Group
Parent Company
Intangible assets
-IT
Capitalized
Acquired
expenditure for
intangible
development
assets
Intangible assets
-IT
Capitalized
Acquired
expenditure for
intangible
development
assets
work
Goodwill
Total
work
Goodwill
Total
Note 12 • Intangible assets
Accumulated acquisition value
Opening balance, 1 Jan 2007
Closing balance, 31 Dec 2007
Opening balance, 1 Jan 2008
Closing balance, 31 Dec 2008
Accumulated amortisation
Opening balance, 1 Jan 2007
Amortisation for the year
Closing balance, 31 Dec 2007
Opening balance, 1 Jan 2008
Amortisation for the year
Closing balance, 31 Dec 2008
Carrying amount
Per 1 Jan 2007
Per 31 Dec 2007
Per 1 Jan 2008
Per 31 Dec 2008
Amortisation for the year is included in the
following rows of the income statement for 2007:
Operating costs
Other costs
Total
Amortisation for the year is included in the
following rows of the income statement for 2008:
Operating costs
Other costs
Total
65
65
65
66
-64
-1
-65
-65
0
-65
1
0
0
1
-1
0
-1
0
0
0
615
615
615
615
-270
-27
-297
-297
-27
-324
345
318
318
291
0
-27
-27
0
-27
-27
680
680
680
681
-334
-28
-362
-362
-27
-389
346
318
318
292
-1
-27
-28
0
-27
-27
IT-related intangible assets include capitalised expenditure for development work of critical business systems.
All intangible assets are amortised. Refer to the accounting principles for information on amortisation.
65
65
65
66
-64
-1
-65
-65
0
-65
1
0
0
1
-1
0
-1
0
0
0
460
460
460
460
-197
-17
-214
-214
-17
-231
263
246
246
229
0
-17
-17
0
-17
-17
525
525
525
526
-261
-18
-279
-279
-17
-296
264
246
246
230
-1
-17
-18
0
-17
-17
43
Annual Report 2008
Note 13 • Land and Buildings
Group
Parent Company
Acquisition cost
Opening balance, 1 January 2007
Closing balance, 31 December 2007
18
18
18
18
Opening balance, 1 January 2008 18 18
Disposals 0 0
Closing balance, 31 December 2008
Depreciation
Opening balance, 1 January 2007
Depreciation for the year
Closing balance, 31 December 2007
Opening balance, 1 January 2008
Depreciation for the year
Disposals
Closing balance, 31 December 2008
Carrying amount
1 January 2007
31 December 2007
1 January 2008
31 December 2008
Assessed value
18
-12
-1
-13
-13
-1
0
-14
7
5
5
4
18
-12
-1
-13
-13
-1
0
-14
7
5
5
4
Group
Parent Company
2008
2007
2008
2007
Assessed value, buildings (in Sweden)
Assessed value, land (in Sweden)
Total
1
1
2
1
1
2
1
1
2
1
1
2
Note 14 • Shares and participations in Group companies
Name of subsidiary Registered offices, country
Participating interest, %
Sirius Rückversicherungs Service GmbH
Hamburg, Germany
Sirius Belgium Réassurances S.A
Liège, Belgium
Sirius International Holding (NL) B.V Amsterdam, The Netherlands
2008
2007
100
100
100
100
100
-
Accumulated acquisition cost
Beginning of year
Acquisition
Disposals
Closing balance, 31 December
Accumulated write-downs
Beginning of year
Acquisition
Disposals
Write-downs for the year
Closing balance, 31 december
Carrying amount 31 December
44
Parent Company
2008
2007
609
643
0
1,252
2,990
0
-2,382
609
-596
-1,487
0
0
0
-596
656
0
891
0
-596
13
Annual Report 2008
Subsidiaries' equity
2008
Name of subsidiary
Equity
Share %
Number of
Book value
Profit/loss
shares
2008
Sirius Rückversicherungs Service GmbH, Hamburg, Germany
Sirius Belgium Réassurances S.A., Liège, Belgium
14
15
100
100
0
13
2
0
I share nom.
Value EUR 51,129
Share capital total
EUR 1,245,681
consisting of
700,000 shares
with nom. value
EUR 100 per share
Sirius International Holding (NL) B.V.,Amsterdam, The Netherlands
467
100
643
Share capital total
-241
EUR 18,000
consisting of
180 shares
with nom. value
EUR 100 per share
Total
496
656
-239
2007
Name of subsidiary
Equity
Share %
Number of
shares
Book value Profit/loss
2007
Sirius Rückversicherungs Service GmbH, Hamburg
Sirius Belgium Réassurances S.A, Liège Belgien
10
13
100 1 share nom.value
0 1
EUR 51,129
100
Share
13 0
capital total
EUR 1,245,681
consisting of
700,000 shares
without nom. value
Total
23
13 1
45
Annual Report 2008
Note 15 • Shares and participations in associated companies
Carrying amount at start of year
Acquisitions of associated companies
Share of associated company's profit/loss
Translation differences
Other changes in associated company's equity
Group
2008
2007
1,652
1,673
385
-249
296
17
0
14
-17
-18
Carrying amount at end of year
2,101
1,652
Carrying amount at start of year
Acquisition of associated company
Carrying amount at end of year
Parent Company
2008
2007
1,673
385
2,058
0
1,673
1,673
Associated Companies
Assets
Liabilities
Equity
Net income
Share of
capital %
1)
Number
of shares
White Mountains International S.a.r.l., Luxemburg
Total
27,461
27,461
20,001
20,001
7,460
7,460
-1,549
-1,549
28,2
28,2
2,461,000
2,461,000
1) The participating interest in the company's total equity at the end of the year was 28.2%, with the equivalent figure at the beginning
of the year at 20.4%. The participating interest in terms of outstanding shares at the end of the year was 22.0%, with the equivalent
figure at the beginning of the year at 17.4%.
Note 16 • Investments in shares and participations
Group
1,745
2,196
2,338
2,072
Fair value
Acquisition cost
2008
2007
2008
2007
Fair value
Acquisition cost
2008
2007
2008
2007
Parent Company
1,294
2,191
1,595
2,069
Further information on financial instruments can be found in Note 31.
46
Annual Report 2008
Note 17 • Bonds and other interest-bearing securities
Group
Swedish government
Swedish mortgage institutions
Other Swedish issuers
Foreign governments
Other foreign issuers
Total
Fair value
Acquisition cost
2008
2007
2008
2007
3,126
1,089
2,578
1,989
8,782
2,780
1,477
1,441
1,964
7,662
2,982
1,121
2,523
2,089
8,715
2,794
1,511
1,444
1,965
7,714
of which listed
8,782
7,662
8,715
7,714
Average difference compared to nominal value
Total excess amount
Total shortfall
365
200
159
53
166
68
183
25
Parent Company
Swedish government
Swedish mortgage institutions
Other Swedish issuers
Foreign governments
Other foreign issuers
Total
Fair value
Acquisition cost
2008
2007
2008
2007
3,126
1,089
2,578
1,989
8,782
2,780
1,447
1,441
1,964
7,662
2,982
1,121
2,523
2,089
8,715
2,794
1,511
1,444
1,965
7,714
of which listed
8 782
7 662
8,782
7,714
Average difference compared to nominal value
Total excess amount
Total shortfall
365
200
159
53
166
68
183
25
Note 18 • Other financial assets
Fair value
Acquisition cost
2008
2007
2008
2007
Group
Derivative currency forward agreements
Total
0
0
2
2
0
0
0
0
Fair value
Acquisition cost
2008
2007
2008
2007
Parent Company
Derivative currency forward agreements
Total
0
0
2
2
0
0
0
0
47
Annual Report 2008
Note 19 • Debtors arising out of direct insurance and other debtors
Debtors arising out of direct insurance
Amounts due from intermediaries
Total debtors arising out of direct insurance
Other debtors Group companies
Income taxes recoverable
Deferred tax assets – see Note 29
Other debtors
Total other debtors
Group
Parent Company
2008
2007
2008
2007
37
37
30
30
37
37
30
30
Group
Parent Company
2008
2007
2008
2007
0
766
21
55
842
2
269
320
63
654
0
753
21
40
814
2
269
320
39
630
Note 20 • Categories of financial assets and liabilities and their fair values
Group 2008
Financial assets
Available-
valued at fair
value via the
income statement
for-sale
financial
assets
Total
carrying
amount
Acquisition
Fair value
value
Financial assets
Shares and participations
Bonds and other interest-bearing securities
Accrued income
Total
1,745
0
629
2,374
0
8,782
0
1,745
8,782
629
1,745
8,782
629
2,099
8,234
629
8,782
11,156
11,156
10,962
Parent Company 2008
Financial assets
Available-
valued at fair
value via the
income statement
for-sale
financial
assets
Total
carrying
amount
Acquisition
Fair value
value
Financial assets
Shares and participations
Bonds and other interest-bearing securities
Accrued income
Total
1,294
0
628
1,922
0
8,782
0
1,294
8,782
628
1,294
8,782
628
1,359
8,234
628
8,782
10,704
10,704
10,221
Group 2008
Financial liabilities
liabilities
amount
Fair value
Other
Carrying
Other liabilities
Accrued expenses
Total
Parent Company 2008
546
122
668
546
122
668
546
122
668
Financial liabilities
liabilities
amount
Fair value
Other
Carrying
Other liabilities
Accrued expenses
Total
554
122
676
554
122
676
554
122
676
48
Annual Report 2008
Group
Equipment
Parent Company
Equipment
88
9
-3
2
-3
93
93
7
-28
72
-75
-6
3
-1
2
-77
-77
-7
28
-56
13
16
16
16
86
9
-3
0
0
92
92
7
-28
71
-74
-6
3
0
0
-77
-77
-7
28
-56
12
15
15
15
Note 21 • Tangible assets
Acquisition cost
Opening balance 1 January 2007
Acquisitions
Disposals
Acquisition of subsidiary
Sale of subsidiary
Closing balance 31 December 2007
Openinge balance 1 January 2008
Acquisitions
Disposals
Closing balance 31 December 2008
Depreciation
Opening balance 1 January 2007
Depreciation for the year
Disposals
Acquisition of subsidiary
Sale of subsidiary
Closing balance 31 December 2007
Opening balance 1 January 2008
Depreciation for the year
Disposals
Closing balance 31 December 2008
Reported values
1 January 2007
31 December 2007
1 January 2008
31 December 2008
Note 22 • Deferred acquisition costs
Opening balance
Capitalisation for the year
Depreciation/amortisation for the year
Exchange rate gains/losses
Closing balance
Note 23 • Untaxed reserves
Parent Company
Group
Parent Company
2008
2007
2008
2007
464
341
-441
77
441
569
468
-551
-22
464
464
341
-441
77
441
569
468
-551
-22
464
Accumulated accelerated depreciation regarding goodwill and equipment
2008
2007
Opening balance 1 January
Change for the year
Exchange rate fluctuation for the year
Closing balance as of 31 December
Safety reserve
Opening balance 1 January
Provisions for the year
Closing balance 31 December
81
-20
0
61
9,136
0
9,136
81
0
0
81
8,599
537
9,136
Total untaxed reserves
9,197
9,217
49
Annual Report 2008
Note 24 • Provisions for unearned premiums and unexpired risks
Provisions for unearned premiums
Opening balance
Insurance policies signed during the period
Earned insurance premiums for the period
Reclassification to return on capital
Currency effect
Closing balance
Provisions for unexpired risks
Opening balance
Current year’s provisions included in profit/loss
Previous yerar´s provisions included in profit/loss
Currency effect
Closing balance
Provisions for unearned premiums
Opening balance
Insurance policies signed during the period
Premiums earned during the period
Currency effect
Closing balance
2008
2007
Group
Gross
Reinsurer's
Net
Gross
Reinsurer's
Net
share
161
200
-135
0
48
274
-1,775
-1,468
1,697
0
-363
-1,909
-1,936
-1,668
1,832
0
-411
-2,183
share
167
144
-144
0
-6
-2,103
-1,710
1,951
8
79
-2,270
-1,854
2,095
8
85
-1,936
161
-1,775
2008
2007
Group
Gross
Reinsurer's
Net
Gross
Reinsurer's
Net
share
93
0
-1
19
111
-125
-9
1
-27
-160
-32
-9
0
-8
-49
share
3
89
0
1
93
-3
-121
0
-1
-125
0
-32
0
0
-32
2008
2007
Parent Company
Gross
Reinsurer's
Net
Gross
Reinsurer's
Net
share
161
200
-135
48
274
-1,775
-1,468
1,697
-363
-1,909
-1,936
-1,668
1,832
-411
-2,183
share
167
144
-144
-6
161
-2,095
-1,710
1,951
79
-1,775
-2,262
1,854
2,095
85
-1,936
Provisions for unexpired risks
Opening balance
Current year’s provisions included in profit/loss
Previous year´s provisions included in profit/loss
Currency effect
Closing balance
2008
2007
Parent Company
Gross
Reinsurer's
Net
Gross
Reinsurer's
Net
share
93
0
-1
19
111
-125
-9
1
-27
-160
-32
-9
0
-8
-49
share
3
89
0
1
93
-3
-121
0
-1
-125
0
-32
0
0
-32
50
Annual Report 2008
Note 25 • Claims outstanding
Provisions for outstanding claims
2008
2007
Group
Gross
Reinsurer's
Net
Gross
Reinsurer's
Net
Opening balance, reported claims
Opening balance, incurred but not reported claims (IBNR)
Opening balance
Cost for claims incurred during the current year
Change in estimated cost for claims incurred
in previous years (close-down profit/loss)
Claims handling expenses
-3,898
-2,321
-6,219
-3,853
-3,460
-241
Paid/transferred to insurance liabilities or other current liabilities
-4,080
Currency effect
Sale of company
Closing balance
Closing balance, reported claims
Closing balance, incurred but not reported claims (IBNR)
-1,296
0
-10,507
-4,861
-5,646
share
712
395
1,107
,
329
3,322
0
561
392
0
4,588
698
3,890
-3,186
-1,926
-5,112
-3,524
-138
-241
-3,519
904
0
-5,919
-4,163
-1,756
share
804
295
1,099
424
43
0
423
-36
0
1,107
712
395
-4,057
-3,678
-7,735
-3,742
-206
-163
-3,714
191
1,396
-6,219
-3,898
-2,321
-3,253
-3,383
-6,636
-3,318
-163
-163
-3,291
155
1,396
-5,112
-3,186
-1,926
Provisions for outstanding claims
2008
2007
Parent Company
Gross
Reinsurer's
Net
Gross
Reinsurer's
Net
Opening balance, reported claims
Opening balance, incurred but not reported claims (IBNR)
Opening balance
Cost for claims incurred during the current year
Change in estimated cost for claims incurred
in previous years (close-down profit/loss)
Claims handling expenses
-3,898
-2,321
-6,219
-3,853
-3,460
-241
Paid/transferred to insurance liabilities or other current liabilities
-4,080
Currency effect
Closing balance
Closing balance, reported claims
Closing balance, incurred but not reported claims (IBNR)
-1,296
-10,507
-4,861
-5,646
share
712
395
1,107
329
3,322
0
561
392
4,588
698
3,890
-3,186
-1,926
-5,112
-3,524
-138
-241
-3,519
904
-5,919
-4,163
-1,756
share
804
295
1,099
424
43
0
423
-36
1,107
712
395
--4,058
-2,266
-6,324
-3,697
-203
-163
-3,693
149
-6,219
-3,898
-2,321
-3,254
-1,971
-5,225
-3,273
-160
-163
-3,270
113
-5,112
-3,186
-1,926
51
Annual Report 2008
Note 26 • Equalisation provision
Group
Parent Company
2008
2007
2008
2007
Opening balance
Dissolution of provisions made in previous years
Exchange rate gain/loss
Closing balance
5
-3
1
3
15
-10
0
5
5
-3
1
3
20
-15
0
5
Note 27 • Claims handling provision
Group
Parent Company
2008
2007
2008
2007
Opening balance
Dissolution of provisions made in previous years
Provisions for the year
Closing balance
77
-77
113
113
21
-21
77
77
77
-77
113
113
0
0
77
77
Note 28 • Pension provisions and similar items
Pension provisions
Group
Parent Company
2008
2007
2008
2007
Total amount *
15
13
0
0
* Employees in Germany are covered by a defined benefit pension plan. The plan is funded by Sirius. Pension claims are reported
as liabilities on the company’s balance sheet.
52
Annual Report 2008
Note 29 • Tax Provisions
Tax items accounted for directly against shareholders’ equity
Group
Parent Company
2008
2007
2008
2007
Deferred taxes attributable to
available-for-sale financial assets
Total tax items reported directly against equity
-33
-33
-4
-4
-33
-33
1
1
Reported tax liabilities
Current tax liability
Deferred tax liability
Total tax liabilities
Group
Parent Company
2008
2007
2008
2007
429
2,419
2,848
225
2,616
2,841
427
0
427
224
33
257
Reported deferred tax receivables and tax liabilities
Reported deferred tax receivables and tax liabilities related to the following:
Group
Pension provisions
Other provisions
Surplus value of securities
Safety reserve and accelerated depreciation
Foreign tax credits
Net tax receivables/tax liabilities
Parent Company
Pension provisions
Other provisions
Surplus value of securities
Foreign tax credits
Net tax receivables/tax liabilities
Unreported deferred tax receivables
Deferred tax
assets
Deferred income
tax liabilities
Net
2008
2007
2008
2007
2008
2007
8
13
0
0
0
21
6
0
15
0
299
320
0
0
0
-2,419
0
-2,419
0
0
-35
-2,581
0
8
13
0
-2,419
0
-2,616
-2,398
6
0
-20
-2,581
299
-2,296
Deferred tax
assets
Deferred income
tax liabilities
Net
2008
2007
2008
2007
2008
2007
8
13
0
0
21
6
0
15
299
320
0
0
0
0
0
0
0
-33
0
-33
8
13
0
0
21
6
0
-18
299
287
Deductible temporary differences and fiscal loss carry forward for which deferred tax receivables have not been reported in the income statement and balance sheet.
53
Annual Report 2008
Changes in deferred tax in temporary differences and loss carry-forward
Group
Balance per
the income
against
Balance per
1 Jan 2008
statement
equity
31 Dec 2008
Recorded in
Recorded
Pension provisions
Other provisions
6
0
2 0
13
0
8
13
Surplus value of securities -20 53 -33 0
Safety reserve and accelerated depreciation
-2,581
162
0
-2,419
Foreign tax credits 299 0 0 299
Reclassification
Total
0
-2,296
-299
-69
0
-33
-299
-2,398
Group
Balance per
the income
against
Balance per
1 Jan 2007
statement
equity
31 Dec 2007
Recorded in
Recorded
Receivables
Reclassification
Pension provisions
Other provisions
Surplus value of securities
Safely reserve and accelerated depreciation
Foreign tax credits
Total
47
-47
3
0
0
3
0
0
0
47
-47
6
-2 2 0 0
0
-2,430
266
-2,163
-16
-151
33
-129
-4
0
0
-4
-20
-2,581
299
-2,296
Parent Company
Balance per
the income
against
Balance per
1 Jan 2008
statement
equity
31 Dec 2008
Recorded in
Recorded
Pension provisions
Other provisions
Surplus value of securities
Foreign tax credits
Reclassification
Total
6
0
-18
299
0
287
2
13
51
0
-299
-233
0
0
-33
0
0
-33
8
13
0
299
-299
21
Parent Company
Balance per
the income
against
Balance per
1 Jan 2007
statement
equity
31 Dec 2007
Recorded in
Recorded
Receivables
47
Reclassification -47
Pension provisions
Surplus value of securities
0
0
Foreign tax credits 266
Total
266
0
0
6
-19
32
19
0
0
0
1
0
1
47
-47
6
-18
299
287
There is no loss carry-forward included in the change of deferred tax.
54
Annual Report 2008
Note 30 • Creditors arising out of direct insurance and other creditors
Creditors arising out of direct insurance
Group
Parent Company
2008
2007
2008
2007
Amounts due to intermediaries
Total creditors arising out of insurance
25
25
23
23
25
25
23
23
Other creditors
Amounts due to group companies
Other creditors
Total other creditors 1)
Group
Parent Company
2008
2007
2008
2007
484
62
546
225
76
301
496
58
554
231
75
306
1) The majority of the receivables has a duration less than one year
Note 31 • Derivatives with negative values
Derivatives with negative values
Fair value
Acquisition cost
Group
2008
2007
2008
2007
Currency forwards
Total
0
0
-1
-1
0
0
0
0
Derivatives with negative values
Parent Company
Fair value
Acquisition cost
2008
2007
2008
2007
Currency forwards
Total
0
0
-1
-1
0
0
0
0
Note 32 • Contingent liabilities and commitments
In the form of pledged assets for
own liabilities and provisions
Bonds and other interest-bearing securities
Accrued interest
Cash and bank
Assets for which policy holders have
Group
Parent Company
2008
2007
2008
2007
8,527
8,343
0
183
7,714
7,570
0
144
8,527
8,343
0
183
7,714
7,570
0
144
preferential rights
8,527
7,714
8,527
7,714
On the basis of the stipulations in Chapter 7, Section 11 of the Insurance Business Act, registered assets amount to MSEK 8,027. In the case of insolvency, the
insured has preferential rights to the registered assets. During the course of operations, the Company has the right to register and de-register assets from the
register, provided that all insurane commitments are covered by technical provisions in accordance with the Insurance Business Act. The summary in the annual
report for 2007 did not include registered assets in their entirety. For the purpose of comparability between the years, the disclosures for 2007, therefore,
have been updated.
Group
Parent Company
MSEK (nominal amount)
2008
2007
2008
2007
Guarantee issued on behalf of subsidiaries
Future commitments for investments in venture capital company
Total
0
79
79
0
76
76
0
79
79
0
76
76
55
Annual Report 2008
Note 33 • Associated parties
Summary of transactions with associated parties
Associated parties within the White Mountains Group
Group and Parent Company
2008
Premium
Services
purchased
from
income,
Indemni-
associated
Receivables
Liabilities,
associated
associated
parties per
parties per
net
fication
parties
Dividends
Other
31 Dec.
31 Dec.
Other associated parties
Folksamerica Reinsurance Co.
Esurance, OneBeacon
WM Life Re - ceded reinsurance
White Mountains Re Underwriting Services Ltd.
White Mountains Financial Services LLC
Sirius Insurance Holding Sweden AB - group contribution
Fund American Holdings AB - group contribution
White Mountains Advisors LLC
Total
336
1,850
-179
0
0
0
0
0
-313
-1,780
3,299
0
0
0
0
0
2,007
1,206
-2
0
0
0
-23
0
0
-24
-49
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
914
540
0
0
0
0
0
0
1,454
1
13
0
23
11
280
186
7
521
Group and Parent Company
2007
Premium
Services
purchased
from
income,
Indemni-
associated
Receivables
Liabilities,
associated
associated
parties per
parties per
net
fication
parties
Dividends
Other
31 Dec.
31 Dec.
Other associated parties
Folksamerica Reinsurance Co.
Esurance, One Beacon
WM Life Re – ceded reinsurance
White Mountains Financial Services LLC
Sirius Insurance Holding Sweden AB
Fund American Holdings AB – group contribution
White Mountains Advisors LLC
Total
637
1,476
-152
0
0
0
0
-332
-1,632
-6
0
0
0
0
1,961
-1,970
0
0
0
-21
0
0
-27
-48
0
0
0
0
414
-235
0
179
0
0
0
0
-411
0
0
-411
610
393
0
0
0
0
0
1,003
0
0
26
7
0
211
6
250
56
Annual Report 2008
Note 34 • Average number of employees, salaries and other remuneration
Average number of employees - Group
Men
Women
Total
Men
Women
Total
2008
2007
Parent Company
Germany
Bermuda
Total, Group
238
10
0
248
117
1
2
120
111
3
0
114
127
7
0
134
2008
244
3
2
249
127
2
0
129
2007
Average number of employees – Parent Company
Men
Women
Total
Men
Women
Total
Sweden
UK
Belgium
Switzerland
Singapore
Denmark
54
23
23
4
5
2
73
19
21
3
9
2
Total, Parent Company
111
127
127
42
44
7
14
4
238
59
25
22
4
6
1
77
19
20
3
8
0
117
127
136
44
42
7
14
1
244
Senior management in the Group and Parent Company
Men
Women
Total
Men
Women
Total
2008
2007
Board and CEO
Other senior members of management
Total Group/Parent Company
4
3
7
0
0
0
4
3
7
4
3
7
0
0
0
4
3
7
Remuneration to employees
Salaries including bonuses
Of which paid out bonuses
Pension expenses
Social security contributions, special employer’s
contributions, pensions
Total remuneration to employees
Group
Parent Company
2008
2007
2008
2007
207
41
41
55
303
191
25
37
52
280
196
39
40
55
291
185
24
37
52
274
Of which paid remuneration for the year to:
Group
Parent Company
CEO
2008
2007
2008
2007
Salaries including bonuses
Of which paid out bonuses
Pension expenses
Total remuneration to CEO
The board and other senior members of management
Salaries including bonuses
Of which paid out bonuses
Pension expenses
Total remuneration to the board and other
senior members of management
8
5
3
11
9
4
2
11
6
3
3
9
7
2
2
9
8
5
3
11
9
4
2
11
6
3
3
9
7
2
2
9
57
Annual Report 2008
Salaries and other remuneration,
divided by country – Group
2008
2007
Of which
bonuses
Salaries and
paid for
Saleries and
Of which
bonuses
paid for
remuneration
the year
remuneration
the year
Total, Parent Company
Germany (1 October – 31 December 2007)
Bermuda (1 January – 30 September 2007)
Total salaries and other remuneration
196
11
0
207
39
2
0
41
185
2
4
191
24
0
1
25
Salaries and other remuneration,
divided by country – Parent Company
2008
2007
Of which
bonuses
Salaries and
paid for
Saleries and
Of which
bonuses
paid for
remuneration
the year
remuneration
the year
104
33
40
9
7
3
196
22
4
10
2
1
0
39
99
28
43
8
7
0
185
13
2
7
1
1
0
24
Sweden
Belgium
UK
Switzerland
Singapore
Denmark
Total, Parent Company
Salaries and remuneration
Belgium: All employees are covered by a pension plan in which Sirius pays 4.5
The Board receives remunerations in accordance with the resolutions of the
percent or 6.5 percent of the salary, depending on the employee category. The
Annual General Meeting. Board fees are not paid to individuals employed in
employee pays 2 percent.
the company. No Board fees were paid in 2008. Remuneration to the CEO and
Possible changes to the plan must be approved by local unions. The
other senior members of management consists of basic salary, bonuses and
premiums are invested by an insurance company and the employee cannot
other compensations such as car benefits and pensions.
influence how the money is invested. At the time of retirement, the employee
has the option of either receiving the money as a lump sum or as a series of
Variable remuneration
payments over time.
The Annual General Meeting has resolved upon a variable remuneration plan for
Germany: Employees are covered by a defined benefit pension plan. The
the CEO and senior members of management.
pension receivables are reported as liabilities on the balance sheet.
Other employees are also covered under a variable remuneration plan.
Switzerland: Employees are covered by pension plans according to the
Levels of variable remuneration are based upon the Group’s profit/loss as well
industrial sector to which they belong.
as individually set goals.
The plan is a combination of a defined benefit and fee based pension plan.
Sirius pays for 60 percent of the premiums while the employee pays for the
Pensions
remaining 40 percent.
Sweden: Sirius applies the pension agreement signed with FAO/FTF/Saco. The
Singapore: The Company is not required to pay pensions.
agreement comes into effect as of 1 January 2008 and implies that employees
Denmark: All employees are covered by a mandatory pension plan with
born 1971 and earlier have a benefit defined pension plan, whereas employees
Danica pension. Sirius pays the agreed upon percentage rate stated in the
born 1979 and earlier are offered a premium defined solution.
emplyee´s employment contract, however, this percentage shall be at a
Employees born between 1 January 1972 and 31 December 1978 have
minimum, 15 % of the employee´s salary. Thereafter, this amount is distributed
the option, until 31 March 2008, to decide to which of these plans they wish to
to cover other aspects such as life insurance and disability benefits.
belong. The pension benefits are safeguarded by insurance.
The Company’s CEO has a premium based executive pension plan. Three
Severance pay
additional senior members of management subscribe to special premium based
Upon termination initiated by the Company, the CEO is entitled to severance pay
pension plans. Both plans are safeguarded by insurance.
during the termination period of 12 months. A 6 month termination period is
The CEO is entitled to a life long pension from the age of 65.
required if termination is initiated by the CEO.
UK: The pension plan covers all employees over 21 years of age and who
are employed with conditional tenure. The plan is premium based. The employee
Drafting and decision-making process
pays 1.5 percent or more of his/her salary and Sirius pays 12 percent of the
Decisions regarding remuneration for the CEO are resolved upon by the Board.
employee’s salary. In terms of salary, no upper limit exists. The money is in-
Decisions regarding remuneration for other senior members of management
vested in funds of the employee’s choosing. The plan is optional and employees
are made by the CEO, in some cases after consultation with the Chairman of
may choose not to participate.
the Board.
Loans to senior members of management – none.
58
Annual Report 2008
Absence due to illness in the Parent Company
2008
2007
Total absence due to illness as a percentage of ordinary working hours
Share of total absence due to illness regarding continuous absence due to illness of 60 days or more
1.98%
11.90%
2.20%
15.40%
Absence due to illness as a proportion of each group’s standard working hours
Absence due to illness divided by gender:
Men
Women
Absence due to illness divided by age category:
Younger than 30 years
30 - 49 years
50 years and older
1.71%
2.18%
2.32%
1.81%
2.20%
1.85%
2.48%
1.10%
2.49%
1.87%
Note 35 • Fees and reimbursement to auditors
Group
Parent Company
2008
2007
2008
2007
Öhrlings PricewaterhouseCoopers - audit engagement
5
6
5
6
Audit assignment refers to the examination of the annual report and accounting records, as well as the administration of the Board of Directors and CEO, other duties
which are the responsibility of the Company’s auditors to execute and the provision of advisory services or other assistance resulting from observations made during
such an examination or the implementation of such other duties. All other undertakings are classified as other assignments.
Note 36 • Operational leasing
Leasing contracts in which the Company is the lessee
Group
Parent Company
2008
2007
2008
2007
Non-cancellable leases amount to:
Due for payment within one year
Due for payment later than one year but within five years
Due for payment after five years
Total
25
57
3
85
24
72
4
100
24
51
0
75
23
67
0
90
59
Annual Report 2008
Note 37 • Class analysis
Profit/loss per insurance class
2008
Parent Company
Personal
Maritime,
Fire and
other
accident and
aviation and
property
Credit
Total direct
Assumed
health
transport
damage
insurance
Miscellaneous
insurance
reinsurance
Total
Premium income, gross
Premium earned, gross
Incurred claims, gross
Operating expenses, gross
Result, ceded reinsurance
Equalisation provision
Technical result
507
498
-268
-209
-23
0
-2
19
41
-5
-20
-3
0
13
43
49
-114
-35
2
0
-98
-80
2
-2
1
0
3
4
67
66
-45
-33
-2
0
-14
556
656
-434
-296
-26
3
-97
6,127
6,183
-6,879
-1,295
2,843
0
852
6,683
6,839
-7,313
-1,591
2,817
3
755
2007
Parent Company
Personal
Maritime,
Fire and
other
accident and
aviation and
property
Credit
Total direct
Assumed
health
transport
damage
insurance
Miscellaneous
insurance
reinsurance
Total
Premium income, gross
Premium earned, gross
Incurred claims, gross
Operating expenses, gross
Result, ceded reinsurance
Equalisation provision
Technical result
464
459
-267
--201
-6
0
-15
67
64
-67
-22
-4
0
-29
71
70
10
-39
0
0
41
0
0
-1
--4
0
3
-2
108
108
-51
-47
--4
3
9
710
701
-376
-313
-14
6
4
5,942
6,071
-3,524
-1,646
-174
9
736
6,652
6,772
-3,900
-1,959
-188
15
740
60
Annual Report 2008
Stockholm, March 9, 2009
Allan Waters
Chairman of the Board of Directors
Brian Kensil
Göran Thorstensson
President & CEO
Jan Silverudd
Employee Repr esentative
Our Auditors’ Report was submitted on March 16, 2009
Catarina Ericsson
Authorized Public Accountant
Anna Hesselman
Authorized Public Accountant
61
Annual Report 2008
Audit Report
To the general meeting of the share-
holders of Sirius International Insurance
Corporation (publ) Corporate identity
number 516401-8136.
We have audited the annual accounts,
the consolidated accounts, the accounting
records and the administration of the board of
directors and the managing director of Sirius
International Insurance Corporation (publ)
for the year 2008. These accounts and the ad-
ministration of the company and the applica-
tion of the Annual Accounts Act for Insurance
Companies when preparing the annual ac-
counts and the consolidated accounts are the
responsibility of the board of directors and
the managing director. Our responsibility is to
express an opinion on the annual accounts,
the consolidated accounts and the administra-
tion based on our audit.
We conducted our audit in accordance
with generally accepted auditing standards in
Sweden. Those standards require that we plan
and perform the audit to obtain high but not
absolute assurance that the annual accounts
and the consolidated accounts are free of ma-
terial misstatement. An audit includes examin-
ing, on a test basis, evidence supporting the
amounts and disclosures in the accounts. An
audit also includes assessing the accounting
principles used and their application by the
board of directors and the managing director
and significant estimates made by the board
of directors and the managing director when
preparing the annual accounts and the con-
solidated accounts as well as evaluating the
overall presentation of information in the an-
nual accounts and consolidated accounts. As
a basis for our opinion concerning discharge
from liability, we examined significant deci-
sions, actions taken and circumstances of the
company in order to be able to determine the
liability, if any, to the company of any board
member or the managing director. We also
examined whether any board member or the
managing director has, in any other way, act-
ed in contravention of the Insurance Business
Act, the Annual Accounts Act for Insurance
Companies or the Articles of Association.
We believe that our audit provides a rea-
sonable basis for our opinion set out below.
The annual accounts and the consolidat-
ed accounts have been prepared in accord-
ance with the Annual Accounts Act for Insur-
ance Companies and give a true and fair view
of the company’s and the group’s financial
position and results of operations in accord-
ance with generally accepted accounting prin-
ciples in Sweden. The statutory administration
report is consistent with the other parts of the
annual accounts and consolidated accounts.
We recommend to the general meeting of
shareholders that the income statement and
balance sheet for the company and the group
be adopted, that the profit be dealt with in
accordance with the proposal in the admin-
istration report and that the members of the
board of directors and the managing director
be discharged from liability for the financial
year.
S t o c k h o l m , March 16, 2 0 0 9
Catarina Ericsson
Authorized Public Accountant
Anna Hesselman
Authorized Public Accountant
62
Annual Report 2008
DEFINITIONS
Combined Ratio
Net claims incurred in relation to net
premiums earned and operating expenses
(both commissions and own expenses)
in relation to net premiums earned.
Net Technical Provisions
Total technical provisions (premium &
claims provisions) less reinsurers’ share
of technical provisions.
Solvency Capital
Total of shareholders’ equity + deferred
taxes (or untaxed reserves in the parent
company) + excess values of investment
assets.
Solvency Ratio
Solvency capital in relation to
net premium income.
This is an unaudited translation of Sirius
International´s Annual Report 2008.
The audited Swedish version is the binding
version.
63
Annual Report 2008
64
Annual Report 2008
hEAD OFFICE
Sirius International Insurance Corporation (publ)
SE-113 96 Stockholm, Sweden.
Visiting address: Birger Jarlsgatan 57B
Telephone: +46 8 458 5500
Telefax:
+46 8 458 5599 (Reinsurance)
+46 8 458 5595 (Corp. Accounting &
Control)
Sirius International Insurance Corporation (publ)
Belgian Branch
Mont Saint Martin 62B/2
BE-4000 Liège, Belgium
Telephone: +32 4 220 8611
Telefax:
+32 4 232 1999 (Underwriting)
+32 4 232 1998 (Accounting/Claims)
+32 4 232 1994 (Finance)
Sirius International Danish Branch,
filial av Sirius International Försäkringsaktiebolag
(publ),
Nyhavn 43, 2 sal
DK-1051 Copenhagen, Denmark
Telephone: +45 88 807 100
Telefax: +45 88 807 111
www.siriusaviationinsurance.com
Sirius Rückversicherungs Service Gmbh
Neuer Wall 52/Entrance: Bleichenbrücke 1-7
DE-20354 hamburg, Germany
Telephone: +49 40 30 95 19-0
Telefax:
+49 40 30 95 19-21
Sirius International Insurance Corporation
(publ) UK Branch
The London Underwriting Centre,
3 Minster Court, Mincing Lane
London EC3R 7DD, Great Britain
Telephone: +44 20 7617 4900
+44 20 7617 4919
Telefax:
Sirius International Insurance Corporation
(publ) (Asia Branch) Singapore
24 Raffles Place #10-01/02, Clifford Centre
048 621 Singapore, Singapore
Telephone: +65 6435 0052
+65 6435 0053
Telefax:
Sirius International Insurance Corporation
(publ) Labuan Branch
c/o MNI Offshore Insurance (L) Ltd
Level 11 (B) Block 4 Office Tower
Financial Park Labuan Complex
Jalan Merdeka
87000 FT Labuan, Malaysia
Telephone: +60 87 417 672 73
Telefax:
+60 87 417 675
Sirius International Insurance Corporation
(publ), Stockholm, Zurich Branch
Bellerivestrasse 49
Ch-8008 Zurich, Switzerland
Telephone: +41 43 443 0180
+41 43 443 0189
Telefax:
www.siriusgroup.com
65