Annual Report 2009
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Annual Report 2009
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 investments
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 Debtors arising out of direct insurance and
other debtors
Note 19 Categories of financial assets and liabilities
and their fair values
Note 20 Tangible assets
Note 21 Deferred acquisition costs
Note 22 Untaxed reserves
Note 23 Provisions for unearned premiums
and unexpired risks
Note 24 Claims outstanding
Note 25 Equalisation provision
Note 26 Claims handling provision
Note 27 Pensions provisions and similar items
Note 28 Creditors arising out of direct insurance
and other creditors
Note 29 Contingent liabilities and commitments
Note 30 Associated parties
Note 31 Average number of employees, salaries
and other remuneration
Note 32 Fees and reimbursement to auditors
Note 33 Operational leasing
Note 34 Class analysis
The Board of Directors’ and the President’s signatures
Audit report
Definitions
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2
Annual Report 2009
White Mountains
– our owners
White Mountains Insurance Group, Ltd.
White Mountains Re Ltd
is a financial services holding company
White Mountains Re Ltd. (“White Moun-
with primary business interests in property
tains Re”) – Bermuda holding company
and casualty insurance and reinsurance.
whose operating companies offer capac-
The Company’s corporate headquarters and
ity for most property, casualty, accident &
its registered office are located in Hamil-
health, marine, and aviation exposures. Its
ton, Bermuda and its principal executive
principal operating companies are:
office is located in Hanover, New Hamp-
White Mountains Reinsurance Company
shire.
of America (“WMRe America”) – a U.S.-
The Company conducts its principal
based international multi-line reinsurance
businesses through:
company that employs a conservative
White Mountains Re – global reinsurance.
strategy with specialized underwriting ex-
Onebeacon – specialty and personal
pertise, a diversified portfolio, and strong
property and casualty primary insurance.
operational discipline. WMRe America’s
OneBeacon’s common shares are listed on
home office is in New York, and it has
the New York Stock Exchange under the
branch offices in Connecticut, Miami and
symbol “OB”. White Mountains owns a 75%
Toronto.
interest of OneBeacon.
Sirius International Insurance Corpora-
White Mountains Advisors – investment
tion (“Sirius”) – a Sweden based inter -
management with $29.2 billion of assets un-
national reinsurer that focuses mainly
der management.
on property and other short-tailed lines.
White Mountains´ common shares are
Sirius is the largest reinsurance company
listed on the New York Stock Exchange
in Scandinavia and a leading reinsurer in
and the Bermuda Stock Exchange under the
Europe. Sirius’ home office is in Stock-
symbol “WTM”. Market capitalization as of
holm, and it has branch offices in Bermu-
December 31, 2009 was approximately $2.9
da, Copenhagen, Hamburg, Liège, London,
billion. As of December 31, 2009, White
Singapore and Zurich.
Mountains reported total assets of $15.4
White Mountains Specialty Under-
billion adjusted, shareholders’ equity NGM of
writing, Inc. (DBA “White Mountains Re
$3.7 billion, and adjusted GAAP book value
Solutions”) – a Connecticut-based profes-
per share NGM of $417.
sional team specializing in opportunistic
structured acquisitions of run-off property
and casualty insurance liabilities. White
Mountains Re Solutions further enhances
traditional returns via effective post-
acquisition management of the run-off
process.
3
Annual Report 2009
Comments from the
President and CEO
figures are set out at the bottom of this
report. They are outstanding no matter
how you view them. Premium income was
higher than ever, whilst the cost of claims
fell. In fact, we only had two net losses
above $10 million, and none at all above
$15 million.
As a result of this combination of
trends, profitability increased from an
already high level, and we were able
to build our solvency capital yet again.
Every one of our business units returned
underwriting surpluses. Overall, 2009 was
the second best year in the history of our
company.
At the same time we were able to
develop our business in a way consistent
with our strategic goal of steady rather
than spectacular growth. Our new Aus-
tralian branch made a promising start and
is giving us a stronger presence in the
region. Above all, we were pleased to
welcome colleagues in our new Bermuda
branch to the Sirius family after their
transfer from our sister company White
Mountains Re. They write mainly US Ca-
tastrophe XL business.
These extensions to our activities
were entirely in line with our main focus:
the maintenance and development of
long-term relationships with brokers and
cedants underpinned by mutual trust.
Consistency of service, combined with
a conservative, sustainable approach to
underwriting, form the basis of all that
2009 was a year that reinsurers will want
to remember, one where profits rose as
losses failed to materialise. As I write
this review, however, 2010 has already
given us a timely reminder of the impor-
tance of maintaining a longer perspec-
tive. After barely two months of the New
Year there have been three big events:
earthquakes in Haiti and Chile; and
storm Xynthia through Portugal, Spain,
France and Germany. In case we forget,
we work in a volatile business.
For this reason, I would like to use
this report to consider Sirius Interna-
tional’s performance over several years,
as well as its achievements during 2009.
As much as it gives me genuine pleasure
to look back on a highly profitable 12
months, our consistency over a longer
timeframe is even more important to our
customers and shareholders alike.
we do.
Beginning with 2009 itself, the headline
Saying this is one thing, making it happen
4
Annual Report 2009
quite another, which is why I would also
like this, we are truly able to back our
like to discuss briefly our longer-term
promise of giving our clients solid, long-
record. We have now returned underwrit-
term support. The growth of our premi-
ing profits every year from 2002 onwards.
um income may not be exciting, but it is
Our average combined ratio for the past
sustainable and a tribute to the quality of
decade, including the World Trade Centre
our underwriting teams.
2001 and the 2005 hurricane season, is
Looking to the prospects for this
94%. This falls to 89% over the past six
year, it started with a challenging renew-
years. In other words, our great results in
al season. Nonetheless, we substantially
2009 were no flash in the pan; they were
increased our footprint in Credit and
part of a pattern.
Aviation, and were pleased to welcome
Similarly, we have increased our sol-
new clients across all classes of business
vency capital for each of the past eight
and geographical regions.
years, even in 2008 at the height of the
As already mentioned, we know
financial crisis. Although the latest rise
that there are some significant losses in
in capital of more than 50% followed a
the pipeline. Even so, the underlying
transfer of funds from within the White
strength of our portfolio and underwrit-
Mountains group, there was also signifi-
ing justifies confidence in the eventual
cant organic growth.
outcome for 2010 and future years.
This year-in, year-out performance
I would like to thank the staff of
underlines our resilience even in diffi-
Sirius International for their continuing
cult times, as our aviation team in Zurich
hard work and loyalty and, above all,
were able to demonstrate in 2009.
our clients and brokers for the trust you
Although benign for the reinsurance
place in us.
industry as a whole, it was one of the
worst years ever for the aviation market.
Yet, even in this class, we achieved a
97% combined ratio. With performances
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 2009
At a glance
2009
2008
Net premium income
$911 million
$858 million
Claims net of reinsurance
$545 million
$560 million
Combined Ratio
86%
87%
Investment income
$30 million
$42 million
Income before tax (group)
$207 million
$127 million
Combined Ratio (Parent Company)
99%
80%
88%
87%
86%
2 0 0 5
2 0 0 6
2 0 0 7
2 0 0 8
2 0 0 9
Solvency Capital (Group), MSEK
9 364
9 893
10 399
10 455
12 544
2 0 0 5
2 0 0 6
2 0 0 7
2 0 0 8
2 0 0 9
6
Annual Report 2009
Board of Directors’ Report
Sirius International Insurance Corporation
by Sirius International’s London branch.
(publ)
Furthermore, a branch office was opened
Corporate Identity Number: 516401-8136
in Bermuda in September. The operations
on Bermuda were taken over from Sirius
The Board of Directors and the President
International’s fellow subsidiary, White
of Sirius International Insurance Corpora-
Mountains Re, Bermuda. The branch under-
tion (publ) (Sirius International) hereby
writes American catastrophe reinsurance.
submit the company’s annual report for
With the new branch in Bermuda, Sirius
2009.
General information
concerning the company
International now underwrites business
from all parts of the world.
The largest claim for the year, a hail
storm in Switzerland and Austria, took
Sirius International is active in internatio-
place in July and is expected to cost
nal insurance and reinsurance. Sirius Inter-
approximately MSEK 118 for own account.
national was established in 1989.
In addition to this claim, there was only
Insurance operations commenced in
one further claim of any significance;
1945 in Försäkringsaktiebolaget Sirius. In
winter storm Klaus, which hit France and
1989, the reinsurance activities were trans-
Spain. The cost for this storm is calculated
ferred to Sirius International. Sirius Inter-
at approximately MSEK 105 for own
national has been the Parent Company of
account.
the Sirius Group since 1992.
In general, price levels were satisfactory
in the majority of markets for all classes of
The development, results and position of
business. The run-off results were positive
the company
for earlier years.
2009 was a benign year as regards natural
Gross premium income for the Group
catastrophes; no major hurricanes, typ-
amounted to MSEK 8,630 (MSEK 6,683) and
hoons, floods or earthquakes occurred, and
MSEK 8,630 (MSEK 6,683) for the Parent
the year turned out to be a good one, both
Company. Premium income for own
for the reinsurance industry as a whole and
account for the Group totalled MSEK 6,957
for Sirius International. The company had
(MSEK 5,602) and for the Parent Company
one of its best years ever, with a combined
MSEK 6,957 (MSEK 5,602). The insurance
ratio of 86%. Sirius International has had,
operating results of the Group amounted to
as of and including 2009, a combined ratio
MSEK 1,316 (MSEK 928) and for the Parent
of less than 100% for eight years in a row.
Company MSEK 1,311 (MSEK 923).
During the year, the operations increased
It is worth noting that all of the branch
with two new branch offices. In January
offices recorded a combined ratio below
a branch office was opened in Australia.
100%, as did all active classes of business.
The aim is to be able to underwrite local
The combined ratio was 86% (87%) for the
business in the country, both direct and
Group and 86% (87%) for the Parent
reinsurance. The administration is handled
Company. The return on deployed capital
7
Annual Report 2009
in the insurance operations amounted
yield and total yield is made in accordance
to 16%.
with the recommendations of the Swedish
The financial markets bounced back
Financial Supervisory Authority.
notably during the year. Stock markets
The investment portfolio’s focus and
around the world saw major upswings,
composition is largely unchanged
with the Swedish OMX 30 increasing by
compared with the previous year. During
44%, S&P 500 in the US increasing by 24%
the latter part of the year, the portion of
and the major stock exchanges in Europe
short-term investments increased, as well
noting upturns of around 20%. The interest
as the bank funds in the portfolio. These
rate levels on government bonds conti-
funds will be reinvested in interest-bearing
nue to be low, in spite of an increase in
investments with a somewhat longer
interest on the somewhat longer durations
investment horizon in 2010. At the end of
during the year. The credit spreads
the year, the investment portfolio was
compared with risk-free interest have
composed of: shares and participations,
decreased notably during the year.
7%; investments in associated companies,
All in all, the yield on the bond portfo-
16%; and interest-bearing investments and
lios amounted to 4.2%, excluding exchange
bank funds, 77%.
rate effects. For the equity portfolio, inclu-
Other events regarding changes in the
ding investments in associated companies
Group’s structure are described primarily
and private equity companies, the yield
under the section “Ownership”.
amounted to 19.7%, excluding exchange
rate effects. As a result of a decline, during
Ownership
the year, in the USD vis á vis the Swedish
Sirius International is a wholly owned sub-
krona of 8.4%, the company’s continued
sidiary of Sirius Insurance Holding Sweden
policy, regarding the exchange rate expo-
AB (Corporate Identity Number 556635-
sure vis á vis the USD, resulted in realised
9724), Stockholm, Sweden, which is ultima-
and unrealised exchange rate losses.
tely owned by White Mountains Insurance
Exchange rate losses have negatively
Group Ltd, Bermuda.
impacted the yield in terms of Swedish
In September 2009, Sirius International
krona. From 1 January, 2010, the company
Insurance Corporation Bermuda Branch,
has hedged approximately 50% of its
Hamilton, Bermuda was opened.
foreign exchange rate exposure in USD.
At year-end 2009, the Group consists of
The investment result, as presented
Sirius International Insurance Corporation
in the Income Statement of the Group,
(publ) with the subsidiaries Sirius Belgium
amounted to a profit of MSEK 658 (MSEK
Réassurances S.A. (in liquidation), Liège,
94) including currency exchange losses but
Belgium, Sirius Rückversicherungs Service
before allocation of interest to the insu-
GmbH, Hamburg, Germany, and Sirius In-
rance operations. If unrealised gains in the
ternational Holdings (NL) BV, Amsterdam,
bond portfolio, which is recorded directly
The Netherlands.
in shareholders’ equity, are included, then
In addition, Sirius International has
the investment result amounted to a profit
eight branch offices outside of Sweden.
of MSEK 791. The year’s total yield amoun-
These include the branch office in London,
ted to 3.3%. Calculation of investment
Great Britain - Sirius International Insu-
8
Annual Report 2009
rance Corporation (publ) UK Branch; the
ownership is equivalent to approximately
branch office in Zurich, Switzerland - Sirius
24%. As per 1 September, 2009 the person-
International Insurance Corporation (publ),
nel in White Mountains Re Bermuda were
Stockholm, Zurich Branch; the branch office
transferred to the newly opened branch
in Singapore - Sirius International
office in Bermuda. After that point in time,
Insurance Corporation Asia Branch,
all new underwriting which previously took
Singapore; the branch office in Liège,
place in White Mountains Re Bermuda, was
Belgium - Sirius International Insurance
executed in the new branch office’s name.
Corporation (publ), Belgian Branch; the
The company White Mountains Re
branch office in Copenhagen, Denmark,
Bermuda has been placed in run-off as
Sirius International Danish Branch,
at the same date. In conjunction with the
filial af Sirius International Försäkringsak-
opening of the branch office, Sirius
tiebolag (publ), the branch office in Hamil-
International received a shareholders’
ton, Bermuda, Sirius International Insurance
contribution of MUSD 200.
Corporation Bermuda Branch, the branch
In the continued restructuring work
office in Australia, Sirius International
within the group, Sirius International has,
Insurance Corporation, Australian Branch,
as at 4 February, 2010, in an intra-group
and in Hamburg, Germany. The operation in
transfer, acquired all of the shares in White
Germany is conducted through the agency
Mountains Re Bermuda Ltd for a purchase
Sirius Rückversicherungs Service GmbH,
price equivalent to MUSD 100.
which operates on behalf of Sirius Interna-
As at 1 January, 2010, the company had
tional.
entered into an internal currency hedging
During 2001, a voluntary liquidation
agreement with White Mountains Re
of Sirius Belgium Réassurances S.A., Liège,
Financial Services Ltd (WMReFS). This
Belgium, was commenced as the company is
agreement implies that Sirius International
no longer in active operation. The liquida-
has sold MUSD 250 on the basis of a
tion has not been completed, due to a tax
currency futures transaction to WMReFS
dispute. The outcome of the dispute will
with a duration of five years. With the help
have no impact on the company’s
of foreign exchange options, the currency
financial status.
futures transactions are settled on the basis
of an exchange rate cap of SEK 11.93 per
Major events occurring during the financial
USD, and an exchange rate floor of SEK
year or after the closing day
5.11 per USD. Outside this range, the com-
As per 21 January, 2009 a restructuring has
pany takes no hedging measures.
taken place within the White Mountains
On 27 February, 2010 a massive earthquake
International Group, of which Sirius Inter-
struck 60 km off the coast of Chile. The
national owned approximately 28%. After
earthquake measured 8.8 on the Richter-
this restructuring, Sirius International is
scale and caused substantial material
part-owner in the Luxembourg-based White
damages. Sirius International has exposures
Mountains Phoenix Group, which, in turn,
in the area. However, it is still too early to
owns 100% of the shares in White Moun-
forcast how large loss the earthquake will
tains Reinsurance Company of America.
cause the company.
After the restructuring, Sirius Ínternationals´
9
Annual Report 2009
Information on risks and factors of uncertainty
Please refer to Note 1, Accounting principles
and Note 2, Information on risks.
Financial instruments and risk management
Please refer to Note 1, Accounting
principles and Note 2, Information on risks.
Salaries and other remuneration to senior mem-
bers of the management
Please refer to Note 31, Average number
of employees, salaries and other
remuneration.
Insurance contracts with no significant
insurance risk
The Company has only a few insurance
contracts, with no significant insurance risk,
deemed to be insufficiently reinsured. These
contracts are then classified as
investment agreements. Please refer to Note
1, Accounting principles.
Expectations concerning future developments
The underlying profitability of the insurance
operations is positive in spite of increasing
competition and the diversified investment
portfolio is expected to
contribute to a stable return on investments.
However, the continued increase in competi-
tion requires discipline in pricing and under-
writing, continued efficiency
improvements and a well-balanced risk
relationship between insurance operations
and investments in order to secure long-term
profitability.
For 2010, Sirius International’s
objective is to achieve a combined ratio lo-
wer than 90% and an underwriting
return on capital (UROC) of 12%.
10
Five-year Summary
Annual Report 2009
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 on reserve for unrealised capital gains
Other adjustment items
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
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
Untaxed reserves
Deferred tax on Reserve for unrealized capital gains
Other adjustment items
Total solvency capital
Solvency ratio
Capital base
Required solvency capital
1) For the comparison year 2006 legally restricted IFRS has been applied
2) For the comparison year 2005 legally restricted IFRS has not been applied.
3) Includes Sirius International with subsidiaries.
4) Includes WM Re Ltd. with subsidiaries.
2009
2008
2007
1)
2006
2)
2005
6,957
6,867
0
369
-4,164
-1,756
1,316
289
-27
1,275
5,602
5,822
0
168
-3,659
-1,403
928
-74
-27
695
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
7,883
18,449
7,992
16,743
7,001
15,508
8,774
17,881
8,824
18,862
61%
25%
86%
2%
3%
9,945
2,548
53
-2
12,544
180%
12,149
1,030
63%
24%
87%
3%
2%
8,017
2,420
18
0
10,455
187%
10,013
956
58%
30%
88%
6%
2%
7,833
2,581
-15
0
10,399
179%
9,764
956
17,544
2,350
17,236
2,566
18,482
2,369
51%
33%
84%
3%
1%
7,468
2,430
-5
0
9,893
136%
9,628
1,154
69%
32%
102%
4%
5%
7,268
2,094
4
-2
9,364
192%
8,324
792
2009
2008
2007
1)
2006
2)
2005
6,957
6,867
369
-4,164
-1,761
1,311
-139
-17
490
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
-2,807
-1,916
1,312
329
-25
227
4,713
4,739
130
-3,165
-1,543
161
511
-25
553
7,886
18,379
7,993
16,882
7,001
15,508
7,340
15,314
7,159
14,431
61%
25%
86%
2%
3%
2,654
9,691
53
0
12,398
178%
12,021
1,030
63%
24%
87%
3%
2%
1,295
9,197
18
0
10,510
188%
9,968
956
57%
31%
88%
5%
3%
1,136
9,217
-15
0
10,338
178%
9,776
956
48%
32%
80%
3%
3%
1,093
8,680
-14
0
9,759
135%
9,560
1,105
67%
33%
99%
4%
5%
1,077
7,408
0
28
8,513
181%
8,210
724
11
Annual Report 2009
Proposed Appropriation of Earnings
For 2009, the Parent Company recorded a
result before appropriations and taxes of
MSEK 1,155 (MSEK 1,012). Net income for
the year amounted to a profit of MSEK 490
(MSEK 738). As of December 31, 2009
retained earnings in the Group amounted
to MSEK 2,000.
At the disposal of the General Meeting
of the Shareholders of the Parent Company
Sirius International:
Retained earnings
Shareholders’ contribution received
Unrestricted reserves
Dividend paid, as 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 be appropriated
as follows:
- Dividends to owners
- Retained earnings
Total
SEK in
thousands
495,027
1,423,660
98,103
-295,000
-357,412
489,782
1,854,160
160,000
1,694,160
1,854,160
The company’s financial position does
in relation to the scope and risks of the
not reflect any other view than that the
operations. Regarding the company’s and
company can be expected to fulfil its
the Group’s results and financial position,
obligations in the short-term, as well as
please refer to the attached income state-
in the long-term. It is the opinion of the
ments and balance sheets, cash flow ana-
Board of Directors that the solvency
lyses, report on changes in shareholders'
capital of the company as it has been
equity and accompanying notes.
reported in the annual report is adequate
12
Annual Report 2009
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
Claims incurred, for own account
Claims paid
- Gross amount
- 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
Balance of technical account
Investment income/expenses
- Investment income
- Unrealised gains
- Investment expenses and charges
- Unrealised losses
Investment income allocated to the technical account
Total investment income/expenses
Goodwill depreciation
Result before taxes
Taxes
Net income for the year
Note
2009
2008
3
3
4
4
5
6
7
8
9
12
11
8,630
-1,673
-237
147
6,867
6,683
-1,081
156
64
5,822
369
168
-4,243
431
-3,812
-206
-146
-4,164
0
0
-4,321
561
-3,760
-2,992
3,090
-3,662
3
3
-1,756
1,316
-1,403
928
1,316
928
421
635
-370
-28
-369
289
-27
1,578
-303
1,275
1,386
170
-563
-899
-168
-74
-27
827
-132
695
13
Annual Report 2009
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 group companies
Other financial investments
Shares and participations
Bonds and other interest bearing securities
Total other financial investments
Note
2009
2008
12
13
15
264
5
269
2
2
291
1
292
4
4
2,185
2,185
2,101
2,101
16, 19
17, 19
1,797
8,662
10,459
1,745
8,782
10,527
Deposits with cedents
1,544
1,716
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
Current tax receivables
Deferred tax receivables
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
23
24
18
11
18
20
21
482
3,948
4,430
10
1,480
108
26
770
385
4,588
4,973
37
1,252
766
21
55
2,394
2,131
21
4,384
4,405
152
419
23
594
16
2,454
2,470
170
441
18
629
TOTAL ASSETS
26,282
24,843
14
Annual Report 2009
December 31
Note
2009
2008
ShAREhOLDERS’ EQUITy, PROVISIONS AND LIABILITIES
Shareholders’ equity
Share capital (8 million shares of nom. value SEK 100)
Other restricted reserves
Other reserves
Retained earnings
Net income for the year
Total shareholders’ equity
Technical provisions
Provisions for unearned premiums
Claims outstanding
Equalisation provision
Total technical provisions
Provisions for other risks and expenses
Pension provisions
Current tax liability
Deferred tax liability
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
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 and other comparable collaterals for own debts and
provisions recorded as insurance liabilities
Other pledged assets and comparable collaterals
Contingent liabilities
Commitments
800
7,142
147
581
1,275
9,945
2,330
9,983
0
800
6,778
49
-305
695
8,017
2,343
10,620
3
12,313
12,966
15
2
2,572
2,589
15
429
2,419
2,863
125
59
14
513
626
1,153
157
157
25
245
546
816
122
122
26,282
24,843
6,647
8,527
0
67
0
0
79
0
23
24, 26
25
27
11
28
19, 28
19
29
29
29
29
15
Annual Report 2009
Change in shareholders´equity for the Group
Restricted equity
Non-restricted equity
Total
Group
(MSEK)
Amount 1 January 2009
Transfer of net result from previous year
Equalisation provision (73.7%)
Shareholders’ contribution 1)
Transfer to fair value reserve
Translation difference for the year
Change of untaxed reserves
Net profit/loss for the year
Group contribution provided 2)
Dividend paid 3)
Amount 31 December 2009
Amount 1 January 2008
Transfer of net result from previous year
Translation difference for the year
Change in fair value reserve
Change in untaxed reserves
Net profit/loss for the year
Group contribution provided
Dividend paid
Share
Other
Other
brought
loss for
Capital
Reserves
Reserves
forward
the year
Profit/loss
Net profit/
800
6,778
0
0
0
0
0
0
0
0
0
0
0
0
0
364
0
0
0
0
49
0
0
0
98
0
0
0
0
0
800
7,142
147
800
6,637
0
0
0
0
0
0
0
0
0
0
141
0
0
0
-37
0
0
86
0
0
0
0
49
-305
695
2
1,424
0
-364
-219
0
-357
-295
581
-144
577
68
0
-141
0
-335
-330
-305
Total
equity
8,017
0
2
1,424
98
0
-219
1,275
-357
-295
695
-695
0
0
0
0
0
1,275
0
0
1,275
9,945
577
-577
0
0
0
695
0
0
7,833
0
68
86
0
695
-335
-330
695
8,017
Amount 31 December 2008
800
6,778
In the table above so-called shareholder activities, consisting of shareholders’ contribution received, provision for group contribution and dividends, are included.
1) Shareholders’ contribution received from White Mountains Re Financial Services Ltd.
2) Group contributions have been provided to Fund American Holdings AB and Sirius Insurance Holding Sweden AB
3) During the year, dividend has been paid to the Parent Company Fund American Holdings AB
16
ShARE CAPITAL
Specified in number of shares
Issued per 1 January
Issued per 31 December
Annual Report 2009
2009
2008
8,000,000
8,000,000
8,000,000
8,000,000
Per 31 December 2009, registered share capital comprised of 8,000,000 (8,000,000) ordinary shares.
The shares have a nominal value of 100 (100) SEK.
2009
2008
UNTAxED RESERVES AND OThER RESTRICTED RESERVES
Equity portion of untaxed reserve and other
restricted reserves
Opening equity portion of untaxed reserves and other
restricted reserves
Change for the year
Closing equity portion of untaxed reserves and
other restricted reserves
OThER RESERVES
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 after tax
Change for the year
Closing tax on fair value reserve after tax
Fair value reserve
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
Shareholders’ contribution
Equalisation provision (73.7%)
Translation difference for the year
Transfer to restricted reserves
Transfer from restricted reserves
Dividend paid
Group contribution provided 73.7% (72%)
Closing profit/loss brought forward
NET PROFIT/LOSS FOR ThE yEAR
Net profit/loss for the year
TRANSLATION DIFFERENCE
Opening translation difference
Change for the year
Closing translation difference
6,778
364
7,142
67
133
200
-18
-35
-53
49
98
147
-305
695
1,424
2
-219
-377
13
-295
-357
581
1,275
75
-219
-144
6,637
141
6,778
-52
119
67
15
-33
-18
-37
86
49
-144
577
0
0
68
-141
0
-335
-330
-305
695
7
68
75
17
Annual Report 2009
Cash flow statement for the Group
2009
2008
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
Cash flow from investing activities
FINANCING ACTIVITIES
Dividends paid
Shareholders contribution received
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
1,578
-192
204
1,590
2
117
-202
-228
1,279
-13
-13
-295
1,424
-465
664
1,930
2,454
1,930
4,384
482
45
527
320
4,064
4,384
827
94
-193
728
1
-997
-4,399
4,885
278
-6
-6
-330
0
-211
- 541
-269
2,723
-269
2,454
455
52
507
272
2,182
2,454
18
Annual Report 2009
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
- 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
Operating costs
Operating profit/loss of technical account
NON-TEChNICAL ACCOUNT
Balance of technical account
Investment income/expenses
- Investment income
- Unrealised gains
- Investment expenses and charges
- Unrealised losses
Investment income allocated to the technical account
Total investment income/expenses
Goodwill depreciation
Result before appropriations and taxes
Appropriation to safety reserve
Changes in excess depreciation on intangible assets
Result before taxes
Taxes
Net income for the year
Note
2009
2008
3
3
4
4
5
6
7
8
9
12
11
8,630
-1,673
-237
147
6,867
6,683
-1,081
156
64
5,822
369
168
-4,243
431
-3,812
-206
-146
-4,164
0
0
-4,321
561
-3,760
-2,992
3,090
-3,662
3
3
-1,761
1,311
-1,408
923
1,311
923
385
228
-355
-28
-369
-139
-17
1,155
-511
17
661
-171
490
1,053
170
-329
-620
-168
106
-17
1,012
0
19
1,031
-293
738
19
Annual Report 2009
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
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
Current tax receivables
Deferred tax receivables
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
2009
2008
12
13
14
15
16, 19
17, 19
23
24
18
11
18
20
21
212
5
217
2
2
656
2,058
2,714
1,251
8,662
9,913
2229
1
230
4
4
656
2,058
2,714
1,294
8,782
10,076
1,544
1,716
482
3,948
4,430
10
1,480
95
25
756
2,366
20
4,331
4,351
152
419
21
592
385
4,588
4,973
37
1,252
753
21
40
2,103
15
2,431
2,446
169
441
18
628
TOTAL ASSETS
26,129
24,890
20
Annual Report 2009
December 31
Note
2009
2008
ShAREhOLDERS’ EQUITy, PROVISIONS AND LIABILITIES
Shareholders’ equity
Share capital (8 million shares of nom. value SEK 100)
Other reserves
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
Equalisation provision
Total technical provisions
Provisions for other risks and expenses
Current tax liability
Deferred tax liability
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
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 and other comparable collaterals for own debts and
provisions recorded as insurance liabilities
Other pledged assets and comparable collateralsr
Contingent liabilities
Commitments
800
147
1,217
490
2,654
44
9,647
9,691
2,330
9,983
3
888 800
49
-292
738
1,295
61
9,136
9,197
2,343
10,620
3
12,316
12,996
0
21
21
125
14
513
638
1,165
157
157
427
0
427
59
25
245
554
824
122
122
26,129
24,890
6,647
8,527
0
67
0
0
79
0
22
23
24, 26
25
11
28
19, 28
19
29
29
29
29
21
Annual Report 2009
Change in shareholders´ equity - Parent Company
(MSEK)
Amount 1 January 2009
Transfer of net result from previous year
Shareholders’ contribution 1)
Change in fair value reserve
Group contribution provided 2)
Dividend paid 3)
Net profit/loss for the year
Amount 31 December 2009
Amount 1 January 2008
Transfer of net result from previous year
Change in fair value reserve
Group contribution provided
Dividend paid
Net profit/loss for the year
Amount 31 December 2008
Non-restricted equity
Total
Restricted
equity
Share
Capital
800
0
0
0
0
0
0
Profit/loss
Net profit/
Other
brought
loss for
reserves
forward
the year
49
0
0
98
0
0
0
-292
738
1,424
0
-358
-295
0
800
147
1,217
800
0
0
0
0
0
-37
0
86
0
0
0
-57
430
0
-335
-330
0
800
49
-292
738
-738
0
0
0
0
490
490
430
-430
0
0
0
738
738
Total
equity
1,295
0
1,424
98
-358
-295
490
2,654
1,136
0
86
-335
-330
738
1,295
In the table above so-called shareholder activities, consisting of shareholders’ contribution received, provision for group
contribution and dividends, are included.
1) Shareholders’ contribution received from White Mountains Re Financial Services Ltd
2) Group contribution provided to Fund American Holdings AB och Sirius Insurance Holding Sweden AB.
3) During the year, dividend has been paid to the Parent Company Fund American Holdings AB.
22
Annual Report 2009
ShARE CAPITAL
Specified in number of shares, SEK
Issued per 1 January
Issued per 31 December
2009
2008
8,000,000
8,000,000
8,000,000
8,000,000
Per 31 December 2009, registered share capital comprised of 8,000,000 (8,000,000) ordinary shares.
The shares have a nominal value of SEK 100 (100).
2009
2008
FAIR VALUE RESERVE
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 after tax
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
Shareholders’ contribution
Dividend paid
Group contribution provided 73,7% (72%)
Closing profit/loss brought forward
67
133
200
-18
-35
-53
49
98
147
-292
738
1,424
-295
-358
1,217
-52
119
67
15
-33
-18
-37
86
49
-57
430
0
-330
-335
-292
NET PROFIT/LOSS FOR ThE yEAR
Net profit/loss for the year
490
738
23
Annual Report 2009
Cash flow statement for the Parent Company
2009
2008
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
Shareholders´ contribution received
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
24
661
515
204
1,380
2
296
-202
-228
1,248
-12
0
0
-12
0
0
0
-295
1,424
-465
664
1,900
2,431
1,900
4,331
481
0
9
490
316
4,015
4,331
1,031
4
-178
857
1
-487
-4,349
4,880
902
-7
0
0
-7
-643
0
0
-330
0
-211
-1,184
-289
2,720
-289
2,431
419
0
34
453
448
1,983
2,431
Annual Report 2009
Performance analysis, Parent Company
Analysis of Insurance Result
(MSEK)
Direct Swedish
Direct
Assumed
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
Reinsurer´s share
Claims handling expenses
Change in provision for outstanding claims
Reinsurer´s share
Claims incurred, for own account
5
0
-2
0
0
3
3
-1
-1
0
0
-2
0
0
0
7
-1
-1
0
5
-1
0
0
-1
0
-2
606
6,256
6,867
23
-372
-282
0
-25
346
-3,790
-1,479
0
369
-4,164
-1,761
0
1,333
1,311
49
232
284
-348
-263
-3
-9
-1,981
-9,597
0
-113
-2,330
-9,861
-3
-122
-623
-11,691
-12,316
77
61
138
813
-202
-5
0
405
3,887
4,292
7,810
-1,470
-231
147
482
3,948
4,430
8,630
-1,673
-237
147
606
6,256
6,867
-563
122
-19
90
-2
-3,511
-4,075
309
-149
-295
-144
431
-168
-206
-146
-372
-3,790
-4,164
1) The performance analysis is substantially the same for the Group and the Parent Company.
2) Defined as result from year 2008 and earlier.
25
Annual Report 2009
Note 1 • Accounting Principles
General information
This annual report was issued per 31 December 2009 and refers to Sirius
International Försäkringsaktiebolag (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 2.2. 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 limita-
tions implied by RFR 2.2 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.
Changed accounting principles
No changes to the accounting principles have been made during the year.
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 2009 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 2009. 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.
IFRS 7 (Financial instruments: Disclosures) has been amended and the
amendment applies to the financial year beginning 1 January 2009 or later.
The amendment requires disclosure in the annual report of the manner in
which fair value measurements have been determined for the financial in-
struments measured at fair value in the balance sheet (Levels 1-3). Financial
instruments classified as Level 1 have quoted prices (unadjusted) in active
markets; financial instruments classified as Level 2 are based on observable
data other than quoted prices included in Level 1; and financial instruments
that are classified as Level 3 are based on non-observable data. No compa-
rative figures are required for previous periods, if the amendments to IFRS 7
are applied in the annual report for 2009. For financial instruments classified
as Level 3, the disclosures shall also be submitted in the form of a reconci-
liation of the changes between opening and closing balance in fair value.
Furthermore, IFRS 7 requires that the annual report be supplemented with
disclosures on liquidity risk. According to IFRS 7.39, a duration analysis
of financial liabilities should be provided, indicating the period of contract
remaining until due date.
Sirius applies the afore-mentioned amendments to IFRS 7 in their annual
report for 2009.
IAS 1 (Presentation of Financial Statements) has been revised and is
mandatory for consolidated accounts, for financial years beginning 1 Ja-
nuary 2010 or later. The revised standard prohibits presentation of revenue
and cost items (that is, changes in shareholders’ equity which do not refer
to transactions with shareholders) in the report of changes in shareholders’
equity, but requires that changes in shareholders’ equity which do not refer
to transactions with shareholders be reported separately from changes in
shareholders’ equity referring to transactions with shareholders, and that
this be included in the report of total other comprehensive income. Compa-
rative information is to be re-calculated, in order that it reflects application
of the revised standard.
The revised standard IAS 1 (Presentation of Financial Statements) has
not been applied in advance of the effective date.
The Swedish Financial Supervisory Authority’s instructions and general
advice on annual accounts in insurance companies (FFFS 2009:12) was
adopted on 11 December 2009. These changed instructions and general
advice come into effect on 1 January 2010 and is applied in the annual book-
closing, annual reports and consolidated accounts prepared for the financial
year beginning after 31 December 2009.
The change implies that the possibility of applying statutory IFRS in
consolidated accounts is eliminated and, instead, IFRS is to be applied in full
in 2010. This implies changes in a number of areas of which the major areas
deemed to impact the company are:
The formats of the income statements and balance sheets are no
longer to follow the guidelines of the Swedish Financial Advisory Authority,
and should, instead, be determined by the company based on the IAS 1
framework. The company has yet to make a final assessment of the effect
of this change.
Pensions are to be reported in accordance with IAS 19, which stipulates
that commitments and plan assets for defined-benefit pension plans are to
be recorded as pension liabilities or assets. The effect for the company is
deemed to be negligible.
Property held for own use may no longer be valued in the same manner
as property held for investment, but are, instead, to be valued at acquisition
value, less depreciation, or according to the valuation method. The effect
for the company is deemed to be negligible.
Goodwill and other items arising in conjunction with the acquisition of
operations is to be reported according to the updated version of IFRS 3,
which primarily implies that depreciation is not to be reported. The effect on
shareholders’ equity, as at 31 December 2009, is equivalent to accumulated
depreciation on Goodwill of MSEK 351. Please see note 12.
Assessments and estimates in the financial statements
The preparation of financial statements in conformity with IFRS requires the
Company’s management to make assessments and estimates, as well as
assumptions impacting the application of the accounting principles and the
recorded values of assets, provisions, liabilities, income and expenses.
These estimates and assumptions are based on historical experience
and a number of other factors considered reasonable in the current situa-
tion. The results of these estimates and assumptions are, subsequently,
used to assess the recorded values of assets, provisions and liabilities
which are not otherwise clearly apparent from other sources. Actual out-
come 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.
Significant assessments in the application of the Accounting principles
26
Annual Report 2009
have been made in conjunction with the decision to report financial instru-
ments at fair value, as well as in conjunction with the decision to classify
insurance contracts as insurance/investment contracts.
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.
• Financial assets and liabilities classified as available-for-sale presume
that the criteria specified in the accounting principles have been fulfilled.
• Classification of financial assets as investments held to maturity under
the presumption that the 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, provisions 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 statements,
unless stated otherwise below.
Approval
The annual accounts were approved for publication by the Board of Direc-
tors on 8 March 2010. The income statement and balance sheet will be
adopted at the General Meeting held in the spring of 2010.
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 provisions, lia-
bilities 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 provisions and 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 statements are included in the consolidated ac-
counts 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 and joint ventures are eliminated to the extent corresponding
to the Group’s participating interest in the company. Unrealised losses are
eliminated in the same manner as unrealised gains, but only to the extent
there is no write-down requirement.
27
Annual Report 2009
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, provisions and liabilities in
foreign currency. 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 7.13
EUR 10.27
GBP 11.51
Financial statements 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. Finacial instruments 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 written 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
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. The premium income includes the net of ente-
red and withdrawn premium portfolios. Reinstatement premiums (premiums
for reinstating 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 written insurance contracts are recog-
nized in the amounts expected to be paid to the Company. Cancellations
reduce premium income, as soon as the amount is known. Additional pre-
miums are recognized in the amount estimated to be paid 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, Equalization provisions
(in the Parent Company) 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. “Policies in
force” refers to insurance policies in accordance with entered agreements
irrespective if they wholly or in part relates to later insurance period. In
calculating these provisions, an estimate is made of anticipated costs 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
consider both the observed and the forecasted development of relevant
costs.
Unexpired risk refers to the risk that the insurance contract’s future
claims and expenses cannot be covered by unearned 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
of the Company’s liability for contracts in force. 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. Differences that can be explained
by translation of changes in technical provisions to the exchange rate
prevailing on the balance sheet date are recorded as exchange rate gains or
losses under investment income.
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 external 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 ex-
penses for incurred but, to date, unknown claims and not yet fully reported
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. Differences that can be explained by the translation of changes in
technical provisions to the exchange rate prevailing on the balance sheet
date are recorded as exchange rate gains or losses under investment
income.
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.
28
Annual Report 2009
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
insurance operations.
equivalent to the actual total yield from the investment assets belonging
to the insurance operations. The weighted average interest rate for 2009
amounted to 6.21%.
Applied interest rates
Claims adjustment provision
The amount of this provision is based on outstanding claims. The provision
is equal to 2% of reported unpaid claims and 4% of incurred unreported or
not yet fully reported claims. The period’s change in the claims adjustment
provision is recorded in the income statement within the items Claims
handling expenses and Operating costs.
EUR
GBP
SEK
USD
2009
2008
2.68%
8.19%
2.06%
8.40%
6.22%
3.73%
8.03%
0.93%
Deferred acquisition costs for insurance contracts
The term acquisition costs refers to such operating costs that, directly or
indirectly, vary with the acquisition or renewal of insurance contracts. Defer-
red 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. Defer-
red acquisition costs are normally amortized 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.
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.
Operating costs
All operating costs are allocated in the income statement according to
their functional nature; acquisition, 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 policyholders, due to insurance contracts or incurred
claims, during the financial year, are recorded as claims paid, regardless of
when the claim was incurred.
Ceded reinsurance
As premiums for ceded reinsurance are recorded amounts paid during the fi-
nancial year, amounts recorded as liabilities to the company that have assu-
med the reinsurance, in accordance with entered reinsurance agreements,
and premium portfolios. 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 the entered agree-
ments. The Company assesses any required impairment for assets referring
to reinsurance agreements biannually. If the recoverable amount is lower
than the carrying amount of the asset, the asset is impaired to the recovera-
ble amount and the impairment is recorded in the income statement.
Reporting of investment return
Investment income allocated to the technical account
Investment return is transferred from the non-technical account to the
technical 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
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
expenses and charges. The item comprises operating costs for land and
buildings, asset management costs, interest expense, 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 in-
vestment items, as appropriate. As regards interest-bearing securities clas-
sified as available-for-sale financial assets, previously unrealised changes
in value are recognized as adjustment entries directly under Shareholders’
equity. 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 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
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
29
Annual Report 2009
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.
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.
Intangible assets
Goodwill
Goodwill represents the difference between the acquisition value in the bu-
siness acquisition and the fair value of acquired assets, assumed provisions
and 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 accumulated 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
3 years
20 years
3 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,
which are recorded at fair value exclusive of transaction costs. A financial
instrument is classified when it is initially reported, based upon the purpose
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
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.
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 -8, while the recorded
value per balance sheet date of 31 December 2009 amounted to MSEK 323.
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 provisions.
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
30
Annual Report 2009
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 disposed.
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
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 write-down 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 com-
mitments regarding contributions to defined contribution plans are recorded
31
Annual Report 2009
as expenses in the income statement at the rate they are earned by employ-
ees 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 RFR2.2, 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 2.2. This implies that the changed
accounting 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.
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% of the untaxed reserves can be considered as a
deferred tax liability and 73.7% 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% of the untaxed reserves can be
allocated to deferred tax liabilities and 73.7% 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.
Equalisation provision
The Parent Company’s balance sheet includes an Equalisation provision
within Technical provisions, and any changes for the period in this provision
are reported in the income statement. However, in the consolidated balance
sheet, the Equalisation provision is allocated into deferred tax liabilities and
shareholders’ equity.
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.
32
Annual Report 2009
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 windstorms in Europe – or in qualitative
terms – for example in relation to operational risk. From these overall risk
appetite statements, operational limits are successively applied at detail
level throughout the organization in the form of operational risk limits, maxi-
mum 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.
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 Sirius risk management
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, risk 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
Sarbanes-Oxley Act, Section 404, to express an opinion on the effective-
ness 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 suc-
cess. 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 selected
risk level. The anticipated profitability of each contract which is entered
into shall comprise the basic ground 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 risk tolerance 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 allocated
capital. The premium risk is therefore associated with any possible level of
losses deviating from expected levels. The premium risk is generally mana-
ged through the application of pricing models and underwriting procedures,
but also through a reduction in underpriced 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 underwrit-
ing 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
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 sys-
tems, which are in place to monitor and control that underwriting policies
and procedures are followed. There is an underwriting control group
reporting to the Chief Underwriting Officer. This group focuses in detail on
how the business is underwritten and that the underwriters follow issued
policies and procedures. Another group controls the underwriting system
and ensures it is used correctly and that input data is accurate. Finally,
Internal Audit and Group Risk Management also monitor these control
33
Annual Report 2009
groups, carrying out random inspections/tests, in detail ensuring they use
out sufficient control.
Retrocession
Sirius International uses retrocession as a tool to manage risk and has a
centralized unit responsible for the purchasing and administration of its
outwards reinsurance. The implementation of reinsurance purchase is based
on the strategic direction of the inwards portfolio, overall risk tolerance and
the search for an optimal portfolio mix. Catastrophe models and other tools
are used in the analytical and decision making process.
Sensitivity to risks attributable to insurance agreements
Within the insurance operations, property damage 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 utilizes a number of different models. Within Property Damage
Insurance, the area with the highest level of catastrophe risk, the company
utilizes a system linked to the underwriting system. In this system, all busi-
ness is registered 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 ana-
lyses catastrophe risks, divided by geographical area and return periods.
The figures show the situation as per October 2009, when the company
experienced its highest level of exposure during 2009.
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
3,584
2,635
3,507
1,888
5,136
3,050
5,136
2,854
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 in is an
estimated net loss of MSEK 2,854 (gross claims MSEK 5,136). In order to
estimate how claims of this size affect solvency capital, the company makes
an estimation of the so-called Net Financial Impact (NFI), which is based on
the estimated net claims adjusted for reinstatement premiums (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 established risk
tolerance.
Within the area Aviation reinsurance, the company applies another licen-
sed third-party model, ALPS, in which the exposure per Airline Company can
be followed on-line. Within the insurance classes, Accident and Trade Credit,
the company has models which it has developed inhouse.
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. This
risk is 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-Fergu-
son method and the Benktander method. A combination of benchmarks 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 also to Note 4 Claims incurred and Note 24 Claims Outstanding,
where a specification of claims costs and expenses relating to the current
year and prior years is made.
historical Loss Reserve Trends
The table below shows historical loss reserve trends. When reading the
table it should be noted that amounts in other currencies are converted
to the closing exchange rate for 2009. The table below is thus not directly
comparable to the income statement. The increases in claims costs shown
in the table should be seen in relation to earned exposure. The amounts
shown do not include internal claims adjustment expenses. During 2004 two
larger operations were acquired, that were accounted in a way that does not
make amounts fully available, thus we have excluded this underwriting year.
34
Annual Report 2009
Claims (MSEK), gross
underwriting year
2004 and
prior years
Estimated claims: at the close of the calendar year
1 year later
2 years later
3 years later
4 years later
Current estimate of total claims
Total paid
2005
2006
2007
2008
2009
Total
3 443
3 994
3 886
3 858
3 844
3 844
3 617
2 648
3 357
6 562
6 030
6 030
2 946
3 749
4 324
4 325
3 819
4 727
3 706
4 325
3 661
4 727
2 927
3 706
1 288
Claims outstanding
1 667
227
3 085
665
1 800
2 417
9 861
Claims (MSEK), gross
underwriting year
2004 and
prior years
Estimated claims: at the close of the calendar year
1 year later
2 years later
3 years later
4 years later
Current estimate of total claims
Total paid
2005
2006
2007
2008
2009
Total
2 876
3 355
3 262
3 251
3 237
3 237
3 016
2 361
3 014
3 074
3 055
3 055
2 724
3 272
3 796
3 775
3 467
4 151
3 162
3 775
3 185
4 151
2 615
3 162
1 199
Claims outstanding
1 272
221
331
590
1 536
1 963
5 913
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 In-
vestments 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 2009 amounted to a total
return of 3.3 percent, expressed in SEK. The duration in the portfolio with
interest-bearing investments at the end of 2009 was 1.56 years which was
unchanged compared to 2008. During the year, the percentage of equities
in the investment portfolio decreased to approximately 12 percent. The ta-
ble below shows the investment assets divided by class of asset, excluding
deposits in companies that are reinsured by Sirius.
Investment assets,
division by class of asset
Percentage split
Bonds and other interest-bearing securities
Shares and participations
- whereof venture capital companies
Cash and bank balances
Total
58.29
12.11
1.47
29.60
100
Market risks
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 2009 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 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 2009.
35
Annual Report 2009
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
3,611
602
4,449
8,662
30%
25%
30%
-
101
85
115
-
82
5
121
208
54
3
80
137
Equity risk
The equity risk is the risk that the market value of equities 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
2009.
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
-
1,251
2,741
3,992
-
35%
35%
-
438
959
1,397
-
285
637
922
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 to Owner’s Funds.
Sirius’ net Policyholders Funds exposure for currency risk is marginal as the
company’s objective for managing currency risk is to match net insurance
debts in foreign currency with corresponding assets within very tight
frames. The company’s total net exposure for currency risk, i.e. including
both Policyholder and Owners Funds, before and after any hedging by
derivatives is shown in the table below.
Exchange rate exposure – Group
(MSEK)
USD
EUR
GBP
Other
Investment assets
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
3,514
4,338
1,395
1,971
11,218
5,323
5,323
114
971
2,176
289
3,550
1,763
1,763
hedging with derivatives
5,895
1,787
Nominal value currency forwards
0
0
Net exposure after financial
hedging with derivatives
5,895
1,787
0
143
39
-41
141
141
141
0
0
0
0
0
38
38
76
66
66
10
0
10
36
Annual Report 2009
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 rate. The sensiti-
vity analysis takes into consideration existing financial hedges with currency
related derivatives.
Sensitivity analysis per currency
(MSEK)
USD
EUR
GBP
Other
Total
Change 25 basis points
Change 10%
205
590
43
178
0
0
-
1
248
769
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 turbulence in the credit and financial mar-
kets, a phenomenon which was clearly manifested during 2008 and 2009.
The table below shows the exposure of Sirius’ investment assets divided
per class of asset.
Exposure (MSEK) - Group
Bonds & other interest-bearing assets
Governments
Swedish mortgage institutions
Other Swedish issuers
Other issuers
Shares & participations
Total
8,662
5,305
103
104
3,150
1,797
10,459
The table below lists the ten largest holdings. The table includes Corporate
bonds and Shares and participations and excludes Government bonds and
other similar interest-bearing securities as well as Shares and participations
in associated companies.
Name of security
Type of security
Market value
% of financial
OneBeacon Insurance Group Ltd
SABMiller PLC
Atlas Copco AB
Royal Dutch Shell PLC
PPG Industries Inc
Anheuser-Busch Inbev
BAE Systems PLC
Enterprise Rent A Car
Merck & Co Inc
Cargill Inc
Total
Share
Bond
Bond
Bond
Bond
Bond
Bond
Bond
Bond
Bond
543
138
106
98
98
77
77
75
72
65
assets
4.3
1.1
0.8
0.8
0.8
0.6
0.6
0.6
0.6
0.5
1,349
10.7
37
A
10
0
0
100
0
25
BBB
BB
Total
13
0
0
0
0
34
0
0
0
0
0
1
100
100
100
100
100
100
Annual Report 2009
The tables 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
-Other Swedish institutions
-Foreign governments
-Other foreign issuers
74
100
100
0
99
33
3
0
0
0
1
7
Equity investments, divided by geographical area
Western Europe
North America
Asia
Total
Percentage Split
25.85
72.28
1.87
100
Interest-bearing investments, divided by geographical areas
Percentage split
Western Europe
North America
Scandinavia
Other
Total
11.65
48.75
38.69
0.91
100
Interest-bearing investments, divided by sector
Governments
Swedish mortgage institutions
Other Swedish issuers
Other foreign issuers
Total
Percentage split
61.26
1.18
1.20
36.36
100
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 in the
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 model for reinsurance counterparty analysis. For
each rating there is a corresponding maximum limit for the total exposure
per reinsurer and per program.
If the credit worthiness of a retrocessionaire deteriorates into unac-
ceptable 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 established based on the company’s Bad Debt Reserving Policy.
The credit risk reserve for these bad debts amounted, as per 31 December
2009, to MSEK 65.
38
Annual Report 2009
Ageing balances
Receivables regarding both direct insurance as well as assumed reinsurance are followed up
on a monthly basis and outwards reinsurance receivables are 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, 1-3 months, 3-6 months, 6-9 months,
9-12 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.
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
total MSEK 13.
Due
<1 month
Net receivables (MSEK)
119
1-3
52
3-6
-1
6-9
1
9-12
-6
>1
64
Total
229
Retrocession credit risk
Reinsurers’ share of technical provisions 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 2009 was MSEK 4,430. The credit rating distribution for this exposure is shown in the
table below.
Financial Strength Rating - Standard & Poor's
Gross MSEK Collateral MSEK
Net MSEK
Percentage
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB or lower
Special approval
Internal reinsurance
Sum
137
0
43
34
387
70
148
5
756
130
2 720
4 430
0
0
0
0
0
0
33
0
107
0
2 720
2 860
137
0
43
34
387
70
115
5
649
130
0
1 570
3
0
1
1
9
2
3
0
17
3
61
100
In the item Internal reinsurance above the majority of ceded reinsurance refers 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 from 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 from Retrocessionaires (excluding costs for
reinstatements) and the distribution of credit ratings for Sirius’ 2009 Retrocession Program.
Financial Strength Rating - Standard & Poor's
MSEK
Percentage
AA+
AA
AA-
A+
A
A-
BBB+
BBB or lower
Fully collateralized
Special approval
Sum
split
3
16
9
33
4
24
2
2
4
3
80.4
483.6
268.0
993.0
125.3
739.3
56.0
54.7
114.6
106.4
3 021.3
100
39
Annual Report 2009
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 derivatives
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 2009, the duration of interest-bearing investment assets
was 1.56 years and the duration of insurance liabilities was 1.88 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 2009 also provides an illustration of the
company’s liquidity situation.
The tables below show a more detailed maturity profile for the Group in
respect of both financial assets and debts.
Liquidity profile – financial assets
(Contractual inflows)
MSEK
On demand
<3 months
–1 year
1-5 years
>5 years
No duration
Total
3 months
Bonds and other interest-bearing securities
Shares & participations in associated companies
Shares & participations
Cash & bank balances
Receivables, direct insurance
Receivables, reinsurance
Other debts
Prepaid expenses and accrued income
Sum
Liquidity profile - financial debts
(Contractual outflows)
1 017
404
5 162
2 079
0
0
0
4 383
0
0
15
0
0
0
0
0
0
719
23
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2 185
1 797
0
10
19
36
0
8 662
2 185
1 797
4 383
10
1 480
770
175
4 398
1 759
5 162
2 079
4 047
19 462
0
0
0
0
1 461
0
152
2 017
3 months
MSEK
On demand
<3 months
–1 year
1-5 years
>5 years
No duration
Total
Payables, direct insurance
Payables, reinsurance
Other debts
Accrued expenses and deferred income
Sum
0
0
0
0
0
0
0
102
78
180
0
556
485
50
1 091
0
0
39
29
68
0
0
0
0
0
14
-43
0
0
-29
14
513
626
157
1 310
Liquidity profile – Technical provisions
(Estimated claim payments, net, excluding ULAE)
MSEK
<3 months
–1 year
1-5 years
>5 years
Total
3 months
Technical provisions
Sum
717
717
2 183
2 183
3 062
3 062
964
964
6 926
6 926
40
Annual Report 2009
Operational risks
Sirius has defined operational risks as “The risk of losses due to defective
or inappropriate internal processes and routines, human errors, defective
systems or external events, including legal risk”.
All employees within Sirius are responsible for the contribution to a
well functioning process for operational risk management and shall see
themselves as risk managers. The Group Risk Management function for Risk
Control is a group function responsible for developing and improving the
operational risk methodology and thereby supporting the organization and
the process owners with the tools needed to manage these risks.
During 2009 the improvement of Sirius’ operational risk management pro-
cess has been into focus. The development of a framework for Operational
Risk Management and an Incident Reporting Database will continue during
the first quarter of 2010, followed by implementation of the framework and
new routines.
Operational risks within Sirius are e.g. identified through regularly con-
ducted Risk Control & Compliance Reviews (the RCC Review). Other helpful
sources are the continuously updated process narratives and flowcharts
where any gaps or operational risks are visualized and can be mitigated.
Operational risks are also identified and managed by defining controls within
the processes and through follow up and testing of the effectiveness of the
key controls.
The result of the RCC Review that was performed from November
2008 until April 2009 was presented to the Executive Group in June 2009
together with suggested recommendations. Within the RCC Review key
persons from different parts of the organization were interviewed regarding
the risks within their respective working area or process, covering not only
operational risks but also other risks.
Any material issues subject to operational risks and incidents are repor-
ted to the Board of Directors and Senior Management within the Quarterly
Risk Report and to the Board of Directors as part of the yearly summarizing
Risk and Governance Report.
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, insu-
rance risk and operating expense risk. The model results in a total capital
net requirement which is compared to a so-called buffer capital (“solvency
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 2009 and 2008.
Total capital requirement
according to the Traffic Light model
Total capital net requirement
Capital buffer
Surplus
2009
2008
3 919
12 567
8 648
2 622
10 925
8 303
Financial Strength Rating
The financial strength of Sirius International has been rated by Standard & Poor’s, A M Best and Moody’s.
Finacial Strength Rating as per 31 December 2009
S&P's
A M Best
Moody’s
Financial Strength Rating
Outlook
A-
Stable
A
Negative
A3
Stable
41
Annual Report 2009
Note 3 • Premium income
Premium income, geographical allocation
Group
Parent Company
2009
2008
2009
2008
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
8
128
684
7,810
8,630
-1,673
6,957
-79
106
529
6,127
6,683
-1,081
5,602
8
128
684
7,810
8,630
-1,673
6,957
-79
106
529
6,127
6,683
-1,081
5,602
Note 4 • Claims incurred for own account
Claims incurred for the year´s operations
2009
2008
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
-1,401
59
-1,563
-981
-168
Total claims incurred for the year’s operations
-4,054
90
0
298
175
0
563
2009
-1,311
59
-1,265
-806
-168
-3,491
-1,531
45
-1,284
-843
-241
-3,854
Group
-1,432
54
-1,119
-788
-241
-3,526
99
9
165
55
0
328
2008
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
Change in provision for incurred but not reported claims (IBNR)
-3,001
268
1,124
1,214
Total claims incurred for the previous year’s operations
-395
337
4
-84
-535
-278
-2,664
272
1,040
679
-673
-2,518
-76
995
-1,860
-3,459
380
73
-273
3,143
3,323
-2,138
-3
722
1,283
-136
Total claims incurred
-4,449
285
-4,164
-7,313
3,651
-3,662
2009
2008
Group
Gross
Ceded
Net
Gross
Ceded
Net
-4,402
327
-168
-4,243
427
-3,975
4
0
331
-168
431
-3,812
-4,049
-31
-241
-4,321
2009
Group
-3,570
51
-241
-3,760
479
82
0
561
2008
Gross
Ceded
Net
Gross
Ceded
Net
-439
233
-206
214
-360
-146
-225
-127
-352
-289
-2,703
-2,992
-108
3,198
3,090
-397
495
98
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
42
Annual Report 2009
Claims incurred for the year´s operations
Gross
Ceded
Net
Gross
Ceded
Net
2009
2008
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
-1,401
59
-1,563
-981
-168
Total claims incurred for the year´s operations
-4,054
90
0
298
175
0
563
2009
-1,311
59
-1,265
-806
-168
-3,491
-1,531
45
-1,284
-843
-241
-3,854
Parent Company
-1,432
54
-1,119
-788
-241
-3,526
99
9
165
55
0
328
2008
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
Change in provision for incurred but not reported claims (IBNR)
Total claims incurred for previous year's operations
-3,001
268
1,124
1,214
-395
337
4
-84
-535
-278
-2,664
272
1,040
679
-673
-2,518
-76
995
-1,860
-3,459
380
73
-273
3,143
3,323
-2,138
-3
722
1,283
-136
Total claims incurred
-4,449
285
-4,164
-7,313
3,651
-3,662
Total claims paid
Claims paid
Loss portfolios
Claims handling expenses
Paid claims
2009
2008
Parent Company
Gross
Ceded
Net
Gross
Ceded
Net
-4,402
327
-168
-4,243
427
-3,975
4
0
331
-168
431
-3,812
-4,049
-31
-241
-4,321
-3,570
51
-241
-3,760
479
82
0
561
2008
Change in Provision for outstanding claims
2009
Parent Company
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
-439
233
-206
214
-360
-146
-225
-127
-352
-289
-2,703
-2,992
-108
3,198
3,090
-397
495
98
43
Annual Report 2009
Note 5 • Operating costs
Specification of income statement item operating costs
Group
Parent Company
2009
2008
2009
2008
Acquisition costs
-1,673
-1,239
-1,673
-1,239
Change in prepaid acquisition costs (+/–)
Administrative expenses
Provisions and profit shares in ceded reinsurance (–)
86
-452
283
-100
-260
196
86
-457
283
-100
-265
196
Total
-1,756
-1,403
-1,761
-1,408
Other operating costs
Group
Parent Company
2009
2008
2009
2008
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
-168
-41
-3
-1,756
-1,968
-241
-45
-2
-1,403
-1,691
-168
-41
-3
-1,761
-1,973
-241
-45
-1
-1,408
-1,695
Total operating costs by type
Direct and indirect personnel costs
Premises costs
Depreciation/Amortisation
Other expenses related to operations
Total
Group
Parent Company
2009
2008
2009
2008
-369
-47
-8
-1,544
-1,968
-318
-46
-7
-1,320
-1,691
-354
-46
-8
-1,565
-1,973
-305
-44
-7
-1,339
-1,695
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)
Swedish shares
Foreign shares
Interest-bearing securities
Property
Group
Parent Company
2009
2008
2009
2008
0
45
329
46
46
0
1
0
0
0
2
48
339
85
85
913
0
0
0
0
0
9
329
46
46
0
1
0
0
0
2
33
338
85
85
595
0
0
0
0
Total return on capital, income
421
1,386
385
1,053
44
Annual Report 2009
Note 7 • Unrealised gains on investments
Swedish shares and participations
Foreign shares and participations
Share of income in associated company 1)
Derivatives
Total unrealised gains on investments
Group
Parent Company
2009
2008
2009
2008
0
365
270
0
635
2
167
0
1
170
0
228
0
0
228
2
167
0
1
170
") Refers to the Group´s share of income in associated company, WM Phoenix.The translation of the exchange rate difference arising in the conversion to Swedish krona
is reported directly against equity (-186). In previous years, the Group´s share of revenues for the previous holdings in associated company White Mountains Internatio-
nal, was recorded as realized and unrealized gain/loss.
Note 8 • Investment expenses and charges
Group
Parent Company
2009
2008
2009
2008
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
-3
-43
-1
-1
Capital losses on foreign exchange, net
-258
Swedish shares and participations
Foreign shares and participations
Subsidiaries & associated companies
Bonds and other interest-bearing securities
Write-down of investment assets
0
-35
0
-30
0
-2
- 49
-2
-2
0
-4
-259
-232
-15
0
-3
-43
-1
-1
-244
0
-34
0
-30
0
-2
-43
-2
-2
0
-4
-258
0
-15
0
Total
-370
-563
-355
-329
Note 9 • Unrealised losses on investments
Group
Parent Company
2009
2008
2009
2008
Swedish shares and participations
Foreign shares and participations
Derivatives, forward exchange agreements
Total unrealised losses on investments
0
-28
0
-28
-8
-889
-1
-899
0
-28
0
-28
-8
-610
-1
-620
45
Annual Report 2009
Note 10 • Net profit or net loss per category of financial instrument
Group 2009
Financial assets
identified as
items valued
Loan
at fair value in
Available-for-
receivables
the income
sale financial
and accounts
Financial assets
statement
instruments
receivables
Total
Shares and participations
Bonds and other interest-bearing securities
Deposits with edents
Other debtors
Total
575
0
0
0
575
0
478
0
0
478
Parent Company 2009
Financial assets
identified as
items valued
575
478
22
7
1,082
0
0
22
7
29
Loan
Financial assets
statement
instruments
receivables
Total
at fair value in
Available-for-
receivables
the income
sale financial
and accounts
Shares and participations
Bonds and other interest-bearing securities
Deposits with edents
Other debtors
Total
166
0
0
0
166
0
478
0
0
478
0
0
22
7
29
166
478
22
7
673
Group 2008
Financial assets
identified as
items valued
at fair value in
Available-for-
the income
sale financial
Financial assets
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 2008
Financial assets
identified as
items valued
at fair value in
Available-for-
the income
sale financial
Financial assets
statement
instruments
Total
Shares and participations
Bonds and other interest-bearing securities
Total
-710
0
-710
0
527
527
-710
527
-183
The amounts in the table above constitute a specification of the amounts regarding finanicial instruments which are reported in the income
statement as (i) return on capital, income (ii) unrealised gains (iii) return on capital, expenses, (iv) unrealised losses, with exception for (a)
potential amortisation and write-downs, (b) asset management costs and (c) excange rate gains/losses.
As the Company has no financial liabilities generating interest expenses, these have not been specified in the above table; neither does
the table include interest income from Cash & Bank.
46
Annual Report 2009
Note 11 • Taxes
Current tax expense (-)[/tax revenue (+)]
Curent tax expenses
Tax adjustment attributable to previous years
Deferred tax expense (-) [/tax revenue (+)]
Deferred tax regarding temporary differences
Total reported tax expense
Group
Parent Company
2009
2008
2009
2008
-187
-4
-112
-303
-341
278
-69
-132
-185
-4
18
-171
-338
278
-233
-293
Reconciliation of effective tax
Reconciliation of effective income tax rate for the Group and Parent Company to the Swedish income tax rate:
Group
Parent Company
2009
2008
2009
2008
Tax according to applicable tax rate for the Parent Company
-26.3%
Non-deductible expenses
Non-taxable income
Tax regarding previous years
Other
-0.3%
8.4%
-1.0%
0%
-28.0%
-8.6%
7.6%
-5.5%
18.6%
-26.3%
-28.0%
-0.3%
3.2%
-2.4%
0
-0.1%
4.4%
-4.5%
-0.2%
Reported effective tax
-19.2%
-15.9%
-25.8%
-28.4%
"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 2009 amounts to 511 (0).
Reported deferred tax receivables and tax liabilities
Reported deferred tax receivables and tax liabilities related to the following:
Group
Deferred tax assets
Deferred tax liabilities
Net
2009
2008
2009
2008
2009
2008
Pension provisions
Other provisions
Surplus value of securities
Safety reserve and accelerated depreciation
Net tax receivables/tax liabilities
10
16
0
0
26
8
13
0
0
21
0
-1
-22
-2 549
-2,572
0
0
0
-2 419
-2,419
10
15
-22
-2 549
-2,546
8
13
0
-2 419
-2,398
Deferred tax assets
Deferred tax liabilities
Net
Parent Company
2009
2008
2009
2008
2009
2008
Pension provisions
Other provisions
Surplus value of securities
Net tax receivables/tax liabilities
10
15
0
25
8
13
0
21
0
0
-21
-21
0
0
0
0
10
15
-21
4
8
13
0
21
Unreported deferred tax receivables
There are no deductible temporary differences and fiscal loss carry forward for which deferred tax
receivables have not been reported in the income statement and balance sheet.
Group
Parent Company
Changes in deferred tax
2009
2008
2009
2008
Opening balance
Recognized in income statement
Recognized in shareholders’ equity
Closing balance
-2,398
-112
-36
-2 296
-69
-33
-2,546
-2,398
21
18
-35
4
287
-233
-33
21
Taxes recognized in shareholders’ equity mainly refers to available-for-sale financial assets -35 (-33).
There is no loss carry-forward included in the change of deferred tax.
47
Annual Report 2009
Note 12 • Intangible assets
Intangible assets
-IT
Intangible assets
-IT
Capitalized
Acquired
Capitalized
Acquired
expenditure for
intangible
expenditure for
intangible
development
assets
development
assets
work
Goodwill
Total
work
Goodwill
Total
Accumulated acquisition value
Opening balance, 1 January 2008
Acquisitions for the year
Closing balance, 31 December 2008
Opening balance, 1 January 2009
Acquisitions for the year
Closing balance, 31 December 2009
Accumulated amortisation
Opening balance, 1 January 2008
Depreciation for the year
Closing balance, 31 December 2008
Opening balance, 1 January 2009
Depreciation for the year
Closing balance, 31 December 2009
Carrying amount
Per 1 January 2008
Per 31 December 2008
Per 1 January 2009
Per 31 December 2009
Amortisation for the year is included in the
following rows of the income statement for 2008:
Operating costs
Other costs
Total
Amortisation for the year is included in the
following rows of the income statement for 2009:
Operating costs
Other costs
Total
65
1
66
66
5
71
-65
0
-65
-65
-1
-66
0
1
1
5
0
0
0
-1
0
-1
615
0
615
615
0
615
-297
-27
-324
-324
-27
-351
318
291
291
264
0
-27
-27
0
-27
-27
680
1
681
681
5
686
-362
-27
-389
-389
-28
-417
318
292
292
269
0
-27
-27
-1
-27
-28
In the item IT-related intangible assets, acquired licenses and expenses brought forward are included for the development
of business-critical systems. All intangible assets are depreciated. For information regarding the deprications, see Note 1,
Accounting principles
65
1
66
66
5
71
-65
0
-65
-65
-1
--66
0
1
1
5
0
0
0
-1
0
-1
460
0
460
460
0
460
-214
-17
-231
-231
-17
-248
246
229
229
212
0
-17
-17
0
-17
-17
525
1
526
526
5
531
-279
-17
-296
-296
-18
-314
246
230
230
217
0
-17
-17
-1
-17
-18
48
Note 13 • Land and Buildings
Acquisition cost
Opening balance, 1 January 2008
Closing balance, 31 December 2008
Opening balance, 1 January 2009
Closing balance, 31 December 2009
Depreciation
Opening balance, 1 January 2008
Depreciation for the year
Closing balance, 31 December 2008
Opening balance, 1 January 2009
Depreciation for the year
Closing balance, 31 December 2009
Carrying amount
1 January 2008
31 December 2008
1 January 2009
31 December 2009
Assessed value
Annual Report 2009
Group
Parent Company
18
18
18
18
-13
-1
-14
-14
-2
-16
5
4
4
2
18
18
18
18
-13
-1
-14
-14
-2
-16
5
4
4
2
Group
Parent Company
2009
2008
2009
2008
Assessed value, buildings (in Sweden)
Assessed value, land (in Sweden)
Total
2
1
3
1
1
2
2
1
3
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 Holdings (NL) B.V Amsterdam, The Netherlands
2009
2008
100
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
Parent Company
2009
2008
1,252
0
0
609
643
0
1,252
1,252
-596
-596
0
0
0
-596
656
0
0
0
-596
656
49
Annual Report 2009
Subsidiaries' equity
2009
Name of subsidiary
Equity
Share %
Number of
Book value
Profit/loss
shares
2009
Sirius Rückversicherungs Service GmbH, Hamburg, Germany
Sirius Belgium Réassurances S.A., Liège, Belgium
18
14
100
100
0
13
5
0
1 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 Holdings (NL) B.V., Amsterdam, The Netherlands
592
100
643
Share capital total
157
EUR 18,000
consisting of
180 shares
with nom. value
EUR 100 per share
Total
624
100
656
162
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
1 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 Holdings (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
50
Annual Report 2009
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 1)
Translation differences
Other changes in associated company's equity
Group
2009
2008
2,101
0
270
-186
0
1,652
385
-249
296
17
Carrying amount at end of year
2,185
2,101
Carrying amount at start of year
Acquisition of associated company
Carrying amount at end of year
Parent Company
2009
2008
2,058
0
2,058
1,673
385
2,058
Associated Companies
Assets
Liabilities
Equity
Net income
Share of
capital %
2)
Number
of shares
White Mountains Phoenix S.a.r.l., Luxembourg
Total
22,921
22,921
14,455
14,455
8,466
8,466
1,139
1,139
23,6
23,6
2,461,000
2,461,000
1) Refers to the Group's share of income in the associated company, WM Phoneix. The translation of the exchange rate difference
arising in the conversion to Swedish krona is reported directly against shareholders equity (-186). In previous years, the Group's share
of revenues for the previous holdings in the associated company, White Mountains International, was specified according to realized and
unrealized income.
2) The participating interest in the Company's total shareholders equity at year-end is equivalent to 23.6% (28.2%). The participating
interest in total outstanding shares at year-end is equivalent to 22.0% (22.0%).
Note 16 • Investments in shares and participations
Group
1,797
1,745
2,053
2,338
Fair value
Acquisition cost
2009
2008
2009
2008
Fair value
Acquisition cost
2009
2008
2009
2008
Parent Company
1,251
1,294
1,352
1,595
Further information on financial instruments can be found in Note 19.
51
Annual Report 2009
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
2009
2008
2009
2008
3,144
466
2,161
2,890
8,662
3,126
1,089
2,578
1,989
8,782
3,038
456
2,152
2,815
8,462
2,982
1 121
2,523
2,089
8,715
of which listed
8,662
8,782
8,462
8,715
Average difference compared to nominal value
Total excess amount
Total shortfall
461
33
365
200
263
35
166
68
Parent Company
Swedish government
Swedish mortgage institutions
Other Swedish issuers
Foreign governments
Other foreign issuers
Total
Fair value
Acquisition cost
2009
2008
2009
2008
3,144
466
2,161
2,890
8,662
3,126
1,089
2,578
1,989
8,782
3,038
456
2,152
2,815
8,462
2,982
1,121
2,523
2,089
8,715
of which listed
8,662
8,782
8,462
8,715
Average difference compared to nominal value
Total excess amount
Total shortfall
461
33
365
200
263
35
166
68
Note 18 • Debtors arising out of direct insurance and other debtors
Group
Parent Company
2009
2008
2009
2008
Amounts due from intermediaries
Total debtors arising out of direct insurance 10
10
37
37
10
10
37
37
Group
Parent Company
2009
2008
2009
2008
Other debtors, group companies
Other debtors
Total other debtors
713
57
770
0
55
55
713
43
756
0
40
40
52
Annual Report 2009
Note 19 • Categories of financial assets and liabilitities and their fair values
Group 2009
Financial
Loan
assets valued
Financial assets
receivables
statement
assets
amount
Fair value
value
receivables and
at fair value
Available-for-
accounts
via the income
sale financial
Total
carrying
Acquisition
Shares and participations
Bonds and other interest-bearing securitites
Accrued income
Other debtors
Total
0
0
0
770
770
1,797
0
594
0
0
8,662
0
0
1,797
8,662
594
770
1,797
8,662
594
770
2,021
8,622
594
770
2,391
8,662
11,823
11,823
12, 007
Parent Company 2009
Financial
Loan
assets valued
Financial assets
receivables
statement
assets
amount
Fair value
value
receivables and
at fair value
Available-for-
accounts
via the income
sale financial
Total
carrying
Acquisition
Shares and participations
Bonds and other interest-bearing securitites
Accrued income
Other debtors
Total
0
0
0
756
756
1,251
0
592
0
0
8,662
0
0
1,251
8,662
592
756
1,251
8,662
592
756
1,352
8,622
592
756
1,843
8,662
11,261
11,261
11,322
Group 2009
Financial liabilities
liabilities
amount
Fair value
Other financial
Carrying
Other liabilities
Accrued expenses
Total
626
157
783
626
157
783
626
157
783
Parent Company 2009
Financial liabilities
liabilities
amount
Fair value
Other financial
Carrying
Other liabilities
Accrued expenses
Total
638
157
795
638
157
795
638
157
795
53
Annual Report 2009
Group 2008
Financial
assets valued
Financial assets
statement
assets
amount
Fair value
value
at fair value
Available-for-
Total
via the income
sale financial
carrying
Acquisition
Shares and participations
Bonds and other interest-bearing securities
Accrued income
Total
1,745
0
629
2,374
0
8,782
0
8,782
1,745
8,782
629
1,745
8,782
629
2,099
8,234
629
11,156
11,156
10,962
Parent Company 2008
Financial
assets valued
Financial assets
statement
assets
amount
Fair value
value
at fair value
Available-for-
Total
via the income
sale financial
carrying
Acquisition
Shares and participations
Bonds and other interest-bearing securities
Accrued income
Total
1,294
0
628
1,922
0
8,782
0
8,782
1,294
8 ,82
628
1,294
8,782
628
1,359
8,234
628
10,704
10,704
10,221
Group 2008
Financial liabilities
liabilities
amount
Fair value
Other financial
Carrying
Other liabilities
Accrued expenses
Total
546
122
668
546
122
668
546
122
668
Parent Company 2008
Financial liabilities
liabilities
amount
Fair value
Other financial
Carrying
Other liabilities
Accrued expenses
Total
554
122
676
554
122
676
554
122
676
54
Annual Report 2009
In the tables below, data is provided regarding the determination
of fair value for financial instruments valued at fair value in the
balance sheet. The determination of fair values is categorized
according to the following three levels:
• Level 1: Based on prices listed on a active market for identical
assets or liabilities
• Level 2: Based on directly (according to price listings) or
indirectly (derived from price listings) observable market data
for assets or liabilities that are not included in Level 1
• Level 3: Based on input data that is not observable on the
market
Group 2009
Levei 1
Level 2
Level 3
Total
Shares and participations
Bonds and other interest-bearing securities
Total
546
4,723
5,269
928
3,939
4,867
323
0
323
1,797
8,662
10,459
Parent Company 2009
Level 1
Level 2
Level 3
Total
Shares and participations
Bonds and other interest-bearing securities
Total
0
4,723
4,723
928
3,939
4,867
323
0
323
1,251
8,662
9,913
The fair value of financial instruments traded on an active market
is based on the listed price on balance sheet date. A market
is seen to be active in cases where listed prices from a stock
exchange, broker, industry group, pricing service or supervisory
authority are easily accessible, and where these prices repre-
sent genuine, regularly-occurring market transactions conducted
at arm’s length. The listed market price applied in determining
the fair value of instruments that are to be found in Level 1 is the
current buying-rate.
Fair value of financial instruments which are not traded
on an active market are determined with the aid of valuation
techniques. This procedure applies, as far as possible, such
market information as is available, while information specific to
a company is applied as little as possible. If all significant input
data required in determining the fair value of an instrument is
observable, the instrument is to be found in Level 2.
Specific valuation techniques applied in valuing financial
instruments include
• Listed market prices or broker listings for similar instruments.
• Fair value of interest swaps is determined as the current value of
estimated future cash flows, based on observable yield curves.
• Fair value for currency forward exchange agreements is determi-
ned through the use of exchange rates for forward exchanges on
balance sheet date, at which point the resulting value is discoun-
ted to current value.
• Other techniques, such as the calculation of discounted
cash-flows, are applied in determining fair value for any financial
instruments not covered by the above techniques.
Note that all fair values determined with the aid of these valua-
tion techniques are to be found in Level 2
In the event that one or more significant input data figures
are not based on observable market information, the associated
instrument is to be classified in Level 3.
The table below shows a reconciliation of opening and closing
balance data for financial instruments valued at fair value in the
balance sheet, on the basis on non-observable input data (Level 3)
Opening balance, 1 January 2009
Total reported profit/loss:
-reported in profit/loss for the year 1)
-reported directly in equity
Acquisition cost , purchase
Proceeds of sale, sales
Transfers from Level 3
Transfers into Level 3
Closing Balance 31 December 2009
Profit/Loss reported in profit/loss for the
year for assets included in the closing
balance 31 December 2009 2)
Shares and
Participations
Bonds
Total
376
-8
0
36
-81
0
0
323
-23
0
0
0
0
0
0
0
0
0
376
-8
0
36
-81
0
0
323
-23
1) Reported in net income of financial transactions in profit/loss for the year.
2) Reported in net income of financial transactions in profit/loss for the year.
55
Annual Report 2009
Note 20 • Tangible assets
Acquisition cost
Opening balance 1 January 2008
Acquisitions
Disposals
Closing balance 31 December 2008
Openinge balance 1 January 2009
Acquisitions
Disposals
Closing balance 31 December 2009
Depreciation
Opening balance 1 January 2008
Depreciation for the year
Disposals
Closing balance 31 December 2008
Opening balance 1 January 2009
Depreciation for the year
Disposals
Closing balance 31 December 2009
Reported values
1 January 2008
31 December 2008
1 January 2009
31 December 2009
Group
Equipment
Parent Company
Equipment
93
7
-28
72
72
13
-5
80
-77
-7
28
-56
-56
-7
4
-59
16
16
16
21
92
7
-28
71
71
13
-5
79
-77
-7
28
-56
-56
-7
4
-59
15
15
15
20
Note 21 • Deferred acquisition costs
Opening balance
Capitalisation for the year
Depreciation/amortisation for the year
Exchange rate gains/losses
Closing balance
Note 22 • Untaxed reserves
Parent Company
Group
Parent Company
2009
2008
2009
2008
441
460
-443
-39
419
464
341
-441
77
441
441
460
-443
-39
419
464
341
-441
77
441
Accumulated accelerated depreciation regarding goodwill and equipment
2009
2008
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
61
-17
0
44
9,136
511
9,647
81
-20
0
61
9,136
0
9,136
Total untaxed reserves
9,691
9,197
56
Annual Report 2009
Note 23 • 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
Currency effect
Closing balance
2009
2008
Group
Gross
Reinsurer's
Net
Gross
Reinsurer's
Net
share
-274
-381
235
41
-379
1,909
2,042
-1,944
-196
1,811
2,183
2,423
-2,179
-237
2,190
share
-161
-200
135
-48
-274
1,775
1,468
-1,697
363
1,909
1,936
1,668
-1,832
411
2,183
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
2009
2008
Group
Gross
Reinsurer's
Net
Gross
Reinsurer's
Net
share
-111
0
-1
9
-103
160
0
-7
-13
140
49
0
-8
-4
37
share
-93
0
1
-19
-111
125
9
-1
27
160
32
9
0
8
49
Provisions for unearned premiums
Opening balance
Insurance policies signed during the period
Premiums earned during the period
Currency effect
Closing balance
2009
2008
Parent Company
Gross
Reinsurer's
Net
Gross
Reinsurer's
Net
share
-274
-381
235
41
-379
1,909
2,042
-1,944
-196
1,811
2,183
2,423
-2,179
-237
2,190
share
-161
-200
135
-48
-274
1,775
1,468
-1,697
363
1,909
1,936
1,668
-1,832
411
2,183
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
2009
Parent Company
2008
Gross
Reinsurer's
Net
Gross
Reinsurer's
Net
share
-111
0
-1
9
-103
160
0
-7
-13
140
49
0
-8
-4
37
share
-93
0
1
-19
-111
125
9
-1
27
160
32
9
0
8
49
57
Annual Report 2009
Note 24 • Claims outstanding
Provisions for outstanding claims
2009
Reinsurer's
Group
2008
Reinsurer's
Gross
share
Net
Gross
share
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
4,861
5,646
10,507
4,054
395
168
Paid/transferred to insurance liabilities or other current liabilities
4,075
Currency effect
Closing balance
Closing balance, reported claims
Closing balance, incurred but not reported claims (IBNR)
-852
9,861
4,982
4,879
-698
-3,890
,
-4,588
-563
278
0
-431
494
-3,948
-852
-3,096
4,163
1,756
5,919
3,491
673
168
3,644
-358
5,913
4,130
1,783
3,898
2,321
6,219
3,853
3,460
241
4,080
1,296
-712
-395
-1,107
-329
-3,322
0
-561
-392
10,507
-4,588
4,861
5,646
-698
-3,890
3,186
1,926
5,112
3,524
138
241
3,519
904
5,919
4,163
1,756
Provisions for outstanding claims
2009
Reinsurer's
Parent Company
2008
Reinsurer's
Gross
share
Net
Gross
share
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
4,861
5,646
10,507
4,054
395
168
Paid/transferred to insurance liabilities or other current liabilities
4,075
Currency effect
Closing balance
Closing balance, reported claims
Closing balance, incurred but not reported claims (IBNR)
-852
9,861
4,982
4,879
-698
-3,890
-4,588
-563
278
0
-431
494
-3,948
-852
-3,096
4,163
1,756
5,919
3,491
673
168
3,644
-358
5,913
4,130
1,783
3,898
2,321
6,219
3,853
3,460
241
4,080
1,296
-712
-395
-1,107
-329
-3,322
0
-561
-392
10,507
-4,588
4,861
5,646
-698
-3,890
3,186
1,926
5,112
3,524
138
241
3,519
904
5,919
4,163
1,756
Note 25 • Equalisation provision
Opening balance
Changed accounting principles 1)
Dissolution of provisions made in previous years
Exchange rate gain/loss
Closing balance
Group
Parent Company
2009
2008
2009
2008
3
-3
0
0
0
5
0
-3
1
3
3
0
0
0
3
5
0
-3
1
3
An allocation of the equalization provision to equity and deferred tax liabilities has been included in the consolidated accounts for 2009.
58
Annual Report 2009
Note 26 • Claims handling provision
Group
Parent Company
2009
2008
2009
2008
Opening balance
Dissolution of provisions made in previous years
Provisions for the year
Closing balance
113
-30
39
122
77
-77
113
113
113
-30
39
122
77
-77
113
113
Note 27 • Pension provisions and similar items
Pension provisions
Group
Parent Company
2009
2008
2009
2008
Total amount *
15
15
0
0
1) The pension provisions only comprise employees in Germany. Employees in Germany are covered by a defined benefit pension plan. The plan is funded by the
Company. Pension claims are reported as liabilities on the company’s balance sheet.
Note 28 • Creditors arising out of direct insurance and other creditors
Creditors arising out of direct insurance
Group
Parent Company
2009
2008
2009
2008
Amounts due to intermediaries
Total creditors arising out of insurance
14
14
25
25
14
14
25
25
Other creditors
Amounts due to group companies
Other creditors
Total other creditors 1)
1) The majority of the receivables has a duration less than one year
Group
Parent Company
2009
2008
2009
2008
543
83
626
484
62
546
560
78
638
496
58
554
59
Annual Report 2009
Note 29 • Contingent liabilities and commitments
In the form of pledged assets for
own liabilities and provisions
Bonds and other interest-bearing securities
Cash and bank
Assets for which policy holders have
Group
Parent Company
2009
2008
2009
2008
6,482
165
8,343
183
6,482
165
8,343
183
preferential rights
6,647
8,527
6,647
8,527
On the basis of the stipulations in Chapter 7, Section 11 of the Insurance Business Act, registered assets amount to MSEK 6,468. 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.
MSEK (nominal amount)
2009
2008
2009
2008
Future commitments for investments in venture capital company
Total
67
67
79
79
67
67
79
79
Group
Parent Company
Note 30 • Associated parties
Summary of transactions with associated parties
Associated parties within the White Mountains Group
Group and Parent Company
2009
Services
purchased
Receivables
Liabilities,
Premium
from
associated
associated
income,
Indemni-
associated
parties per
parties per
net
fication
parties
31 Dec.
31 Dec.
Other associated parties
White Mountains Re America – assumed reinsurance
Esurance - assumed reinsurance
WM Life Re - ceded reinsurance
White Mountains Re Services - administrative services
White Mountains Re Services Ltd - assumed reinsurance
and adminstrative services
White Mountains Re Underwriting Services Ltd.
- assumed reinsurance
White Mountains Financial Services LLC - financial services
Sirius Insurance Holding Sweden AB - group contribution
Fund American Holdings AB - group contribution
White Mountains Advisors LLC - asset management
376
1,956
-216
0
95
0
0
0
0
0
-166
- 1,844
-491
0
0
0
0
0
0
0
Total
2,211
-2,501
1) Refers to reinsurer´s share of outstanding claims.
-1
0
0
-35
0
0
0
0
0
-23
-59
841
498
2,7151)
0
0
0
713
0
0
0
4,767
3
0
16
16
36
5
0
302
183
6
567
60
Annual Report 2009
Group and Parent Company
2008
Services
purchased
Receivables
Liabilities,
Premium
from
associated
associated
income,
Indemni-
associated
parties per
parties per
net
fication
parties
31 Dec.
31 Dec.
Other associated parties
Folksamerica Reinsurance Co. (White Mountains Re America)
Esurance, One Beacon
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
914
540
0
0
0
0
0
0
1,454
1
13
0
23
11
280
186
7
521
Note 31 • Average number of employees, salaries and other remuneration
Average number of employees - Group
Men
Women
Total
Men
Women
Total
2009
2008
Parent Company
Germany
Total, Group
250
11
261
111
3
114
123
4
127
127
7
134
2009
238
10
248
127
7
134
2008
Average number of employees – Parent Company
Men
Women
Total
Men
Women
Total
Sweden
UK
Belgium
Switzerland
Singapore
Denmark
Bermuda (1 September 2009 - 31 December 2009)
59
23
24
4
5
3
5
70
18
20
4
9
1
5
129
41
44
8
14
4
10
54
23
23
4
5
2
0
73
19
21
3
9
2
0
Total, Parent Company
123
127
250
111
127
127
42
44
7
14
4
0
238
Senior management in the Group and Parent Company
Men
Women
Total
Men
Women
Total
2009
2008
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
61
Receivables
Liabilities,
associated
associated
parties per
parties per
31 Dec.
31 Dec.
841
498
2,7151)
0
0
0
0
0
0
713
4,767
3
0
16
16
36
5
0
302
183
6
567
Annual Report 2009
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
2009
2008
2009
2008
244
34
44
65
353
207
41
41
55
303
232
32
43
65
340
196
39
40
55
291
Of which paid remuneration for the year to:
Group
Parent Company
CEO
2009
2008
2009
2008
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
4
3
11
10
5
2
12
8
5
3
11
9
4
2
11
8
4
3
11
10
5
2
12
8
5
3
11
9
4
2
11
Salaries and other remuneration,
divided by country – Group
2009
2008
Of which
bonuses
Salaries and
paid for
Saleries and
Of which
bonuses
paid for
remuneration
the year
remuneration
the year
Total, Parent Company
Germany
Total salaries and other remuneration
232
12
244
32
2
34
196
11
207
39
2
41
Salaries and other remuneration,
divided by country – Parent Company
2009
2008
Of which
bonuses
Salaries and
paid for
Saleries and
Of which
bonuses
paid for
remuneration
the year
remuneration
the year
113
34
45
15
9
3
13
232
17
1
10
3
1
0
0
32
104
33
40
9
7
3
196
22
4
10
2
1
0
39
Sweden
Belgium
UK
Switzerland
Singapore
Denmark
Bermuda (1 September 2009 - 31 December 2009)
Total, Parent Company
62
Annual Report 2009
Salaries and remuneration
the money is invested. At the time of retirement, the employee has the option of
The Board receives remunerations in accordance with the resolutions of the
either receiving the money as a lump sum or as a series of payments over time.
Annual General Meeting. Board fees are not paid to individuals employed in
Germany: Employees are covered by a defined benefit pension plan.The plan
the company. No Board fees were paid in 2009. Remuneration to the CEO and
is funded by the company. The pension receivables are reported as liabilities on
other senior members of management consists of basic salary, bonuses and
the balance sheet.
other compensations such as car benefits and pensions.
Switzerland: Employees are covered by pension plans according to the
Variable remuneration
The plan is a combination of a defined benefit and fee based pension plan.
The Annual General Meeting has resolved upon a variable remuneration plan for
Sirius pays for 60 percent of the premiums while the employee pays for the
the CEO and senior members of management.
remaining 40 percent.
Other employees are also covered under a variable remuneration plan.
Singapore: The Company is not required to pay pensions.
Levels of variable remuneration are based upon the Group’s profit/loss as well
Denmark: All employees are covered by a mandatory pension plan with
industrial sector to which they belong.
as individually set goals.
Pensions
Danica pension. Sirius pays the agreed upon percentage rate stated in the
emplyee´s employment contract, however, this percentage shall be at a
minimum, 15 % of the employee´s salary. Thereafter, this amount is distributed
Sweden: Sirius applies the pension agreement signed with FAO/FTF/Saco.
to cover other aspects such as life insurance and disability benefits.
The agreement comes into effect as of 1 January 2008 and implies that
Bermuda: All employees are covered by the pension plan applied. The
employees born 1971 and earlier have a benefit defined pension plan, whereas
plan is premium based. The company pays 10% of the employee's income in
employees born 1979 and earlier are offered a premium defined solution. The
accordance with The National Pension Scheme Act.
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.
Belgium: All employees are covered by a pension plan in which Sirius pays
4.5 percent or 6.5 percent of the salary, depending on the employee category.
Loans to senior members of management – none.
The employee pays 2 percent.
Possible changes to the plan must be approved by local unions. The premiums
are invested by an insurance company and the employee cannot influence how
Absence due to illness in the Parent Company
2009
2008
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
2.49%
0.71%
1.98%
11.90%
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
2.66%
2.35%
1.55%
3.09%
1.83%
1.71%
2.18%
2.32%
1.81%
2.20%
63
Annual Report 2009
Note 32 • Fees and reimbursement to auditors
Group
Parent Company
2009
2008
2009
2008
Öhrlings PricewaterhouseCoopers - audit engagement
4
5
4
5
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 33 • Operational leasing
Leasing contracts in which the Company is the lessee
Group
Parent Company
2009
2008
2009
2008
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
33
54
9
96
25
57
3
85
31
48
8
87
24
51
0
75
Note 34 • Class analysis
Profit/loss per insurance class
2009
Parent Company
Personal
Marine,
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
640
645
-349
-267
-7
0
22
28
20
-72
-11
-4
0
-67
61
59
-29
-35
0
0
-5
1
1
0
0
0
0
1
90
89
-44
-41
0
0
4
820
814
-494
-354
-11
0
-45
7,810
7,579
-3,955
-1,658
-979
0
987
8,630
8,393
-4,449
-2,012
-990
0
942
2008
Parent Company
Personal
Marine,
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
64
Annual Report 2009
Stockholm, March 8, 2010
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 10, 2010
Catarina Ericsson
Authorized Public Accountant
Anna Hesselman
Authorized Public Accountant
65
Annual Report 2009
Audit Report
To the general meeting of the share-
solidated accounts as well as evaluating the
holders of Sirius International Insurance
overall presentation of information in the an-
Corporation (publ) Corporate identity
nual accounts and consolidated accounts. As
number 516401-8136.
a basis for our opinion concerning discharge
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 2009. 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
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
preparing the annual accounts and the con-
year.
S t o c k h o l m , March 10, 2 0 10
Catarina Ericsson
Authorized Public Accountant
Anna Hesselman
Authorized Public Accountant
66
Annual Report 2009
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 Annual Report 2009.
The audited Swedish version is the binding
version.
67
Annual Report 2009
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)
Sirus Internationl Insurance Corporation (publ)
Bermuda Branch
hamilton hMJx, Bermuda
Visiting address; 14 Wesley Street; 5th floor
Telephone: +1 441 278 3140
+1 441 278 3145
Telefax:
Sirius International Danish Branch,
filial av Sirius International Försäkringsaktiebolag
(publ), Sverige
Nyhavn 43, 2nd floor
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
P.O. Box 2807
Ch-8022, Zurich, Switzerland
Visiting address: Dreikönigstrasse 12
Telephone: +41 43 443 0180
+41 43 443 0189
Telefax:
www.siriusgroup.com
Art and production: Studio Ringvall
68