Annual Report 2010
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Annual Report 2010
Contents
White Mountains Insurance Group
Comments from the President and CEO
Board of Directors’ Report
Income Statement - Group
Statement of Comprehensive Income - Group
Balance Sheet - Group
Change in Shareholders’ Equity - Group
Cash flow Statement - Group
Income Statement – Parent Company
Statement of Comprehensive Income – 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
instruments
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 Investments in shares and participations
Note 17 Bonds and other interest-bearing securities
Note 18 Derivatives
Note 19 Other debtors
Note 20 Categories of financial assets and liabilities and their
fair value
Note 21 Tangible assets
Note 22 Deferred acquisition costs
Note 23 Untaxed reserves
Note 24 Provisions for unearned premiums and unexpired
risks
Note 25 Claims outstanding
Note 26 Equalisation provision
Note 27 Claims handling provision
Note 28 Employee benefits
Note 29 Other creditors
Note 30 Contingent liabilities and commitments
Note 31 Associated parties
Note 32 Average number of employees, salaries and other
remunerations
Note 33 Fees and reimbursements to auditors
Note 34 Operational leasing
Note 35 Class analysis
Note 36 Transition to IFRS
Audit Report
Definitions
History
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2
Annual Report 2010
White Mountains
– our owners
White Mountains Insurance Group, Ltd.
White Mountains Re Ltd.
is a financial services holding company with
White Mountains Re Ltd. (White Mountains
primary business interests in property and
Re) – is a Bermuda-domiciled holding
casualty insurance and reinsurance. The Com-
company whose operating companies
pany’s corporate headquarters and its regis-
offer capacity for property, accident &
tered office are located in Hamilton, Bermuda,
health, aviation, trade credit, marine and
and its principal executive office is located in
other exposures.
Hanover, New Hampshire.
Our principal operating companies are:
The Company conducts its principal busi-
Sirius International Insurance Corporation
nesses through:
(WMRe Sirius) – a Sweden-based international
White Mountains Re – global reinsurance.
reinsurer that focuses mainly on property
OneBeacon – specialty insurance. OneBea-
and other short-tailed lines. WMRe Sirius is
con’s common shares are listed on the New
the largest reinsurance company in Scandina-
York Stock Exchange under the symbol “OB”.
via and a leading reinsurer in Europe. WMRe
White Mountains owns 76% of OneBeacon.
Sirius’ home office is in Stockholm, and it
Esurance & AFI – personal auto insurance
has branch offices in Australia, Bermuda,
directly marketed and underwritten on the
Copenhagen, Hamburg, Labuan, Liège, Lon-
internet and through call centers.
don, Singapore and Zürich.
White Mountains Advisors – investment
White Mountains Reinsurance Company of
management with $32 billion of assets under
America (WMRe America) – a U.S.-based
management.
international multi-line reinsurance com-
White Mountains’ common shares are listed
pany that employs a conservative strategy
on the New York Stock Exchange and the
with specialized underwriting expertise and
Bermuda Stock Exchange under the symbol
strong operational discipline. WMRe Ameri-
“WTM”. Market capitalization as of December
ca’s home office is in New York with branch
31, 2010 was (“ABVPS”) $2.8 billion. As of
offices in Connecticut, Miami and Toronto.
December 31, 2010, White Mountains reported
White Mountains Specialty Underwriting,Inc.
total assets of $14.5 billion, adjusted share-
(DBA White Mountains Re Solutions) – a
holders’ equity NGM of $3.6 billion, and adjusted
Connecticut-based professional team special-
book value per share NGM of $441.
izing in opportunistic structured acquisitions
of run-off property and casualty insurance
liabilities. White Mountains Re Solutions
further enhances transaction returns via ef-
fective post-acquisition management of the
run-off process.
3
Annual Report 2010
Comments from the
President and CEO
In the previous annual report I indicated
million people homeless and continues to
that 2010 would be a challenging year,
cause tremendous suffering. The second,
not least because it had started with a
in Chile the following month, killed around
high level of natural catastrophes. I re-
500 people but was much bigger in terms
mained optimistic, however, that the qual-
of cost to the insurance and reinsurance in-
ity of our underwriting and the spread
dustries. For Sirius International, it became
of our portfolio would hold us in good
the second largest net loss in our history at
stead.
$80 million.
Claims experience for the reinsurance
There were several other catastrophes
industry in 2010 did indeed prove to be
in the first half of the year. European wind-
much higher than average but, despite a
storm Xynthia in western Europe, although
string of substantial losses, Sirius Interna-
not as big as originally feared, had a size-
tional turned in another set of excellent
able financial impact, as did the flooding
results. Our combined ratio of 89% was
in Poland, Czech Republic and Slovakia.
virtually unchanged on 2009, maintaining
The most publicised disaster of the year
our record of stability.
was, however, man-made. The implications
The year began with two big earth-
of the Deepwater Horizon blow-out will
quakes. The first, in Haiti in January, took
reverberate for years to come and go well
at least 250,000 lives, left more than a
beyond our industry. Sirius International’s
4
Annual Report 2010
exposure was relatively modest in the
pecially out of the USA and Brazil. Else-
scale of things, but is still likely to be in
where, I was pleased with the progress of
$10-15 million range.
all our offices and classes, though Marine
Fortunately the second half of the
did experience above-average losses.
year was mostly free of major catastro-
Apart from our usual preoccupa-
phes, despite the earthquake in New
tion with serving our customers, another
Zealand and events in Australia. At the
priority has been the need to prepare for
time of writing we are still assessing the
Solvency II. Sirius has more than enough
effects of the flooding and cyclone in
solvency capital to meet the new regu-
Queensland, but our exposure is likely to
latory requirements but, as the whole
be relatively modest. We also anticipate
European industry is experiencing, the
a significant level of claims as a result of
administrative and compliance demands
the exceptionally cold winter in Scandi-
are burdensome. I am happy to report
navia.
that our preparations are on schedule,
The fact that we were able to main-
and we will submit an internal model for
tain our excellent levels of profitability
approval by the Swedish regulator.
at a time of substantial losses and highly
Looking ahead to 2011, there is no
competitive market conditions under-
doubt that it will be challenging for the
lines the stability we are able to offer
reinsurance industry as a whole.
our customers. Our average combined
A quarter of the way through the year,
ratio for the past seven years has been
and we have already seen some excep-
89%. Over the past fifteen years, a period
tional natural catastrophes. Most notably,
that includes the events of September 11,
the New Zealand earthquake in January
2001 and the 2005 hurricane season, it
was followed by the Japanese earthquake
has been 94%. This exceptional degree
and tsunami, an event that is certain to
of resilience helps to explain why we are
be among our highest-ever losses, though
able to provide a safe haven for the busi-
still not the biggest we have experienced.
ness of any ceding company.
These events came after a flat renewal
At Sirius, we do not believe in
season, with conditions overall soften-
change for change’s sake, nor will we
ing a bit despite hardening in one or two
expand just to gain market share when
areas, most notably Chilean earthquake
conditions dictate a more cautious strat-
covers. As ever, I maintain the utmost
egy. 2010 saw little in the way of new
confidence in our underwriting teams to
announcements, and our premium income
handle these challenges professionally
remained broadly flat. One significant
within a robust risk management frame-
change from 2009 was in the Credit and
work. I thank all the staff at Sirius Inter-
Bond area where the financial crisis had
national for their dedication, and look
created space in the market. Our writing
forward to being of continued service to
of this type of business through the Liège
our customers and brokers throughout
office increased many-fold, most of it for
2011 and beyond.
European customers. Our Accident and
Health portfolio had another excellent
year and also enjoyed steady growth, es-
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 2010
At a glance
2010
2009
Net premium income
$778 million
$911 million
Claims net of reinsurance
$475 million
$545 million
Underwriting profit
$116 million
$172 million
Combined Ratio 89% 86%
Investment income $12 million $30 million
Income before tax (group)
$150 million
$207 million
Combined Ratio (Parent Company)
80%
88%
87%
86%
89%
2 0 0 6
2 0 0 7
2 0 0 8
2 0 0 9
2 0 1 0
Solvency Capital (Group), MSEK
9 893
10 399
10 455
12 544
12 516
2 0 0 6
2 0 0 7
2 0 0 8
2 0 0 9
2 0 1 0
6
Annual Report 2010
Board of Directors’ Report
Sirius International Insurance Corporation
across Western Europe between 27 and 28
(publ)
February. At the end of April, Deepwater
Cor porate Identity Number: 516401-8136
Horizon’s drilling rig in the Mexican Gulf
sank. The resulting oil spill is considered
The Board of Directors and the President
to be the largest ever environmental di-
of Sirius International Insurance Corpora-
saster in the USA. During May, the central
tion (publ) (Sirius International) hereby
and eastern parts of Europe were affec-
submit the company’s annual report for
ted by floods. On 4 September, a further
2010.
General information
concerning the company
powerful earthquake struck, this time in
New Zealand, with similar comprehensive
material damage, primarily in the town of
Christchurch. There were also a number of
Sirius International is active in interna-
aviation claims during the year. During the
tional insurance and reinsurance. Sirius
final weeks of December, Queensland in
International was established in 1989.
Australia was affected by significant floo-
Insurance operations commenced in 1945
ding after a prolonged period of rain. The
in Försäkringsaktiebolaget Sirius. In 1989,
floods in Australia did not, however, have
the reinsurance activities were transferred
any more than a small effect on net profit
to Sirius International. Sirius International
for the year.
has been the Parent Company of the Sirius
Thanks to a strong earnings trend during
Group since 1992.
the second half of the year, the company
can, despite the increased claims, report a
The development, results and position of
very satisfactory result from the insurance
the company
operations, with a combined ratio of 89%.
2010 was significantly more affected than
With the inclusion of 2010, Sirius Interna-
both 2008 and 2009 as regards natural
tional has experienced a combined ratio
disasters and other large damaging events.
below 100% for nine consecutive years.
This applies for Sirius International and the
In general, price levels were satisfactory
entire reinsurance industry. As a compa-
in the majority of markets and classes of
rison, it can be stated that the company’s
business. The run-off results were positive
10 largest claims during 2010 cost the
for earlier years.
company more than twice as much com-
Gross premium income for the Group
pared with 2009. The larger claims during
amounted to MSEK 7,395 (MSEK 8,630) and
the year can be summarized as follows: a
MSEK 7,395 (MSEK 8,630) for the Parent
powerful earthquake struck 100 km from
Company. Premium income for own ac-
the coast of Chile on 27 February. The
count for the Group totalled MSEK 5,608
earthquake, which is the largest to have hit
(MSEK 6,957) and for the Parent Company
Chile in fifty years, measured 8.8 on the
MSEK 5,608 (MSEK 6,957). The insurance
Richter scale and caused comprehensive
operating results of the Group amounted to
material damage. Hurricane Xynthia swept
MSEK 838 (MSEK 1,317) and for the Parent
7
Annual Report 2010
Company MSEK 839 (MSEK 1,311).
currencies, resulted in realised and unrea-
It is worth noting that all branch offices,
lised foreign exchange rate losses. Fo-
with the exception of the branch office in
reign exchange rate losses have negatively
Copenhagen, which is currently undergo-
impacted the yield measured in Swedish
ing a build-up phase, report a combined
krona. From 1 January, 2010, the Parent
ratio under 100% for all insurance catego-
Company has hedged approximately thirty
ries, with the exception of assumed Marine
percent of its USD exposure, including the
reinsurance, which was affected by the
exposure stemming from subsidiaries and
Deepwater Horizon disaster. The combined
associated companies.
ratio amounted to 89% (86%) for the Group
The investment results, as presented
and 89% (86%) for the parent company. Re-
in the Income Statement of the Group,
turn on capital employed in the insurance
amounted to a profit of MSEK 449 (MSEK
operations amounted to 16%.
658) including foreign currency exchange
The financial markets have continued to
losses but before allocation of interest to
recover during the year. The stock mar-
the insurance operations. Investment yield
kets in Sweden and the USA saw stable
amounted to 2.6% (2.4%) and total yield
improvements, with the Swedish OMX 30
amounted to 0.9% (3.3%). Calculation of
increasing by 21.4% and the S&P 500 in the
investment yield and total yield is made in
USA increasing by 12.8%. The major stock
accordance with the recommendations of
markets in Europe display a more varied
the Swedish Financial Supervisory Autho-
pattern, with growth of between 9-16%
rity.
in England and Germany, while the stock
The investment portfolio’s focus and
markets in France and Switzerland declined
composition is largely unchanged com-
slightly. Interest rates on government secu-
pared with the previous year, however,
rities remained low, despite rate increases
the portion of bank funds and short-term
on both short and long durations during
investments in the portfolio has been re-
the second half of the year. The Swedish
duced and reinvested in interest-bearing
interest rates generally lie at a higher
investments with somewhat longer invest-
level compared to the USA and the rest of
ment horizons. At the end of the year, the
Europe. The credit spreads compared with
investment portfolio was composed of:
the risk-free interest rates have continued
shares and participations, 12%; investments
to decrease during the year.
in associated companies, 12%; and interest-
All in all, the yield on the bond portfo-
bearing investments and bank funds, 76%.
lios amounted to 2.5%, excluding foreign
Other events regarding changes in the
exchange rate effects. For the equity port-
Group’s structure are described primarily
folio, including investments in associated
under the section “Ownership”.
companies and private equity companies,
the yield amounted to 9.4%, excluding
Ownership
foreign exchange rate effects. As a result of
Sirius International is a wholly owned sub-
the continued strengthening of the Swedish
sidiary of Sirius Insurance Holding Sweden
krona of 6.2% versus the USD and 14.2%
AB (Corporate Identity Number 556635-
versus the EUR, the company’s continued
9724), Stockholm, Sweden, which is ultima-
policy, regarding the exposure versus these
tely owned by White Mountains Insurance
8
Annual Report 2010
Group Ltd, Bermuda.
Sirius Belgium Réassurances S.A.(in liqui-
In February 2010, Sirius International ac-
dation), Liège, Belgium, was commenced as
quired all of the shares in White Mountains
the company is no longer in active opera-
Re Bermuda Ltd, Bermuda.
tion. The liquidation has not been comple-
At year-end 2010, the Group consists
ted, due to a tax dispute.
of the Parent Company Sirius Internatio-
nal Insurance Corporation (publ) with the
Major events occurring during the financial
subsidiaries Sirius Belgium Réassurances
year or after the closing day
S.A. (in liquidation), Liège, Belgium, Sirius
As a part of the continued restructuring
Rückversicherungs Service GmbH, Hamburg,
work within the Group, Sirius Internatio-
Germany, Sirius International Holdings (NL)
nal has, on 4 February, 2010, in an intra-
BV, Amsterdam, The Netherlands and White
Group transfer within the White Mountains
Mountains Re Bermuda Ltd, Hamilton, Ber-
Group, acquired all of the shares in White
muda.
Mountains Re Bermuda Ltd for a purchase
In addition, Sirius International has eight
price equivalent to USD 100 million. Since
branch offices outside of Sweden. These
September 2009, the company has been in
include the branch office in London, Great
run-off, as operations were transferred to
Britain - Sirius International Insurance
the then newly-opened branch in Ber-
Corporation (publ) UK Branch; the branch
muda. After approval from the authorities
office in Zürich, Switzerland - Sirius In-
in Bermuda, a reduction, and subsequent
ternational Insurance Corporation (publ),
repayment, of the company’s sharehol-
Stockholm, Zürich Branch; the branch office
ders’ equity was carried out during the
in Singapore - Sirius International Insurance
fourth quarter. Following this reduction the
Corporation (publ) Asia Branch, Singapore;
company’s shareholders’ equity amounts to
the branch office in Labuan, Malaysia –
MUSD 5. Sirius aims at liquidating White
Sirius International Insurance Corporation
Mountains Re Bermuda Ltd and its subsi-
(publ) Labuan branch; the branch office in
diaries in 2011.
Liège, Belgium - Sirius International Insu-
During the year, the subsidiary, Sirius In-
rance Corporation (publ), Belgian Branch;
ternational Holdings (NL) BV, has changed
the branch office in Copenhagen, Denmark
its functional currency from EUR to USD.
- Sirius International Danish Branch, filial
Upon the change of functional currency,
af Sirius International Försäkringsaktiebo-
the opening balances in the previous cur-
lag (publ), the branch office in Hamilton,
rency have been recalculated in the new
Bermuda - Sirius International Insurance
functional currency in accordance with IAS
Corporation (publ) Bermuda Branch, the
21. This change to the new functional cur-
branch office in Australia - Sirius Interna-
rency has no impact on total shareholders’
tional Insurance Corporation (publ) Austra-
equity. As at 1 January, 2010, the company
lian Branch as well as Hamburg, Germany
had entered into an internal currency
where the operation is conducted through
hedging agreement with White Mountains
the agency Sirius Rückversicherungs Service
Re Financial Services Ltd (WMReFS). This
GmbH, which operates on behalf of Sirius
agreement implies that Sirius International
International.
has sold MUSD 250 on the basis of a cur-
During 2001, a voluntary liquidation of
rency futures transaction to WMReFS with
9
Annual Report 2010
a duration of five years. With the help of
Information on risks and factors of uncertainty
foreign exchange options, the currency futu-
Please refer to Note 1 "Accounting principles"
res transactions are settled on the basis of an
and Note 2 "Information on risks".
exchange rate cap of SEK 11.93 per USD, and
an exchange rate floor of SEK 5.11 per USD.
Financial instruments and risk management
Outside this range, the company takes no
Please refer to Note 1 “Accounting principles”
hedging measures.
and Note 2 “Information on risks”.
The significant flooding in the state of
Queensland in north-east Australia, which be-
Salaries and other remuneration to senior mem-
gan at the end of December 2010, has conti-
bers of the management
nued through the first weeks of January 2011.
Please refer to Note 32 “Average number of
The damages from these floods will likely be
employees, salaries and other remuneration”.
defined as several events, which will affect
several underwriting years to varying degrees.
Insurance contracts with no significant
Sirius International has exposures in the area,
insurance risk
regarding underwriting years 2010 and earlier,
The Company has only a few contracts de-
as well as underwriting year 2011. The as-
emed to transfer insufficient insurance risk
sessment is that the claims for 2010 will have
and consequently do not qualify as insurance
a negligible effect on the company. However,
contracts. These contracts are classified as
it is too early to say what the claims costs
investment contracts. Please refer to Note 1
attributable to the flooding will be for the
“Accounting principles”.
company during 2011.
On 22 February, 2011, another earthquake
Expectations concerning future developments
occurred in New Zealand. The earthquake’s
The underlying profitability of the insurance
magnitude was 6.3 on the Richter scale and
operations is positive in spite of increasing
had its epicentre near the city of Christ-
competition and the diversified investment
church. Sirius International is currently asses-
portfolio is expected to contribute to a stable
sing the impact on the company’s results. The
return on investments. However, the conti-
current estimate is that the costs attributable
nued increased competition requires disci-
to the earthquake will represent less than 2%
pline in pricing and underwriting, continued
of the solvency capital.
efficiency improvements and a well-balanced
risk relationship between insurance
operations and investments in order to se-
cure long-term profitability. For 2011, Sirius
International’s objective is to achieve a com-
bined ratio lower than 90% and an underwrit-
ing return on capital (UROC) of 11%.
10
Annual Report 2010
11
Annual Report 2010
Five-year Summary
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
2010
20094)
2008
2007
20061)
5,608
5,742
0
214
-3,428
-1,690
838
235
0
879
6,957
6,867
0
369
-4,164
-1,755
1,317
289
0
1,302
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
Net technical provisions
Market value on investment assets 5)
7,221
18,480
7,883
18,449
7,992
16,743
7,001
15,508
8,774
17,881
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 unrealized capital gains
Other adjustment items
Total solvency capital
Solvency ratio
Capital base 2)
Required solvency capital
Group based values 3)
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
60%
29%
89%
3%
1%
9,950
2,548
18
0
12,516
223%
11,735
958
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
16,315
2,255
17,544
2,373
17,236
2,566
18,482
2,369
2010
2009
2008
2007
5,608
5,742
214
-3,421
-1,687
839
-128
-4
522
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
51%
33%
84%
3%
1%
7,468
2,430
-5
0
9,893
136%
9,628
1,154
1)
2006
7,245
5,886
149
-2,807
-1,916
1,312
329
-25
227
Net technical provisions
Market value on investment assets 5)
7,233
18,155
7,886
18,379
7,992
16,882
7,001
15,508
7,340
15,314
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 on reserve for unrealized capital gains
Other adjustment items
Total solvency capital
Solvency ratio
Capital base
Required solvency capital
60%
29%
89%
3%
0%
2,564
9,687
18
0
61%
25%
86%
2%
3%
2,654
9,691
53
0
63%
24%
87%
3%
2%
1,295
9,197
18
0
57%
31%
88%
5%
3%
1,136
9,217
-15
0
48%
32%
80%
3%
3%
1,093
8,680
-14
0
12,269
12,398
10,510
10,338
9,759
219%
11,603
958
178%
12,021
1,030
188%
9,968
956
178%
9,776
956
135%
9,560
1,105
1) For the comparison year 2006 legally restricted IFRS has been applied.
2) Includes Sirius International with subsidiaries.
3) Includes WM Re Ltd. with subsidiaries.
12
4) For the comparison year 2009 IFRS has been applied. Solvency capital and required solvency capital have not been converted.
5) Includes investment assets and cash and bank with deduction for deposits received from reinsurers.
Annual Report 2010
Proposed appropriation of earnings
For 2010, the Parent Company recorded a
result before appropriations and taxes of
MSEK 707 (MSEK 1,155). Net income for
the year amounted to a profit of MSEK 522
(MSEK 490). As of December 31, 2010 re-
tained earnings in the Group amounted to
MSEK 2,011.
At the disposal of the General Meeting
of the Shareholders of the Parent Company
Sirius International:
Retained earnings
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
SEK in
thousands
1,854,160
-98,350
-160,000
-354,190
522,367
1,763,987
435,695
1,328,292
1,763,987
The company’s financial position does not
scope and risks of the operations.
reflect any other view than that the com-
Regarding the company’s and the Group’s
pany can be expected to fulfil its obliga-
results and financial position, please refer
tions in the short-term, as well as in the
to the attached income statements and ba-
long-term. It is the opinion of the Board
lance sheets, cash flow analyses, report on
of Directors that the solvency capital of
changes in shareholders' equity and accom-
the company as it has been reported in the
panying notes.
annual report is adequate in relation to the
13
Annual Report 2010
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
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
Result before taxes
Taxes
Net income for the year
Note
2010
2009
3
3
4
4
5
10
6
7
8
9
11
7,395
-1,787
46
88
5,742
8,630
-1,673
-237
147
6,867
214
369
-4,428
937
-3,491
-1,595
1,658
-3,428
1,690
838
-4,243
431
-3,812
-206
-146
-4,164
-1,755
1,317
838
1,317
623
397
-466
-105
-214
235
421
635
-370
-28
-369
289
1,073
1,606
-194
879
-304
1,302
14
Annual Report 2010
Statement of Comprehensive Income - Group
January 1 - December 31
MSEK
Net income for the year
Other comprehensive income
- Change of fair value on bonds
- Currency translation differences
- Other
Tax on components of other comprehensive income
Other comprehensive income for the year, net of tax
Note
2010
2009
879
1,302
-133
-295
0
35
-393
133
-219
2
-35
-119
Total comprehensive income for the year
486
1,183
15
Annual Report 2010
Balance Sheet - Group
December 31
MSEK
ASSETS
Intangible assets
Goodwill
Capitalised software
Total intangible assets
Investment assets
Land and buildings
Shares and participations in associated companies
Other financial investments
- Shares and participations
- Bonds and other interest bearing securities
- Derivative financial instruments
Total other financial investments
Deposits with cedents
Total investment assets
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
Pension assets
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
2010
2009
1 January, 2009
12
13
15
291
22
313
291
5
296
291
1
292
2
2
4
2,178
2,185
2,101
16, 20
17, 20
18, 20
1,808
12,067
273
14,148
1,797
8,662
0
1,745
8,782
0
10,459
10,527
1,221
17,549
1,544
14,190
1,716
14,348
24
25
11
28
19
21
22
496
5,556
6,052
5
1,385
72
34
0
63
1,559
32
1,082
1,114
195
386
26
607
482
3,948
4,430
10
1,480
108
26
9
755
2,388
21
4,384
4,405
152
419
23
594
385
4,588
4,973
37
1,252
766
21
8
55
2,139
16
2,454
2,470
170
441
18
629
TOTAL ASSETS
27,194
26,303
24,851
16
Annual Report 2010
December 31
Note
2010
2009
1 January, 2009
SHAREHOLDERS’ EQUITY AND LIABILITIES
Shareholders’ equity
Share capital (8 million shares of nom. value SEK 100)
Additional paid in capital
Reserves
Retained earnings – restricted
Retained earnings – non-restricted, including net income for the year
Total shareholders’ equity
800
1,424
-354
7,139
941
9,950
800
1,424
2
7,142
610
9,978
2,330
9,983
0
24
25, 27
26
2,062
11,211
0
13,273
12,313
28
11
5
0
0
2
2,553
2,575
151
2
474
593
193
125
14
513
626
157
20, 29
20
800
0
124
6,778
321
8,023
2,343
10,620
3
12,966
15
429
2,421
59
25
245
546
122
Liabilities
Technical provisions
Provisions for unearned premiums
Claims outstanding
Equalization provision
Total technical provisions
Other liabilities
Employee benefits
Current tax liabilities
Deferred tax liabilities
Deposits received from reinsurers
Creditors arising out of direct insurance operations
Creditors arising out of reinsurance operations
Other liabilities
Accrued expenses and deferred income
Total other liabilities
3,971
4,012
3,862
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
27,194
26,303
24,851
Pledged assets and other comparable collaterals for own debts and
provisions recorded as insurance liabilities
Other pledged assets and comparable collaterals
Contingent liabilities
Commitments
30
30
30
30
7,668
6,647
8,527
-
60
-
-
67
-
-
79
-
17
Annual Report 2010
Change in shareholders´equity - Group
MSEK
Amount 1 January, 2010
Comprehensive income
Net profit/loss for the year
Other comprehensive income
Change of fair value on bonds
Reclassification within shareholders’ equity
Currency translation differences
Total other comprehensive income
Total comprehensive income
Transactions with owners
Group contribution provided 3)
Dividend paid 2)
Total transactions with owners
Amount 31 December, 2010
Amount 1 January, 2009
Comprehensive income
Net profit/loss for the year
Other comprehensive income
Equalization provision 73.7%
Change of fair value on bonds
Reclassification within shareholders’ equity
Currency translation differences
Total other comprehensive income
Total comprehensive income
Transactions with owners
Shareholders’ contribution 1)
Group contribution provided 3)
Dividend paid 2)
Total transactions with owners
Amount 31 December, 2009
Share
Additional
Reserves 4)
Retained
Retained
Capital
paid in
earnings -
earnings
Total
Share-
capital 4)
restricted
– non-res-
holders’
tricted 4)
equity
7,142
610
9,978
800
1,424
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2
0
-98
37
-295
-356
-356
0
0
0
800
1,424
-354
7,139
0
0
-3
0
-3
-3
0
0
0
879
879
-98
0
-295
-393
486
-354
-160
-514
9,950
0
-34
0
-34
845
-354
-160
-514
941
-
800
0
0
0
0
0
0
0
0
0
0
0
800
0
0
0
0
0
0
0
0
1,424
0
0
1,424
1,424
124
6,778
321
8,023
0
0
98
0
-220
-122
-122
0
0
0
0
2
0
0
0
364
0
364
364
0
0
0
0
7,142
1,302
1,302
2
0
-364
0
-361
941
0
-357
-295
-652
610
2
98
0
-220
-119
1,183
1,424
-357
-295
772
9,978
1) Received shareholders’ contribution from White Mountains Re Financial Services Ltd.
2) Dividend paid to the parent company Fund American Holdings AB.
3) Group contribution provided to Fund American Holdings AB and Sirius Insurance Holding Sweden AB.
4) The non-restricted shareholders’ equity for the group amounts of the non-restricted shareholders’ equity in the group companies.
In the table above it is represented by the columns Additional paid in capital, Reserves and Retained earnings – non-restricted.
18
Annual Report 2010
SHARE CAPITAL
Specified in number of shares
Issued per 1 January
Issued per 31 December
2010
2009
8,000,000
8,000,000
8,000,000
8,000,000
Per 31 December, 2010 the share capital comprised 8,000,000 (8,000,000) ordinary shares.
The shares have a nominal value of 100 (100) SEK.
2010
2009
1,424
0
1,424
0
1,424
1,424
200
-133
67
-53
35
-18
147
-98
49
-145
37
-295
-403
7,142
-3
7,139
610
879
0
-34
-160
-354
941
67
133
200
-18
-35
-53
49
98
147
75
0
-220
-145
6,778
364
7,142
321
1,302
2
-364
-295
-357
610
ADDITIONAL PAID IN CAPITAL
Opening additional paid in capital
Shareholders’ contribution
Closing additional paid in capital
RESERvES
Fair value reserve
Opening fair value reserve
Change for the year
Closing fair value reserve
Tax on fair value reserves
Opening tax on fair value reserves
Change for the year
Closing tax on fair value reserve
Fair value reserve after tax
Opening fair value reserve after tax
Change for the year
Closing fair value reserve after tax
Translation difference
Opening translation difference
Reclassification within shareholders’ equity
Change for the year
Closing translation difference
RETAINED EARNINGS RESTRICTED
Opening equity portion of untaxed reserves and other
restricted reserves
Change for the year
Closing equity portion of untaxed reserves and other
restricted reserves
RETAINED EARNINGS NON-RESTRICTED
Opening retained earnings – non-restricted
Net profit/loss for the year
Equalization provision 73.7%
Reclassification within shareholders’ equity
Dividend paid
Group contribution provided 73.7%
Closing retained earnings – non-restricted
19
Annual Report 2010
Cash flow statement - Group
MSEK
2010
2009
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
Acquisition of subsidiary
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) Of which
Cash and bank balances
Current investments, equivalent to cash and cash equivalents
Total
1,073
-295
-32
746
0
-3,109
-505
929
-1,939
-706
-25
-731
-160
0
-472
-632
-3,302
4,384
-3,302
1,082
475
153
628
300
782
1,082
1,606
-220
204
1,590
2
117
-202
-228
1,279
0
-13
-13
-295
1,424
-465
664
1,930
2,454
1,930
4,384
482
45
527
320
4,064
4,384
20
Annual Report 2010
"Our combined ratio of 89% was vir tually unchanged on 2009,
maintaining our record of stability"
21
Annual Report 2010
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 change in other technical provisions, 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
22
Note
2010
2009
3
3
4
4
26
5
10
6
7
8
9
12
11
7,395
-1,787
46
88
5,742
8,630
-1,673
-237
147
6,867
214
369
-4,415
937
-3,478
-1,601
1,658
-3,421
-9
-9
-4,243
431
-3,812
-206
-146
-4,164
0
0
-1,687
839
-1,761
1,311
839
1,311
649
184
-642
-105
-214
-128
-4
707
0
4
711
-189
522
385
228
-355
-28
-369
-139
-17
1,155
-
511
17
661
-171
490
Annual Report 2010
Statement of Comprehensive Income
– Parent Company
January 1 - December 31
MSEK
Net income for the year
Other comprehensive income
- Change of fair value on bonds
Tax on components of other comprehensive income
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Note
2010
522
-133
35
-98
424
2009
490
133
-35
98
588
23
Annual Report 2010
Balance Sheet - Parent Company
December 31
MSEK
ASSETS
Intangible assets
Goodwill
Other intangible assets
Total intangible assets
Investment assets
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
- Derivative financial instruments
Total financial investments
Deposits with cedents
Total investment assets
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
2010
2009
12
13
14
15
16, 20
17, 20
18
24
25
11
19
21
22
207
22
229
2212
5
217
2
2
1,081
2,058
3,139
874
12,067
24
12,965
1,221
17,327
496
5,556
6,052
5
1,384
61
35
262
1,747
31
979
1,010
194
386
26
606
656
2,058
2,714
1,251
8,662
0
9,913
1,544
14,173
482
3,948
4,430
10
1,480
95
25
756
2,366
20
4,331
4,351
152
419
21
592
TOTAL ASSETS
26,971
26,129
24
Annual Report 2010
December 31
Note
2010
2009
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 collaterals
Contingent liabilities
Commitments
23
24
25, 27
26
28
11
20, 29
20
30
30
30
30
800
49
1,193
522
2,564
40
9,647
9,687
2,062
11,211
12
888800
147
1,217
490
2,654
44
9,647
9,691
2,330
9,983
3
13,285
12,316
9
0
9
0
21
21
151
125
2
473
608
14
513
638
1,083
1,165
192
192
157
157
26,971
26,129
7,668
6,647
-
60
-
-
67
-
25
Annual Report 2010
Change in shareholders´ equity - Parent Company
MSEK
Amount 1 January, 2010
Transfer of net result from previous year
Comprehensive income
Net profit/loss for the year
Other comprehensive income
Change of fair value on bonds
Total other comprehensive income
Total comprehensive income
Transactions with owners
Group contribution provided 2)
Dividend paid 3)
Total transactions with owners
Amount 31 December, 2010
Amount 1 January, 2009
Transfer of net result from previous year
Comprehensive income
Net profit/loss for the year
Other comprehensive income
Change of fair value on bonds
Total other comprehensive income
Total comprehensive income
Transactions with owners
Shareholders’ contribution 1)
Group contribution provided 2)
Dividend paid 3)
Total transactions with owners
Amount 31 December, 2009
Share
Capital
Other
Retained
Net profit/
reserves 4)
earnings 4)
loss for the
800
147
1,217
year 4)
490
-490
522
0
0
490
0
0
0
490
522
-354
-160
-514
0
0
0
Total
Share-
holders’
equity
2,654
0
522
-98
-98
424
-354
-160
-514
0
0
0
0
0
0
0
0
0
0
-98
-98
-98
0
0
0
800
49
1,193
522
2,564
800
0
0
0
0
0
0
0
0
0
49
0
0
98
0
98
0
0
0
0
-292
738
0
0
0
0
1,424
-358
-295
771
738
-738
490
0
490
490
0
0
0
0
1,295
0
490
98
98
588
1,424
-358
-295
771
800
147
1,217
490
2,654
1) Received shareholders’ contribution from White Mountains Re Financial Services Ltd.
2) Group contribution provided to Fund American Holdings AB and Sirius Insurance Holding Sweden AB.
3) Dividend paid to the parent company Fund American Holdings AB.
4) The columns Other reserves, retained earnings and Net profit/loss for the year together represents the non-restricted
shareholders’ equity for the parent company.
26
Annual Report 2010
SHARE CAPITAL
Specified in number of shares, SEK
Issued per 1 January
Issued per 31 December
2010
2009
8,000,000
8,000,000
8,000,000
8,000,000
Per 31 December, 2010 the share capital comprised 8,000,000 (8,000,000) ordinary shares.
The shares have a nominal value of 100 (100) SEK.
2010
2009
200
-133
67
-53
35
-18
147
-98
49
1,217
490
0
-160
-354
1,193
67
133
200
-18
-35
-53
49
98
147
-292
738
1,424
-295
-358
1,217
522
490
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
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
RETAINED EARNINGS
Opening retained earnings
Transfer of net result from previous year
Shareholders’ contribution
Dividend paid
Group contribution provided 73.7%
Closing retained earnings
NET PROFIT/LOSS FOR THE YEAR
Net profit/loss for the year
27
Annual Report 2010
Cash flow statement - Parent Company
2010
2009
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
Interests received
Dividends received
Total
2) Of which
Cash and bank balances
Current investments, equivalent to cash and cash equivalents
Total
711
-4
-25
682
0
-3,611
-718
949
-2,698
-22
-22
-160
0
-472
-632
-3,352
4,331
-3,352
979
599
9
608
421
558
979
661
515
204
1,380
2
296
-202
-228
1,248
-12
-12
-295
1,424
-465
664
1,900
2,431
1,900
4,331
481
9
490
316
4,015
4,331
28
Annual Report 2010
Performance analysis - Parent Company
The performance analysis is substantially the same for the Group and the Parent Company.
Analysis of Insurance Result
Direct Swedish
Direct Swedish
Direct
Assumed
MSEK
risks - aviation
risks - financial
foreign risks
reinsurance
Total
6
0
-3
-1
0
2
0
-1
-2
0
0
-3
0
0
0
7
-1
0
0
6
-2
0
0
-1
0
-3
1
0
0
0
0
1
0
0
0
0
0
0
0
0
0
1
0
0
0
1
0
0
0
0
0
0
648
5,087
5,742
14
-323
-292
3
50
32
-353
-277
-8
0
200
-3,095
-1,394
-12
786
906
214
-3,421
-1,687
-9
839
938
-1,708
-10,803
-121
-12
-2,062
-11,082
-129
-12
-638
-12,644
-13,285
88
70
158
871
-206
-29
12
648
408
5,486
5,894
6,516
-1,580
75
76
496
5,556
6,052
7,395
-1,787
46
88
5,087
5,742
-382
-3,857
-4,241
85
-8
-27
9
-323
852
-166
-1,573
1,649
-3,095
937
-174
-1,601
1,658
-3,421
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, gross amounts 1)
Technical provisions
Unearned premiums and remaining risks
Outstanding claims
Claims adjustment provision
Equalisation provision
Technical provisions
Reinsurers´ share of technical provisions
Unearned premiums and remaining risks
Outstanding claims
Reinsurers´ share of technical provisions
Premiums earned, for own account
Gross premium income
Ceded reinsurance premium
Change in gross provision for unearned premiums
Reinsurers’ share of change in unearned premiums
Premiums earned, for own account
Claims incurred, for own account
Claims paid
Reinsurers’ share
Claims handling expenses
Change in provision for outstanding claims
Reinsurers’ share
Claims incurred, for own account
1) Defined as result from 2009 and earlier.
29
Annual Report 2010
Note 1 • Accounting Principles
General information
This annual report was issued per 31 December, 2010 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 has been prepared 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) with the
amendments in FFFS 2009:12 and the Swedish Financial Reporting Board
RFR 2.2.
The Sirius International Group’s annual report has been prepared in ac-
cordance 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) with the amendments in FFFS 2009:12 and the Swedish Financial
Reporting Board RFR 1 Supplementary Accounting Rules for Groups, as well
as International Financial Reporting Standards (IFRS) and IFRIC interpreta-
tions as adopted by the EU.
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,
other than those resulting from the adaptations to International Financial
Reporting Standards as described below.
The Swedish Financial Supervisory Authority’s revised regulations and
general advice, FFFS 2009:12, came into force on 1 January, 2010 and are
applied in the annual financial statements, annual report and consolidated
financial statements prepared for the financial year commencing after 31
December, 2009. The revision entails that the application of limited IFRS
in the consolidated financial statements is no longer possible and, instead,
International Financial Reporting Standards according to IAS are to be app-
lied in full for 2010. As the Company follows these revised regulations and
general advice, all standards, statements and interpretations in accordance
with the regulations of IAS are applicable as of 1 January, 2009, which is
the date of the Group’s transition to IFRS. The effects of the transition to
International Financial Reporting Standards according to the regulations
of IAS are described under Note 36 “Transition to International Financial
Reporting Standards”.
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, 2010 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 2010. 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 9, “Financial instruments”, published November 2009. This standard
is the first step in the process of replacing IAS 39, “Financial instruments:
Recognition and Measurement”. IFRS 9 introduces two new requirements
for the valuation and classification of financial assets and is likely to have a
negligible affect on the Group’s reporting of financial assets. The Group is
yet to evaluate the future effects of these requirements on the financial sta-
tements. The standard is not applicable for financial years beginning before
1 January 2013 but is available for early adoption. However, the standard is
yet to be adopted by the EU.
• IAS 24 (revised). “Related Party Disclosures”, published November 2009.
This standard replaces IAS 24, “Related Party Disclosures”, published 2003.
IAS 24 (revised) is to be applied for financial years beginning 1 January,
2011 or later. Early application of the standard is permitted both in part and
as a whole. The revised standard clarifies and simplifies the definition of
Related Party and provides an exemption from the disclosure requirements
for transactions between a government-controlled reporting entity and that
government or other entities controlled by that government. The Group will
apply the revised standard from 1 January, 2011. The current assessment
is that this change will have no material effect on the Group’s financial
statements
Assessments and estimates in the financial statements
The preparation of financial statements in conformity with International
Financial Reporting Standards 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 assump-
tions are based on historical experience and a number of other factors con-
sidered reasonable in the current situation. 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 outcome can deviate from these estimates and
assessments.
Estimates and assumptions are reviewed on a regular basis. Changes
in estimates are recorded in the period in which the change is made if the
change only affects that period, or the period in which the change is made
as well as future periods, if such change affects both current and future
periods.
Significant assessments in the application of the Accounting principles have
been made in conjunction with the decision to report financial instruments
at fair value, as well as in conjunction with the decision to classify insurance
contracts as insurance or 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.
30
Annual Report 2010
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.
Effects of the above-named classifications entail that changes in fair
value of equity securities are reported in the income statement and changes
in fair value on bonds and other interest-bearing securities are reported in
Other comprehensive income.
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,
forming 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 4 March, 2011. The income statement and balance sheet will be
adopted at the General Meeting held in May 2011.
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. The Group’s
participations in the associate’s net profit after taxes and minority interests,
adjusted for any amortisation, impairment or dissolution of acquired surplus
or deficit value, are reported in the consolidated income statement under
the item ”Share of associated companies’ income”. Dividends received from
associated companies decrease the book 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.
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 Parent Company’s,
including the branch offices, and the Group’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.
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 in other comprehensive
income.
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
in other comprehensive income. 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.
31
Annual Report 2010
Rates for the most important currencies
Currency Closing Average
USD 6.70 7.21
EUR 8.98 9.54
GBP 10.44 11.12
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-determined insured event occurs are recorded as
insurance contracts. Financial 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 suffi-
cient insurance 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, recor-
ding 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
Gross premiums written relate to insurance contracts incepted during the
financial year, together with any differences between booked premiums for
prior financial years and those premiums previously accrued, and include
estimates of premiums due but not yet receivable or notified, less an
allowance for cancellations. The gross premium income also includes the
net of entered and withdrawn premium portfolios. Gross premiums written
are stated before deduction of brokerage, taxes, duties levied on premiums
and other deductions. Premiums are earned on a pro rata temporis basis
over the term of the related contract, except for those contracts where the
period of risk differs significantly from the contract period, or where the ex-
posure vary during the contract period. In these circumstances, premiums
are recognized as earned over the period of risk in proportion to the amount
of insurance protection provided. Reinstatement premiums receivable are
recognized and fully earned as they fall due. Premium revenue corresponds
to the portion of premium income that has been earned. Unearned premi-
ums are allocated to Provision for unearned premiums.
Acquisition costs
By acquisition costs are meant such operating expenses that directly or
indirectly vary with the acquisition or renewal of insurance contracts. The
deferred acquisition costs are expensed in correspondence with the periodi-
sation for earned premiums for the related insurance contracts.
Technical provisions
Technical provisions consist of the Provisions for unearned premiums and
unexpired risks, Provisions for outstanding claims, claims handling provision
and equalization provision (in the Parent Company).
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 considers 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 and expected premium
revenue after the close of the financial year.
Provisions for unearned premiums are estimated with the help of the une-
arned 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 or over the contract period in relation to the insurance coverage
for the period. If the premium level for policies in force is considered insuf-
ficient the deferred acquisition costs are first written down, then a provision
is made for unexpired risks. The periods change in provisions for unearned
premium and unexpired risks is recorded in the income statement.
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.
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 and
not yet fully reported claims. The claims handling reserve for catastrophe
insurance is calculated in the same way, but with the difference that they are
calculated on a five year average for those provisions. The period’s change
in the claims adjustment provision is recorded in the income statement
within the items Claims handling expenses and Operating costs.
Provision adequacy testing
The Company’s applied accounting and valuation principles for the balance
sheet items Deferred acquisition costs, Provisions for unearned premiums
and Unexpired risks automatically entail testing of whether the provisions
are sufficient with regard to expected future cash flows.
Deferred acquisition costs for insurance contracts
Deferred acquisition costs are only recorded for insurance contracts
deemed to generate a margin at least covering the acquisition costs. Sirius
only records external deferred acquisition costs. The asset is tested for im-
pairment each quarter to ensure that the contracts are deemed to generate
a margin that, as a minimum, covers the value of the asset. Other costs for
insurance contracts are recorded as costs when they arise.
Operating costs
All operating costs are allocated in the income statement according to
their functional nature, 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 financial year, amounts recorded as liabilities to the company that
have assumed the reinsurance, in accordance with entered reinsurance
agreements, and also premium portfolios. These premiums are periodised
so that costs are allocated to the corresponding period of the insurance
cover. All items relating to ceded reinsurance are shown on separate lines
32
Annual Report 2010
in the income statement. Deductions are made for amounts credited due
to portfolio transfers or a change in the reinsurer’s share of proportional
reinsurance contracts.
The reinsurers’ share of technical provisions are recorded as an asset in
the balance sheet and corresponds to the reinsurers’ liability for technical
provisions in accordance with entered agreements. The Company assesses
any required impairment for assets referring to reinsurance agreements bi-
annually. If the recoverable amount is lower than the carrying amount of the
asset, the asset is impaired to the recoverable amount and the impairment
is recorded in the income statement.
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
equivalent to the actual total yield from the investment assets belonging
to the insurance operations. The weighted average interest rate for 2010
amounted to 3.69%.
Applied interest rates
EUR
GBP
SEK
USD
2010
2009
2.90%
1.80%
0.50%
4.20%
2.68%
8.19%
2.06%
8.40%
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 in Other comprehensive income.
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 in Other comprehensive income, whereupon the pertaining tax
effect is recorded in Other comprehensive income.
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
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.
Intangible assets
Goodwill
Goodwill comprises the amount by which the acquisition cost exceeds
the fair value of the Group’s participation in the acquired subsidiary’s or
associate’s identifiable net assets at the point in time of the acquisition.
Goodwill on the acquisition of subsidiaries is recognised as an intangible
asset. Goodwill is tested annually for impairment and is recognised at
acquisition cost less accumulated impairment losses. Impairment losses
of goodwill are not reversed. Profit or loss on the sale of a unit includes
the remaining carrying value of goodwill referring to the unit sold. Goodwill
is distributed to cash-generating units upon testing of any write-down
requirement.
Other intangible assets
Other intangible assets which have been acquired separately are reported
at acquisition cost. Other intangible assets acquired through a business
acquisition are reported at fair value as per the acquisition date. Acquired
Other intangible assets are capitalised on the basis of the costs arising at
the point in time in which the asset in question was acquired and put into
operation. These capitalised costs are amortised during the assessed
useful life of three years.
Self-developed software
Costs for maintenance of software are charged at the time at which they
arise. Development costs directly attributable to the development and tes-
ting of identifiable and unique software products controlled by the Company
are reported as intangible assets when the following criteria are fulfilled:
• it is technically possible to prepare the software for use,
• the Company’s intention is to complete the software and to put it into use,
• the conditions for the use of the software are in place,
• the manner in which the software can generate probable future economic
benefits can be demonstrated,
• adequate technical, financial and other resources for the completion of
development and for the use of the software are accessible, and
• expenditure attributable to the software during its development period can
be calculated in a reliable manner.
Other development costs, which do not fulfil these criteria, are charged
at the time at which they arise. Development costs which have previously
been charged are not reported as an asset in the following period. Develop-
ment costs for software reported as an asset are amortised during their
assessed useful life, which does not exceed three years.
33
Annual Report 2010
Land and buildings
All properties owned by the Company are operational properties and are
valued using the acquisition cost method, in accordance with IAS 16. The
Company owns three properties located in Sweden and Belgium. Sirius
reports its properties in accordance with the acquisition cost method and
the capitalised costs are depreciated over 50 years. No depreciation is
carried out on land.
Financial instruments
Financial instruments recorded in the balance sheet include, on the asset
side, shares and participations, loan receivables, bond and other interest-
bearing securities as well as derivatives. Where appropriate, derivatives
with negative market value are included among liabilities, other 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
for which the instrument was acquired. This classification determines the
manner in which the financial instrument will be valued after initial recording,
as described below.
Derivative instruments are recorded at fair value both initially and on an
ongoing basis. Changes in fair value are recorded in the manner described
below.
Financial assets valued at fair value via the income statement
This category consists of two sub-groups: financial assets available for sale
and other financial assets that the Company had initially chosen to be placed
into this category (according to the so-called Fair Value Option). Financial in-
struments in this category are continually valued at fair value, with changes
in value recorded in the income statement. The first sub-group includes deri-
vatives with a positive fair value. The second sub-group consists of financial
investments in shares and participations, 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 and Bonds and other
interest-bearing securities. 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 esta-
blishes the fair value by means of various valuation techniques. As far as
is possible, the valuation methods employed are based on market data,
while companyspecific 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 observa-
ble current market transactions in the same instrument.
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 a profit of MSEK 5, while the
recorded value per balance sheet date of 31 December, 2010 amounted to
MSEK 802.
Accounts receivable
Account receivables are non-derivative financial assets which are not listed
on an active market and with fixed or determinable payments. Accounts
receivables are reported in the amounts which are expected to be received,
that is, after deductions for bad debt provisions.
Available-for-sale financial assets
The category available-for-sale financial assets include 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 other
comprehensive income, except for changes in value due to impairment or
to foreign exchange rate differences on monetary items recorded in the
income statement. 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, thereaf-
ter, be assessed on an ongoing basis at fair value, to be included in other
comprehensive income, until that point in time the instruments in question
mature or are disposed. At disposal of the assets, the accumulated profit/
loss 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 fair value including
transaction costs.
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.
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 account
receivables, recorded at amortised cost, is reversed if a later increase of
the recoverable amount can be objectively related to an event occurring
34
Annual Report 2010
after the impairment has been performed.
The impairment of interest-bearing instruments, classified as available-
for-sale financial assets, is reversed via Other comprehensive income 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 for equipment such as cars,
furniture and computer equipment amounts to 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. Reversals are 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 Group companies’ pension plans differ. The pension plans are usually
financed through payments to insurance companies or managed funds.
These payments are determined based on periodic actuarial calculations.
The Group has both defined benefit and defined contribution pension plans.
A defined contribution plan is a pension plan under which the Group pays
fixed contributions into a separate legal entity. The Group has no legal
or constructive obligations to pay further contributions if this legal entity
does not hold sufficient assets to pay all employees the benefits relating to
employee service in the current and prior periods. A defined benefit plan is
a pension plan that is not a defined contribution plan. A characteristic of de-
fined benefit plans is that they indicate an amount for the pension benefit an
employee receives after retirement, usually based on one or several factors,
such as age, duration of employment and salary.
The liability reported in the balance sheet regarding defined benefit
pension plans is the current value of the defined benefit obligation at the end
of the period, less the fair value of the managed assets, with adjustments
for unreported gains and losses, as well as for unreported costs for service
during earlier periods. The defined benefit pension plan obligation is cal-
culated annually by independent actuaries applying the so-called projected
unit credit method. The current value of the defined benefit obligation is
determined through discounting of expected future cash flows, with the
application of the interest rate for first-class mortgage bonds issued in the
same currency as that in which the remuneration will be paid, with durations
comparable with that of the current pension obligation.
Costs referring to service during earlier periods are reported directly in
the income statement, unless the changes in the pension plan are condi-
tional on the employee remaining employed during a given period (earning
period). In this case, the cost referring to service during earlier periods is
distributed on a straight-line basis over the earning period.
For defined contribution pension plans, the Group pays fees to publicly or
privately administered pension insurance plans on an obligatory, contractual
or voluntary basis. The Group has no further payment obligations when all
fees are paid. The fees are reported as personnel costs at the point in time
at which they fall due for payment. Prepaid fees are reported as an asset to
the extent that cash repayment or reduction of future payments may benefit
the Group.
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.
Remuneration upon termination of employment
Remuneration upon employment of contract is payable when an employee’s
employment is terminated by the Group before the normal retirement age
or when an employee voluntarily accepts the termination of employment in
exchange for such remuneration. The Group reports severance payments
when it is demonstrably obliged to terminate employees’ employment in
accordance with a detailed formal plan, without possibility of revocation. In
the case that the Company has submitted an offer to encourage voluntary
termination of employment, the calculation of severance payment is based
on the number of employees which it is estimated will accept this offer. No
remuneration upon termination of employment has been paid during 2009
and 2010.
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 a 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, as well as its financial statements
in general, has been prepared using the same accounting principles and
calculation methods used in the most recent annual report.
35
Annual Report 2010
Differences between accounting principles in the
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 are allocated to defer-
red 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 re-
serve 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. The amount of the provision is
calculated as the equivalent of 150% of the highest net premium income for
Class 14, credit insurance, with equivalent reinsurance, for the five most
recent financial years. The provisions for each financial year are equivalent
to 75% of the technical surplus in the credit insurance operations. 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.
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.
Goodwill
Goodwill represents the difference between acquisition cost for business
acquisitions and the fair value of acquired assets, assumed liabilities and
contingent liabilities. In the Parent Company, goodwill is amortised in
accordance with the Swedish Annual Account Act and is reported in the
balance sheet on a straight-line basis over the estimated useful life of the
asset. The estimated useful life is reviewed annually. The estimated useful
life for goodwill, and goodwill arising from the purchase of the net assets of
a business, amounts to 20 years. Amortisation which deviates from plan is
handled as an appropriation and is reported under the heading Difference
between reported depreciation/amortisation and depreciation/amortisation
according to plan.
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.
Pensions
The Parent Company applies a different form of reporting of defined benefit
pension plans than stipulated in IAS 19. The Parent Company’s reporting of
defined benefit pension plans follows the Pension Obligations Vesting Act
and the regulations of the Swedish Financial Supervisory Authority, as it is
stated in RFR 2 that it is not necessary to apply the regulations in IAS 19
regarding defined benefit pension plans in legal entities. Pension costs are
reported as Operational expenses in the Parent Company’s income state-
ment and a provision referring to individuals with the option of retiring at the
ages of 62 and 64 exists under Other provisions in the Parent Company’s
income statement.
Appropriations and untaxed reserves
Appropriations and untaxed reserves are only recorded in the Parent
Company.
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.
36
Annual Report 2010
Note 2 • Information on risks
Risk management
The company’s risk management – also referred to as Enterprise risk mana-
gement, 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 state-
ments, operational limits are successively applied at detail level throughout
the organization in the form of operational risk limits, maximum risk exposure,
retrocession limits, foreign exchange exposure limits, maximum equity expo-
sure 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 governance
The risk management processes within Sirius are supported by a risk manage-
ment 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.
Sirius’ Board of Directors is ultimately responsible for the company’s risk
management strategy, risk tolerance and policies.
Sirius’ Management has day-to-day responsibility for all ERM activities and
it deploys this responsibility through different risk committees carrying out
certain duties.
A Risk Management Committee has been established in 2010 on White
Mountains Re Group level. The Committee meets monthly with the objective of
formalizing the oversight of critical risks, including the following risk manage-
ment processes of:
• Establishment of risk tolerances
• Identification and management of emerging risks
• Quantification and subsequent monitoring of exposures
• Implementation of risk reduction/reward expansion strategies
• Risk reporting
Sirius’ Group Risk Management function is responsible for the coordination,
monitoring, risk control and compliance of all risk areas. This function submits
quarterly compliance and risk reports to the CEO, the Executive Group and
to the Board of Directors. A summarizing yearly risk and governance report
is submitted to the Board of Directors. Additionally, ad hoc reporting is done
when deemed necessary.
Internal Audit fulfils an important role in the independent evaluation of
risk management and control systems. This includes the evaluation of the
reliability of reporting, the effectiveness and efficiency of operations, and the
compliance with laws and regulations.
Sirius’ ultimate owner is listed on the New York Stock Exchange and,
consequently, is required by the Sarbanes-Oxley Act, Section 404, to express
an opinion on the effectiveness of internal control over financial reporting
executed during the year. As part of this assessment, a thorough documenta-
tion 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) that 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 underwri-
ting. Other guiding principles include diversification, strong accumulation
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; under-
writing 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 underwriting
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 managed
through the application of pricing models and underwriting procedures, but
also through a reduction in under-priced business, or through declining to
accept such business.
If a larger, catastrophic event occurs, simultaneously impacting a large
number of cedants, this may result in a single loss that could wipe out the
expected annual profit, or, even consume a portion of the solvency capital.
This catastrophic risk is generally managed with the assistance of underwri-
ting methods and tools which monitor and control the company’s total risks,
both gross and net. Catastrophe risk is also managed by the effective use of
retrocession.
In order to ensure consistency in the underwriting process, all underwriting
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 Restric-
ted 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 continuously and reviewed annually.
There are several levels of control functions as well as technical systems,
which are in place to monitor and control that underwriting policies and pro-
cedures are followed. There is an underwriting control group reporting to the
Chief Underwriting Officer. This group focuses in detail on how the business is
37
Annual Report 2010
underwritten and that the underwriters follow issued policies and procedures.
Another group controls the underwriting system and ensures it is used cor-
rectly and that input data is accurate.
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 in-house.
Reserve risk
The reserving risk, i.e. the risk that insurance technical provisions will be insuf-
ficient to settle incurred and future claims, is foremost handled by actuarial
methods and a careful continuous review of reported claims.
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 fulfil all expected obliga-
tions 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 25 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 clo-
sing exchange rate for 2010. 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 in-
clude 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.
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 utili-
zes 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 business 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 modelling single events, aggregate claims are also mo-
delled. Different levels of claims can also be modelled with 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 analy-
ses catastrophe risks, divided by geographical area and return periods. The
company analyses catastrophe risks each quarter during the financial year.
The figures show the situation at the end of Q4, 2010.
Sensitivity analysis – losses divided by geographical
area and return periods
2010
2009
Once per
Once per
Once per
Once per
100 years
250 years
100 years
250 years
Global - Gross
Global - Net
Europe - Gross
Europe - Net
3,331
2,313
3,251
1,320
4,424
2,654
4,424
1,729
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 esti-
mation of catastrophe risk, both prior to and after retrocession. The largest
single catastrophe risk in the current portfolio is a storm (“windstorm”) in
Europe. An estimation of the maximum loss an individual windstorm in Europe,
with a modelled return period of 250 years, is an estimated net loss of MSEK
1,729 (gross claims MSEK 4,424). In order to estimate how claims of this size
affect solvency capital, the company makes an estimate 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 within the company’s established risk
tolerance.
Within the area Aviation reinsurance, the company applies another licen-
38
Annual Report 2010
Claims, 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
5 years later
Current estimate of total claims
Total paid
2005
2006
2007
2008
2009
2010
Total
3,222
3,748
3,647
3,621
3,608
3,603
3,603
3,449
2,487
3,154
6,574
6,005
7,191
3,490
4,041
4,038
3,960
3,545
4,392
4,391
3,448
5,001
2,922
7,191
2,870
3,960
3,650
4,391
3,454
5,001
3,027
2,922
864
Claims outstanding 1)
1,327
154
4,322
310
937
1,974
2,058
11,082
Claims, net of reinsurance
2004 and
underwriting year
prior years
2005
2006
2007
2008
2009
2010
Total
Estimated claims: at the close of the calendar year
1 year later
2 years later
3 years later
4 years later
5 years later
Current estimate of total claims
Total paid
2,694
3,151
3,063
3,052
3,040
3,036
3,036
2,886
2,206
2,822
2,877
2,858
2,834
3,067
3,568
3,543
3,465
3,231
3,866
3,833
2,962
3,887
2,381
2,834
2,640
3,465
3,199
3,833
3,079
3,887
2,353
2,381
739
Claims outstanding 1)
987
150
194
266
754
1,533
1,642
5,526
1) For reconciliation against Balance Sheet, see Note 25.
Financial risk management
Goals, principles and methods
In the company’s operation various types of financial risks arise, such as
market risks, credit risks and liquidity risks. In order to limit and control the
risk taking in the operations, Sirius’ Board of Directors, being ultimately re-
sponsible for the internal control in the company, has determined 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 (FSA), Finansinspek-
tionen.
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 Market Risk Committee is responsible for the continuous mana-
gement of market risks. The development of the market risks is reported
within the Market Risk Committee on a monthly basis. The Committee
consists of the Group Chief Financial Officer, the Company Chief Financial
Officer and the Manager of Investment Accounting and Control.
The company’s investment operations during 2010 yielded a return of 1
percent, expressed in SEK. During the year, the percentage of equities in
the investment portfolio increased to approximately 14 percent. The table
below shows the investment assets divided by class of asset, excluding
deposits in companies that are reinsured by Sirius.
Investment assets,
Percentage split
division by class of asset
2010
2009
Bonds and other interest-bearing securities
Shares and participations
- whereof venture capital companies
Derivatives
Cash and bank balances
Total
79.23
11.87
1.97
1.79
7.11
100
58.29
12.11
1.47
-
29.60
100
39
Annual Report 2010
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, 2010 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-inte-
rest assets decreases as market interest rates increase, or alternatively,
that the market value increases as the interest rates decrease. The level
of interest rate 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, 2010.
Investment assets, interest rate risk according to the Traffic Light model
Scenario, Corresponding
Capital
Reduced
capital
Exposure
stress test
basis points
requirements
requirements
Assets in SEK
Assets in EUR
Assets in USD and other currencies
Total
4,823
2,784
4,368
11,975
30%
25%
30%
-
98
74
99
-
130
66
112
308
82
42
71
195
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 rela-
ted specifically to the company in question. Equity risks are mainly mitigated
by a diversification of the equity portfolio. The table below shows the equity
risk in accordance with the Traffic Light model as per 31 December, 2010.
Investment assets, equity risk according to the Traffic Light model
Scenario,
Capital
capital
Exposure
stress test
requirements
requirements
Reduced
Swedish shares and participations
Foreign shares and participations
Foreign stock warrants
Foreign associated companies
Total
-
1,804
249
2,191
4,244
-
35%
75%
35%
-
-
632
186
767
-
400
118
486
1,585
1,004
Currency risk
Currency risk arises if assets and liabilities in the same foreign currency
vary in amounts.
A Currency Committee is established and meets at least monthly in order
to monitor the currency exposure and to limit the currency risk. Besides
that, it is the responsibility of the Currency Committee to review and update
the Currency Risk Policy and ensure it is approved by the Board of Directors
on a yearly basis. The Currency Committee consists of the same members
as the Market Risk Committee.
Sirius’ total net currency exposure is divided into two categories,
exposure related to Policyholders Funds, which is matched with the cor-
responding assets, and exposure related to Owner’s Funds. Sirius’ net Po-
licyholders Funds exposure for currency risk is marginal as the company’s
objective for managing currency risk is to match net insurance liabilities in
foreign currency with corresponding assets within very tight time 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.
40
Annual Report 2010
Exchange rate exposure – Group
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
USD
4,182
3,539
715
1,749
2010
EUR
100
2,866
185
130
10,185
3,281
-4,644
-1,578
-4,644
-1,578
Net exposure before financial hedging with derivatives
5,541
1,703
Nominal value currency forwards
-1,676
-
Net exposure after financial hedging with derivatives
3,865
1,703
GBP
Other
USD
EUR
GBP
Other
2009
-
706
30
-29
707
-139
-139
568
-
568
-
233
93
46
3,514
4,338
114
971
1,395
2,176
1,971
289
0
143
39
-41
372
11,218
3,550
141
-301
-301
5,323
1,763
5,323
1,763
141
141
71
5,895
1,787
-
71
-
-
5,895
1,787
0
-
0
0
0
38
38
76
66
66
10
-
10
In below table, the effect on the company’s shareholders’ equity and income
statement of two stress tests are shown: An unfavourable foreign exchange
rate move of 25 basis points, in the respective foreign currencies towards
SEK and an unfavourable change to foreign exchange rates by 10 percent in
the respective foreign currencies towards SEK.
The analysis below assumes that the changes in exchange rates do not
affect other risk parameters, such as interest rate. The sensitivity analysis
takes into consideration existing financial hedges with currency related
derivatives.
Sensitivity analysis per currency
USD
EUR
GBP
Other
Total
2010
2009
Change 25 basis points
Change 10%
Change 25 basis points
Change 10%
203
387
205
590
47
170
43
178
14
57
0
0
-
7
-
1
264
621
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 fulfil 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 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 markets.
The table below shows the exposure of Sirius´ investment assets divided
per class of asset.
Exposure - Group
2010
2009
Bonds & other interest-bearing assets
- Governments
- Swedish mortgage institutions
- Other Swedish issuers
- Other issuers
Shares & participations
Derivatives
Total
12,067
7,608
-
102
4,357
1,808
273
8,662
5,305
103
104
3,150
1,797
-
14,148
10,459
41
Annual Report 2010
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
Symetra
Share/Warrant
OneBeacon Insurance Group Ltd
Prospector Offshore Fund
Pentelia Ltd
Ironshore Inc
Atlas Copco AB
JP Morgan Chase
BAA Funding Ltd
Casino Guichard Perrach
SES Global Americas Holding
Total
Share
Share
Share
Share
Bond
Bond
Bond
Bond
Bond
assets
4.4
4.0
2.3
1.1
0.7
0.7
0.6
0.5
0.4
0.4
618
561
330
161
106
102
83
71
60
60
2,152
15.2
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 investment assets, %
2010
AAA
AA
Bonds and other interest-bearing securities 70
- Swedish government
- Swedish mortgage institutions
- Other Swedish institutions
- Foreign governments
- Other foreign issuers
100
-
0
95
22
2
0
-
0
0
7
A
14
0
-
100
5
33
BBB
14
0
-
0
0
37
BB
Total
0
0
-
0
0
1
100
100
-
100
100
100
AAA
74
100
100
0
99
33
AA
3
0
0
0
1
7
2009
A
10
0
0
100
0
25
BBB
13
0
0
0
0
34
BB
0
0
0
0
0
1
Total
100
100
100
100
100
100
2010
17.12
59.84
23.04
100
2010
29.02
28.40
40.01
2.57
100
2010
63.05
-
0.85
2009
25.85
72.28
1.87
100
2009
11.65
48.75
38.69
0.91
100
2009
61.26
1.18
1.20
36.10
36.36
100
100
Equity investments,
divided by geographical area %
Western Europe
North America
Other
Total
Interest-bearing investments,
divided by geographical areas %
Western Europe
North America
Scandinavia
Other
Total
Interest-bearing investments,
divided by sector %
Governments
Swedish mortgage institutions
Other Swedish issuers
Other foreign issuers
Total
42
Annual Report 2010
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
honour 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,
2010, to MSEK 56 (2009 MSEK 65).
Ageing balances
Receivables regarding both direct insurance as well as assumed rein-
surance 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: Less than 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 outstan-
ding for more than 1 year, there is a specific reserve for counterparties
which are not classified as IDC companies which total MSEK 10.
Due for
<1 Month
1-3 Months
3-6 Months
6-9 Months
9-12 Months
>1 Year
Total
2010
2009
Net receivables
Net receivables
106
119
59
52
23
-1
-8
1
-6
-6
24
64
198
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, 2010 was MSEK 6,052. The credit rating distribution for this exposure is shown in the
table below.
Rating –
2010
Percentage
2009
Percentage
Standard & Poor's
Gross
Collateral
Net
split
Gross
Collateral
Net
split
124
0
64
56
413
152
94
10
639
344
4,156
6,052
0
0
0
0
0
0
63
0
10
101
4,156
4,330
124
0
64
56
413
152
31
10
629
243
0
2
0
1
1
7
2
1
0
11
6
69
1,722
100
137
0
43
34
387
70
148
5
756
130
2,720
4,430
0
0
0
0
0
0
33
0
107
0
2,702
2,860
137
0
43
34
387
70
115
5
649
130
0
157
3
0
1
1
9
2
3
0
17
3
61
100
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB or lower
Special approval
Internal reinsurance
Total
43
Annual Report 2010
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’ 2010 Retrocession Program.
Rating –
Standard & Poor's
AA+
AA
AA-
A+
A
A-
BBB+
BBB or lower
Fully collateralized
Special approval
Sum
2010
Percentage
split
2009
Percentage
split
23
649
539
946
123
1,336
60
2
164
68
1
17
14
24
3
34
1
0
4
2
80
484
268
993
125
739
56
55
115
106
3
16
9
33
4
24
2
2
4
3
3,910
100
3,021
100
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 fulfil 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 accom-
plished through advanced liquidity analysis of financial assets and insurance liabilities. At the end of 2010,
the duration of interest-bearing investment assets was 2.72 years and the duration of insurance liabilities
was 1.96 years. The liquidity is monitored continuously and stress tests are performed for different scena-
rios. 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 2010 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 outflows
2010
On demand
<3 months
3 months –1 year
1-5 years
>5 years No duration
Total
Bonds and other interest-bearing securities
(discounted amounts)
Shares & participations in associated companies
Shares & participations
Cash & bank balances
Receivables, direct insurance
Receivables, reinsurance
Other debts
Prepaid expenses and accrued income
0
0
0
1,082
0
0
0
0
1,268
898
7,008
2,893
0
12,067
0
0
0
0
0
31
26
0
0
0
0
1,491
0
195
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2,178
2,057
0
5
2,178
2,057
1,082
5
-106
1,385
32
0
63
221
Total
1,082
1,325
2,584
7,008
2,893
4,166
19,058
44
Annual Report 2010
2009
On demand
<3 months
3 months –1 year
1-5 years
>5 years No duration
Total
Bonds and other interest-bearing securities
(discounted amounts)
Shares & participations in associated companies
Shares & participations
Cash & bank balances
Receivables, direct insurance
Receivables, reinsurance
Other debts
Prepaid expenses and accrued income
0
0
0
4,383
0
0
15
0
1,017
404
5,162
2,079
0
0
0
0
0
719
23
0
0
0
0
1,461
0
152
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
Total
4,398
1,759
2,017
5,162
2,079
4,047
19,462
Liquidity profile - financial debts
Contractual outflows
2010
On demand
<3 months
3 months–1 year
1-5 year
>5 years No duration
Total
Payables, direct insurance
Payables, reinsurance
Other debts
Accrued expenses and deferred income
Total
0
0
0
0
0
0
0
74
69
143
0
590
481
81
1,152
0
0
38
42
80
0
0
0
1
1
2
-116
0
0
2
474
593
193
-114
1,262
2009
On demand
<3 months
3 months–1 year
1-5 year
>5 years No duration
Total
Payables, direct insurance
Payables, reinsurance
Other debts
Accrued expenses and deferred income
Total
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
Technical provisions
<3 months
3 months–1 year
1-5 year
>5 year
Total
2010
2009
647
717
1,966
2,183
2,842
3,062
939
964
6,394
6,926
45
Annual Report 2010
Operational risk management
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 opera-
tional risk methodology and thereby supporting the organiza-
tion and the process owners with the tools needed to manage
these risks. During 2010 the framework for Operational Risk
Management and Incident Reporting was approved by Sirius’
Board of Directors and implemented within the organization.
The implementation will continue during 2011 with information
and training for all Sirius employees.
Operational risks within Sirius are e.g. identified through
regularly conducted Risk Control & Compliance Reviews.
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 proces-
ses and through follow up and testing of the effectiveness of
the key controls.
Sirius’ operational risks shall be reduced to acceptable levels
based on the pre-defined risk appetite, taking into account the
cost-benefit considerations of risk mitigation.
Compliance risk management
Compliance risk is “the risk of legal or regulatory sanctions,
material financial loss or loss to reputation that Sirius may
suffer as a result of not complying with laws, internal or external
regulations and administrative provisions as applicable to
Sirius activities.” The responsibility for Sirius’ compliance
with internal and external regulation lies with all employees.
Compliance risks are identified by all employees on an ad hoc
basis and more formally through the Risk Control & Compliance
Reviews. The Compliance function supports the organization
and processes by informing and advising but also by monitoring
compliance issues throughout the group.
Sirius has a very conservative approach towards compliance
risks and risk mitigation is encouraged. A well functioning and
structured process for managing and monitoring these risks is
therefore essential for Sirius.
During 2010 a Compliance Risk Management Framework was
Total capital requirement
according to the Traffic Light model
2010
2009
Total capital net requirement
Capital buffer
Surplus
3,626
12,534
8,908
3,919
12,567
8,648
approved by the Board of Directors and the implementation
process, covering head office and all branches, is underway and
will continue during 2011.
Solvency and capital requirements
Sirius is preparing for compliance with the Solvency II regulation.
As part of this, and as a test of the standard solvency capital
requirement formula, the company has participated in the Quanti-
tative Impact Study (QIS) 5.
Sirius has been working extensively with the implementation
of an Economic Risk Capital (ERC) Model.
Objectives for the ERC model are:
• Consolidating quantifiable risks into one model
• Producing a realistic distribution of financial outcomes
various return periods
• Allocating capital to key risks, business units and lines of
business units more consistently
• Addressing Solvency II Pillar I and II issues
• Streamlined and inclusive view of interdependencies of
these risks
• Stochastically calculate economic capital
Practical applications of the ERC model include:
• Enhancing capital management and allocation
• More efficient retrocession purchases
• Streamlining catastrophe accumulation reporting for
planning and actual PML reporting
• Group-wide risk adjusted performance measurement
The company has furthermore decided to enter into the Internal
Model Approval Process with the company’s regulator, the Swe-
dish FSA. The goal is to gain approval to replace the standard
model with the company’s internal Economic Risk Capital Model
solvency capital calculations under Solvency II.
As a predecessor to Solvency II, the Swedish FSA has
established a local solvency regulation, the Traffic Light system.
It takes into account the company’s risks in the areas financial
risks, insurance risk and operating expense risk. The model
results in a total capital net requirement which is 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 2010.
Financial strength rating
The financial strength of Sirius International has been rated by Standard & Poor’s, A M Best and Moody’s.
Financial strength rating as per 31 December
2010
2009
S&P’s
A M Best
Moody’s
S&P’s
A M Best
Moody’s
Financial strength rating
Outlook
A-
Stable
A
Stable
A3
Stable
A-
A
Stable
Negative
A3
Stable
46
Annual Report 2010
Note 3 • Premium income
Premium income, geographical allocation
Group
Parent Company
Direct insurance, Sweden
Direct insurance, other EES
Direct insurance, other countries
Premiums for accepted reinsurance
Premium income before ceded reinsurance
Premium for ceded reinsurance
Premium income after ceded reinsurance
2010
8
197
674
6,516
7,395
-1,787
5,608
Note 4 • Claims incurred, for own account
Claims incurred for the year´s operations
2009
2010
2009
8
128
684
7,810
8,630
-1,673
6,957
8
128
684
7,810
8,630
-1,673
6,957
8
197
674
6,516
7,395
-1,787
5,608
Group
2010
2009
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
Total claims incurred for the year’s operations
-952
39
-1,254
-942
-175
-3,284
Claims incurred for previous year’s operations
137
0
331
114
0
582
2010
-815
39
-923
-828
-175
-1,401
59
-1,563
-981
-168
-2,702
-4,054
Group
-1,311
59
-1,265
-806
-168
-3,491
90
0
298
175
0
563
2009
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
-3,277
-63
1,033
-432
-2,739
800
0
83
1,130
2,013
-2,477
-3,001
-63
1,116
698
-726
268
1,124
1,214
-395
337
4
-84
-535
-278
-2,664
272
1,040
679
-673
Total claims incurred
-6,023
2,595
-3 428
-4,449
285
-4,164
Total claims paid
Claims paid
Loss portfolios
Claims handling expenses
Total claims paid
2010
2009
Group
Gross
Ceded
Net
Gross
Ceded
Net
-4,229
-24
-175
-4,428
937
-3,292
-4,402
427
-3,975
0
0
-24
-175
327
-168
4
0
331
-168
937
-3,491
-4,243
431
-3,812
Change in Provision for outstanding claims
Group
2010
2009
Change in provision for incurred and reported claims
Change in provision for incurred but not reported claims (IBNR)
Total change in provisions for outstanding claims
-221
-1,374
-1,595
414
1,244
1,658
193
-130
63
-439
233
-206
214
-360
-146
-225
-127
-352
Gross
Ceded
Net
Gross
Ceded
Net
47
Annual Report 2010
Claims incurred for the year’s operations
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
Total claims incurred for the year’s operations
Gross
-952
39
-1,254
-942
-175
-3,284
2010
Ceded
137
0
331
114
0
582
Net
Gross
-815
39
-923
-828
-175
-1,401
59
-1,563
-981
-168
-2,702
-4,054
Claims incurred for previous year’s operations
Parent Company
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
Gross
-3,264
-63
1,027
-432
-2,732
2010
Ceded
800
0
83
1,130
2,013
Net
Gross
-2,464
-63
1,110
698
-719
-3,001
268
1,124
1,214
-395
2009
Ceded
90
0
298
175
0
563
2009
Ceded
337
4
-84
-535
-278
Net
-1,311
59
-1,265
-806
-168
-3,491
Net
-2,664
272
1,040
679
-673
Total claims incurred
-6,016
2,595
-3,421
-4,449
285
-4,164
Total claims paid
Parent Company
Claims paid
Loss portfolios
Claims handling expenses
Total claims paid
Gross
-4,216
-24
-175
-4,415
2010
Ceded
Net
Gross
2009
Ceded
Net
937
-3,279
-4,402
427
-3,975
0
0
-24
-175
327
-168
4
0
331
-168
937
-3,478
-4,243
431
-3,812
Change in provision for outstanding claims
Parent Company
Change in provision for incurred and reported claims
Change in provision for incurred but not reported claims (IBNR)
Total change in provision for outstanding claims
Gross
-227
-1,374
-1,601
2010
Ceded
414
1,244
1,658
Net
Gross
187
-130
57
-439
233
-206
2009
Ceded
214
-360
-146
Net
-225
-127
-352
48
Annual Report 2010
Note 5 • Operating costs
Specification of income statement item operating costs
Group
Parent Company
2010
2009
2010
2009
Acquisition costs
-1,494
-1,673
-1,493
-1,673
Change in prepaid acquisition costs (+/–)
Administrative expenses
Provisions and profit shares in ceded reinsurance (–)
-5
-475
284
86
-451
283
-5
-473
284
86
-457
283
Total operating costs
-1,690
-1,755
-1,687
-1,761
Other operating costs
Group
Parent Company
2010
2009
2010
2009
Operating costs
Claims handling expenses included in claims paid
Costs for treasury mgmt. incl. in Return on capital, costs
Costs for property mgmt. incl. in Return on capital, net
-1,690
-175
-53
-5
-1,755
-168
-41
-3
-1,687
-175
-51
-5
-1,761
-168
-41
-3
Total other operating costs
-1,923
-1,967
-1,918
-1,973
Total operating costs per type
Group
Parent Company
2010
2009
2010
2009
-429
-50
-17
-1,427
-1,923
-368
-47
-8
-1,544
-1,967
-418
-48
-16
-1,436
-1,918
-354
-46
-8
-1,565
-1,973
Direct and indirect personnel costs
Premises costs
Depreciation/amortisation
Other expenses related to operations
Total other operating costs
Note 6 • Investment income
Group
Parent Company
2010
2009
2010
2009
Dividend income from:
Foreign shares and participations
Interest income
Bonds and other interest-bearing securities
Other interest income
153
313
25
- of which from financial assets not valued at fair value
with changes in value reported in the income statement
0
Capital gains and reversed write-downs (net)
Swedish shares
Foreign shares
Interest-bearing securities
Total return on capital, income
0
25
107
623
45
329
46
46
1
0
0
421
206
312
25
0
0
6
100
649
9
329
46
46
1
0
0
385
49
Annual Report 2010
Note 7 • Unrealised gains on investments
Total operating costs per type
Group
Parent Company
2010
2009
2010
2009
Foreign shares and participations
Share of income in associated company 1)
Derivative financial instruments
Total unrealised gains on investments
243
125
29
397
365
270
0
635
155
0
29
184
228
0
0
228
1) Refers to the Group´s share of income in associated company, WM Phoenix. The currency translation differences arising in the conversion to Swedish krona is
reported in other comprehensive income (-133).
Note 8 • Investment expenses and charges
Operating expenses for land and buildings
Asset management costs
Interest expenses
Other interest expenses
- of which from financial assets not valued at fair value with
changes in value reported in the income statement
Group
Parent Company
2010
2009
2010
2009
-5
-54
-3
0
-3
-43
-1
-1
-5
-51
-3
0
-3
-43
-1
-1
Capital losses on foreign exchange, net
-394
-258
-398
-244
Capital losses
Foreign shares and participations
Subsidiaries and associated companies
Bonds and other interest-bearing securities
Derivative financial instruments
Total
0
0
0
-10
-466
-35
0
-30
0
0
-185
0
0
-34
0
-30
0
-370
-642
-355
Note 9 • Unrealised losses on investments
Group
Parent Company
2010
2009
2010
2009
Foreign shares and participations
Derivatives, forward exchange agreements
Total unrealised losses on investments
-92
-13
-105
-28
0
-28
-92
-13
-105
-28
0
-28
50
Annual Report 2010
Note 10 • Net profit or net loss per category of financial instruments
Group 2010
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
Derivative financial instruments
Bonds and other interest-bearing securities
Deposits with cedants
Other debtors
Total
328
7
0
0
0
335
0
0
287
0
0
287
Parent Company 2010
Financial assets
identified as
items valued
328
7
287
19
6
647
0
0
0
19
6
25
Loan
at fair value in
Available-for-
receivables
the income
sale financial
and accounts
Financial assets
statement
instruments
receivables
Total
Shares and participations
Derivative financial instruments
Bonds and other interest-bearing securities
Deposits with cedants
Other debtors
Total
Group 2009
276
17
0
0
0
293
0
0
279
0
0
279
Financial assets
identified as
items valued
276
17
279
19
6
597
0
0
0
19
6
25
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 cedants
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 cedants
Other debtors
Total
166
0
0
0
166
0
478
0
0
478
0
0
22
7
29
166
478
22
7
673
The amounts in the table above constitute a specification of the amounts regarding financial 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) exchange rate gains/losses.
Currency exchange losses amount to 394 (258) for the Group, of which 658 (639) refer to exchange rate losses on financial assets.
Exchange rate gains on liabilities and other assets amount to 264 (381).
As the Company has no financial liabilities generating interest expenses, these have not been specified in the above table; neither does
the tables include interest income from Cash and bank.
51
Annual Report 2010
Note 11 • Taxes
Current tax expense (-)[/tax revenue (+)]
Current tax expenses
Tax adjustment attributable to previous years
Deferred tax expense (-)[/tax revenue (+)]
Deferred tax regarding temporary differences
Total reported tax expense
Reconciliation of effective tax
Group
Parent Company
2010
2009
2010
2009
-189
0
-5
-194
-187
-4
-113
-304
-185
0
-4
-189
-185
-4
18
-171
Reconciliation of effective income tax rate for the Group and Parent
Group
Parent Company
Company to the Swedish income tax rate
2010
2009
2010
2009
Tax according to applicable tax rate for the Parent Company
-26.3%
-26.3%
-26.3%
-26.3%
Non-deductible expenses
Non-taxable income
Tax regarding previous years
Reported effective tax
-5.3%
13.5%
0%
-0.3%
8.4%
-1.0%
-7.7%
7.5%
0%
-0.3%
3.2%
-2.4%
-18.1%
-19.2%
-26.5%
-25.8%
Result before tax for the Parent Company refers to profit after transfer to safety reserve. The total provision for 2010 amounts to 0 (511).
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
2010
2009
2010
2009
2010
2009
Personnel-related provisions
Other provisions
Surplus value of securities
Safety reserve and accelerated depreciation
Net tax receivables/net tax liabilities
19
12
3
0
34
10
16
0
0
26
0
-4
0
-3
-1
-22
2
25
3
7
15
-22
-2,549
-2,553
-2,549
-2,575
-2,549
-2,519
-2,549
-2,549
Parent Company
Deferred tax assets
Deferred tax liabilities
Net
2010
2009
2010
2009
2010
2009
Personnel-related provisions
Other provisions
Surplus value of securities
Net tax receivables/net tax liabilities
20
12
3
35
10
15
0
25
0
0
0
0
0
0
-21
-21
3
29
3
35
10
15
-21
4
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
2010
2009
2010
2009
Opening balance
Recognised in income statement
Recognised in shareholders’ equity
Closing balance
-2,549
-2,400
-5
35
-113
-36
-2,519
-2,549
4
-4
35
35
21
18
-35
4
Taxes recognised in shareholders’ equity mainly refers to available-for-sale financial assets 35 (-35).
There is no loss carry-forward included in the change of deferred tax.
52
Annual Report 2010
Note 12 • Intangible assets
Group
Parent Company
Intangible assets
Acquired
Intangible assets
Acquired
–IT Capitalised
intangible
–IT Capitalised
intangible
expenditurer for
assets
expenditurer for
assets
development work
Goodwill 1)
Total
development work
Goodwill 1)
Total
Accumulated acquisition value
Opening balance 1 January, 2009
Acquisitions for the year
Closing balance 31 December, 2009
Opening balance 1 January, 2010
Acquisitions for the year
Closing balance 31 December, 2010
Accumulated amortisation
Opening balance 1 January, 2009
Depreciation for the year
Closing balance 31 December, 2009
Opening balance 1 January, 2010
Depreciation for the year
Closing balance 31 December, 2010
Carrying amount
Per 1 January, 2009
Per 31 December, 2009
Per 1 January, 2010
Per 31 December, 2010
Amortisation for the year is included in the
following rows of the income statement for 2009:
Operating costs
Other costs
Total
Amortisation for the year is included in the
following rows of the income statement for 2010:
Operating costs
Other costs
Total
66
5
71
71
22
93
-65
-1
-66
-66
-5
-71
1
5
5
22
-1
0
-1
-5
0
-5
615
0
615
615
0
615
-324
0
-324
-324
0
-324
291
291
291
291
0
0
0
0
0
0
681
5
686
686
22
708
-389
-1
-390
-390
-5
-395
292
269
296
313
-1
0
-1
-5
0
-5
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 depreciations, see Note 1
"Accounting principles"
1) The Group and Parent Company goodwill derive from the acquired operation in Belgium, which is an identifiable cash genera-
ting unit. The amounts refer both to acquisition- and asset deal goodwill and are annually tested for impairment. The projected
future cash flows are based on a conservative assessment of the unit’s earnings, based on historical and future earning pat-
terns. The forecasted profit margin is currently equal to a combined ratio of approximately 95%.
66
5
71
71
22
93
-65
-1
-66
-66
-5
-71
1
5
5
22
-1
0
-1
-5
0
-5
460
0
460
460
0
460
-231
-17
-248
-248
-4
-252
229
212
212
207
0
-17
-17
0
-4
-4
526
5
531
531
22
553
-296
-18
-314
-314
-9
-323
230
217
217
229
-1
-17
-18
-5
-4
-9
53
Annual Report 2010
Note 13 • Land and buildings
Group
Parent Company
Acquisition cost
Opening balance 1 January, 2009
Closing balance 31 December, 2009
Opening balance 1 January, 2010
Closing balance 31 December, 2010
Depreciation
Opening balance 1 January, 2009
Depreciation for the year
Closing balance 31 December, 2009
Opening balance 1 January, 2010
Depreciation for the year
Closing balance 31 December, 2010
Carrying amount
Per 1 January, 2009
Per 31 December, 2009
Per 1 January, 2010
Per 31 December, 2010
18
18
18
18
-14
-2
-16
-16
0
-16
4
2
2
2
18
18
18
18
-14
-2
-16
-16
0
-16
4
2
2
2
The Parent Company holds three properties, located in Sweden and Belgium. Sirius International accounts for the properties, including building
supplies, according to the acquisition value method and the capitalised expenses are depreciated over 50 and 10 years, respectively. No
depreciation is performed on land.
Assessed value
Group
Parent Company
2010
2009
2010
2009
Assessed value, buildings (in Sweden)
Assessed value, land (in Sweden)
Total
2
1
3
2
1
3
2
1
3
2
1
3
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. (in liquidation)
Liège, Belgium
Sirius International Holdings (NL) B.V.
Amsterdam, The Netherlands
White Mountains Re Bermuda Ltd
Hamilton, Bermuda
Accumulated acquisition cost
Beginning of year
Acquisition
Disposals
Capital contribution
Repayment of paid-up capital
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
54
2010
2009
100
100
100
100
100
100
100
0
2010
2009
1,252
1,252
728
0
388
-506
0
0
0
0
1,862
1,252
-596
-596
0
0
-185
-781
1,081
0
0
0
-596
656
Annual Report 2010
Subsidiaries’ shareholders’ equity
2010
Name of subsidiary
Shareholders’ equity
Shares %
Number of shares
Book value
Profit/loss
Sirius Rückversicherungs Service GmbH,
12
100
1 share nom. value EUR 51,129
Hamburg, Germany
Sirius Belgium Réassurances S.A. (in liquidation), Liège,
12
100
Share capital total EUR 1,245,681 consisting of
Belgium
700,000 shares without nom. value
0
13
-2
0
Sirius International Holdings (NL) B.V
1,045
100
Share capital total EUR 18,000 consisting of
1,032
381
Amsterdam, The Netherlands
180 shares with nom. value EUR 100 per share
White Mountains Re Bermuda Ltd,
36
100
Share capital total 120,000 USD consists of
36
-143
Hamilton, Bermuda
120,000 shares nom. value USD 1 per share
1,105
-
100
1,081
236
Total
2009
Name of subsidiary
Shareholders’ equity
Shares %
Number of shares
Book value
Profit/loss
Sirius Rückversicherungs Service GmbH,
18
100
1 share nom. value EUR 51,129
Hamburg, Germany
Sirius Belgium Réassurances S.A. (in liquidation), Liège,
14
100
Share capital total EUR 1,245,681 consisting
Belgium
of 700,000 shares without nom. value
0
13
5
0
Sirius International Holdings (NL) B.V.,
592
100
Share capital total EUR 18,000 consisting of
643
157
Amsterdam, The Netherlands
180 shares with nom. value EUR 100 per share
Total
624
100
656
162
55
Annual Report 2010
Note 15 • Shares and participations in associated companies
Carrying amount at beginning of the year
Share of associated company’s profit/loss 1)
Foreign exchange effect
Carrying amount at end of year
Carrying amount at beginning of the year
Acquisition of associated company
Carrying amount at end of year
Group
2010
2009
2,185
125
-132
2,178
2,101
270
-186
2,185
Parent Company
2010
2009
2,058
0
2,058
2,058
0
2,058
Name of associated companies
Assets
Liabilities
Shareholders’ equity
Net income
Share of capital % 2)
Number of shares
White Mountains Phoenix S.a.r.l.,
Luxemburg
Total
20,166
20,166
11,355
11,335
8,811
8,811
533
533
24.7
24.7
2,461,000
2,461,000
1) Refers to the Group's share of income in the associated company, White Mountains Phoenix. The translation of the exchange rate
difference arising in the conversion to Swedish krona is reported directly against shareholders´equity.
2) The participating interest in the Company’s total shareholders’ equity is equivalent to 24.7% (23.6%). The participating interest in
total outstanding shares at year-end is equivalent to 22.0% (22.0%).
Note 16 • Investments in shares and participations
Fair value
Acquisition cost
2010
2009
2010
2009
Group
1,808
1,797
1,946
2,053
Fair value
Acquisition cost
2010
2009
2010
2009
Parent Company
874
1,251
940
1,352
Further information on financial instruments can be found in Note 20.
56
Annual Report 2010
Note 17 • Bonds and other interest-bearing securities
Fair value
Acquisition cost
Group
2010
2009
2010
2009
Swedish government
Swedish mortgage institutions
Other Swedish issuers
Foreign governments
Other foreign issuers
Total
4,725
0
102
2,883
4,357
12,067
3,144
466
0
2,161
2,890
8,662
4,735
0
98
2,886
4,292
12,011
3,038
456
0
2,152
2,815
8,462
Of which listed
12,067
8,662
12,011
8,462
Average difference compared to nominal value
Total excess amount
Total shortfall
622
40
461
33
549
24
263
35
Fair value
Acquisition cost
Parent Company
2010
2009
2010
2009
Swedish government
Swedish mortgage institutions
Other Swedish issuers
Foreign governments
Other foreign issuers
Total
4,725
0
102
2,883
4,357
12,067
3,144
466
0
2,161
2,890
8,662
4,735
0
98
2,886
4,292
12,011
3,038
456
0
2,152
2,815
8,462
Of which listed
12,067
8,662
12,011
8,462
Average difference compared to nominal value
Total excess amount
Total shortfall
622
40
461
33
549
24
263
35
Note 18 • Derivatives
Group
Parent Company
Derivatives
2010
2009
2010
2009
Derivatives with underlying security shares
Derivatives with underlying security currency
Total
249
24
273
0
0
0
0
24
24
0
0
0
Derivatives with underlying security in currency refer to a currency hedge of MUSD 250 against SEK. As at 1 January, 2010, the
company had entered into an internal currency hedging agreement with White Mountains Re Financial Services Ltd (WMReFS). This
agreement implies that Sirius International has sold MUSD 250 on the basis of a currency futures transaction to WMReFS with a dura-
tion of five years. With the help of foreign exchange options, the currency futures transactions are settled on the basis of an exchange
rate cap of SEK 11.93 per USD, and an exchange rate floor of SEK 5.11 per USD. Outside this range, the company takes no hedging
measures. The currency hedge agreement is valued monthly. Derivatives with securities in shares are exclusively warrants in Symetra.
57
Annual Report 2010
Note 19 • Other debtors
Group
Parent Company
2010
2009
2010
2009
Other debtors, group companies
Other debtors
Total other debtors
0
63
63
713
42
755
201
61
262
713
43
756
Note 20 • Categories of financial assets and liabilitities and their fair value
Group 2010
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
Derivatives
Bonds and other interest-bearing securities
Accrued income
Other debtors
Total
0
0
0
607
63
670
1,808
273
0
0
0
0
0
12,067
0
0
1,808
273
12,067
607
63
1,808
273
12,067
607
63
1,946
266
12,599
607
63
2,081
12,067
14,818
14,818
15,481
Parent Company 2010
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
Derivatives
Bonds and other interest-bearing securities
Accrued income
Other debtors
Total
0
0
0
606
262
868
874
24
0
0
0
0
0
874
24
874
24
940
7
12,067
12,067
12,067
12,599
0
0
606
262
606
262
606
262
898
12,067
13,833
13,833
14,414
Group 2010
Financial liabilities
liabilities
amount
Fair value
Other financial
Carrying
Other liabilities
Accrued expenses
Total
593
193
786
593
193
786
593
193
786
Parent Company 2010
Financial liabilities
liabilities
amount
Fair value
Other financial
Carrying
Other liabilities
Accrued expenses
Total
608
192
800
608
192
800
608
192
800
58
Annual Report 2010
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 securities
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 securities
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
Parent Company 2009
626
157
783
626
157
783
626
157
783
Financial liabilities
liabilities
amount
Fair value
Other financial
Carrying
Other liabilities
Accrued expenses
Total
638
157
795
638
157
795
638
157
795
59
Annual Report 2010
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 2010
Level 1
Level 2
Level 3
Total
Shares and participations
Derivatives
Bonds and other interest-bearing securities
Total
935
0
6,234
7,169
344
0
5,833
6,177
529
273
0
802
1,808
273
12,067
14,148
Parent Company 2010
Level 1
Level 2
Level 3
Total
Shares and participations
Derivatives
Bonds and other interest-bearing securities
Total
0
0
6,234
6,234
345
0
5,833
6,178
529
24
0
553
874
24
12,067
12,965
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 discounted
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).
Group 2010
Shares and
Participations
Derivatives
Bonds
Total
Opening balance 1 January, 2010
Total reported profit/loss:
- reported in profit/loss for the year 1)
- reported in shareholders’ equity
Acquisition cost, purchase
Proceeds of sale, sales
Transfer from Level 3
Transfer into Level 3
Closing balance 31 December, 2010
323
-12
0
251
-33
0
0
529
0
7
0
266
0
0
0
273
Profit/loss reported in profit/loss for the
year for assets included in the closing
balance 31 December, 2010 1)
-12
7
0
0
0
0
0
0
0
0
0
323
-5
0
517
-33
0
0
802
-5
60
Annual Report 2010
Parent Company 2010
Shares and
Participations
Derivatives
Bonds
Total
Opening balance 1 January, 2010
Total reported profit/loss:
- reported in profit/loss for the year 1)
- reported in shareholders’ equity
Acquisition cost, purchase
Proceeds of sale, sales
Transfer from Level 3
Transfer into Level 3
Closing balance 31 December, 2010
323
-12
0
251
-33
0
0
529
0
17
0
7
0
0
0
24
Profit/loss reported in profit/loss for the
year for assets included in the closing
balance 31 December, 2010 1)
-12
17
0
0
0
0
0
0
0
0
0
323
5
0
258
-33
0
0
553
5
Group and Parent Company 2009
Shares and
Participations
Bonds
Total
Opening balance 1 January, 2009
Total reported profit/loss:
- reported in profit/loss for the year 1)
- reported in shareholders’ equity
Acquisition cost, purchase
Proceeds of sale, sales
Transfer from Level 3
Transfer into Level 3
Closing balance 31 December, 2009
376
-8
0
36
-81
0
0
323
0
0
0
0
0
0
0
0
376
-8
0
36
-81
0
0
323
Profit/loss reported in profit/loss for the
year for assets included in the closing
balance 31 December, 2009 1)
-23
0
-23
1) Reported in net income of financial transactions in profit/loss for the year.
61
Annual Report 2010
Note 21 • Tangible assets
Acquisition cost
Opening balance 1 January, 2009
Acquisition
Disposals
Closing balance 31 December, 2009
Opening balance 1 January, 2010
Acquisition
Disposals
Closing balance 31 December, 2010
Depreciations
Opening balance 1 January, 2009
Depreciation for the year
Disposals
Closing balance 31 December, 2009
Opening balance 1 January, 2010
Depreciation for the year
Disposals
Closing balance 31 December, 2010
Reported values
1 January, 2009
31 December, 2009
1 January, 2010
31 December, 2010
Group
Equipment
Parent Company
Equipment
72
13
-5
80
80
24
-18
86
-56
-7
4
-59
-59
-12
17
-54
16
21
21
32
71
13
-5
79
79
24
-18
85
-56
-7
4
-59
-59
-12
17
-54
15
20
20
31
Note 22 • Deferred acquisition costs
Opening balance
Capitalisation for the year
Depreciation/amortisation for the year
Exchange rate gains/losses
Closing balance
Note 23 • Untaxed reserves
Parent Company
Group
Parent Company
2010
2009
2010
2009
419
406
-411
-28
386
441
460
-443
-39
419
419
406
-411
-28
386
441
460
-443
-39
419
Accumulated accelerated depreciation regarding goodwill and equipment
Opening balance 1 January
Change for the year
Exchange rate gains/losses
Closing balance 31 December
Safety reserve
Opening balance 1 January
Change for the year
Closing balance 31 December
Total
62
2010
2009
44
-4
0
40
9,647
0
9,647
9,687
61
-17
0
44
9,136
511
9,647
9,691
Annual Report 2010
Note 24 • Provisions for unearned premiums and unexpired risks
Provisions for unearned premiums
2010
2009
Group
Gross
Reinsurers´
Net
Gross
Reinsurers´
Net
Opening balance
Insurance policies signed during period
Earned premiums for the period
Currency effect
Closing balance
2,190
2,072
-2,111
-215
1,936
share
-379
-419
327
68
-403
1,811
1,653
-1,784
-147
1,533
2,183
2,423
-2,179
-237
2,190
share
-274
-381
235
41
-379
1,909
2,042
-1,944
-196
1,811
Provisions for unexpired risks
2010
2009
Group
Gross
Reinsurers´
Net
Gross
Reinsurers´
Net
Opening balance
Current year’s provisions included in profit/loss
Previous year’s provisions included in profit/loss
Currency effect
Closing balance
140
0
-6
-8
126
share
-103
0
4
6
-93
37
0
-2
-2
33
share
-111
0
-1
9
-103
160
0
-7
-13
140
49
0
-8
-4
37
Provisions for unearned premiums
2010
2009
Parent Company
Gross
Reinsurers´
Net
Gross
Reinsurers´
Net
Opening balance
Insurance policies signed during period
Earned premiums for the period
Currency effect
Closing balance
2,190
2,071
-2,111
-214
1,936
share
-379
-419
327
68
-403
1,811
1,652
-1,784
-146
1,533
2,183
2,423
-2,179
-237
2,190
share
-274
-381
235
41
-379
1,909
2,042
-1,944
-196
1,811
Provisions for unexpired risks
2010
2009
Parent Company
Gross
Reinsurers´
Net
Gross
Reinsurers´
Net
Opening balance
Current year’s provisions included in profit/loss
Previous year’s provisions included in profit/loss
Currency effect
Closing balance
140
0
-6
-8
126
share
-103
0
4
6
-93
37
0
-2
-2
33
share
-111
0
-1
9
-103
160
0
-7
-13
140
49
0
-8
-4
37
63
Annual Report 2010
Note 25 • Claims outstanding
Provisions for outstanding claims
2010
2009
Group
Gross
Reinsurers´
Net
Gross
Reinsurers´
Net
Opening balance, reported claims
4,982
Opening balance, incurred but not reported claims (IBNR)
4,879
Opening balance
Portfolio transfer WTM Re Bermuda
Cost for claims incurred during the current year
Change in estimated cost for claims incurred in
previous years (close down profit/loss)
Claims handling expense
Paid/transferred to insurance liabilities or other
current liabilities
Currency affect
Closing balance
Closing balance, reported claims
9,861
6
3,284
2,739
175
4,253
-380
11,082
4,831
Closing balance, incurred but not reported claims (IBNR)
6,251
share
-852
-3,096
-3,948
0
-582
-2,013
0
-937
50
-5,556
-1,124
-4,432
4,130
1,783
5,913
6
2,702
726
175
3,316
-330
5,526
3,707
1,819
share
-698
-3,890
-4,588
0
-563
278
0
-431
494
-3,948
-852
-3,096
4,163
1,756
5,919
0
3,491
673
168
3,644
-358
5,913
4,130
1,783
4,861
5,646
10,507
0
4,054
395
168
4,075
-852
9,861
4,982
4,879
Provisions for outstanding claims
2010
2009
Parent Company
Gross
Reinsurers´
Net
Gross
Reinsurers´
Net
Opening balance, reported claims
4,982
Opening balance, incurred but not reported claims (IBNR)
4,879
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 expense
Paid/transferred to insurance liabilities or other
current liabilities
Currency affect
Closing balance
Closing balance, reported claims
9,861
3,284
2,732
175
4,240
-380
11,082
4,831
Closing balance, incurred but not reported claims (IBNR)
6,251
Note 26 • Equalisation provision
share
-852
-3,096
-3,948
-582
-2,013
0
-937
50
-5,556
-1,124
-4,432
4,130
1,783
5,913
2,702
719
175
3,303
-330
5,526
3,707
1,819
share
-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
4,861
5,646
10,507
4,054
395
168
4,075
-852
9,861
4,982
4,879
Opening balance
Change in accounting principles
Release of provision made in prior years
Provision for the year
Closing balance
Group
Parent Company
2010
2009
2010
2009
0
0
0
0
0
3
-3
0
0
0
3
0
-3
12
12
3
0
0
0
3
64
Annual Report 2010
Note 27 • Claims handling provision
Opening balance
Release of provisions made in prior years
Provisions for the year
Currency effect
Closing balance
Note 28 • Employee benefits
Group
Parent Company
2010
2009
2010
2009
122
-20
41
-14
129
113
-30
39
0
122
122
-20
41
-14
129
113
-30
39
0
122
Group
Parent Company
Employee benefits
2010
2009
2010
2009
Pension provision – defined benefit plans
Total employee benefits
5
5
-9
-9
9
9
0
0
Specification of provisions for employee benefits
A defined benefit plan is a plan which does not comprise a
defined contribution plan. In a defined benefit plan, the employer
guarantees that the employee will receive a defined amount of
benefit upon retirement, usually based on one or more factors,
such as age, length of service and salary. The group calculates
its provisions and expenses based on the conditions of the gua-
ranteed pension obligations, as well as on its own assumptions
regarding future development.
The provision reported in the balance sheet for defined benefit
plans is the present value of the defined benefit obligation at the
end of the reporting period, less the fair value of plan assets,
adjusted for unrecognised actuarial gains and losses, and unre-
cognised service costs related to prior periods. Actuarial gains
and losses arise if actual outcome deviates from calculated,
defined assumptions, or if there is a change in assumptions. The
defined pension obligation is calculated annually by independent
actuaries, applying the projected unit credit method. The net
present value of the obligation is defined by discounting of esti-
mated future cash flows, using the interest rate of high quality
mortgage bonds that are emitted in the same currency in which
the obligations are to paid, with durations comparable to the
duration of the current pension obligation.
The group applies the corridor method, implying that actuarial
net losses are recorded when the opening balance of actuarial
losses exceeds 10% of either the projected benefit obligation or of
investment assets. As actuarial net loss amount does not exceed
the corridor amount, there is no surplus to report in income or
charge against results during the employees’ remaining period of
service.
The group has defined benefit plans in Sweden and Germany
which are based on the employees’ pension entitlements and
length of employment. In Germany all employees are included
in the plan. In Sweden only employees born 1971 or earlier are
covered by defined benefit plans and, thus, form part of the FTP2.
Furthermore, there are two variations regarding early retirement.
Employees born 1955 and earlier have the possibility to retire
between the ages of 62 and 65 according to local agreement.
Staff employed before 1 January, 2004 have the right to retire
from the age of 64. These plans are also defined benefit plans and
are reflected in financial statements of both the Group and the
Parent Company.
Employees in Sweden born 1972 or later, are covered by a
defined contribution plan, FTP1.
Employees outside Sweden and Germany are mainly covered by
defined contribution plans in which the employer has a responsibi-
lity for the employees’ pension.
Group
Amounts in balance sheet for defined benefit plans
2010
2009
Defined benefit obligations
Fair value of plan assets
Sub-total
Net cumulative unrecognised actuarial losses
Provisions for defined benefit plans
59
-53
6
-1
5
41
-50
-9
0
-9
Plans with a net surplus, i.e. where the plan assets’ fair value exceeds pension obligation, are reported
as debtors in the balance sheet. The net surplus for 2009 was 9 MSEK.
65
Annual Report 2010
Pension cost recognised in the income statement
2010
2009
Group
Current service cost
Interest cost
Expected return on plan assets
Amortisation of actuarial net loss
Amortisation of service cost prior year
Pension cost for defined benefit plans
Paid premiums, defined contribution plans
Total pension cost 1)
11
3
-2
0
6
18
44
62
3
2
-1
0
0
4
39
43
1) Tax on pensions, 12 MSEK, is recorded as ”Remuneration to employees” and is included in Note 32.
Changes in defined benefit obligations
2010
2009
Group
Opening balance pension obligation
Current service cost
Interest cost, pension obligation
Actuarial gains and losses, net
Release of obligation by payment
Service cost, prior year
Exchange differences on foreign plans
Closing balance pension obligation
36
3
2
0
1
0
-1
41
41
11
3
1
-1
6
-1
59
Group
Changes in plan assets
2010
2009
Opening balance plan assets at fair value
Expected return on plan assets
Actuarial gains and losses, net
Contributions
Release of obligation by payment
Exchange differences on foreign plans
Closing balance plan assets at fair value
50
1
0
5
-1
-2
53
46
1
0
5
-1
-1
50
Plan assets at fair value per 31 December, 2010 exceed the group’s defined benefit obligations. Therefore, no extra
funding is required to secure the defined benefit pension obligations.
Group
Unrecognised actuarial net loss
2010
2009
Opening balance actuarial net losses
Defined benefit obligations
The period’s experience effect on actuarial net
gains (-)/net losses (+) on pension obligations
Amortisation of actuarial net gains/losses
Plan assets
The period’s experience effect on actuarial net
gains (-)/net losses (+) on plan assets
Amortisation of actuarial net gains/losses
Closing balance actuarial net losses
0
1
0
0
0
1
0
0
0
0
0
0
66
Annual Report 2010
Corridor method
Opening balance actuarial net losses
Corridor amount
Gains/losses subject to amortisation
Expected remaining service time (years)
Amortised actuarial net gains/losses
Group
2010
0
5
0
15.7
0
2011
1
5
0
14.9
0
Group
2009
0
5
0
15.0
0
Actuarial assumptions, percentage
2010
2009
Discount rate, 1 January
Discount rate, 31 December
Expected return on plan assets
Expected salary increases, 1 January
Expected salary increases, 31 December
Indexation of benefits
Indexation of income base amount, 1 January
Indexation of income base amount, 31 December
Staff turnover
5%
5%
3%
3.5%
3.5%
2%
3%
3%
3%
5%
5%
0%
3.5%
3.5%
2%
3%
3%
3%
When calculating the expense for defined benefit obligations, assumptions are made
regarding the future development of factors which may influence the size of expected
payments. The discount rate is the interest rate applied to discount the value of expected
payments. This rate is fixed applying a market rate with a remaining duration equivalent
to the pension obligations. The group’s applied discount rate, for the Swedish defined
obligations, is based on Swedish mortgage bonds.
Assets to secure these pension obligations are invested in a variety of financial instru-
ments by Skandia Liv. The expected return on plan assets mirrors the expected average
yearly return on those financial instruments for the remaining duration.
Future annual salary increases reflect expected future salary increases resulting
from collective agreements and salary expectations. Final benefits according to FTP are
governed by Swedish base income amount (inkomstbasbeloppet). Consequently, there
is a requirement to assess future base income amounts. Annual pension increases also
need to be considered, as these have historically always taken place.
Assumptions about the beneficiaries’ life expectancy comply with FFFS 2007:31
(DUS06) and are updated annually.
67
Annual Report 2010
Note 29 • Other creditors
Group
Parent Company
2010
2009
2010
2009
Amounts due to group companies
Other debtors
Total other creditors 1)
519
74
593
543
83
626
539
69
608
560
78
638
1) The majority of the liabilities have a duration less than one year.
Note 30 • Contingent liabilities and commitments
In the form of pledged assets for own liabilities
Group
Parent Company
and provisions
2010
2009
2010
2009
Bonds and other interest-bearing securities
Cash and bank
7,553
115
Assets for which policy holders have preferential rights 7,668
6,482
165
6,647
7,553
115
7,668
6,482
165
6,647
On the basis of the stipulations in Chapter 7, Section 11 of the Insurance Business Act, registered assets amount to MSEK 6,573. 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 insurance commitments are covered by technical provisions in accordance with the Insurance Business Act.
Nominal amount
2010
2009
2010
2009
Group
Parent Company
Future commitments for investments in
private equity companies
Total
Note 31 • Associated parties
Summary of transactions with associated parties
Associated parties within the White Mountains Group
Group and Parent Company
2010
60
60
67
67
60
60
67
67
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
White Mountains Re America – ceded reinsurance
White Mountains Re America – administrative services
Esurance – assumed reinsurance
WM Life Re – ceded reinsurance
White Mountains Re Services – administrative services
White Mountains Holding - administrative services
White Mountains Re Underwriting Services Ltd. –
assumed reinsurance
White Mountains Financial Services LLC – financial services
Sirius Insurance Holding Sweden AB – group contributions
Fund American Holdings AB – group contributions
White Mountains Advisors LLC – financial services
512
- 56
0
727
-216
0
0
0
0
0
0
0
- 465
56
0
- 713
1,306
0
0
0
0
0
0
0
Total
967
184
0
0
-1
0
0
-11
-2
0
-17
0
0
-20
-51
819
0
0
181
4,093 1)
0
0
0
0
0
0
0
5,093
0
7
0
0
13
14
0
2
7
323
170
5
541
68
Annual Report 2010
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 – ceded reinsurance
WM Life Re – ceded reinsurance
White Mountains Re Services – administrative services
White Mountains Re Bermuda Ltd – ceded reinsurance and
administrative services
White Mountains Re Underwriting Services Ltd. –
assumed reinsurance
White Mountains Financial Services LLC – financial services
Sirius Insurance Holding Sweden AB - group contributions
Fund American Holdings AB – group contributions
White Mountains Advisors LLC – financial services
376
1,956
-216
-166
- 1,844
-491
0
95
0
0
0
0
0
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
2,715 1)
0
0
0
713
0
0
0
4,767
3
0
16
16
36
5
0
302
183
6
567
Note 32 • Average number of employees, salaries and other remunerations
Average number of employees - Group
2010
2009
Parent Company
Germany
Total
Men
Women
Total
132
5
137
142
7
149
274
12
286
Men
123
4
127
Women
Total
127
7
134
250
11
261
Average number of employees
– Parent Company
2010
2009
Men
Women
Total
Men
Women
Total
63
23
24
4
5
5
8
70
19
20
5
10
7
11
133
42
44
9
15
12
19
59
23
24
4
5
3
5
70
18
20
4
9
1
5
129
41
44
8
14
4
10
132
142
274
123
127
250
Sweden
UK
Belgium
Switzerland
Singapore
Denmark
Bermuda 1)
Total
Senior management in the Group
and Parent Company
2010
2009
Men
Women
Total
Men
Women
Total
Board and CEO
Other senior members of management
Total
3
3
6
1
0
1
4
3
7
4
3
7
0
0
0
4
3
7
1) Average number of employees in Bermuda for 2009 only refers to the period 1 September, 2009 – 31 December, 2009.
69
Annual Report 2010
Remunerations to employees
Group
Parent Company
2010
2009
2010
2009
Salaries including bonuses
273
244
261
232
Of which expenses bonus and other similar
remunerations
Pension expenses
- Defined contribution plans
- Defined benefit plans (Note 28)
Social security contributions, special
employer’s contributions on pensions
Total
Of which paid remunerations for the year to:
80
62
43
19
76
411
34
43
39
4
65
352
77
56
43
13
76
393
32
43
39
4
65
340
Group
Parent Company
CEO
2010
2009
2010
2009
Salaries including bonuses
Of which paid out bonuses
Pension expenses
- Defined contribution plans
- Defined benefit plans
Total
Board and other senior members of management
Salaries including bonuses
Of which expenses bonus and other similar remunerations
Pension expenses
- Defined contribution plans
- Defined benefit plans
Total
12
8
3
3
0
15
12
7
3
3
0
15
8
4
3
3
0
11
10
5
2
2
0
12
12
8
3
3
0
15
12
7
3
3
0
15
8
4
3
3
0
11
10
5
2
2
0
12
Salaries and other remunerations,
2010
2009
divided by country - Group
Of which
Of which
Of which
Of which
expensed bonuses
bonuses
expensed bonuses
bonuses
Salaries and
and other
paid for
Salaries and
and other
paid for
remuneration
remunerations
the year
remuneration
remunerations
the year
Parent company
Germany
Total
261
12
273
77
3
80
85
3
88
232
12
244
Salaries and other remunerations,
2010
divided by country - Group
32
2
34
60
4
64
2009
Of which
Of which
Of which
Of which
expensed bonuses
bonuses
expensed bonuses
bonuses
Salaries and
and other
paid for
Salaries and
and other
paid for
remuneration
remunerations
the year
remuneration
remunerations
the year
Sweden
UK
Belgium
Switzerland
Singapore
Denmark
Bermuda (1 Sep – 31 Dec, 2009)
Total
120
32
42
16
9
4
38
261
37
3
15
7
1
0
14
77
33
2
16
5
2
0
27
85
113
34
45
15
9
3
13
232
34
3
16
5
2
0
0
60
17
1
10
3
1
0
0
32
70
Annual Report 2010
Salaries and remuneration
The Board receives remunerations in accordance with the reso-
lutions of the Annual General Meeting. Board fees are not paid to
individuals employed in the company. No Board fees were paid in
2009 and 2010. Remuneration to the CEO and other senior mem-
bers of management consists of basic salary, bonuses and other
compensations such as car benefits and pensions.
variable remuneration
The Annual General Meeting has resolved upon a variable remunera-
tion plan for the CEO and senior members of management. Other
employees are also covered under a variable remuneration plan.
Levels of variable remuneration are based upon the Group’s profit/
loss as well as individually set goals.
Remuneration policy
Sirius International’s remuneration policy is available on the
Company’s homepage, which follows FFFS 2009:7.
Pensions
Sweden: Sirius applies the pension agreement signed with FAO/
FTF/Saco. The agreement came into effect as of 1 January, 2008
and implies that employees born 1971 and earlier have a benefit
defined pension plan, whereas employees born 1979 and earlier
are offered a premium defined solution. The pension benefits are
safeguarded by insurance.
Employees born 1955 and earlier has the benefit of entering into
retirement between 62 and 65 years of age according to collective
agreements. Employees starting at Sirius International prior to 1
January, 2004 have a retirement age of 64.
The Company’s CEO has a premium based executive pension
plan. Three additional senior members of management subscribe to
special premium based pension plans. Both plans are safeguarded
by insurance. The Company’s CEO has the right of receiving a
lifelong pension as of 65 years of age.
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 pays 1.5 percent or more of his/her salary
and Sirius pays 12 percent of the employee’s salary. In terms of
salary, no upper limit exists. The money is invested in funds of the
employee’s choosing. The plan is optional and employees may
choose not to participate.
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. The employee pays 2 percent. Pos-
sible changes to the plan must be approved by local unions. The
premiums are invested by an insurance company and the employee
cannot influence how the money is invested. At the time of retire-
ment, the employee has the option of either receiving the money as
a lump sum or as a series of payments over time.
Germany: Employees are covered by a defined benefit pension
plan. The plan is funded by the company. The pension receivables
are reported as liabilities on the balance sheet.
Switzerland: Employees are covered by pension plans according
to the industrial sector to which they belong. The plan is a combina-
tion of a defined benefit and fee based pension plan. Sirius pays
for 60 percent of the premiums while the employee pays for the
remaining 40 percent.
Singapore: The Company is not required to pay pensions.
Denmark: All employees are covered by a mandatory pension
plan with Danica pension. Sirius pays the agreed upon percentage
rate stated in the employee´s employment contract, however, this
percentage shall be at a minimum, 15 % of the employee´s salary.
Thereafter, this amount is distributed to cover other aspects such
as life insurance and disability benefits.
Bermuda: All employees are covered by the pension plan
applied. The plan is premium based. The company pays 10% of
the employee's income in accordance with The National Pension
Scheme Act.
Severance pay
Upon termination initiated by the Company, the CEO is entitled to
severance pay during the termination period of 12 months. A 6
month termination period is required if termination is initiated by
the CEO.
Drafting and decision-making process
Decisions regarding remuneration for the CEO are resolved upon
by the Board. Decisions regarding remuneration for other senior
members of management are made by the CEO, in some cases
after consultation with the Chairman of the Board.
Loans to senior members of management – none.
Absence due to illness in the Parent Company
2010
2009
Total absence due to illness as a percentage of ordinary working hours
2.56%
2.49%
Share of total absence due to illness regarding continuous absence
due to illness of 60 days or more
43.26%
40.00%
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
2.04%
3.03%
1.17%
2.60%
2.57%
2.66%
2.35%
1.55%
3.09%
1.83%
71
Annual Report 2010
Note 33 • Fees and reimbursement to auditors
Group
Parent Company
Öhrlings PriceWaterhouseCoopers (PWC)
2010
2009
2010
2009
Audit services
Tax counselling
Total
4
1
5
4
0
4
4
1
5
4
0
4
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. Other services than those included in the audit agreement are classified as audit services in addition to
audit agreement, tax counselling and other services.
Note 34 • 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
32
40
7
79
33
54
9
96
31
35
7
73
31
48
8
87
Note 35 • Class analysis
Profit/loss per insurance class
2010
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
637
630
-337
-277
-17
0
-1
57
55
-17
-24
-5
0
9
2009
Parent Company
Personal
Marine,
89
79
-33
-39
0
0
7
Fire and
other
0
0
-2
0
0
0
-2
96
86
-31
-31
-1
3
26
879
850
-420
-371
-23
3
39
6,516
6,591
-5,596
-1,589
1,192
-12
586
7,395
7,441
-6,016
-1,960
1,169
-9
625
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
72
Annual Report 2010
Note 36 • Transition to IFRS
Listed companies within the EU were required to adopt International
Financial Reporting Standards (IFRS) for consolidated accounts as
of 2005. Finansinspektionen (the Swedish Financial Supervisory
Authority) requested, instead, that companies under the supervision
of Finansinspektionen adopt legally restricted IFRS (IFRS as restric-
ted by Swedish legislation) in both the parent company- and group
accounts as of 1 January, 2007. Furthermore, as of 1 January,
2010 all companies under the supervision of Finansinspektionen
are obliged to adopt IFRS in their consolidated accounts. Sirius
International’s consolidated accounts have therefore been prepared
according to IFRS as of 1 January, 2010.
A company adopting IFRS for the first time shall comply with
IFRS 1 “First time adoption of International Financial Reporting
Standards”. Sirius adopts IFRS in its group accounts retroactively
and has prepared opening balances per 1 January, 2009.This also
implies that all comparative figures have been reported according
to the new accounting principles. Sirius’ consolidated accounts are,
therefore, adapted to IFRS as of 1 January, 2010.
As the Sirius Group has, in prior years, prepared its consolidated
accounts according to legally restricted IFRS, the differences with
IFRS are limited. The differences are described in the text below
and in the following tables.
IAS1 Presentation of financial statements
The Sirius Group implements limited changes in its presentation of
financial statements in the transition to IFRS. One change is that
Sirius Group presents, as of 2010, an income statement in two sec-
tions; one income statement and one statement of comprehensive
income. The later shows changes in shareholders’ equity which do
not refer to owner-related transactions. The change in presentation
is also adopted in the accounts of the parent company as this type
of presentation of financial statements is also required according to
legally restricted IFRS.
Effect on net income for the year of transition to IFRS
IAS19 Employee benefits
Employee benefits are to be accounted for according to IAS 19,
which stipulates that the value of defined benefit plans should
usually be measured, and subsequently accounted for in the
balance sheet. The reported expense does not necessarily need to
correspond with the payments made in the period. The obligation
in the balance sheet regarding defined benefit plans refer to the
net present value of the defined benefit obligation at the end of the
reporting period, less the fair value of the plan assets, with adjust-
ment for unrecognised actuarial gains and losses and unrecognised
service costs related to prior periods.
Within Sirius Group the defined benefit obligation is annually
calculated by independent actuaries who apply the so called pro-
jected unit credit method. The net present value of the obligation is
defined by discounting the estimated future cash flows, applying the
interest rate of high quality mortgage bonds are issued in the same
currency in which the obligations are to be settled, with durations
comparable to the duration of the current pension obligation.
IAS27 Consolidated and separate financial state-
ments
Sirius International applies IFRS 1, which states that IAS 27 must be
adopted prospectively as of the comparative year, i.e. 1 January,
2009.
IFRS3 Business combinations
Goodwill arising from a business acquisition must be accounted
for in accordance with IFRS 3, which implies that depreciation ac-
cording to plan on goodwill is not to be recorded. Impairment test,
shall, instead, be performed.
The tables below illustrate the transition’s impact on the balance
sheet and the income statement. The effects on the balance sheet
are recorded as accumulative figures.
Net income for the year according to legally restricted IFRS
Effect on net income for the year of transition to IFRS
A, B
Net income for the year according to IFRS
Effect on income statement of transition to IFRS
Operating costs
Depreciation, goodwill
Effect on income statement of transition to IFRS
A
B
Jan-Dec 2009
1,275
27
1,302
Jan-Dec 2009
0
27
27
73
Annual Report 2010
Effect on balance sheet of transition to IFRS
1 January, 2009
31 December, 2009
Assets according to legally restricted IFRS
24,843
26,282
Intangible assets
Debtors
Assets according to IFRS
B
A
Shareholders’ equity and liabilities according to legally restricted IFRS
Shareholders’ equity
Other creditors
Shareholders’ equity and liabilities according to IFRS
0
8
27
-6
24,851
26,303
24,843
6
2
24,851
26 282
33
-14
26,303
Effect on shareholders’ equity of transition to IFRS
1 January, 2009
31 December, 2009
Shareholders’ equity and liabilities according to legally restricted IFRS
Retained earnings, including net income for the year – non-restricted
A, B
Shareholders’ equity according to IFRS
8,017
6
8,023
9,945
33
9,978
A: Pensions have a transition effect of MSEK 6 on shareholders’ equity per 1 January, 2009 which is accounted
for as an increase in pension assets on the line item, Debtors. In addition, a deferred tax liability is recorded in
the pension obligation. The transition to IFRS for the period 1 January, 2009 to 31 December, 2009 results in
an income of MSEK 1. The accumulative impact on shareholders’ equity sums up to MSEK 9.
Furthermore, assets and obligations referring to defined benefit plans in Sirius International’s subsidiary,
Sirius Rück, are presented net in the balance sheet. Previously, these pension plans have been presented gross
in the balance sheet. This change reduces the group’s total assets by MSEK 15.
B: As IFRS stipulates that the group can no longer depreciate goodwill but, instead, should perform impair-
ment tests, the group’s intangible assets have been adjusted. This had a positive impact on net income for the
year, MSEK 27, for the period 1 January, 2009 to 31 December, 2009.
74
Annual Report 2010
Stockholm, 4 March, 2011
Allan Waters
Chairman of the Board of Directors
Brian Kensil
Göran Thorstensson
President & CEO
Jan Silverudd
Employee Representative
Our Auditors’ Report was submitted on 4 March, 2011
Catarina Ericsson
Authorized Public Accountant
Anna Hesselman
Authorized Public Accountant
75
Annual Report 2010
Audit Report
To the general meeting of the share-
presentation of information in the annual ac-
holders of Sirius International Insurance
counts and consolidated accounts. As a basis for
Corporation (publ) Cor porate identity
number 516401-8136.
our opinion concerning discharge from liability,
we examined significant decisions, actions taken
and circumstances if the company in order to
We have audited the annual accounts, the
be able to determine the liability, if any, to the
consolidated accounts, the accounting records
company of any board member or the managing
and the administration of the board of directors
director. We also examined whether any board
and the managing director of Sirius Interna-
member or the managing director has, in any
tional Insurance Corporation (publ) for the
other way, acted in contravention of the Insur-
year 2010. These accounts and the administra-
ance Business Act, the Annual Accounts Act
tion of the company and the application of the
for Insurance Companies or the Articles of
Annual Accounts Act for Insurance Companies
Association.
when preparing the annual accounts as well
We believe that our audit provides a rea-
as the application of the International Finan-
sonable basis for our opinion set out below.
cial Reporting Standards (IFRS) as adopted by
The annual accounts and the consolidated ac-
EU and the Annual Accounts Act for Insurance
counts have been prepared in accordance with
Companies when preparing the consolidated
the Annual Accounts Act for Insurance Compa-
accounts, are the responsibility of the board
nies and give a true and fair view of the com-
of directors and the managing director. Our
pany’s and the group’s financial position and re-
responsibility is to express an opinion on the
sults of operations in accordance with generally
annual accounts, the consolidated accounts and
accepted accounting principles in Sweden. The
the administration based on our audit.
consolidated accounts have been prepared in
We conducted our audit in accordance
accordance with IFRS as adopted by the EU and
with generally accepted auditing standards in
in accordance with the Annual Accounts Act for
Sweden. Those standards require that we plan
Insurance Companies and provide a true and
and perform the audit to obtain high but not
fair view of the Group’s financial position and
absolute assurance that the annual accounts
results of the operations. The statutory admin-
and the consolidated accounts are free of mate-
istration report is consistent with the other
rial misstatement. An audit includes examin-
parts of the annual accounts and consolidated
ing, on a test basis, evidence supporting the
accounts.
amounts and disclosures in the accounts. An
We recommend to the general meeting of
audit also includes assessing the accounting
shareholders that the income statement and bal-
principles used and their application by the
ance sheet for the company and the group be
board of directors and the managing director
adopted, that the profit be dealt with in accord-
and significant estimates made by the board
ance with the proposal in the administration
of directors and the managing director when
report and that the members of the board of di-
preparing the annual accounts and the consoli-
rectors and the managing director be discharged
dated accounts as well as evaluating the overall
from liability for the financial year.
S t o c k h o l m , 4 March, 2011
Catarina Ericsson
Authorized Public Accountant
Anna Hesselman
Authorized Public Accountant
76
Annual Report 2010
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 2010.
The audited Swedish version is the binding
version.
77
Annual Report 2010
78
Annual Report 2010
Sirius was founded in 1945 as a captive by the Swedish industrial group Axel Johnson. Initially the
company insured only Johnson fleet vessels and reinsured at Lloyd’s. Over time, Sirius moved into
third party business and during the 1970s a global assumed reinsurance account was developed.
By 1978 Sirius had become one of the largest reinsurance companies in Sweden with premiums of
about $40 million.
In 1985, the Johnson group ran into financial difficulties and reluctantly sold Sirius to the Swedish
industrial group ASEA, later to become ABB. Premium volume was now around $180 million,
nearly all written on a proportional basis.
In 1990 Göran Thorstensson became CEO of Sirius. The company added non-proportional busi-
ness and improved profitability. Sirius gradually emerged as a leading excess of loss reinsurer.
By 2000, Sirius was the only major Nordic reinsurer. Merely 15 years earlier, some 35-40 Nordic
companies were writing assumed reinsurance accounts; alas, without sustainable results.
In 2004, history then repeated itself as Sirius’ second owner also ran into financial difficulties,
enabling White Mountains to acquire Sirius for $428 million and record a gain of $111 million.
A combination of strong underwriting controls and uniquely experienced management – most of
the team has been with the company for more than 20 years – has allowed Sirius to outperform
the reinsurance industry over an extended period. Nearly all of Sirius’ customers have been
business partners for a long time, many for more than 40 years. The company’s philosophy has
always been to write for profit only – every company says so but few walk the walk. Management has
no volume targets, avoids legacy problems by maintaining a strong balance sheet, and always sticks to
what it knows.
Since the acquisition by White Mountains, Sirius has an average combined ratio of 88% and cumulative
underwriting profits in excess of $500 million. This long-term track record is perhaps unparalleled.
79
Annual Report 2010
Art and production: Studio Ringvall
80