Annual Report 2011
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1
Annual Report 2011
White Mountains,
our owners
White Mountains Insurance Group, Ltd.
Sirius International Insurance Group Ltd.
A financial services holding company with
A Bermuda-domiciled holding company
primary business interests in property and
whose operating companies offer capacity
casualty insurance and reinsurance.
for property, accident & health, trade credit,
White Mountains´corporate headquarters and
aviation, marine and other exposures. Our
its registered office are located in Hamilton,
principal operating companies are:
Bermuda, and its principal executive office is
located in Hanover, New Hampshire.
Sirius Inter national Insurance Corporation
White Mountains conducts its principal
A Swedish-based international reinsurer that
businesses through:
focuses mainly on property and other short-
tailed lines. Sirius International is the largest
Sirius International Insurance Group Ltd.
reinsurance company in Scandinavia and a
Global reinsurance.
OneBeacon
leading reinsurer in Europe. Sirius Interna-
tional’s home office is in Stockholm, and it
has branch offices in Australia, Bermuda,
Specialty insurance. OneBeacon’s common
Copenhagen, Hamburg, Liège, London,
shares are listed on the New York Stock
Singapore and Zürich.
Exchange under the symbol “OB”. White
Mountains owns 75% of OneBeacon.
Sirius America Insurance Company
White Mountains Advisors
company that focuses on the property and
Investment management with $34 billion of
accident & health lines in North and Latin
assets under management.
America. Sirius America’s home office is in
A U.S.-based, international, (re)insurance
New York with branch offices in Miami and
White Mountains’ common shares are listed
Toronto.
on the New York Stock Exchange and the
Bermuda Stock Exchange under the symbol
Sirius Syndicate 1945
“WTM”. Market capitalization as of December
A Lloyd’s syndicate that began writing busi-
31, 2011 was $3.4 billion. As of December
ness at July 1, 2011 with initial stamp capac-
31, 2011, White Mountains reported total
ity of £67 million and focus on accident &
assets of $14.1 billion, adjusted shareholders’
health and contingency lines.
equity NGM of $4.1 billion, and adjusted book
value per share NGM of $542.
White Mountains Solutions Inc.
A Connecticut-based professional team spe-
cializing in opportunistic structured acquisi-
tions of run-off property and casualty insur-
ance liabilities. The team further enhances
transaction returns via effective post-acquisi-
tion management of the run-off process.
2
Annual Report 2011
Comments from the
President and CEO
2011 was an extraordinarily challeng-
underwriting surpluses for every year of the
ing year for our industry. Insured losses
past decade, with an average combined ratio
worldwide topped $100 billion, making it
of just 91%. As I have said in annual report
the second most expensive in history after
after report, this ability to ride the peaks and
2005, with the reinsurance sector shoul-
troughs and maintain long-term profitability
dering around 50% of the total. All this
underpins the stability we offer our clients
came at a time when soft rates had already
and brokers.
eroded margins.
2011 saw some important new corporate
Sirius International inevitably felt the
developments for Sirius International – more
impact of this tough environment. None-
of which later. First, however, a brief outline
theless, I am pleased to report that we
of the main claims events of the year.
were able to maintain an underwriting
As readers will be aware, it got off to
profit, returning a combined ratio of 97%.
a terrible start in terms of both the human
A small increase in premium income, when
and financial consequences of a series of
measured on a like-for-like basis, was
natural disasters. The flooding in Queens-
offset by a rise in claims. Although our
land, Australia was quickly followed by the
relatively modest surplus in 2011 was eight
earthquake in Christchurch, New Zealand.
points off our previous result and below
The worst was still to come, however, when
our long-term average, it represents a
Japan was hit by the largest recorded earth-
highly commendable achievement in such
quake in its history followed by a devastat-
difficult times.
ing tsunami, which cost tens of thousands
We have now achieved an unbroken run of
of lives. Although there was then something
3
Annual Report 2011
of a temporary respite, there were sev-
tary set out above relate solely to Sirius
eral other sizeable natural catastrophes to
International’s operations as constituted at
come. The flooding in Thailand was the
the start of 2011.)
most notable, causing extensive disruption
In July, meanwhile, Sirius entered the
to supply chains.
Lloyd’s market for the first time. Syndicate
For the record, the Japanese earth-
1945, the number chosen because it was
quake and tsunami represented Sirius’ sec-
the year our company was founded, writes
ond biggest-ever net loss at $79 million,
an international book of Accident and
whilst the Christchurch earthquake was
Health and Contingency business. Its Ac-
our fifth biggest at $44 million. The Thai
tive Underwriter Mike Dashfield continues
flooding came in at $34 million. The fact
to be the manager of our London branch
that we can report a healthy financial out-
based nearby. The diversification into
come despite these events owes much to
Lloyd’s has proved highly positive, ena-
our long-term policy of diversification of
bling us to write profitable business that
risk, both in terms of geography and class
we would otherwise not have seen.
of business. In 2010, the benign environ-
Looking ahead to the rest of 2012 and
ment in the Asia-Pacific region balanced
beyond, a top priority is to ensure that the
out some big natural catastrophes in Chile
arrival of Sirius America benefits custom-
and Europe. In 2011, it was the other
ers, brokers and shareholders alike – that
way around, with the western hemisphere
it enables us to provide an enhanced,
proving to be relatively uneventful.
seamless service. We also continue to
Internal reorganisations, although
work hard towards the implementation
exciting to those involved, can be of little
of Solvency II, now put back to January
interest to the outside world. It is impor-
2014, where our preparations have made
tant to place on record, however, two
good progress.
major developments that should further
The start of 2012 saw some long over-
strengthen Sirius International and help us
due hardening of the market and, although
reach out to new customers.
the movement was only modest, our book
In the third quarter of 2011 our sister
is better rated than it has been for years.
company White Mountains Re America
As ever, we look ahead confident that we
became part of the Sirius group, and now
can meet whatever challenges may await
trades as Sirius America. This move in-
us. I would like to thank all our staff for
creases our size by about a third in terms
their loyalty and professionalism and,
of premium income. Based in New York,
above all, our brokers and customers for
it writes a book of North American Prop-
enabling us to build strong long-term rela-
erty book. At the same time we received a
tionships.
capital infusion of $300 million from our
parent company. Together with some or-
ganic growth, this brought our regulatory
capital up to slightly more than $2 billion.
(Please note: the performance of Sirius
America will be reflected in next year’s
annual report. The statistics and commen-
4
g ö r a n t h o r s t e n s s o n
p r e s i d e n t & c e o
Annual Report 2011
At a glance
2011
2010
Net premium income
$583 million*
$778 million
Claims net of reinsurance
$419 million*
$474 million
Underwriting profit
$14 million
$88 million
Combined Ratio
97%
89%
Income before tax
$68 million
$99 million
Combined Ratio (Parent)
96%
96%
93%
99%
80%
88%
87%
86%
89%
97%
2 0 0 2
2 0 0 3
2 0 0 4
2 0 0 5
2 0 0 6
2 0 0 7
2 0 0 8
2 0 0 9
2 0 1 0
2 0 1 1
Solvency Capital (Group), MSEK
14,150
10,399
10,455
12,544
12,516
2 0 0 7
2 0 0 8
2 0 0 9
2 0 1 0
2 0 1 1
*The fall in premium income and claims was a result of lower business volumes from other parts of the White Mountains Group, which were reduced
after the sale of Esurance to Allstate Corporation. Net premium income generated by the Sirius Group itself, rather than other White Mountains
companies, increased by 7% to $630 million. Claims generated by Sirius rose by 41% to $437 million.
5
Annual Report 2011
Board of Directors’ Report
The Board of Directors and Managing
and resulted in extensive material damages
Director of Sirius International Försäkrings-
and thousands of fatal casualties. In the
aktiebolag (publ), (Sirius International),
USA, two tornadoes in April caused major
Corporate Identity Number 516401-8136,
destruction and, in August, the hurricane
hereby present their annual financial state-
Irene hit along the East Coast. Extremely
ments for 2011.
General information
concerning the company
heavy rains hit Copenhagen during the
month of July, which was followed by
flooding and major material damages.
During the autumn, Thailand suffered huge
Sirius International is active in internatio-
flooding in the area around Bangkok after
nal insurance and reinsurance. Sirius Inter-
a long period of non-stop rain. A number
national was established in 1989.
of medium-sized aviation losses also took
Insurance operations commenced in
place during the year.
1945 in Försäkringsaktiebolaget Sirius. In
Against the background of these
1989, the reinsurance activities were trans-
extraordinary losses, it is satisfying that,
ferred to Sirius International. Sirius Inter-
in spite of everything, the Company can
national has been the Parent Company of
report positive results from the insurance
the Sirius Group since 1992.
operations with a combined ratio under
100%. The contributing factors were stable
Development of the Company’s operations,
price levels in the majority of markets and
income and financial positionent, results and
classes of business and positive run-off
position of the company
results from previous accident years. Sirius
2011 was a year characterized by extensive
International has, as of 2011, had a combi-
natural disasters and other major claims
ned ratio under 100% for ten consecutive
events. The year will be remembered, ex-
years.
pressed in terms of total financial damage,
Gross premium income for the Group
as the worst year ever. For the insurance
amounted to MSEK 5,955 (7,395), respec-
industry, the year was the second worst
tive MSEK 5,347 (7,395) for the Parent
year in history as regards claims, with only
Company. The Group’s premium income
2005 seeing a greater level of insurance
for own account amounted to MSEK 4,363
claims. The larger claims events during the
(5,608), respective MSEK 3,768 (5,608)
year can be summarized as: on February
for the Parent Company. The decline in
22, and on June 13, New Zealand was
premium volume compared with previous
hit by two earthquakes in the vicinity of
years is due, primarily, to lower business
Christchurch. The impacted area was being
volumes from companies within the White
rebuilt as it was hit by a previous earth-
Mountains Group, which is a result of the
quake, as late as autumn 2010. On March
sale of Esurance to Allstate Corporation.
11, a very strong earthquake hit off Japan’s
The Group’s operating profit from the
northeast coast. This earthquake measured
insurance operations amounted to MSEK
a magnitude of 9.0 on the Richter scale
223 (838), respective MSEK 266 (839) for
6
Annual Report 2011
the Parent Company. The combined ratio
securities in shares, the yield amounted to
amounted to 99% (89%) for the Group and
-1.3%, adjusted for exchange rate effects.
97% (89%) for the Parent Company.
Realized and unrealized exchange rate
2011 also turned out to be parti-
gains, net, amounted to MSEK 126, prima-
cularly eventful for Sirius International in
rily due to a strengthening of the US Dollar
other respects. Our syndicate with Lloyds,
against the Swedish krona. During the year,
Syndicate 1945, was established and started
further exchange rate hedging against the
operations on 1 July. The syndicate will
USD has been undertaken, whereby the
provide, for the time being, primarily Ac-
total, nominal hedged sum now amounts to
cident & Health insurance. In October, the
USD 500 million. This was done to counte-
remaining shares in White Mountains Pho-
ract the effects of the increased exchange
enix (Luxembourg) S.à.r.l. were contributed
rate exposure which has arisen due to the
and acquired. The company is, thereby,
acquisition of White Mountains Phoenix.
consolidated as a wholly-owned subsidiary.
The portion of the solvency capital which
The financial markets were characteri-
is exposed to foreign currency after ex-
zed by major uncertainty and large fluc-
change rate hedging is, largely, unchanged
tuations during the year. The accelerated
compared to the previous year.
debt crisis in Europe, the instable political
The investment result, as presented in
situation in the Middle East and North
the Group’s income statement, amounted
Africa, and the consequences of the sub-
to a gain of MSEK 444 (449), including ex-
stantial natural disasters noted above have
change rate gains, net, but before alloca-
contributed notably to this uncertainty.
tion of interest to the insurance operations.
The stock markets in Sweden, Europe and
The direct yield amounts to 2.2% (2.6%)
the USA noted stable rises during the final
and the total yield amounts to 2.2% (0.9%).
quarter of the year. On an annual basis,
Calculation of the direct yield and total
S&P 500 in the USA ended at an unchanged
yield takes place according to the Swedish
level compared with the previous year. In
Financial Supervisory Authority’s recom-
Sweden, OMX 30 noted a decline of 14.5%.
mendations. The focus and composition of
The major continental, European exchanges
the investment portfolio is, largely, un-
showed declines between 8-17%, whilst
changed compared with the previous year.
the decline in England landed at 5.6%. The
However, the proportion of associated
bond portfolios in the USA, Sweden, Ger-
companies has been reduced, as the com-
many and the UK are the most important.
pany, White Mountains Phoenix, is now
Interest rate levels on government bonds
consolidated as a wholly-owned subsidiary.
fell to record levels in these markets. The
At the end of the year, the consolidated
Company has, in practice, no direct expo-
investment portfolio had the following
sure to any so-called PIIGS countries in its
composition: shares and participations,
bond portfolio.
13%, investments in associated companies,
Overall, the bond portfolio’s yield
0%, and interest-bearing investments and
was 3.2%, adjusted for exchange rate ef-
bank funds, 87%.
fects. As regards the share portfolio, inclu-
Other events regarding the changes in
ding investments in associated companies,
the Group’s structure are described prima-
risk capital companies and derivatives with
rily under the section, Ownership.
7
Annual Report 2011
Ownership
Ltd, London, UK and White Mountains Pho-
Sirius International Försäkringsaktiebolag
enix (Luxembourg) S.à.r.l., Luxembourg.
(publ) is a wholly-owned subsidiary of
In addition, Sirius International has
Fund American Holdings AB (Corporate
eight branch offices outside Sweden. These
Identity Number 556651-1084), Stockholm,
are Sirius International Insurance Corpora-
Sweden, which is ultimately owned by
tion (publ) UK branch, London, UK, Sirius
White Mountains Insurance Group Ltd,
International Insurance Corporation (publ)
Bermuda.
Stockholm Zürich branch, Zürich, Switzer-
In May, 75 % of the shares in Passa-
land, Sirius International Insurance Corpo-
ge2Health Ltd, London, Great Britain were
ration (publ) Asia branch, Singapore, Sirius
acquired. The company operates an insu-
International Insurance Corporation (publ)
rance agency for a special type of health
Labuan branch, Labuan, Malaysia, Sirius
care insurance, primarily focused on the
International Insurance Corporation (publ)
UK market.
Belgian branch, Liège, Belgium, Sirius
During the month of May, the com-
International Danish Branch, filial af Sirius
pany, White Mountains Re Capital Ltd,
International Försäkringsaktiebolag (publ),
London, UK was established. The company
Copenhagen, Denmark, Sirius Internatio-
is the so-called Corporate Member for the
nal Insurance Corporation (publ) Bermuda
newly started Syndicate 1945 at Lloyd’s of
Branch, Hamilton, Bermuda, Sirius Interna-
London. The syndicate started its opera-
tional Insurance Corporation (publ) Aus-
tions on July 1, and has, thus far, provided
tralian Branch, Australia and in Hamburg,
primarily Accident & Health insurance/
Germany, where the operations are con-
reinsurance.
ducted through the agency, Sirius Rückver-
In October 2011, Sirius International
sicherungs Service GmbH, which provides
received and acquired the remainder of
insurance on behalf of Sirius International.
the outstanding shares in White Mountains
During 2001, Sirius Belgium Réassu-
Phoenix (Luxembourg) S.à.r.l. The com-
rances S.A. (in liquidation), Liège, Belgium
pany owns, amongst other entities, Sirius
commenced voluntary liquidation procee-
America Insurance Company, which imp-
dings, as the company had ceased to con-
lies that the entire reinsurance operations
duct operations. The liquidation remains
within White Mountains are now underta-
incomplete, as the result of a tax dispute.
ken within the Sirius International Group.
The outcome of the dispute will not impact
At the end of the year 2011, the
the company’s financial position.
Group comprises the Parent Company
The ongoing liquidation of White
Sirius International Försäkringsaktiebolag
Mountains Re Bermuda Ltd, Hamilton, Ber-
(publ) with the subsidiaries Sirius Belgium
muda, was completed during January 2012.
Réassurances S.A. (in liquidation), Liège,
Belgium, Sirius Rückversicherungs Service
Significant events during and after the
GmbH, Hamburg, Germany, Sirius Inter-
financial year
national Holdings (NL) BV, Amsterdam,
As part of the continuing restructuring
Holland, White Mountains Re Bermuda Ltd,
work within the Group, on October 7,
Hamilton, Bermuda, Passage2Health Ltd,
2011, Sirius International has received and
London, UK, White Mountains Re Capital
purchased the remaining shares in White
8
Annual Report 2011
Mountains Phoenix (Luxembourg) S.à.r.l.
Insurance contracts with insufficient
The total transaction amounted to MSEK
insurance risk
4,100, whereof MSEK 2,935 was contribu-
The Company retains only a few contracts
ted by means of an intra-Group transfer.
for which insufficient insurance risk is
In conjunction with the acquisition, Sirius
assessed to exist, and which, thereby, do
International received a shareholders’
not qualify as insurance contract. These
contribution of USD 436 million. Sirius
contracts are classified as investment cont-
International had previously owned 22% of
racts. For further details, refer to Note 1,
the outstanding shares in White Mountains
Accounting Principles.
Phoenix. The accounting effects of the
acquisition are reported in Note 1, Accoun-
Expected future developments
ting Principles.
The underlying profitability in the insu-
rance operations is good, despite increased
Information regarding risks and factors of
competition on the market, and the diver-
uncertainty
sified investment portfolio is expected to
Please refer to Note 1 “Accounting princip-
provide a stable yield. However, the stiff
les” and Note 2 “Information on risks”.
competition implies that stringent require-
ments are in place as regards the pricing
Financial instruments and risk management
and signing of insurance agreements, conti-
See Note 1, Accounting Principles, and
nued efficiency improvements and weigh-
Note 2, Information on Risks.
ted risks between the insurance and invest-
ment operations in order to ensure long-
Remuneration and benefits to senior
term profitability. Sirius International’s
executives
targets for 2012 are to achieve a combined
See Note 32, Average number of employ-
ratio under 90% and an underwriting return
ees, salaries and other remuneration.
on capital (UROC) of 11%.
9
Annual Report 2011
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
2011
2010
20093)
2008
2007
4,363
4,584
0
225
-3,125
-1,461
223
219
0
320
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
Net technical provisions
Market value on investment assets4)
14,743
26,094
7,221
18,480
7,883
18,449
7,992
16,743
7,001
15,508
Insurance operating result, for own account
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 base1)
Required solvency capital
Group based values2)
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
68%
31%
99%
2%
2%
11,560
2,547
43
0
14,150
324%
13,644
1,755
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
13,792
1,872
16,315
2,255
17,544
2,373
17,236
2,566
18,482
2,369
2011
2010
2009
2008
2007
3,768
4,037
225
-2,708
-1,239
266
175
-4
321
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
Net technical provisions
Market value on investment assets5)
6,922
19,678
7,233
18,155
7,886
18,379
7,992
16,882
7,001
15,508
Insurance operating result, for own account
Claims ratio
Cost ratio
Combined ratio
Investment result
Investment yield
Total yield
Solvency capital
Shareholders’ equity
Untaxed reserves
Deferred tax on Reserve for unrealized capital gains
Total solvency capital
Solvency ratio
Capital base
Required solvency capital
1) Includes Sirius International with subsidiaries.
2) Includes Sirius International Insurance Group Ltd.
67%
30%
97%
3%
3%
4,335
9,682
43
14,060
373%
13,648
765
60%
29%
89%
3%
0%
2,564
9,687
18
12,269
219%
11,603
958
61%
25%
86%
2%
3%
2,654
9,691
53
12,398
178%
12,021
1,030
63%
24%
87%
3%
2%
1,295
9,197
18
10,510
188%
9,968
956
57%
31%
88%
5%
3%
1,136
9,217
-15
10,338
178%
9,776
956
3) For the comparison year 2009 IFRS has been applied. Solvency capital and required solvency capital have not been converted.
10
4) Includes investment assets and cash and bank.
5) Includes investment assets and cash and bank.
Annual Report 2011
Proposed Appropriation of Earnings
For 2011, the Parent Company recorded
a result before appropriations and taxes
of MSEK 437 (MSEK 707). Net income for
the year amounted to a profit of MSEK 321
(MSEK 522). As of December 31, 2011 re-
tained earnings in the Group amounted to
MSEK 3,625.
At the disposal of the General Meet-
ing of the Shareholders of the Parent Com-
pany Sirius International:
- Retained earnings
- Unrestricted reserves
- Dividend paid, as resolved by the meeting
of the shareholders
- Received shareholders’ contribution
- Group contribution
- Net income for the year
- Total
The Board of Directors and the President
propose that the amount is appropriated as
follows:
- Dividends to owners
- Retained earnings
- Total
SEK in
thousands
1,763,987
72,186
-1,143,700
2,935,207
-413,761
320,593
3,534,512
162,700
3,371,812
3,534,512
The company’s financial position does not
Regarding the company’s and the Group’s
reflect any other view than that the com-
results and financial position, please refer to
pany can be expected to fulfill its obliga-
the attached income statements and balance
tions in the short-term, as well as in the
sheets, cash flow analyses, report on changes
long-term. It is the opinion of the Board
in shareholders' equity and accompanying
of Directors that the solvency capital of
notes.
the company as it has been reported in
the annual report is adequate in relation
to the scope and risks of the operations.
11
Annual Report 2011
”We were able to maintain an underwriting profit,
returning a combined ratio of 97%, in an
extraordinarily challenging year for our industry.”
12
Annual Report 2011
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
Balance of technical account
Investment income/expenses
- Investment income
- Unrealised gains
- Investment expenses and charges
- Unrealised losses
- Share of associated company’s profit/loss
Investment income allocated to the technical account
Total investment income/expenses
Result before taxes
Taxes
Result after taxes
Minority interest
Net income for the year
Note
2011
2010
3
3
4
5
10
6
7
8
9
15
11
5,955
-1,592
194
27
4,584
7,395
-1,787
46
88
5,742
225
214
-4,190
736
-3,454
-330
659
-3,125
-1,461
223
223
764
196
-132
-465
81
-225
219
-4,428
937
-3,491
-1,595
1,658
-3,428
-1,690
838
838
623
272
-466
-105
125
-214
235
442
1,073
-123
319
1
320
-194
879
-
879
13
Annual Report 2011
Statement of Comprehensive Income - Group
January 1 - December 31
(MSEK)
Net income for the year
Other comprehensive income
Items to be reclassified to income statement:
- Change of fair value on bonds
- Currency translation differences
- Tax on items to be reclassified ton income statement
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
2011
320
98
84
-26
156
476
2010
879
-133
-295
35
-393
486
14
Annual Report 2011
Note
2011
2010
12
13
15
16, 20
17, 20
18, 20
24
25
11
19
21
22
296
47
343
291
22
313
11
2
-
1,021
1,021
3,300
18,819
30
22,149
624
23,805
526
7,585
8,111
2
2,423
274
1,233
189
4,121
47
2,289
2,336
203
471
21
695
2,178
-
2,178
1,808
12,067
273
14,148
1,221
17,549
496
5,556
6,052
5
1,385
72
34
63
1,559
32
1,082
1,114
195
386
26
607
Balance Sheet - Group
December 31
(MSEK)
ASSETS
Intangible assets
Goodwill
Capitalized software
Total intangible assets
Investment assets
Land and buildings
Investments in group companies and participating interests
Shares and participations in associated companies
Interest bearing investments emitted by, and loans to, group companies
Total investments in group companies and participating interests
Other financial investments
Shares and participations
Bonds and other interest bearing investments
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
Other debtors
Total debtors
Other assets
Tangible assets
Cash and bank balance
Total other assets
Prepayments and accrued income
Accrued interest
Deferred acquisition costs
Other prepayments and accrued income
Total prepayments and accrued income
TOTAL ASSETS
39,411
27,194
15
Annual Report 2011
December 31
Note
2011
2010
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
minority interest
Liabilities
Technical provisions
Provisions for unearned premiums
Claims outstanding
Total technical provisions
Other liabilities
Employee benefits
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
800
4,359
-266
7,135
-468
11,560
800
1,424
-354
7,139
941
9,950
4
-
2,300
20,554
22,854
2,062
11,211
13,273
2
2,820
201
1
805
814
350
5
2,553
151
2
474
593
193
4,993
3,971
24
25, 27
28
11
20, 29
20
TOTAL ShAREhOLDERS’ EQUITy AND LIABILITIES
39,411
27,194
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
9,751
-
1,458
174
7,668
-
-
60
16
Annual Report 2011
Change in shareholders´equity - Group
(MSEK)
Amount January 1, 2011
Comprehensive income
Net profit/loss for the year
Other comprehensive income, net after tax
Change of fair value on bonds
Reclassification within shareholders’ equity
Currency translation differences
Total other comprehensive income
Total comprehensive income
Transactions with owners
Capital contribution received 1)
Group contribution provided 3)
Dividend paid 2)
Effects from internal restructuring 5)
Total transactions with owners
Amount December 31, 2011
Amount January 1, 2010
Comprehensive income
Net profit/loss for the year
Other comprehensive income, net after tax
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 December 31, 2010
Share
Additional
Reserves
Retained
Capital 4)
paid in
capital
earnings
– restricted 4)
Retained
earnings
– non-
restricted
Total
Share-
holders’
equity
800
1,424
-354
7,139
941
9,950
-
-
-
-
-
-
-
-
-
-
-
800
-
-
-
-
-
-
2,935
-
-
-
2,935
4,359
800
1,424
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
72
-1
84
155
155
-
-
-
-67
-67
-
-
-4
-
-4
-4
-
-
-
-
-
320
320
-
5
-
5
72
-
84
-
325
476
-
-414
2,935
-414
-1,143
-1,143
-177
-1,734
-244
1,134
-266
7,135
-468
11,560
7,142
610
9,978
2
-
-98
37
-295
-356
-356
-
-
-
-
-3
-
-3
-3
-
-
-
879
879
-
-34
-
-34
845
-354
-160
-514
941
-98
-
-295
-393
486
-354
-160
-514
9,950
800
1,424
-354
7,139
1) Capital contribution received from Fund American Holdings AB in form of shares in White Mountains Phoenix (Luxembourg) S.à.r.l
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) Share capital and Retained earnings – restricted represents the restricted shareholders’ equity.
5) During the fourth quarter 2011 Sirius International received and purchased the remaining shares in White Mountains Phoenix (Luxembourg) S.à.r.l. The shares
have therefore been reclassified from associated company to a group company and were consolidated at December 31, 2011 for the first time. The -244
MSEK is the effect from this restructuring.
17
Annual Report 2011
ShARE CAPITAL
Specified in number of shares, SEK
Issued per 1 January
Issued per 31 December
2011
2010
8,000,000
8,000,000
8,000,000
8,000,000
Per 31 December, 2011 the share capital comprised 8,000,000 (8,000,000) ordinary shares.
The shares have a nominal value of 100 (100) SEK.
ADDITIONAL PAID IN CAPITAL
Opening additional paid in capital
Capital 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
Effects from internal restructuring
Change for the year
Closing translation difference
RETAINED EARNINGS - RESTRICTED
Opening retained earnings - restricted
Change in excess depreciation
Closing retained earnings - restricted
RETAINED EARNINGS – NON-RESTRICTED
Opening retained earnings – non-restricted
Net profit/loss for the year
Effects from internal restructuring
Reclassification within shareholders’ equity
Dividend paid
Group contribution provided 73.7%
Closing retained earnings – non-restricted
2011
2010
1,424
2,935
4,359
1,424
-
1,424
67
98
165
-18
-26
-44
49
72
121
-403
-2
-67
84
-387
7,139
-4
7,135
941
320
-177
5
-1,143
-414
-468
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
18
Cash flow statement - Group
Annual Report 2011
(MSEK)
2011
2010
OPERATING ACTIvITIES
Profit/loss before tax
Interest income
Interest expenses
Dividends received
Adjustment for non-cash items 1)
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
Acquisition of subsidiary, acquired Cash and cash equivalents
Net investment of intangible assets
Net investments of tangible assets
Cash flow from investing activities
fINANCIAL ACTIvITIES
Dividends received
Shareholders contributions’ 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) Depreciations Notes 12, 13, 21
Capital gains on foreign exchange Note 6
Capital losses on foreign exchange Note 8
Capital gains Note 6
Capital losses Note 8
Unrealized gains Note 7
Unrealized losses Note 9
Interest income Note 6
Interest expenses Note 8
Dividends received Note 6
Change in provisions for outstanding claims Note 25
Effects from internal restructuring
Translation difference
Total
2) The following components are included in cash and cash equivalents:
Cash and bank balances
Short term investments, equivalent to cash and cash equivalents
Total
442
390
-43
113
-796
-65
41
-9
2,153
-770
1,428
2,843
-
76
-45
-28
3
-1,144
-
-495
-1,639
1,207
1,082
1,207
2,289
29
-126
-
-135
20
-196
465
-390
43
-113
-237
-244
84
-796
955
1,334
2,289
1,073
338
-3
153
-1,045
-32
484
-
-3,214
-505
1,315
-1,920
-706
-
-14
-30
-751
-160
-
-472
-632
-3,302
4,384
-3,302
1,082
20
-
394
-132
10
-272
105
-338
3
-153
-387
-
-295
-1,045
300
782
1,082
19
Annual Report 2011
Comments to Cash flow statement
Sirius International have per October 7, 2011, trough a internal restructuring within the White
Mountains-group received and purchased the remaining shares in White Mountains Phoenix
(Luxembourg) S.à.r.l. The total transaction amounted to MSEK 4,100, whereof MSEK 2,935 was
received as a group contribution. Of the purchase amount MSEK 1,165, MSEK 44 was paid in cash
and MSEK 1,121 was paid in form of other financial assets. The acquired company had Cash and
cash equivalents of MSEK 141. The acquired companies’ assets split into: Investment assets MSEK
12,619, Cash and cash equivalents MSEK 141, other operating receivables MSEK 2,819,
tax receivables MSEK 1,071 and other operating liabilities of MSEK 10,468.
20
Performance Analysis – Group
Annual Report 2011
Analysis of Insurance Result
(MSEK)
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
Technical result of insurance operation
Of which results from prior years, gross amounts 1)
Technical provisions
Unearned premiums and remaining risks
Outstanding claims
Claims adjustment 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 2010 and earlier.
Direct
Swedish
risks -
Direct
Swedish
risks -
Aviation
Financial
Direct
Assumed
Total
foreign
reinsurance
risks
6
-
-1
-1
4
-1
-1
-3
-
-4
-
-
-
7
-1
-
-
6
-2
-
-
-
1
-1
1
-
-
-
1
-
-
-
-
-
-
-
-
1
-
-
-
1
-
-
-
-
-
-
611
3,966
4,584
18
-386
-290
-47
207
-2,738
-1,170
265
225
-3,125
-1,416
223
-271
-1,919
-2,191
-435
-335
-9
-779
132
81
213
892
-254
-70
43
611
-459
116
-7
-47
11
-1,864
-2,300
-19,692
-20,300
-245
-254
-22,071
-22,854
394
7,504
7,898
5,055
-1,337
264
-16
526
7,585
8,111
5,955
-1,592
194
27
3,966
4,584
-3,559
-4,020
620
-163
-283
647
736
-170
-330
659
-386
-2,738
-3,125
21
Annual Report 2011
22
Annual Report 2011
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
Change in equalization provision
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
Unrealized gains
Investment expenses and charges
Unrealized losses
Investment income allocated to the technical account
Total investment income/expenses
Goodwill depreciation
Result before appropriations and taxes
Appropriations
Changes in excess depreciation on intangible assets
Result before taxes
Taxes
Net income for the year
Note
2011
2010
3
3
4
26
5
10
6
7
8
9
12
11
5,347
-1,579
249
20
4,037
7,395
-1,787
46
88
5,742
225
214
-3,603
650
-2,953
-420
665
-2,708
-49
-49
-1,239
266
266
515
34
-56
-93
-225
175
-4
437
5
442
-121
321
-4,415
937
-3,478
-1,601
1,658
-3,421
-9
-9
-1,687
839
839
649
184
-642
-105
-214
-128
-4
707
4
711
-189
522
23
Annual Report 2011
Statement of Comprehensive Income
– Parent Company
January 1 - December 31
(MSEK)
Net income for the year
Other comprehensive income
Items to be reclassified to income statement:
- Change of fair value on bonds
- Tax on items to be reclassified to income statement
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Note
2011
321
98
-26
72
393
2010
522
-133
35
-98
424
24
Annual Report 2011
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 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
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
2011
2010
12
13
14
15
16, 20
17, 20
18
24
25
11
19
21
22
203
45
248
2207
22
229
11
2
7,317
-
7,317
667
9,472
30
1,081
2,058
3,139
874
12,067
24
10,169
12,965
770
18,267
1,221
17,327
529
6,545
7,074
2
1,880
125
41
293
496
5,556
6,052
5
1,384
61
35
262
2,341
1,747
40
1,411
1,451
131
341
20
492
31
979
1,010
194
386
26
606
TOTAL ASSETS
29,873
26,971
25
Annual Report 2011
December 31
Note
2011
2010
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
Equalization provision
Total technical provisions
Provisions for other risks and expenses
Pension provisions
Deferred tax liabilities
Total provisions for other risks and expenses
800
121
3,093
321
4,335
35
9,647
9,682
1,848
12,087
61
888 800
49
1,193
522
2,564
40
9,647
9,687
2,062
11,211
12
13,996
13,285
7
6
13
9
-
9
23
24
25, 27
26
28
11
Deposits received from reinsurers
173
151
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
1
784
690
2
473
608
1,475
1,083
199
199
192
192
29,873
26,971
8,623
-
1,458
56
7,668
-
-
60
20, 29
20
30
30
30
30
26
Annual Report 2011
Change in Shareholders’ Equity – Parent Company
(MSEK)
Amount January 1, 2011
Transfer of net result from previous year
Comprehensive income
Net profit/loss for the year
Other comprehensive income, net after tax
Change of fair value on bonds
Total other comprehensive income
Total comprehensive income
Transactions with owners
Capital contribution received 1)
Group contribution provided 2)
Dividend paid 3)
Total transactions with owners
Amount December 31, 2011
Amount January 1, 2010
Transfer of net result from previous year
Comprehensive income
Net profit/loss for the year
Other comprehensive income, net after tax
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 December 31, 2010
Share
Capital
Other
Retained
loss for the
reserves 4)
earnings 4)
year 4)
Net profit/
800
49
-
-
-
-
-
-
-
-
-
-
-
72
72
72
-
-
-
-
800
121
800
147
-
-
-
-
-
-
-
-
-
-
-98
-98
-98
-
-
-
1,193
522
-
-
-
522
-522
321
-
-
522
321
2,935
-414
-1,144
1,377
3,093
1,217
490
-
-
-
-
-
-
-
321
490
-490
522
-
-
490
522
-354
-160
-514
-
-
-
Total
Shareholders’
equity
2,564
-
321
72
72
393
2,935
-414
-1,144
1,377
4,335
2,654
-
522
-98
-98
424
-354
-160
-514
800
49
1,193
522
2,564
1) Capital contribution received from Fund American Holdings AB in form of shares in White Mountains Phoenix (Luxembourg) S.à.r.l
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.
27
Annual Report 2011
ShARE CAPITAL
Specified in number of shares, SEK
Issued per 1 January
Issued per 31 December
2011
2010
8,000,000
8,000,000
8,000,000
8,000,000
Per December 31, 2011 the share capital comprised 8,000,000 (8,000,000) ordinary shares.
The shares have a nominal value of 100 (100) SEK.
2011
2010
67
98
165
-18
-26
44
49
72
121
1,193
522
2,935
-1,144
-414
3,093
200
-133
67
-53
35
-18
147
-98
49
-1,217
490
-
-160
-354
1,193
321
522
OThER 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
RETAINED EARNINGS
Opening retained earnings
Transfer of net result from previous year
Capital contribution
Dividend paid
Group contribution provided 73.7%
Closing retained earnings
NET PROfIT/LOSS fOR ThE yEAR
Net profit/loss for the year
28
Annual Report 2011
Cash flow Statement – Parent Company
(MSEK)
2011
2010
OPERATING ACTIvITIES
Profit/loss before tax
Interest income
Interest expenses
Dividends received
Adjustment for non-cash items 1)
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, effect on liquidity
Net investment of intangible assets
Net investments of tangible assets
Cash flow from investing activities
fINANCING ACTIvITIES
Shareholders contributions’ paid
Capital repayment
Dividend paid
Group contributions paid
Cash flow from financing activities
Cash flow for the year
Cash and cash equivalents at beginning of year
Cash flow for the year
Cash and cash equivalents at end of year 2)
1) Depreciations Notes 12, 13, 21
Capital gains on foreign exchange Note 6
Capital losses on foreign exchange Note 8
Capital gains Note 6
Capital losses Note 8
Unrealized gains Note 7
Unrealized losses Note 9
Interest income Note 6
Interest paid Note 8
Dividends received Note 6
Change in provisions for outstanding claims Note 25
Total
2) The following components are included in Cash and cash equivalents:
Cash and bank balances
Short term investments, equivalent to cash and cash equivalents
Total
442
314
-2
1
-547
-63
145
-9
1,406
-855
1,568
2,255
-64
-39
-22
-125
-92
34
- 1,144
-495
-1,697
432
979
432
1,411
33
-130
-
-70
-
-34
93
-314
2
-1
-126
-547
498
913
1 411
711
337
-3
206
-533
-25
693
-
-4,009
-331
949
-2,698
-
-
-22
-22
-
-
-160
-472
-632
-3,352
4,331
-3,352
979
-4
-
398
-106
185
-184
105
-337
3
-206
-387
-533
421
558
979
29
Annual Report 2011
Performance analysis - Parent Company
Analysis of Insurance Result
Direct Swedish
Direct Swedish
Direct
Assumed
(MSEK)
risks - Aviation
risks - Financial
foreign risks
reinsurance
Total
6
-
-1
-1
-
4
-1
-1
-3
-
-
-4
-
-
-
7
-1
-
-
6
-2
-
-
-
1
-1
1
-
-
-
-
1
-
-
-
-
-
-
-
-
-
1
-
-
-
1
-
-
-
-
-
-
605
3,425
4,037
18
-383
-278
-
-38
207
-2,324
-960
-49
299
225
-2,708
-1,239
-49
266
-271
-1,896
-2,168
-416
-332
-10
-
-757
132
81
213
868
-254
-52
43
605
-459
116
-7
-44
11
-1,431
-11,611
-132
-61
-1,848
-11,946
-141
-61
-13,235
-13,996
397
6,464
6,861
4,471
-1,324
301
-23
529
6,545
7,074
5,347
-1,579
249
20
3,425
4,037
-2,983
-3,444
534
-152
-376
653
650
-159
-420
665
-383
-2,324
-2,708
Technical result insurance operations
Premiums earned, for own account
Allocated investment return transferred from the
non-technical account
Claims incurred, for own account
Operating costs
Change of equalisation provision
Technical result of insurance operations
Of which results from prior years 1)
Technical provisions
Unearned premiums and remaining risks
Outstanding claims
Claims adjustment provision
Equalization 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 2010 and earlier.
30
Annual Report 2011
Note 1 • Accounting Principles
General information
This annual report was issued per December 31, 2011 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, Stock-
holm 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.
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 FFFS 2011:28, the
Swedish Financial Reporting Board RFR 1 Supplementary Accounting Rules
for Groups, as well as International Financial Reporting Standards (IFRS) and
IFRIC interpretations 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.
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
December 31, 2011 but have not yet come into force. In addition, certain
standards, statements and interpretations currently in force have been chan-
ged, and certain standards, statements and interpretations have come into
force during 2011. 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.
New and amended standards applied by the Group
None of the IFRS of IFRIC interpretations which are mandatory for the first
time for the financial year beginning January 1, 2011 have had any signifi-
cant impact on the Group.
New standards, amendments and interpretations of existing standards which
have not yet entered into force and which have not been early adopted by
the Group.
• IAS 19 “Employee Benefits”, was amended in June 2011. The amendment
implies that the Group will stop applying the "corridor method" and instead
recognize all actuarial gains and losses in Other comprehensive income as
incurred. Expenses for past employment will be reported immediately. Inte-
rest expenses and expected return on plan assets will be replaced by a net
interest calculated using the discount rate, based on the net surplus or net
deficit in the defined benefit plan. The Group intends to apply the amended
standard for the financial year beginning January 1, 2013 and assesses that
it will have an adverse effect on shareholders equity of approximately
MSEK 4. The standard has not yet been adopted by the EU.
• IFRS 9 “Financial instruments” addresses the classification, valuation
and accounting of financial assets and liabilities. IFRS 9 was published in
November 2009 regarding financial assets and in October 2010 regarding
financial liabilities and replaces the parts of IAS 39 which are related to the
classification and measurement of financial instruments. IFRS 9 stipulates
that financial assets are to be classified in two different categories; valued
at fair value or valued at amortized cost. The classification is established
the first time that the liability or asset is reported in accordance with the
standard, on the basis of the company’s business model and the charac-
teristic features in the cash flows according to the agreement. In terms of
financial liabilities, there are no major changes compared with IAS 39.
The largest change addresses changes in liabilities which are valued
at fair value. To such liabilities, the following is applied: the portion of the
change in fair value which is attributable to the company’s own credit risk
is to be reported in the statement of Other comprehensive income instead
of the income statement, so long as this does not result in an accounting
mismatch. The Group intends to apply the new standard no later than the
financial year beginning on January 1, 2015 and has not yet assessed the
effects. The standard has not yet been adopted by the EU.
• IFRS 10 “Consolidated financial statements” builds on existing principles
by identifying the concept of control as the determining factor in whether
an entity should be included within the consolidated financial statements.
The standard provides additional guidance to assist in the determination of
control where this is difficult to assess. The Group intends to apply IFRS 10
for the financial year beginning on January 1, 2013 and has not yet assessed
the full effects on the financial statements. The standard has not yet been
adopted by the EU.
• IFRS 12 “Disclosures of Interests in Other entities” includes disclosure re-
quirements for subsidiaries, joint arrangements, associated companies and
“structured entities” which have not been consolidated. The Group intends
to apply IFRS 12 in the financial year starting on January 1, 2013 and is yet
to assess the full effect on the financial statements. The standard has not
yet been adopted by the EU.
• IFRS 13 “Fair value measurement” aims at more consequent and less
complex valuations at fair value by providing an exact definition and a com-
mon source in IFRS for valuations at fair value and associated disclosures.
The requirements do not extend to the area of application for when the
fair value should be applied but provides guidance regarding the manner in
which it should be applied in areas where other IFRS already require or allow
valuation at fair value. The Group has not yet assessed the full effect of IFRS
13 on the financial statements. The Group intends to apply the new standard
in the financial year starting on January 1, 2013. The standard has not yet
been adopted by the EU.
• IAS 32 “Financial instruments: Presentation” and IFRS 7 “Financial
instruments: Disclosures”, amendments regarding the offsetting of financial
assets and financial liabilities. The amendments provide more detailed cla-
rification of when financial assets and financial liabilities may be offset and
introduce new disclosure requirements for offset assets and liabilities. The
Group has not yet assessed the full effect of the amendments. The Group
intends to apply the disclosure requirements in the financial year starting
on January 1, 2013 and the more detailed clarification regarding offsetting
no later than the financial year beginning January 1, 2014. The amendments
have not yet been adopted by the EU.
No other of the IFRS or IFRIC interpretations which have not yet entered into
force are expected to have any significant impact on the Group.
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
31
Annual Report 2011
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 instru-
ments 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.
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 March 6, 2012. The income statement and balance sheet will be
adopted at the General Meeting held in May 2012.
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. Acquisitions of subsidiaries are
reported according to the purchase method, as described in IFRS 3, with the
exception of intra-group acquisitions of subsidiaries under common control.
The application of the purchase method implies requirements for the identifi-
cation of the purchaser and the establishment of the acquisition date.
The purchase method further implies that the acquisition of subsidia-
ries is considered to be a transaction through which the Group indirectly
acquires the subsidiary’s assets and assumes its provisions, liabilities and
contingent liabilities. The Group acquisition value is determined through
an acquisition analysis of the identifiable acquired assets and the assumed
provisions and liabilities, as well as any contingent liabilities 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 good-
will. When the difference is negative, this is recorded directly in the income
statement. The subsidiary’s financial reports are included in the consolida-
ted financial statements as of the acquisition date, until such date as the
controlling influence is transferred from the Parent Company.
As IFRS 3 is not directly applicable on intra-group acquisitions of subsi-
diaries under common control, such acquisitions are reported according to
the “predecessor accounting method”. This method implies that the acquirer
assumes the acquired company’s reported book values as presented in the
divested entity’s accounts. Adjustment of the acquired values is to be car-
ried out in the case that these accounts are not prepared in accordance with
IFRS. Furthermore, the method implies that goodwill is not reported; any
possible difference between the consideration paid and the acquired values
is reported directly against shareholders equity. Subsidiaries’ financial state-
ments are included in the consolidated accounts from the date of acquisition
until the date upon which the controlling influence ceases.
Associated companies
Associated companies are those companies in which the Group has a
significant, but not controlling, influence over the operational and financial
administration, usually through the holding of participations between 20%
and 50% of the number of votes. From the point in time when the significant
influence is acquired, participations in associated companies are recorded
in the consolidated accounts according to the equity method. The equity
method implies that the value of the shares in the associated company,
reported in the Group, corresponds to the Group’s share of the associated
companies’ equity and Group goodwill and any other remaining amount
of positive or negative group adjustment in consolidation. The Group’s
participations in the associate’s net profit after taxes and minority interests,
adjusted for any amortization, 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.
32
Annual Report 2011
Transactions eliminated on consolidation
Receivables and liabilities, income and expenses, and unrealized gains
and losses arising on internal transactions between Group companies are
eliminated in their entirety when the consolidated financial statements
are prepared. Unrealized 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. Unrealized losses are
eliminated in the same manner as unrealized 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 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 realized in the Group’s income statement.
Rates for the most important currencies
Closing
Average
USD
EUR
GBP
6.86
8.91
10.67
6.46
9.02
10.36
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 latest when fallen due. Premium revenue cor-
responds to the portion of premium income that has been earned.
Acquisition costs
By acquisition costs are meant such external operating expenses that
directly vary with the acquisition or renewal of insurance contracts. The
deferred acquisition costs are amortized in the same way as corresponding
premiums are earned.
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.
These future costs are tested quarterly against the unexposed portion
of the premium for the contracts in force and if the latter exceeds the
costs, the unexposed portion of the written premium will form an unearned
premium reserve. If the future costs exceed the unexposed portion of the
written premium, the deferred acquisition costs are written down, but if that
is insufficient, an unexpired risk provision will also be set up. The unexposed
premium is also in this case recorded as a provision for unearned premium.
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
costs for incurred but, to date, unknown claims and not yet fully reported
claims. This amount is an estimate based on historic experience and
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 a percentage of reported unpaid claims and a percentage 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 an average of four to five years for
those provisions. The period’s change in the claims adjustment provision is
recorded in the income statement within the items Claims handling expen-
ses and Operating costs.
33
Annual Report 2011
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. Other costs for insurance
contracts are recorded as costs when they arise.
Investment expenses and charges
Charges on investment assets are recorded under the item Investment expen-
ses 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.
Provision adequacy testing
The Company’s applied accounting and valuation principles for the balance
sheet items Deferred acquisition costs, Provisions for unearned premiums
and Unexpired risks automatically entail testing of whether the provisions
are sufficient with regard to expected future cash flows.
Operating costs
All operating costs are allocated in the income statement according to
their functional nature, acquisition, claims adjustment, administration,
commission and profit shares in ceded reinsurance, investment expenses
and in certain cases, other technical costs. Changes in technical provisions
for insurance contracts are recorded in the income statement under each
heading. Payments to policyholders, due to insurance contracts or incurred
claims, during the financial year, are recorded as claims paid, regardless of
when the claim was incurred.
Ceded reinsurance
As premiums for ceded reinsurance are recorded amounts paid during the
financial year and amounts recorded as liabilities to the company that have
assumed the reinsurance, in accordance with entered reinsuranc
agreements. Deductions are made for amounts credited due to portfolio
transfers. Adjustments are also made for change in the reinsurer’s share of
proportional reinsurance contracts. The premiums are periodized so that
costs are allocated to the corresponding period of the insurance cover.
All items relating to ceded reinsurance are shown on separate lines in the
income statement.
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 2011
amounted to 3.85%.
Applied interest rates
%
EUR
GBP
SEK
USD
2011
2010
4.99%
0.61%
3.87%
3.75%
2.90%
1.80%
0.50%
4.20%
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, interest
income, net foreign exchange gains, reversed impairments and net capital
gains.
Changes in realized and unrealized 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 amortized cost value and, for other investment assets, it is the historical
acquisition value. At the sale of investment assets, previously unrealized chan-
ges in value are recognized as adjustment entries under the item Unrealized
profits from investment items or Unrealized losses from investment items, as
appropriate. As regards interest-bearing securities classified as available-for-
sale financial assets, previously unrealized 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.
Unrealized 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.
Share of associated company´s profit or loss
Share of associated company’s profit or loss represents Sirius’ share of the
associated company’s result, accounted for according to the equity accoun-
ting method. Currency translation effects are recorded in Other comprehen-
sive income.
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 refer-
ring 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 participations in subsi-
diaries or associated companies that are not expected to be reversed within
the foreseeable future are not considered either. The valuation of deferred tax
is based on the extent to which underlying assets and liabilities are expected
to be realized 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 utilized. The value of deferred tax assets is reduced when it is no longer
considered likely that they can be utilized.
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 recognized as an intangible asset. Goodwill is
tested annually for impairment and is recognized at acquisition cost less accu-
mulated impairment losses. Impairment losses of goodwill are not reversed.
34
Annual Report 2011
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 capitalized 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 capitalized costs are amortized 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 fulfill 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. Development
costs for software reported as an asset are amortized during their asses-
sed useful life, which does not exceed three years.
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 capitalized 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 an asset
and thus gains or looses control of the asset.
Classification and valuation
Financial instruments are initially recorded at acquisition value correspon-
ding 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.
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 establis-
hes the fair value by means of various valuation techniques. As far as is
possible, the valuation methods employed are based on market data, while
company-specific information is used to the least degree possible. The
Company regularly calibrates valuation methods and tests their validity by
comparing the outcome of the valuation methods with prices from 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 loss of MSEK 182, while the
recorded value per balance sheet date of December 31, 2011 amounted to
MSEK 1,111.
Loans receivables and Account receivables
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. The major posts are
Interest bearing investments emitted by, and loans to, group companies and
Other debtors.
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,
35
Annual Report 2011
where the yield granted by these instruments at the time of investment is of
significance for which investments shall be made.
impairment of other assets included in the unit is subsequently performed.
The recoverable amount is the highest of fair value less selling expen-
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
assumptions forming the basis of the estimation of the impaired amount.
The impairment of loans receivable and account receivables, recorded at
amortized cost, is reversed if a later increase of the recoverable amount
can be objectively related to an event occurring after the impairment has
been performed.
The impairment of interest-bearing instruments, classified as available-
for-sale financial assets, is reversed 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 amortization 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 recognized when the reported value of an asset
or cash-generating unit exceeds its recoverable amount. An impairment loss
is recognized in the income statement. The impairment of assets related to
a cash-generating unit is primarily allocated to goodwill. The proportional
ses 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 amortization 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 recognized 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
defined benefit plans is that they indicate a level 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, reduced with the fair value of the managed assets, with adjust-
ments for unreported gains and losses, as well as for unreported costs for
service during earlier periods. The defined benefit pension plan obligation
is calculated annually by independent actuaries applying the so-called pro-
jected 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, contrac-
tual 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
36
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.
The group has defined benefit plans in Sweden (collective agreement) 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 of retirement earlier
than at the age of 65. Employees born 1955 and earlier have the possibility to
retire between the ages of 62 and 65 according to local agreement.
Staff employed before January 1, 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.
Remuneration upon termination of employment
Remuneration upon employment of contract is payable when an employee’s em-
ployment 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.
Contingent liabilities
A contingent liability is recognized 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.
Differences between accounting principles in the Group
and the Parent Company
The differences between the accounting principles in the Group and the Parent
Company are presented below. The accounting principles stated below for the
Parent Company have been consistently applied for all periods presented in the
Parent Company’s financial statements, unless stated otherwise.
Goodwill
Goodwill represents the difference between acquisition cost for business acqui-
sitions and the fair value of acquired assets, assumed liabilities and contingent
liabilities. In the Parent Company, goodwill is amortized 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. Amortization
which deviates from plan is handled as an appropriation and is reported under the
heading Difference between reported depreciation/amortization and depreciation/
amortization according to plan.
Subsidiaries and associated companies
The Parent Company records participations in subsidiaries and associates accor-
ding to the cost method. Only dividends which have been received are recognized
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.
Annual Report 2011
Taxes
Untaxed reserves are recorded in the Parent Company including deferred
income tax liabilities. However, untaxed reserves in the consolidated accounts
are allocated between deferred income tax liabilities and shareholders' 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 statement and a provi-
sion referring to individuals with the option of retiring at the ages of 62 and 64
is found on the line Pension provisions in the Parent Company’s balance sheet.
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 practice,
changes in untaxed reserves are recorded in the income statement. Provisions
made to untaxed reserves are recorded in the income statement under the
heading Appropriations. The accumulated value of the provisions is recorded in
the balance sheet under the heading Untaxed Reserves.
A total of 26.3% of the untaxed reserves can be considered as a deferred
tax liability and 73.7% as shareholders' equity. The deferred tax liabilities can
be described as an interest-free liability with a non-defined duration. In the
group accounts, 26.3% of the untaxed reserves are allocated to deferred tax
liabilities and 73.7% to shareholders' equity. In an assessment of financial
strength, the total value of the untaxed reserves is considered risk capital,
as any losses can be covered, to a large extent, by the dissolution of untaxed
reserves without taxes becoming payable. The largest item attributable to
untaxed reserves refers to the safety reserve. The safety reserve forms a
collective security-conditioned reinforcement of the technical provisions. Acces-
sibility is limited to loss coverage and otherwise requires official authorization.
Equalization provision
The Parent Company’s balance sheet includes an Equalization 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 Equalization 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 Swedish Financial Reporting Board (RFR2).
Shareholders’ contributions are recorded directly against shareholders'
equity in the receiving entity and in shares and participations in the entity provi-
ding the contribution, to the extent that no impairment is required.
Group contributions are recorded according to their financial significance.
This implies that group contributions provided and received for the purpose
of minimizing 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.
37
Annual Report 2011
Note 2 • Information on risks
Risk management
The company’s Enterprise Risk Management, ERM, is at the heart of Sirius’
thinking. Sirius defines ERM as the discipline by which the company iden-
tifies, assesses, controls, monitors, and discloses risks from all sources
for the purpose of increasing Sirius’ short- and long-term value to Sirius
stakeholders.
ERM is an ongoing process with the objective of creating a risk mana-
gement culture that emanates from top management and which permeates
throughout the entire organization. Sirius strives to maintain a risk culture
where employees are aware of and measure, assess and communicate risk
as part of their responsibilities. Management’s role includes communicating,
implementing, monitoring and nurturing this culture.
The objectives of Sirius’ work with ERM are:
• Define Sirius’ risk tolerance and develop appropriate operating guidelines
consistent with that framework
• Optimize profitability within the established risk tolerance framework
• Provide clear information for strategic management decisions
• Demonstrate strong risk management through a well defined process
including identification, quantification, monitoring, and appropriate manage-
ment response
• Provide stakeholders with transparent risk management information
• Comply with Solvency II and other regulatory requirements
Risk strategy and the company’s risk appetite
Risk strategy and risk appetite comprise the foundation of the risk
management processes. Sirius' risk strategy and risk appetite have been
established by Sirius’ Board of Directors, which aims to secure a balance
between risk, return and capital requirements. As part of the planning pro-
cess, strategic limits are explicitly discussed and specified. The strategic
risk appetite is expressed either in quantitative terms (e.g., an aggregate
risk limit for windstorms in Europe) or in qualitative terms (e.g., in relation to
operational risk). From these overall risk appetite statements, operational
limits are applied at a detail level throughout the organization in the form of
operational risk limits, maximum risk exposure, retrocession limits, foreign
exchange exposure limits, maximum equity exposure in the investment
portfolio, etc.
As part of the ERM culture, Sirius embraces the following qualitative
principles:
• Controlled risk taking and appropriate capitalization
• Insurance transactions are expected to yield positive technical results
• Active use of retrocessional protections as part of business
and capital planning
• Reduce risk by proper risk selection and active portfolio 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 mana-
gement infrastructure consisting of the Board of Directors, an experienced
management team, various risk committees, 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 tolerances and policies.
Sirius’ Management has day-to-day responsibility for all ERM activities.
It deploys this responsibility through different risk committees carrying out
certain duties.
The Risk Management Committee has the objective of formalizing the over-
sight of critical risks, including the following risk management processes:
• 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’ independent functions for risk control and compliance are re-
sponsible for the monitoring of Sirius’ risks. The functions submit quarterly
risk control and compliance reports to the CEO, the Management Group and
to the Board of Directors. A summary risk and governance report is submit-
ted annually 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
compliance with laws and regulations. The Internal Audit department reports
to the Board of Directors.
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
documentation and evaluation of all processes and controls leading up to
the annual report have been undertaken. This work has enabled Sirius to
demonstrate compliance with the requirements of the Act.
Insurance risk management
Goals, principles and methods
A clear focus on managing insurance risks is vital for Sirius’ continued suc-
cess. These risks are managed mainly by evaluating the degree of gross and
net risk (after retrocessional protections) that Sirius is willing to assume.
Sirius divides insurance risk management into two principal areas; underwri-
ting risk and reserve risk.
Underwriting risk
Underwriting risk refers to premium and accumulation assessment, which is
defined as premium risk and catastrophe risk, respectively. The underwri-
ting risk assessment is performed by underwriters on each individual risk
and the Chief Underwriting Officer is ultimately responsible for managing
these risks.
The goal for all underwriting is to maximize profitability for each selec-
ted risk level. The anticipated profitability of each contract which is entered
into shall comprise the basic ground for decision making regarding all
underwriting. Other underwriting guiding principles include diversification,
strong accumulation controls and an active use of reinsurance in order to
adjust risks to acceptable risk tolerance levels.
At Sirius America the ultimate responsibility for managing these risks
is assigned by underwriting unit. For property it is the Property Chief
Underwriting Officer, and for A&H it is the Global A&H Head in conjunction
with the America Underwriting Manager. They are 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 employed
capital. The premium risk is therefore associated with any possible level of
losses deviating from expected levels. The premium risk is generally mana-
ged through the application of pricing models and underwriting procedures,
but also through a restructuring of under-performing 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 offset the
expected annual profit, or, even consume a portion of the solvency capital.
This catastrophic risk is managed with the assistance of underwriting
methods and tools which monitor and control the company’s total aggregate
38
risks, both gross and net. Catastrophe risk is also managed by the effective
use of retrocessional protections.
In order to ensure consistency in the underwriting process, all under-
writing within Sirius complies with specific routines. Detailed Underwriting
Guidelines comprise the framework for all risk acceptances, and these guide-
lines contain sections regarding, for example, Limits, Underwriting Authorities
and Restricted Business. A Four-Eyes Underwriting System, that is, a system
in which at least two individuals participate in each decision, is applied for
the majority of all business. The Guidelines are reviewed at least annually and
updated when appropriate.
There are several levels of control functions as well as technical systems,
which are in place to monitor and control that underwriting policies and
procedures are followed. At Sirius International, there is an underwriting control
group reporting to the Chief Underwriting Officer. This group focuses in detail
on how the business is underwritten and that the underwriters follow issued
policies and procedures. Another group controls the underwriting system and
ensures it is used correctly and that input data is accurate. Finally, Risk Control,
Compliance and Internal Audit also monitor these control groups, carrying out
random inspections/tests, in detail ensuring they use sufficient control.
Retrocession
Sirius International uses retrocession as a tool to manage risk and has a cen-
tralized unit responsible for the purchasing and administration of its outwards
reinsurance. The implementation of reinsurance purchases is based on the
strategic direction of the inwards portfolio, overall risk tolerances and the
search for an optimal portfolio mix. Catastrophe models and capital modeling
tools are used in the analytical and decision making process.
Sensitivity to risks attributable to insurance agreements
Within the insurance operations, Property Damage Insurance (wind, flooding,
and earthquakes) constitutes the company’s greatest risk. In order to manage
this catastrophe risk, and the resulting accumulated risks, the company utilizes
a number of different models. Sirius has developed a proprietary tool to price
and manage accumulations of global property catastrophe risk. The underlying
model assumptions are taken from third party catastrophe models and inter-
nally developed loss curves. There is a process in place to evaluate and select
a model of choice per territory and peril. Based on the new tool, reports and
analyses can be produced on an as required 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 stochastically estimated using these models. Aside from the possibility of
modeling single events, aggregate claims are also modeled.
Sensitivity analyses are undertaken based on a comparison of claims esti-
mated by various models, but also through changes to the assumptions applied
by the different models, such as, return periods.
In addition, Sirius International 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.
Sirius International and Sirius America also register and monitor total
exposed limits to wind and Earthquake losses per country and/or zone.
Concentrations and sensitivity analysis
The table below shows a summary of the manner in which Sirius analyzes cata-
strophe risks, divided by geographical area and return periods. Sirius analyzes
catastrophe risks each quarter during the financial year. The figures show the
situation at the end of Q4 2011.
Through the use of these simulation models, the company can obtain an esti-
Sensitivity analysis – losses divided by geographical area and return
periods for the Group 1)
2011 2010
Once per
100 years
Once per
250 years
Once per
100 years
Once per
250 years
Global – Gross
Global – Net
3,667
2,793
Europe – Gross
3,204
Europe – Net
US – Gross
US – Net
1,348
2,964
2,737
4,509
3,247
4,429
1,854
3,476
3,221
3,331
2,313
3,251
1,320
2,370
2,299
4,424
2,654
4,424
1,729
2,792
2,652
Annual Report 2011
mation of catastrophe risk, both prior to and after retrocession.
In addition, to better manage its aggregate exposure to very large
catastrophic events, Sirius monitors the maximum net financial impact (“NFI”) it
would suffer in the worst aggregate loss year modeled in third-party software,
i.e., the 10,000-year global annual aggregate probable maximum loss (PML). The
calculation of the NFI begins with the modeled 10,000-year global annual aggre-
gate PML and takes account of estimated reinstatement premiums, reinsurance
recoverables net of estimated uncollectible balances, and tax benefits. This
amount is deducted from Sirius’ planned legal entity comprehensive net income
for the year (before any planned losses for catastrophe events) to arrive at the
NFI. The NFI does not include the potential impact of the loss events on Sirius'
investment portfolio.
Within Aviation reinsurance, the company applies another licensed third-
party model, ALPS, in which the exposure per Airline Company can be modeled
and monitored. Within the insurance classes Accident & Health, Property and
Trade Credit, the company has models which it has developed internally.
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 fulfill all expected obligations
and reflect the best knowledge available to Sirius. Acknowledged and appro-
priate methods are used in these estimations.
Sirius supports its decisions on provisions by a combination of several
actuarial methods, such as the Chain Ladder method, the Bornhuetter-Ferguson
method and the Benktander method. A combination of benchmarks and under-
writing judgment is used for the most recent years.
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.
The acquisition of Sirius America has entailed an increase of asbestos and
environmental claims. These claims are actively managed and have been subject
to recurrent in depth analyses, the latest in the third quarter 2010. Reserves for
these claims are included at MSEK 1,117 net in the consolidated balance sheet.
historical Loss Reserve Trends
The table below shows historical loss reserve trends. When reading the table it
should be noted that amounts in other currencies are converted to the closing
exchange rate for 2011. The table below is thus not directly comparable to the
income statement. The increases in claims costs shown in the table should be
seen in relation to earned exposure. The amounts shown do not include internal
claims adjustment expenses. During 2004 two larger operations were acquired.
These operations were accounted for in a way that does not make amounts fully
available, thus we show the annual development starting with underwriting year
2005. For the Group, the last diagonal includes claims from the new subsidiaries
acquired in 2011. This implies that the table only shows the loss development
from the date of acquisition, which is the point of time when controlling influence
was obtained.
1) The increase from year 2010 to 2011 can partially be explained by
the acquisition of a subsidiary, during the fourth quarter 2011.
39
Annual Report 2011
Group / 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
6 years later
2005
2006
2007
2008
2009
2010
2011
Total
3,265
3,809
3,706
3,680
3,667
3,662
15,848
2,520
3,215
6,902
6,290
7,570
10,718
3,536
4,112
4,107
4,027
7,591
3,594
4,462
4,459
7,733
3,495
5,061
7,948
2,946
7,470
4,271
Current estimate of total claims
Total paid
15,848
15,148
10,718
4,920
7,591
7,048
7,733
6,961
7,948
6,914
7,470
4,870
4,271
1,793
Claims outstanding 1)
6,372
700
5,799
543
772
1,035
2,601
2,478
20,299
Claims net of reinsurance
2004 and
Underwriting year
prior years
2005
2006
2007
2008
2009
2010
2011
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
6 years later
Current estimate of total claims
Total paid
2,729
3,199
3,110
3,100
3,087
3,083
8,407
8,407
7,899
2,238
2,871
2,929
2,911
2,886
5,113
3,114
3,637
3,610
3,530
6,979
3,281
3,930
3,894
7,207
3,009
3,933
6,634
2,399
6,716
3,790
5,113
4,601
6,979
6,480
7,207
6,547
6,634
5,777
6,716
4,408
3,790
1,720
Claims outstanding 1)
5,302
508
511
499
660
857
2,307
2,071
12,715
Parent Company / Claims, gross
2004 and
Underwriting year
prior years
2005
2006
2007
2008
2009
2010
2011
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
6 years later
Current estimate of total claims
Total paid
3,265
3,809
3,706
3,680
3,667
3,662
3,651
3,651
3,536
2,520
3,215
6,902
6,290
7,570
8,428
3,536
4,112
4,107
4,027
4,007
3,594
4,462
4,459
4,386
3,495
5,061
4,842
2,946
4,588
2,145
8,428
3,035
4,007
3,828
4,386
3,884
4,842
4,047
4,588
2,489
2,145
244
Claims outstanding 1)
962
115
5,393
179
502
795
2,099
1,901
11,946
Claims net of reinsurance
2004 and
Underwriting year
prior years
2005
2006
2007
2008
2009
2010
2011
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
6 years later
Current estimate of total claims
Total paid
2,729
3,199
3,110
3,100
3,087
3,083
3,072
3,072
2,960
2,238
2,871
2,929
2,911
2,886
2,878
3,114
3,637
3,610
3,530
3,506
3,281
3,930
3,894
3,818
3,009
3,933
3,749
2,399
3,818
1,665
2,878
2,771
3,506
3,365
3,818
3,471
3,749
3,175
3,818
2,028
1,665
171
Claims outstanding 1)
834
112
107
141
347
575
1,790
1,495
5,400
40
1) For reconciliation against Balance Sheet, see Note 25.
Annual Report 2011
financial Risk management
Officer and the Manager of Investment Accounting and Control.
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 responsible for
the internal control in the company, has determined guidelines for the financial
operations.
The overall investment objective is to achieve consistent positive returns
The company’s investment operations during 2011 yielded a return of 2
percent, expressed in SEK. The duration in the port¬folio with interest-bearing
investments at the end of 2011 was 2.15 years which was lower compared to
2010 (2.72 years). During the year, the percentage of equities in the investment
portfolio increased to approximately 13 percent. The table below shows the
investment assets divided by class of asset, excluding deposits in companies
that are reinsured by Sirius.
and to maximize long-term after-tax return on invested assets within prudent
levels of risk, through a diversified portfolio of high-quality fixed income and
equity investments.
Sirius makes an important distinction between Policyholder Funds Invest-
ments and Owners’ Funds Investments. Policyholder Funds are defined as poli-
cyholder 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), Finansinspektionen.
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 guidelines also include restrictions on expo-
sures due to size, industry and financial strength rating.
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 Currency and Market Risk Committee is responsible for the continuous
management of market risks. The development of the market risks is reported
within the Currency and Market Risk Committee on a monthly basis. The Com-
mittee consists of the Group Chief Financial Officer, the Company Chief Financial
Investment assets, division by class of asset, percentage split
Group Parent Company
2011
2010
2011
2010
Bonds and other interest-bearing securities 77.93
Shares in Associated companies
Shares and participations
- whereof venture capital companies
Derivatives
Cash and bank balances
-
12.96
2.09
0.12
8.99
69.31
12.51
10.39
1.73
1.57
6.22
50.12
38.72
3.53
1.24
0.16
7.47
70.64
18.37
5.12
1.76
0.14
5.73
Total
100.00
100.00
100.00
100.00
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 FSA as per December 31, 2011 with
its sensitivity analyses in the form of stress tests and subsequent capital
requirements.
Interest Rate Risk
The company is exposed to the risk that the market value on its fixed-interest
assets decreases as market interest rates increase, or alternatively, that the
market value increases as the interest rates decrease. The level of interest rate
risk increases with the asset’s duration. The tables below illustrate, in absolute
figures, the exposure to interest rate risk in accordance with the risk scenarios
per the Traffic Light model as per 31 December.
Investment assets, interest rate risk according to the Traffic Light model risk scenarios / Group
Exposure
(mSEK)
Scenario,
stress test
Corresponding
Capital
basis points
requirements (mSEK)
2011
2010
2011
2010
2011
2010
2011
2010
Assets in SEK
Assets in EUR
3,540
4,823
1,406
2,784
Assets in USD and other currencies
13,873
4,368
Total
18,819 11,975
30%
25%
30%
-
30%
25%
30%
-
49
46
56
-
98
74
99
-
29
26
234
289
130
66
112
308
Investment assets, interest rate risk according to the Traffic Light model risk scenarios / Parent Company
Exposure
(mSEK)
Scenario,
stress test
Corresponding
Capital
basis points
requirements (mSEK)
2011
2010
2011
2010
2011
2010
2011
2010
Assets in SEK
Assets in EUR
3,540
4,823
1,409
2,784
Assets in USD and other currencies
4,550
4,368
Total
9,499 11,975
30%
25%
30%
-
30%
25%
30%
-
49
46
56
-
98
74
99
-
29
26
82
137
130
66
112
308
41
Annual Report 2011
Equity risk
The equity risk is the risk that the market value of equities will decrease
as a result of factors related to the external economic climate and factors
related specifically to the company in question. Equity risks are mainly
mitigated by a diversification of the share portfolio. The tables below show
the equity risk in accordance with the risk scenarios per the Traffic Light
model as per December 31.
Investment assets, equity risk according to the Traffic Light model risk scenarios / Group
Exposure
(mSEK)
Scenario,
stress test
Capital
requirements (mSEK)
Foreign shares and participations
2011
3,300
Foreign stock warrants
-
Foreign subsidiaries and associated companies
-
Total
3,300
2010
1,804
249
2,191
4,244
2011
35%
-
-
-
2010
35%
75%
35%
-
2011
1,155
-
-
2010
632
186
767
1,155
1,585
Investment assets, equity risk according to the Traffic Light model risk scenarios / Parent Company
Exposure
(mSEK)
Scenario,
stress test
Capital
requirements (mSEK)
Foreign shares and participations
Foreign stock warrants
2011
1,702
-
Foreign subsidiaries and associated companies
6,324
Total
8,026
2010
1,804
249
2,191
4,244
2011
35%
-
35%
-
2010
35%
75%
35%
-
2011
596
-
2,213
2,809
2010
632
186
767
1,585
Currency risk
Currency risk arises if assets and liabilities in the same foreign currency
vary in amounts.
The Currency and Market Risk Committee meets at least monthly in
order to monitor currency exposure and limit 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. Sirius’ total net currency exposure is divided into two
categories, exposure related to Policyholders Funds, which is matched
with the corresponding assets, and exposure related to Owner’s Funds.
Sirius’ net Policyholders Funds exposure for currency risk is marginal as the
company’s objective for managing currency risk is to match net insurance
liabilities in foreign currency with corresponding assets within very tight
time frames. The company’s total net exposure for currency risk, i.e. inclu-
ding both Policyholder and Owners Funds, before and after any hedging by
derivatives is shown in the table below.
Exchange rate exposure – Investment assets / Group
2011
2010
Shares and participations
USD
3,244
EUR
71
Bonds and other interest-bearing securities
14,308
1,471
Other financial investment assets
Other assets and liabilities, net
Total assets
Technical provisions, net
Total liabilities and provisions
1,739
2,550
81
325
21,841
1,948
-11,926
-1,400
-11,926
-1,400
Net exposure before financial hedging with derivatives
9,915
548
Nominal value currency forwards
Net exposure after financial hedging with derivatives
-3,432
6,483
-
548
GBP
20
629
58
23
730
-189
-189
541
-
541
Other
-
61
312
71
444
-437
-437
7
-
7
USD
4,182
3,539
715
1,749
EUR
100
2,866
185
130
10 185
3 281
-4,644
-1,578
-4,644
-1,578
5 541
1,703
-1,676
3,865
-
1,703
GBP
-
706
30
-29
707
-139
-139
568
-
568
Other
-
233
93
46
372
-301
-301
71
-
71
42
Annual Report 2011
In the table below, the effect on the company’s shareholders’ equity and
income statement of two stress tests are shown: An unfavorable foreign
exchange rate move of 25 basis points, in the respective foreign currencies
towards SEK and an unfavorable change to fx 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
2011
2010
Change 25 basis points
Change 10%
Change 25 basis points
Change 10%
236
648
203
387
15
55
47
170
12
54
14
57
-
1
-
7
263
758
264
621
Credit risk
Credit risk, or counterparty risk, refers to the risk that the company will not
receive agreed payment and/or will make a loss due to the counterparty’s
inability to fulfill its obligations. A substantial portion of the credit risk to
which the company is exposed, arises as a result of established reinsurance
agreements.
Credit risk in investment assets
The credit risk in investment assets can be split into credit spread risk and
counterparty risk.
Credit spread risk in investment assets
Credit spread risk results from the sensitivity of the value of fixed interest
assets to changes in the level or in the volatility of credits spreads over the
risk-free term structure. Assets sensitive to changes in credit spreads may
also give rise to others risks, e.g. counterparty default risk, which is not
covered below. The tables below show the credit spread risk in accordance
with the risk scenarios per the Traffic Light model as per 31 December.
Investment assets, credit spread risk according to the Traffic Light model risk scenarios / Group
Exposure
(mSEK)
Average credit
Scenario
Capital
spread
impact
requirements (mSEK)
2011
2010
2011
2010
2011
2010
2011
2010
Assets in SEK
Assets in EUR
852
102
1,262
1,824
Assets in USD and other currencies
9,050
2,543
1,37
2.74
1.82
1.13
-3.4%
-1.5%
1.53
-10.3%
-6.7%
1.09
-5.5%
-3.7%
Total
11,164
4,469
1.93
1.30
-5.9%
-4.8%
29
130
496
655
2
121
93
216
Investment assets, credit spread risk according to the Traffic Light model risk scenarios / Parent Company
Exposure
(mSEK)
Average credit
Scenario
Capital
spread
imapct
requirements (mSEK)
2011
2010
2011
2010
2011
2010
2011
2010
Assets in SEK
Assets in EUR
852
102
1,264
1,824
Assets in USD and other currencies
3,223
2,543
1.37
2.74
1.77
1.13
-3.4%
-1.5%
1.53
-10.3%
-6.7%
1.09
-5.7%
-3.7%
Total
5,339
4,469
2.01
1.30
-6.4%
-4.8%
29
130
183
342
2
121
93
216
43
Annual Report 2011
Counterparty risk in investment assets
The company’s policy is to allow only investments in securities with high
credit quality and therefore the counterparty risk in investment assets is
assessed to be relatively limited.
The table below shows the exposure of Sirius’ investment assets divided
per class of asset.
Exposure Group
2011
2010
2011
2010
Group Parent Company
Bonds & other interest-bearing assets
19,840
12,067
- Governments
9,151
7,608
- Swedish mortgage institutions
- Other Swedish issuers
- Other issuers
Shares in Associated Companies
Shares & participations
Derivatives
Total
156
697
9,836
-
3,300
30
-
102
4,357
2,178
1,808
273
9,472
4,840
156
697
3,779
7,317
667
30
12,067
7,608
-
102
4,357
3,139
874
24
23,170
16,326
17,486
16,104
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.
Group / 2011
Name of
security
Type
of security
market value
% of financial
(mSEK)
assets
Sirius International Financial Services Loan note to
Group Company
1,021
One Beacon Insurance Group
Symetra
Prospector Offshore Fund
Total Capital Canada Ltd
Ironshore Inc.
Volkswagen Fin Serv NV
Swedbank Hypotek AB
BMW Finance NV
Shering Plough
Share
Share
Share
Bond
Share
Bond
Bond
Bond
Bond
785
501
336
263
188
177
156
156
143
4.3
3.3
2.1
1.4
1.1
0.8
0.7
0.7
0.7
0.6
Total 3,726 15.7
Parent Company / 2011
Name of
security
Type
market value
% of financial
of security
(mSEK)
assets
WM Phoenix (Luxembourg) S.à.r.l Shares in Subsidiary 6,338 34.7
Sirius International Holdings (NL) BV Shares in Subsidiary 1,005
Share
Bond
Bond
Bond
Share
Share
Bond
Bond
336
263
177
156
156
116
112
100
5.5
1.8
1.4
1.0
0.9
0.9
0.6
0.6
0.6
8,759 48.0
Prospector Offshore Fund
Total Capital Canada Ltd
Volkswagen Fin Serv NV
Swedbank Hypotek AB
BMW Finance NV
Pentelia Ltd
Permanent Master Issuer PLC
Atlas Copco AB
Total
44
Annual Report 2011
Group and Parent Company / 2010
Name of
security
Type
market value
% of financial
of security
(mSEK)
assets
Symetra Share/Warrant
OneBeacon Insurance Group Ltd
Prospector Offshore Fund
Pentelia Ltd
Ironshore Inc
Atlas Copco AB
JP Morgan Chase
BAA Funding Ltdr
Casino Guichard Perrach
SES Global Americas Holding
Total
Share
Share
Share
Share
Bond
Bond
Bond
Bond
Bond
618
561
330
161
106
102
83
71
60
60
4.4
4.0
2.3
1.1
0.7
0.7
0.6
0.5
0.4
0.4
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.
Credit quality on classes
2011
2010
of investment assets, %
AAA
AA
A
BBB
CCC Not
Total
AAA
AA
A
BBB
BB
Total
Bonds and other interest-bearing securities 25
- Swedish government
- Swedish mortgage institutions
- Other Swedish institutions
- Foreign governments
- Other foreign issuers
18
100
100
15
12
34
31
-
-
84
10
15
51
-
-
1
20
-
-
-
-
25
41
Rated
5
-
-
-
-
10
1
-
-
-
-
2
100
100
100
100
100
100
70
100
-
0
95
22
2
0
-
0
0
7
14
0
-
100
5
33
14
0
-
0
0
37
0
0
-
0
0
1
100
100
-
100
100
100
Equity investments, divided by geographical area %
Western Europe
North America
Other
Total
Group Parent company
2011
2.60
79,13
18.27
100
2010
7.62
81.99
10.39
100
2011
1.04
91.78
7.19
100
2010
7.77
81.77
10.46
100
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
Group Parent company
2010
29.02
28.40
40.01
2.57
100
2011
21,44
39,70
37,37
1,49
100
2010
29.02
28.40
40.01
2.57
100
Group Parent company
2010
63.05
-
0.85
36.10
100
2011
51,10
1,65
7,35
39,90
100
2010
63.05
-
0.85
36.10
100
2011
10.84
70.36
17.84
0.96
100
2011
46.12
0.79
3.51
49.58
100
45
Annual Report 2011
Credit risk on receivables with reinsurers
are regularly monitored by the company’s Credit Control Committee.
The credit risk resulting from reinsurance ceded by Sirius can be divided
For IDC companies, a provision is made to a credit risk reserve, which is
into two separate components; reinsurers’ share of technical provisions as
established based on the company’s Bad Debt Reserving Policy. The credit
recorded on an ongoing basis under assets in the balance sheet, and the
risk reserve for these bad debts amounted, as per December 31, 2011,
potential exposure that would emerge in the event of large claims in the
to MSEK 62 for the group, whereof MSEK 44 at Sirius International (2010
insurance portfolio, for example, in the case of a severe European wind-
MSEK 56).
storm. An event like this would trigger major portions of Sirius’ purchased
reinsurance programme.
Ageing balances
To manage the risk of reinsurer insolvency, Sirius’ Security Commit-
Receivables regarding both direct insurance as well as assumed rein-
tee assigns and monitors ratings of all counterparties according to Sirius’
surance are followed up on a monthly basis and outwards reinsurance
internal rating scale and model for reinsurance counterparty analysis.
receivables are followed-up on a quarterly basis. Outstanding receivables
Monetary limits are set per counterparty based on the established ratings.
are analyzed on the basis of the length of time that has passed since the
If the credit worthiness of a retrocessionaire deteriorates into unacceptable
due date with the following distribution: Less than 1 month, 1-3 months,
status (in bankruptcy, liquidation, insolvent run-off, scheme of arrangement,
3-6 months, 6-9 months, 9-12 months and over 1 year. These analyses
or is, by other reasons, deemed to be unable or unwilling to honor its obliga-
comprise the basis for various collection activities, as does the supporting
tions), the counterparty is classified as an Insolvent or Doubtful Company
documentation regarding the assessment of the counterparty’s credit risk
(IDC company). Counterparties which are classified as IDC companies
status and any write-down requirements.
Group
Due for
<1 month
1-3 months
4-6 months
7-9 months
10-12 months
>1 year
Total
2 0 1 1
N e t r e c e i v a b l e s
2 0 1 0
N e t r e c e i v a b l e s
5 8 0
1 0 6
1 8 5
5 9
6 0
2 3
- 6
- 8
8
- 6
2 1 0
2 4
1 , 0 3 7
1 9 8
Parent Company
Due for
<1 month
1-3 months
4-6 months
7-9 months
10-12 months
>1 year
Total
2 0 1 1
N e t r e c e i v a b l e s
2 0 1 0
N e t r e c e i v a b l e s
1 1 4
1 0 6
5 8
5 9
4 0
2 3
- 6
- 8
- 2
- 6
2 3 5
2 4
4 4 2
1 9 8
In accordance with Sirius International’s policy for write-downs of receiva-
bles outstanding for more than 1 year, there is a specific reserve for coun-
terparties which are not classified as IDC companies which totals MSEK 7.
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 credit rating distribution for this exposure is shown in
the table below.
Group
Rating –
Standard & Poor's
A A A
A A +
A A
A A -
A +
A
A -
B B B +
B B B o r l o w e r
S p e c i a l a p p r o v a l
I n t e r n a l r e i n s u r a n c e 5 , 2 5 3
T o t a l
8 , 1 1 1
46
2011 2010
Gross Collateral Net Percentage split Gross Collateral Net Percentage split
2 1 0
0
2 4 1
4 5
3 0 7
4 7 0
2 5 3
6 2
8 4 9
4 2 0
0
0
2
0
0
4
6 7
0
9 6
1 1 9
4 , 8 3 1
5 , 1 1 9
2 1 0
0
2 3 9
4 5
3 0 7
4 6 6
1 8 7
6 2
7 5 4
3 0 1
4 2 1
3
0
3
1
4
6
3
1
1 0
5
6 5
2 , 9 9 2
1 0 0
1 2 4
0
6 4
5 6
4 1 3
1 5 2
9 4
1 0
6 3 9
3 4 4
4 , 1 5 6
6 , 0 5 2
0
0
0
0
0
0
6 3
0
1 0
1 0 1
4 , 1 5 6
4 , 3 3 0
1 2 4
0
6 4
5 6
4 1 3
1 5 2
3 1
1 0
6 2 9
2 4 3
0
1 , 7 2 2
2
0
1
1
7
2
1
0
1 1
6
6 9
1 0 0
Annual Report 2011
2011 2010
Gross Collateral Net Percentage split Gross Collateral Net Percentage split
0
0
0
0
0
0
6 6
0
1 1
1 1 9
4 , 8 3 1
5 , 0 2 7
1 1 8
0
1 7 3
4 5
3 0 7
1 0 9
1 5 5
5 9
3 5 8
3 0 1
4 2 1
2 , 0 4 7
2
0
2
1
4
2
3
1
5
6
1 2 4
0
6 4
5 6
4 1 3
1 5 2
9 4
1 0
6 3 9
3 4 4
7 4
1 0 0
4 , 1 5 6
6 , 0 5 2
0
0
0
0
0
0
6 3
0
1 0
1 0 1
4 , 1 5 6
4 , 3 3 0
1 2 4
0
6 4
5 6
4 1 3
1 5 2
3 1
1 0
6 2 9
2 4 3
0
1 , 7 2 2
2
0
1
1
7
2
1
0
1 1
6
6 9
1 0 0
Parent Company
Rating –
Standard & Poor's
A A A
A A +
A A
A A -
A +
A
A -
B B B +
B B B o r l o w e r
S p e c i a l a p p r o v a l
1 1 8
0
1 7 3
4 5
3 0 7
1 0 9
2 2 2
5 9
3 6 9
4 2 0
I n t e r n a l r e i n s u r a n c e 5 , 2 5 3
T o t a l
7 , 0 7 4
The item Internal reinsurance above refers to ceded reinsurance to White Mountains Life Re. This
receivable is collateralized with securities pertaining to the underlying liability to the original ceding
company.
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’ 2011 Retrocession Program.
financial Strength Rating
– Standard & Poor's 2011
2010
mSEK Percentage split
mSEK
Percentage split
A A +
A A
A A -
A +
A
A -
B B B +
B B B o r l o w e r
F u l l y c o l l a t e r a l i z e d
S p e c i a l a p p r o v a l
T o t a l
0
3 7 4
4 8 9
9 5 3
1 5 2
9 3 0
1 2 7
0
1 8 5
1 2 2
0
1 1
1 5
2 9
5
2 8
4
0
6
4
2 3
6 4 9
5 3 9
9 4 6
1 2 3
1 , 3 3 6
6 0
2
1 6 4
6 8
1
1 7
1 4
2 4
3
3 4
1
0
4
2
3 , 3 3 1
1 0 0
3 , 9 1 0
1 0 0
47
Annual Report 2011
Liquidity risk
Liquidity risk is the risk that the company will have difficulties fulfilling
payment obligations, mainly those related to insurance liabilities. Liquidity
risk can also be expressed as the risk of loss or impaired earning potential
as a result of the company not being able to fulfill payment obligations in
due time. Liquidity risks arise as assets and debts including derivatives
instruments have different durations.
The company’s strategy for dealing with liquidity risk aims to match
expected payments and receipts of payment (so called asset-liability mana-
gement, ALM). This is accomplished through advanced liquidity analysis of
financial assets and insurance liabilities. At the end of 2011 the duration
of interest-bearing investment assets was 2.15 years and the duration of
insurance liabilities was 2.18 years. The liquidity is monitored continuous-
ly and stress tests are performed for different scenarios. The company’s
claims payment capabilities are further strengthened with its high portion
of cash and bank deposits of the total investment assets.
The cash flow analysis also provides an illustration of the company’s
liquidity situation.
The tables below show a more detailed maturity profile for the Group
and Parent Company in respect of both financial assets and debts.
Liquidity profile – financial assets (Contractual inflows) / 2011
Group
On demand
<3 months 3 months –1 year
1-5 years
>5 years
No duration
Total
Group
On demand
<3 months 3 months –1 year
1-5 years
>5 years
No duration
Total
291
2,957
6,985
8,585
1,021
19,839
-
-
-
-
1,052
2
215
4,226
-
-
-
-
211
-
-
-
-
-
-
-
-
-
-
3,300
-
2
398
70
-
-
3,300
2,289
2
2,423
189
224
7,196
8,585
5,791
28,266
1,268
898
7,008
2,893
-
12,067
-
-
-
-
1,302
-
195
2,584
-
-
-
-
24
-
-
-
-
-
-
-
-
-
2,178
2,057
-
5
-106
32
-
2,178
2,057
1,082
5
1,385
63
221
7,008
2,893
4,166
19,058
-
-
-
-
762
117
9
-
-
-
-
165
31
26
Bonds and other interest-bearing
securities (discounted amounts)
Shares & participations
in associated companies
Shares & participations
Cash & bank balances
Receivables, direct insurance
Receivables, reinsurance
Other debtors
Prepayments and accrued income
-
-
-
2,289
-
-
-
-
Total
2,289
1,179
Liquidity profile – financial assets (Contractual inflows) / 2010
Bonds and other interest-bearing
securities (discounted amounts)
Shares & participations
in associated companies
Shares & participations
Cash & bank balances
Receivables, direct insurance
Receivables, reinsurance
Other debtors
Prepayments and accrued income
-
-
-
1,082
-
-
-
-
Total
1,082
1,325
48
9,472
7,317
667
1,411
2
1,880
293
151
2,058
874
979
5
1,384
262
26
17,655
Annual Report 2011
Liquidity profile – financial assets (Contractual inflows) / 2011
Parent Company
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 and subsidiaries
Shares & participations
Cash & bank balances
Receivables, direct insurance
Receivables, reinsurance
Other debtors
Prepayments and accrued income
Total
-
-
-
1,411
-
-
39
-
1,450
94
2,377
4,088
2,913
-
-
-
-
-
172
17
9
292
-
-
-
-
1,026
206
142
3,751
-
-
-
-
235
-
-
-
-
-
-
-
-
-
7,317
667
-
2
447
31
-
4,323
2,913
8,464
21,193
Liquidity profile – financial assets (Contractual inflows) / 2010
Parent Company
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 debtors
Prepayments and accrued income
-
-
-
979
-
-
-
-
1,268
898
7,008
2,893
-
12,067
-
-
-
-
165
257
26
-
-
-
-
1,301
-
-
-
-
-
-
24
-
-
-
-
-
-
-
-
-
2,058
874
-
5
-106
5
-
Total
979
1,716
2,199
7,032
2,893
2,836
Liquidity profile – financial debts (Contractual outflows) / 2011
Group
On demand
<3 months 3 months –1 year
1-5 years
>5 years
No duration
Total
Payables, direct insurance
Payables, reinsurance
Other creditors
Accrued expenses and deferred income
Total
-
-
-
-
-
-
-
57
132
189
-
437
701
111
1,249
-
-
36
88
124
-
-
-
19
19
1
368
20
-
389
1
805
814
350
1,970
Liquidity profile – financial debts (Contractual outflows) / 2010
Group
On demand
<3 months 3 months –1 year
1-5 years
>5 years
No duration
Total
Payables, direct insurance
Payables, reinsurance
Other creditors
Accrued expenses and deferred income
Total
-
-
-
-
-
-
-
74
69
-
590
481
81
143
1,152
-
-
38
42
80
-
-
-
1
1
2
-116
-
-
-114
2
474
593
193
1,262
49
Annual Report 2011
Liquidity profile – financial debts (Contractual outflows) / 2011
Parent Company
On demand
<3 months 3 months –1 year
1-5 years
>5 years
No duration
Total
Payables, direct insurance
Payables, reinsurance
Other creditors
Accrued expenses and deferred income
Total
-
-
-
-
-
-
-
53
51
-
453
591
112
104
1,156
-
-
23
36
59
-
-
-
-
-
1
331
23
-
355
1
784
690
199
1,674
Liquidity profile – financial debts (Contractual outflows) / 2010
Parent Company
On demand
<3 months 3 months –1 year
1-5 years
>5 years
No duration
Total
Payables, direct insurance
Payables, reinsurance
Other creditors
Accrued expenses and deferred income
Total
-
-
-
-
-
-
-
69
70
-
590
81
500
139
1,171
-
-
42
38
80
-
-
-
-
-
2
-117
-
-
-115
2
473
192
608
1,275
Liquidity profile – Technical provisions
Estimated claim payments, net, excluding ULAE
Group
2011
2010
Parent Company
<3 months
3 months–1 year
1-5 year
>5 year
Total
1,172
647
3,565
1,966
5,433
2,842
3,715
939
<3 months
3 months–1 year
1-5 year
>5 year
2011
2010
628
647
1,935
1,966
2,599
2,842
1,113
939
13,885
6,394
Total
6,275
6,394
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 fun-
ctioning process for operational risk management and shall see themselves
as risk managers. The function for Risk Control is a function responsible
for developing and improving the operational risk methodology and thereby
supporting the organization and the process owners with the tools
needed to manage these risks.
Operational risks within Sirius are identified through regularly conducted
risk control and compliance reviews. Operational risks are also identified
and managed by defining controls within the processes and through fol-
low up and testing of the effectiveness of the key controls.
Sirius’ operational risks are always reduced to acceptable levels based
on the pre-defined risk appetite.
50
Annual Report 2011
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 em-
ployees on an ad hoc basis and more formally through the risk control and
compliance reviews. The Compliance function supports the organization
and processes by informing, advising, and monitoring compliance issues
throughout the group.
Solvency II
Sirius is preparing for compliance with the Solvency II regulation. The
company has a project in place with several defined subprojects. The sub-
projects are covering all three Pillars. The project has a dedicated Project
Manager and the company’s group CFO is the chairman of the Steering
Group and the sponsor of the project.
Solvency II is discussed regularly at Board of Directors (Board)
meetings. The group CFO reports to the Board on Solvency II matters, thus
ensuring the Board’s involvement and oversight over the Solvency II project.
The company’s CRO reports about Solvency II at all Risk Management Com-
mittee meetings. During 2011 the Board requested and received an in depth
training in Solvency II covering all Pillars.
Solvency and Capital requirements
Sirius has continued to develop its internal Economic Risk Capital (ERC)
model.
The objectives for the internal ERC model are:
• Stochastically calculate capital needed at the legal entity (operating
company) level to be economically solvent over a one year period within
some specified probability level
• Consolidate quantifiable risks into one model
• Produce a realistic distribution of financial outcomes at various return
periods
• Allocate capital to key risks, business units and lines of business more
consistently
• Address Solvency II requirements
• Produce a streamlined and inclusive view of interdependencies
of these risks
The practical applications of the internal ERC model include the following:
• Assess the amount of capital necessary to support the underwriting and
investment operations over the course of a one-year period
• Allocate deployed capital in the organization to key underwriting risk
areas in order to establish appropriate risk-adjusted pricing targets
• Monitor the risk appetite established by the Risk Management Committee
• Measurement of key risks and their interaction
• Evaluate reinsurance purchases
Furthermore, the company uses the internal ERC model for stress
testing and scenario analysis and it compares results from the internal ERC
model with the Solvency II Standard Formula SCR.
Sirius has entered into the Internal Model pre-application review process
with the company’s regulator, the Swedish FSA, Finansinspektionen. By
participating in this pre-application review process, the company will be well
prepared before the final application shall be submitted. The ultimate goal is
to gain approval to use the company’s Internal Economic Risk Capital Model
for the calculations of the solvency capital requirements under Solvency II.
Sirius updated its QIS 5 SCR calculations for year-end 2010 as it was
required by the Swedish FSA to participate in the EIOPA stress test, a
European Union test of the insurance industry’s resilience to stresses in
macroeconomic variables. The results show that Sirius’ current solvency
capital is sufficient and prudent, even under stressed market conditions.
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 solvency capital (the so called “capital buffer”) in order to
asses the company’s capital strength. The model is presented on a solo
company basis with holdings in subsidiaries modeled with an equity risk
charge of 35%. The table below shows the result in accordance with the
Traffic Light model as per December 31, 2011 and 2010.
Total capital requirement according to the Traffic Light model
2011
2010
Total capital net requirement
Capital buffer
Surplus
4,691
14,096
9,405
3,626
12,534
8,908
financial Strength Rating
The financial strength of Sirius has been rated by Standard & Poor’s, A. M. Best and Moody’s.
Group and Parent Company
2011
2010
S&P 1)
A.m. Best 2)
moody’s 3)
S&P 1)
A.m. Best 2)
moody’s 3)
F i n a n c i a l S t r e n g t h R a t i n g
O u t l o o k
A -
S t a b l e
A
S t a b l e
A 3
S t a b l e
A -
A
S t a b l e
S t a b l e
A 3
S t a b l e
1) "A-" is the seventh highest of twenty-one financial strength ratings assigned by Standard & Poor’s.
2) "A" is the third highest of fifteen financial strength ratings assigned by A.M. Best.
3) "A3" is the seventh highest of twenty-one financial strength ratings assigned by Moody’s.
51
Annual Report 2011
Note 3 • Premium income
Premium income, geographical allocation
Group
Parent Company
2011
2010
2011
2010
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
8
213
655
5,079
5,955
-1,592
4,363
8
197
674
6,516
7,395
-1,787
5,608
8
213
655
4,471
5,347
-1,579
3,768
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 / Group
2011
2010
Gross
Ceded
Net
Gross
Ceded
Net
Claims paid
Loss portfolios
Change in provision for incurred and reported claims
-447
35
-832
Change in provision for incurred but not reported claims (IBNR)
-1,211
Claims handling expenses
Total claims incurred for the year´s operations
-170
-2,625
73
0
194
210
0
477
-374
35
-638
-1,001
-170
-952
39
-1,254
-942
-175
-2,148
-3,284
137
0
331
114
0
582
-815
39
-923
-828
-175
-2,702
Claims incurred for previous years´operations / Group
2011
2010
Gross
Ceded
Net
Gross
Ceded
Net
Claims paid
Loss portfolios
Change in provision for incurred and reported claims
-3,105
-503
1,554
Change in provision for incurred but not reported claims (IBNR)
159
Total claims incurred for previous years´operations
-1,895
667
-4
-433
688
918
-2,438
-507
1,121
847
-977
-3,277
-63
1,033
-432
-2,739
800
0
83
1,130
2,013
-2,477
-63
1,116
698
-726
Total claims incurred
-4,520
1,395
-3,125
-6,023
2,595
-3 428
Total claims paid / Group
2011
2010
Claims paid
Loss portfolios
Claims handling expenses
Total claims paid
Gross
Ceded
Net
Gross
Ceded
Net
-3,552
740
-2,812
-4,229
937
-3,292
-468
-170
-4
0
-472
-170
-24
-175
0
0
-24
-175
-4,190
736
-3,454
-4,428
937
-3,491
Change in provision for outstanding claims / Group
2011
2010
Gross
Ceded
Net
Gross
Ceded
Net
Change in provision for incurred and reported claims
722
Change in provision for incurred but not reported claims (IBNR)
-1,052
Total change in provisions for outstanding claims
-330
-239
898
659
483
-154
329
-221
-1,374
-1,595
414
1,244
1,658
193
-130
63
52
Annual Report 2011
Claims incurred for the year´s operations / Parent Company
2011
2010
Gross
Ceded
Net
Gross
Ceded
Net
Claims paid
Loss portfolios
Change in provision for incurred and reported claims
-273
35
-767
Change in provision for incurred but not reported claims (IBNR)
-1,074
Claims handling expenses
Total claims for the year´s operations
-159
-2,238
72
0
194
210
0
476
-201
35
-573
-864
-159
-952
39
-1,254
-942
-175
-1,762
-3,284
137
0
331
114
0
582
-815
39
-923
-828
-175
-2,702
Claims incurred for previous years´operations / Parent Company
2011
2010
Gross
Ceded
Net
Gross
Ceded
Net
Claims paid
Loss portfolios
Change in provision for incurred and reported claims
-2,703
-503
1,355
Change in provision for incurred but not reported claims (IBNR)
66
Total claims incurred for previous years´operations
-1,785
582
-4
-400
661
839
-2,121
-3,264
-507
955
727
-946
-63
1,027
-432
-2,732
800
0
83
1,130
2,013
-2,464
-63
1,110
698
-719
Total claims incurred
-4,023
1,315
-2,708
-6,016
2,595
-3,421
Total claims paid / Parent Company
2011
2010
Claims paid
Loss portfolios
Claims handling expenses
Total claims paid
Gross
Ceded
Net
Gross
Ceded
Net
-2,976
654
-2,322
-4,216
937
-3,279
-468
-159
-4
0
-472
-159
-24
-175
0
0
-24
-175
-3,603
650
-2,953
-4,415
937
-3,478
Change in provision for outstanding claims / Parent Company
2011
2010
Gross
Ceded
Net
Gross
Ceded
Net
Change in provision for incurred and reported claims
588
Change in provision for incurred but not reported claims (IBNR)
-1,008
Total change in provision for outstanding claims
-420
-205
870
665
383
-138
245
-227
-1,374
-1,601
414
1,244
1,658
187
-130
57
53
Annual Report 2011
Note 5 • Operating costs
Specification of income statement item operating costs
Group
Parent Company
2011
2010
2011
2010
Acquisition costs
-1,136
-1,494
-1,015
-1,493
Change in prepaid acquisition costs (+/–)
Administrative expenses
Provisions and profit shares in ceded reinsurance
-42
-573
290
-5
-475
284
-30
-509
315
-5
-473
284
Total operating costs
-1,461
-1,690
-1,239
-1,687
Other operating costs
Group
Parent Company
2011
2010
2011
2010
Operating costs
Claims handling expenses included in claims paid
-1,461
-170
Asset management costs included in Investment expenses
-64
Expenses for land and buildings included in Investment
expenses, net
Total other operating costs
-1
-1,696
-1,690
-175
-53
-5
-1,923
-1,239
-159
-53
-1
-1,452
-1,687
-175
-51
-5
-1,918
Total operating costs per type
Group
Parent Company
2011
2010
2011
2010
Direct and indirect personnel costs
Premises costs
Depreciation/amortization
Other expenses related to operations
Total other operating costs
-469
-48
-31
-1,148
-1,696
-429
-50
-17
-1,427
-1,923
-414
-41
-29
-968
-1,452
-418
-48
-16
-1,436
-1,918
Note 6 • Investment income
Group
Parent Company
2011
2010
2011
2010
Dividend income
Foreign shares and participations
Interest income
Bonds and other interest-bearing securities
Other interest income
113
360
30
- of which from financial assets not valued at fair value
with changes in value reported in the income statement
-
Capital gains on foreign exchange, net
Capital gains and reversed write-downs (net)
Swedish shares
Foreign shares
Interest-bearing securities
Total
126
-
89
46
764
153
313
25
-
-
-
25
107
623
1
293
21
-
130
-
27
43
515
206
312
25
-
-
-
6
100
649
54
Annual Report 2011
Note 7 • Unrealised gains on investments
Group
Parent Company
2011
2010
2011
2010
Foreign shares and participations
Derivative financial instruments
Total
185
11
196
243
29
272
23
11
34
155
29
184
Note 8 • Investment expenses and charges
Group
Parent Company
2011
2010
2011
2010
Operating expenses for land and buildings
Asset management costs
Interest expenses
Other interest expenses
-1
-64
-43
- of which from financial assets not valued at fair value
with changes in value reported in the income statement
-37
Capital losses on foreign exchange, net
Capital losses
Foreign shares and participations
Subsidiaries and associated companies
Bonds and other interest-bearing securities
Derivative financial instruments
Total
-
-
-
-
-24
-132
-5
-54
-3
-
-394
-
-
-
-10
-466
-1
-53
-2
-
-
-
-
-
-
-5
-51
-3
-
-398
-
-185
-
-
-56
-642
Note 9 • Unrealised losses on investments
Group
Parent Company
2011
2010
2011
2010
Foreign shares and participations
Bonds and other interest-bearing securities
Derivatives
Total
-302
-18
-145
-465
-92
-
-13
-105
-82
-
-11
-93
-92
-
-13
-105
55
Annual Report 2011
Note 10 • Net profit or net loss per category of financial instrument
financial assets / Group 2011
financial assets
Loan
receivables
valued at fair
financial
Available-for
and other
value in the
assets held
-sale financial
receivables
income statement
for trading
instruments
accounts
Total
Shares and participations
Derivative financial instruments
Bonds and other interest-bearing securities
Deposits with cedants
Cash and bank balance
Other debts
Total
84
-
-18
-
-
-
-
-157
-
-
-
-
-
-
488
-
-
-
66
-157
488
-
-
-
17
6
-36
-13
84
-157
470
17
6
-36
384
financial assets / Group 2010
financial assets
Loan
receivables
valued at fair
financial
Available-for
and other
value in the
assets held
-sale financial
receivables
income statement
for trading
instruments
accounts
Total
SShares and participations
Derivative financial instruments
Bonds and other interest-bearing securities
Deposits with cedants
Other debtors
Total
328
-
-
-
-
328
-
7
-
-
-
7
-
-
287
-
-
287
-
-
-
19
6
25
328
7
287
19
6
647
financial assets / Parent Company 2011
financial assets
identified
Loan
receivables
valued at fair
financial
Available-for
and other
value in the
assets held
-sale financial
accounts
income statement
for trading
instruments
receivables
Total
Shares and participations
Derivative financial instruments
Bonds and other interest-bearing securities
Deposits with cedants
Cash and bank balance
Total
-32
-
-
-
-32
-
1
-
-
-
1
-
-
456
-
-
456
-
-
-
16
5
21
-32
1
456
16
5
446
financial assets / Parent Company 2010
financial assets
identified
Loan
receivables
valued at fair
financial
Available-for
and other
value in the
assets held
-sale financial
accounts
income statement
for trading
instruments
receivables
Total
Shares and participations
Derivative financial instruments
Bonds and other interest-bearing securities
Deposits with cedants
Other debtors
Total
276
17
-
-
-
293
-
-
-
-
-
-
-
-
279
-
-
279
-
-
-
19
6
25
276
17
279
19
6
597
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) unrealized gains, (iii) return on capital, expenses, (iv) unrealized losses, with exception for (a) potential amortization and write-downs, (b) asset mana-
gement costs and (c) exchange rate gains/losses.
Currency exchange gains amount to 126 (-394) for the Group, of which 256 (-658) refer to exchange rate losses on financial assets. Exchange rate losses on liabilities
and other assets amount to -130 (264).
56
Annual Report 2011
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
Group
Parent Company
2011
2010
2011
2010
-147
41
-17
-123
-189
-
-5
-194
-147
-
26
-121
-185
-
-4
-189
Reconciliation of effective tax
Reconciliation of effective income tax rate for the Group and Parent Company to the Swedish income tax rate:
Group
Parent Company
2011
2010
2011
2010
Tax according to applicable tax rate for the Parent Company -26.3 %
-26.3 %
-26.3 %
-26.3 %
Effects of foreign tax rates
Tax effect from non-deductible expenses
Tax effect from non-taxable income
Current tax regarding previous years
Recognition/remeasurement of deductible temporary
-0.2 %
-12.9 %
8.6 %
9.3 %
-
-5.3 %
13.5 %
0 %
-
-1.6 %
0.5 %
0 %
-
-7.7 %
7.5 %
0 %
differences related to prior years
-6.3 %
0 %
0 %
0 %
Reported effective tax
-27.8 %
-18.1 %
-27.4 %
-26.5 %
Reported deferred tax receivables and deferred tax liabilities / Group
Deferred tax assets
Deferred tax liabilities
Net
2011
2010
2011
2010
2011
2010
Personnel-related provisions
Timing difference on recognition of underwriting result
Other provisions
Surplus value of securities
Safety reserve and accelerated depreciation
Tax loss carry forwards
45
361
56
118
-
653
19
-
12
3
-
-
-
-38
-52
-180
-2,550
-
-
-
-4
-
45
323
4
-62
19
-
8
3
-2,549
-2,550
-2,549
-
653
-
Net tax receivables/net tax liabilities
1,233
34
-2,820
-2,553
-1,587
-2,519
Reported deferred tax receivables and deferred tax liabilities / Parent Company
Deferred tax assets
Deferred tax liabilities
Net
2011
2010
2011
2010
2011
2010
14
12
-
15
41
20
12
3
-
35
-
-
-6
-
-6
-
-
-
-
-
14
12
-6
15
35
20
12
3
-
35
Personnel-related provisions
Other provisions
Surplus value of securities
Tax loss carry forwards
Net tax receivables/net tax liabilities
Unreported deferred tax receivables
Unreported deferred tax receivables for deductible temporary differences and tax loss carry forwards amount to 1 (0)
Opening balance
Acquisition of subsidiaries
Recognized in income statement
Recognized in other comprehensive income
Tax loss carry forwards
Closing balance
Group
Parent Company
2011
2010
2011
2010
-2,519
-2,549
982
-17
-29
-4
-
-5
35
-
-1,587
-2,519
35
-
26
-26
-
35
4
-
-4
35
-
35
Taxes recognized in shareholders’ equity mainly refer to available-for-sale financial assets -26 (35).
57
Annual Report 2011
Note 12 • Intangible assets
Group
Parent Company
Intangible assets
-IT
Capitalized
Acquired
expenditure for
intangible
development
assets
Intangible assets
-IT
Capitalized
expenditure for
development
Acquired
intangible
assets
work
Goodwill 1)
Total
work
Goodwill 1)
Total
Accumulated acquisition value
Opening balance January 1, 2010
Acquisitions for the year
Closing balance December 31, 2010
Opening balance January 1, 2011
Acquisitions for the year
Closing balance December 31, 2011
Accumulated amortization
Opening balance January 1, 2010
Depreciation for the year
Closing balance December 31, 2010
Opening balance January 1, 2011
Depreciation for the year
Closing balance December 31, 2011
Carrying amount
Per January 1, 2010
Per December 31, 2010
Per January 1, 2011
Per December 31, 2011
Amortization for the year is included in the
following rows of the income statement for 2010:
Operating costs
Other costs
Total
Amortization for the year is included in the
following rows of the income statement for 2011:
Operating costs
Other costs
Total
71
22
93
93
40
133
-66
-5
-71
-71
-15
-86
5
22
22
47
-5
-
-5
-15
-
-15
615
-
615
615
5
620
-324
-
-324
-324
-
-324
291
291
291
296
-
-
-
-
-
-
686
22
708
708
46
754
-390
-5
-395
-395
-15
-410
296
313
313
343
-5
-
-5
-15
-
-15
71
22
93
93
38
131
-66
-5
-71
-71
-15
-86
5
22
22
45
-5
-
-5
-15
-
-15
460
-
460
460
-
460
-248
-4
-252
-252
-4
-257
212
207
207
203
-
-4
-4
-
-4
-4
531
22
553
553
38
591
-314
-9
-323
-323
-20
-343
217
229
229
248
-5
-4
-9
-15
-4
-19
In the item IT-related intangible assets, acquired licenses and expenses brought forward are included for the development
of business-critical systems. For the group, no depreciation is made on goodwill, the -324 is accumulated depreciations per January 1, 2009 when IFRS was adopted.
For further 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 generating 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 without any growth of the unit’s earnings, based on historical and future
earning patterns. Cash flows are discounted using a discount rate of 1.2 %. The forecasted profit margin is currently equal to a combined ratio of approximately 95 %.
58
Annual Report 2011
Note 13 • Land and Buildings
Group and Parent Company
Acquisition cost
Opening balance January 1, 2010
Closing balance December 31, 2010
Opening balance January 1, 2011
Disposals
Acquisitions
Closing balance December 31, 2011
Depreciation
Opening balance January 1, 2010
Depreciation for the year
Closing balance December 31, 2010
Opening balance January 1, 2011
Disposals
Depreciation for the year
Closing balance December 31, 2011
Carrying amount
Per January 1, 2010
Per December 31, 2010
Per January 1, 2011
Per December 31, 2011
18
18
18
-1
10
27
-16
0
-16
-16
1
-1
-16
2
2
2
11
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 capitalized expenses are depreciated over 50 and 10 years, respectively. No depreciation is performed on land.
Note 14 • Shares and participations in Group companies
Name of subsidiary Registered offices, country
Participating interest, %
Passage2Health Ltd
London, Great Britain
Sirius Rückversicherungs Service GmbH
Hamburg, Germany
Sirius Belgium Réassurances S.A.
Liège, Belgium
Sirius International Holdings (NL) B.V. Amsterdam, The Netherlands
White Mountains Re Bermuda Ltd
Hamilton, Bermuda
White Mountains Phoenix (Luxembourg) S.à.r.l
Luxembourg
White Mountains Re Sirius Capital Ltd
London, Great Britain
2011
2010
75
100
100
100
100
100
100
-
100
100
100
100
-
-
Accumulated acquisition cost
Beginning of year
Acquisition
Disposals
Capital contribution
Repayment of paid-up capital
Reclassification from associated companies
Closing balance December 31
Accumulated write-downs
Beginning of year
Acquisition
Disposals
Write-downs for the year
Closing balance December 31
Carrying amount December 31
Parent Company
2011
2010
1,862
1,185
-
3,028
-35
2,058
8,098
1,252
728
-
388
-506
-
1,862
-781
-596
-
-
-
-781
7,317
-
-
-185
-781
1,081
59
Annual Report 2011
Subsidiaries' shareholders´equity
2011
Name of subsidiary
Shareholders’ equity
Shares %
Number of shares
Book value
Profit/loss
Passage2Health Ltd, London, Great Britain
Sirius Rückversicherungs Service GmbH
Hamburg, Germany
16
15
75
Share capital total GBP 6,800 consisting of
20
6,800 shares with nom. GBP 1 per share
100
1 share nom. value EUR 51,129
1
Sirius Belgium Réassurances S.A., (in liquidation)
11
100
Share capital total EUR 1,245,681 consisting
13
Liège, Belgium
of 700,000 shares without nom. value
-4
4
0
Sirius International Holdings (NL) B.V.,
1,005
100
Share capital total EUR 18,000 consisting of
1,124
-159
Amsterdam, The Netherlands
180 shares with nom. EUR 100 per share
White Mountains Re Bermuda Ltd,
2
100
Share capital total 120,000 USD consists of
Hamilton, Bermuda
120,000 shares nom. USD 1 per share
White Mountains Re Sirius Capital Ltd,
1
100
Share capital total GBP 1 consisting of
London, Great Britain
1 share with nom. GBP 1 per share
1
0
-1
-1
White Mountains Phoenix (Luxembourg)
6,338
100
Share capital total USD 42,266,200 consisting of
6,158
10
S.à.r.l., Luxembourg
1,690,648 shares with nom. USD 25 per share
Total
7,388
7,317
-151
2010
Name of subsidiary
Shareholders’ equity
Shares %
Number of shares
Book value
Profit/loss
Sirius Rückversicherungs Service GmbH, Hamburg, Germany
12
100
1 share nom. value EUR 51,129
Sirius Belgium Réassurances S.A. (in liquidation),
12
100
Share capital total EUR 1,245,681 consisting
Liège, Belgium
of 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. EUR 100 per share
White Mountains Re Bermuda Ltd,
36
100
Share capital total USD 120,000 consists of
36
-143
Hamilton, Bermuda
120,000 shares with nom. USD 1 per share
Total
1,105
1,081
236
60
Annual Report 2011
Note 15 • Shares and participations in associated companies
Carrying amount January 1
Share of associated company’s profit/loss 1)
Foreign exchange effect
Reclassification of associated company 2)
Carrying amount December 31
Carrying amount January 1
Reclassification of associated company 2)
Carrying amount December 31
Name of associated companies / 2011
Group
2011
2010
2,178
81
67
-2,236
-
2,185
125
-132
-
2,178
Parent Company
2011
2010
2,058
-2,058
-
2,058
-
2,058
Assets
Liabilities
Shareholders’
Net income
Share of
equity
capital %
White Mountains Phoenix (Luxenbourg) S.à.r.l., Luxemburg
Total
-
-
-
-
-
-
-
-
-
-
Name of associated companies / 2010
Assets
Liabilities
Shareholders’
Net income
Share of
White Mountains Phoenix (Luxenbourg) S.à.r.l., Luxemburg
20,166
Total
20,166
11,355
11,335
equity
8,811
8,811
capital %
533
533
24.7
24.7
Number
of shares
-
-
Number
of shares
2,461,000
2,461,000
1) Refers to the Group's share of income in the associated company White Mountains Phoenix (Luxembourg) S.à.r.l. The translation of
the exchange rate difference arising in the conversion to Swedish krona is reported directly against shareholders’ equity.
2) During 2011 Sirius International received and purchased the remaining shares in White Mountains Phoenix (Luxembourg) S.à.r.l. and
owns 100 % per December 31, 2011. Consequently, the holding is reclassified to Shares in group companies.
Note 16 • Investments in shares and participations
Group
3,300
1,808
3,575
1,946
fair value
Acquisition cost
2011
2010
2011
2010
fair value
Acquisition cost
2011
2010
2011
2010
Parent Company
667
874
783
940
Further information on financial instruments can be found in Note 20.
61
Annual Report 2011
Note 17 • Bonds and other interest-bearing securities
fair value
Acquisition cost
Group
2011
2010
2011
2010
Swedish government
Swedish mortgage institutions
Other Swedish issuers
Foreign governments
Other foreign issuers
Total
2,688
156
696
6,463
8,816
4,725
0
102
2,883
4,357
2,632
152
675
6,381
8,640
4,735
0
98
2,886
4,292
18,819
12,067
18,480
12,011
Of which listed
18,731
12,067
18,391
12,011
Difference compared to nominal value
Total excess amount
Total shortfall
1,111
95
622
40
753
75
549
24
fair value
Acquisition cost
Parent Company
2011
2010
2011
2010
Swedish government
Swedish mortgage institutions
Other Swedish issuers
Foreign governments
Other foreign issuers
Total
2,687
156
696
2,128
3,805
9,472
4,725
0
102
2,883
4,357
12,067
2, 632
4,735
152
675
2,102
3,746
9,307
0
98
2,886
4,292
12,011
Of which listed
9,472
12,067
9,307
12,011
Difference compared to nominal value
Total excess amount
Total shortfall
503
33
622
40
323
17
549
24
Note 18 • Derivatives
Group
Parent Company
Derivatives
2011
2010
2011
2010
Derivatives with underlying security shares
Derivatives with underlying security currency
Total
-
30
30
249
24
273
-
30
30
-
24
24
Derivatives with underlying security in currency refer to currency hedging of MUSD 500 against SEK. The company has entered into two internal currency hedging
agreements with Sirius International Financial Services Ltd (formerly White Mountains Re Financial Services Ltd).
The first agreement implies that Sirius International per January 1, 2010 has sold MUSD 250 on the basis of a currency futures transaction with a duration
of five years at the exchange rate 7.18. 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.
The second agreement, as per September 30, 2011, implies that Sirius International has sold another MUSD 250 on the basis of a currency futures
transaction with a duration of two years at the exchange rate 7.00. With the help of foreign exchange options, the currency futures transactions are settled on the
basis of an exchange rate cap of SEK 11.39 per USD, and an exchange rate floor of SEK 4.86 per USD.
Outside these ranges, the company takes no hedging measures. The currency hedge agreements are valued monthly.
Derivatives with underlying security in shares are exclusively Symetra warrants. These warrants have been sold during 2011 to a company within the White
Mountains Group
62
Annual Report 2011
Note 19 • Other debtors
Group
Parent Company
2011
2010
2011
2010
Other debtors, group companies 1)
Other debtors
Total other debtors 2)
2
187
189
-
63
63
244
49
293
201
61
262
1) Group companies are defined as companies within the White Mountains-group.
2) The majority of the receivables have a duration less than three months.
Note 20 • Categories of financial assets and liabilitities and their fair values
financial
Loan
assets valued
receivables and
at fair value
Available-for-
Total
Group 2011
accounts
via the income
sale financial
carrying
Acquisition
receivables
statement
assets
amount
fair value
value
Shares and participations
Derivatives
Bonds and other interest-bearing securities
Accrued income
Other debtors
Total
-
-
-
494
189
683
3,300
30
9,347
71
-
-
-
3,300
30
3,300
30
9,472
18,819
18,819
130
-
695
189
695
189
3,575
12
18,523
695
189
12,748
9,602
23,033
23,033
22,994
financial
Loan
assets valued
receivables and
at fair value
Available-for-
Total
Parent Company 2011
accounts
via the income
sale financial
carrying
Acquisition
receivables
statement
assets
amount
fair value
value
Shares and participations
Derivatives
Bonds and other interest-bearing securities
Accrued income
Other debtors
Total
-
-
-
362
293
655
667
30
-
-
-
-
-
667
30
667
30
9,472
9,472
9,472
130
-
492
293
492
293
783
12
9,333
492
293
697
9,602
10,954
10,954
10,913
63
Annual Report 2011
financial liabilities
Group 2011
Other financial
Carrying
liabilities
amount
fair value
Other liabilities
Accrued expenses
Total
814
350
814
350
814
350
1,164
1,164
1,164
financial liabilities
Parent Company 2011
Other financial
Carrying
liabilities
amount
fair value
Other liabilities
Accrued expenses
Total
690
199
889
690
199
889
690
199
889
financial
Loan
assets valued
financial assets
Group 2010
receivables and
at fair value
Available-for-
Total
accounts
via the income
sale financial
carrying
Acquisition
receivables
statement
assets
amount
fair value
value
Shares and participations
Derivatives
Bonds and other interest-bearing securities
Accrued income
Other debtors
Total
-
-
-
607
63
670
1,808
273
-
-
-
-
-
1,808
273
1,808
273
12,067
12,067
12,067
-
-
607
63
607
63
1,946
266
12,599
607
63
2,081
12,067
14,818
14,818
15,481
financial
Loan
assets valued
financial assets
Parent Company 2010
receivables and
at fair value
Available-for-
Total
accounts
via the income
sale financial
carrying
Acquisition
receivables
statement
assets
amount
fair value
value
Shares and participations
Derivatives
Bonds and other interest-bearing securities
Accrued income
Other debtors
Total
-
-
-
606
262
868
874
24
-
-
-
-
-
874
24
874
24
940
7
12,067
12,067
12,067
12,599
-
-
606
262
606
262
606
262
898
12,067
13,833
13,833
14,414
financial liabilities
Other financial
Carrying
Group 2010
liabilities
amount
fair value
Other liabilities
Accrued expenses
Total
593
193
786
593
193
786
593
193
786
financial liabilities
Other financial
Carrying
Parent Company 2010
liabilities
amount
fair value
Other liabilities
Accrued expenses
Total
608
192
800
608
192
800
608
192
800
64
Annual Report 2011
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 / 2011
Level 1
Level 2
Level 3
Total
Shares and participations
Derivatives
Bonds and other interest-bearing securities
Total
1,693
-
4,044
5,737
614
-
14,687
15,301
993
30
88
1,111
3,300
30
18,819
22,149
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 / 2011
Level 1
Level 2
Level 3
Total
Shares and participations
Derivatives
Bonds and other interest-bearing securities
Total
-
-
3,228
3,228
348
-
6,244
6,592
319
30
0
349
667
30
9,472
10,169
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 values 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 or 3.
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 deter-
mined 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
valuation 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.
65
Annual Report 2011
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 / 2011
participations
Derivatives
Bonds
Total
Shares and
Opening balance January 1, 2011
Total reported profit/loss:
-reported in profit/loss for the year 1)
Acquired balances
Acquisition cost, purchase
Proceeds of sale, sales
Transfer from Level 3
Transfer into Level 3
FX difference
Closing balance December 31, 2011
Profit/loss reported in profit/loss for the
year for assets included in the closing
529
-24
985
-
-497
-
3
-3
993
273
-158
6
-87
-
-
-4
30
-
-
246
-
-
-245
88
-1
88
802
-182
1,231
6
-584
-245
91
-8
1,111
balance December 31, 2011 1)
-24
-158
-
-182
Parent Company / 2011
participations
Derivatives
Bonds
Total
Shares and
Opening balance January 1, 2011
Total reported profit/loss:
-reported in profit/loss for the year 1)
Acquisition cost, purchase
Proceeds of sale, sales
Transfer from Level 3
Transfer into Level 3
Closing balance December 31, 2011
Profit/loss reported in profit/loss for the
year for assets included in the closing
529
-33
-
-180
-
3
319
24
-
6
-
-
-
30
balance December 31, 2011 1)
-33
-
-
-
-
-
-
-
-
-
553
-33
6
-180
-
3
349
-33
66
Annual Report 2011
Group / 2010
participations
Derivatives
Bonds
Total
Shares and
Opening balance January 1, 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 December 31, 2010
Profit/loss reported in profit/loss for the
year for assets included in the closing
323
-12
-
251
-33
-
-
529
-
7
-
266
-
-
-
273
balance December 31, 2010 1)
-12
7
-
-
-
-
-
-
-
-
-
323
-5
-
517
-33
-
-
802
-5
Parent Company / 2010
participations
Derivatives
Bonds
Total
Shares and
Opening balance January 1, 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 December 31, 2010
Profit/loss reported in profit/loss for the year
for assets included in the closing
balance December 31, 2010 1)
323
-12
0
251
-33
-
-
529
-
17
-
7
-
-
-
24
-12
17
-
-
-
-
-
-
-
-
-
323
5
0
258
-33
0
0
553
5
1) Reported in net income of financial transactions in profit/loss for the year.
Financial instruments classified in Level 3 are to some extent funds valued at NAV-rate. In one of these holdings the board of the fund, in
early 2012, informed the investors that the future cash flows may be affected negatively under certain unfavorable scenarios. Such
a development would affect the value of the fund negatively. To date, enough information to evaluate the possible negative impact of the
scenarios is not available. Sirius will monitor the development carefully and regularly conduct impairment tests of the holding.
67
Annual Report 2011
Note 21 • Tangible assets
Acquisition cost
Opening balance January 1, 2010
Acquisition
Disposals
Closing balance December 31, 2010
Opening balance January 1, 2011
Acquisition
Acquired balances
Disposals
Currency reevaluation effect
Group
Parent Company
Equipment
Equipment
80
24
-18
86
86
23
59
-16
0
79
24
-18
85
85
23
-
-8
-
Closing balance December 31, 2011
152
100
Depreciations
Opening balance January 1, 2010
Depreciation for the year
Disposals
Closing balance December 31, 2010
Opening balance January 1, 2011
Acquired balances
Depreciation for the year
Disposals
Currency reevaluation effect
Closing balance December 31, 2011
Carrying amount
January 1, 2010
December 31, 2010
January 1, 2011
December 31, 2011
Note 22 • Deferred acquisition costs
Opening balance
Acquired portfolio
Capitalization for the year
Depreciation/amortization for the year
Exchange rate gains/losses
Closing balance
Note 23 • Untaxed reserves
Parent Company
Accumulated accelerated depreciation, goodwill and equipment
Opening balance January 1
Change for the year
Closing balance December 31
Appropriation to safety reserve
Opening balance January 1
Change for the year
Closing balance December 31
Total
68
-59
-12
17
-54
-54
-52
-13
14
0
-105
21
32
32
47
-59
-12
17
-54
-54
-
-13
7
-
-60
20
31
31
40
Group
Parent Company
2011
2010
2011
2010
386
118
323
-359
3
471
419
-
406
-411
-28
386
386
-
296
-344
3
341
419
-
406
-411
-28
386
2011
2010
40
-5
35
9,647
-
9,647
9,682
44
-4
40
9,647
-
9,647
9,687
Annual Report 2011
Note 24 • Provisions for unearned premiums and unexpired risks
Provisions for unearned premiums / Group
2011
Gross
Reinsurers’
2010
Reinsurers’
share
Net
Gross
share
Net
Opening balance
Acquired portfolio
Insurance policies signed during period
Earned premiums for the period
Currency effect
Closing balance
1,936
395
1,479
-1,663
35
2,182
Provisions for unexpired risks / Group
-403
11
-289
254
-12
-439
2011
Gross
Reinsurers’
1,533
406
1,190
-1,409
23
1,743
2,190
-
2,072
-2,111
-215
1,936
-379
-
-419
327
68
-403
1,811
-
1,653
-1,784
-147
1,533
2010
Reinsurers’
share
Net
Gross
share
Net
Opening balance
Current year´s provisions included in profit/loss
Previous years´provisions included in profit/loss
Currency effect
Closing balance
126
-
-10
2
118
-93
-
8
-2
-87
33
-
-2
0
31
140
-
-6
-8
126
-103
-
4
6
-93
37
-
-2
-2
33
Provisions for unearned premiums / Parent Company
2011
Gross
Reinsurers’
2010
Reinsurers’
share
Net
Gross
share
Net
Opening balance
Insurance policies signed during period
Earned premiums for the period
Currency effec
Closing balance
1,936
1,487
-1,726
33
1,730
Provisions for unexpired risks / Group
-403
-369
341
-11
-442
2011
Gross
Reinsurers’
1,533
1,118
-1,385
22
1,288
2,190
2,071
-2,111
-214
1,936
-379
-419
327
68
-403
1,811
1,652
-1,784
-146
1,533
2010
Reinsurers’
share
Net
Gross
share
Net
Opening balance
Current year´s provisions included in profit/loss
Previous years´provisions included in profit/loss
Currency effect
Closing balance
126
-
-10
2
118
-93
-
8
-2
-87
33
-
-2
-
31
140
-
-6
-8
126
-103
-
4
6
-93
37
-
-2
-2
33
69
Annual Report 2011
Note 25 • Claims outstanding
Provisions for outstanding claims
2011
2010
Reinsurers´
Reinsurers´
Group
Gross
share
Net
Gross
share
Net
3,707
1,819
5,526
7,426
-
4,982
4,879
9,861
-
6
-852
-3,096
-3,948
-
0
4,130
1,783
5,913
-
6
2,148
3,284
-582
2,702
Opening balance, reported claims
Opening balance, incurred but not reported claims (IBNR)
Opening balance
Acquired portfolio
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
4,831
6,251
11,082
8,475
-
2,625
1,895
170
Paid/transferred to insurance liabilities or other current liabilities
4,020
-1,124
-4,432
-5,556
-1,049
-
-477
-918
0
-736
-321
Currency effect
Closing balance
Closing balance, reported claims
Closing balance, incurred but not reported claims (IBNR)
Provisions for outstanding claims
977
170
3,284
92
2,739
175
4,253
-380
-2,013
0
-937
50
413
20,300
-7,585
12,715
11,082
-5,556
7,882
12,418
-1,454
-6,131
6,428
6,287
4,831
6,251
-1,124
-4,432
2011
Reinsurers´
2010
Reinsurers´
726
175
3,316
-330
5,526
3,707
1,819
Parent Company
Gross
share
Net
Gross
share
Net
Opening balance, reported claims
Opening balance, incurred but not reported claims (IBNR)
Opening balance
Cost for claims incurred during the current year
Change in estimated cost for claims incurred in previous years
(close down profit/loss)
Claims handling expense
Paid/transferred to insurance liabilities or other current liabilities
Currency effect
Closing balance
Closing balance, reported claims
Closing balance, incurred but not reported claims (IBNR)
4,831
6,251
11,082
2,238
1,785
159
3,444
443
-1,124
-4,432
-5,556
-476
-839
0
-650
-324
11,945
-6,545
4,272
7,673
-908
-5,637
3,707
1,819
5,526
1,762
946
159
2,794
119
5,400
3,364
2,036
4,982
4,879
9,861
3,284
2,732
175
4,240
-380
-852
-3,096
-3,948
-582
-2,013
0
-937
50
11,082
-5,556
4,831
6,251
-1,124
-4,432
4,130
1,783
5,913
2,702
719
175
3,303
-330
5,526
3,707
1,819
Note 26 • Equalisation provision
Group
Parent Company
2011
2010
2011
2010
Opening balance
Release of provision made in prior years
Provision for the year
Closing balance
-
-
-
-
-
-
-
-
12
-
49
61
3
-3
12
12
70
Annual Report 2011
Note 27 • Claims handling provision
Opening balance
Acquired portfolio
Release of provision made in prior years
Provision for the year
Currency effect
Closing balance
Note 28 • Employee benefits
Group
Parent Company
2011
2010
2011
2010
129
115
-34
44
0
254
122
-
-20
41
-14
129
129
-
-28
41
0
142
122
-
-20
41
-14
129
Group
Parent Company
Pension provisions
2011
2010
2011
2010
Pension provision – defined benefit plans Sweden
Pension provision – other defined benefit plans
Total
-4
6
2
-2
7
5
7
-
7
9
-
9
Specification of provisions for employee benefits
In a defined benefit plan, the employer guarantees that the
employee will receive a defined level of benefit upon retirement,
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 guaranteed pension obligations,
as well as on its own assumptions regarding future development.
The provision reported in the balance sheet for defined bene-
fit 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 unrecognized actuarial gains and losses, and unre-
cognized 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 be 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 the actuarial net loss
amount does not exceed the corridor amount, there is no surplus
to amortize through the income statement during the employees’
remaining period of service.
The group has defined benefit plans in Sweden (collective
agreement) 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
of retirement earlier than at the age of 65. 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 responsi-
bility for the employees’ pension.
Amounts in the balance sheet for defined benefit plans / Group
2011
2010
Defined benefit obligations
Fair value of plan assets
Sub-total
Net cumulative unrecognized actuarial losses
Provisions for defined benefit plans
67
-61
6
-4
2
59
-53
6
-1
5
71
Annual Report 2011
Pension cost recognized in the income statement / Group
2011
2010
Current service cost
Interest cost
Expected return on plan assets
Amortization of actuarial net loss
Amortization of service cost prior year
Pension cost for defined benefit plans
Paid premiums, defined contribution plans
Total pension cost 1)
1
2
-2
-
-
1
70
71
11
3
-2
0
6
18
44
62
1) The pension cost for the year does not include special salary tax, which is disclosed in note 32 in the table ”Remuneration to employees”.
Changes in defined benefit obligations / Group
2011
2010
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
Transition
Exchange differences on foreign plans
Closing balance pension obligation
59
1
3
3
-2
-
3
0
67
41
11
3
1
-1
6
-
-1
59
Changes in plan assets / Group
2011
2010
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
53
2
-1
8
-2
1
61
50
1
0
5
-1
-2
53
The investment assets’ fair value, as per December 31, 2011,
is lower than the value of the Group’s defined benefit pension
commitments. This is due to the Group having a non-funded com-
mitment, for the portion of the Group’s benefit-based pension
plans which facilitate retirement between 62 and 65 years of
age. Actual retirements are settled when the decision regarding
retirement is made. In conjunction with such a decision, the total
pension premium is paid to the company’s pension administrator
for the period up to 65 years of age. During the year, three indivi-
duals have exercised the opportunity to take early retirement.
Unrecognized actuarial net loss / Group
2011
2010
Opening balance actuarial net losses
Defined benefit obligations
The period’s experience effect on actuarial net gains (-)/net losses (+) on pension obligations
Amortization of actuarial net gains/losses
Plan assets
The period’s experience effect on actuarial net gains (-)/net losses (+) on plan assets
Amortization of actuarial net gains/losses
Closing balance actuarial net losses
1
3
-
0
-
4
-
1
-
-
-
1
72
Annual Report 2011
Corridor method / Group
2012
2011
2010
Opening balance actuarial net losses
Corridor amount
Expected remaining service time (years)
Gains/losses subject to amortization
4
6
14.7
-
1
5
14.9
-
0
5
15.7
-
Actuarial assumptions, percentages / Group
2011
2010
Discount rate, January 1
Discount rate, December 31
Expected return on plan assets
Expected salary increases, January 1
Expected salary increases, December 31
Indexation of benefits
Indexation of income base amount, January 1
Indexation of income base amount, December 31
Staff turnover
5 %
3.7 %
3 %
2.9 %
2.9 %
1.4 %
2.4 %
2.4 %
3 %
5 %
5 %
3 %
3.5 %
3.5 %
2 %
3 %
3 %
3 %
When calculating the expense for defined benefit obligations, as-
sumptions 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 remain-
ing 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 instruments by Sirius pension investment
manager. The expected return on plan assets mirrors the expec-
ted average yearly return on those financial instruments for the
remaining duration.
Expected future annual salary increases is mirrored by com-
position of effects from collective agreements and salary drift.
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.
Three-year summary / Group
2011
2010
2009
Defined benefit obligations
Fair value of plan assets
Total
Actuarial gains (-) losses (+) for the year
Pension obligations
Plan assets
Note 29 • Other creditors
Creditors arising out of direct insurance
-67
61
-6
3
0
-59
53
-6
1
-
-41
50
9
-
-
Group
Parent Company
2011
2010
2011
2010
Amounts due to group companies 1)
Other debtors
Total other creditors 2)
595
219
814
519
74
593
609
81
690
539
69
608
1) Group companies are defined as companies within the White Mountains-group.
2) The majority of the liabilities have a duration less than one year.
73
Annual Report 2011
Note 30 • Contingent liabilities and commitments
Group
Parent Company
Pledged assets for own liabilities and provisions
2011
2010
2011
2010
Bonds and other interest-bearing securities
Cash and bank
9,528
223
Assets for which policy holders have preferential rights 9,751
7,553
115
7,668
8,453
170
8,623
7,553
115
7,668
On the basis of the stipulations in Chapter 7, Section 11 of the Insurance Business Act, registered assets amount to MSEK 7,029. 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.
Contingent liabilities and other commitments
2011
2010
2011
2010
Group
Parent Company
Nominal amount
Guarantees on behalf of subsidiary
Future commitments for investments in private
equity companies
Total
Note 31 • Associated parties
1,458
174
1,632
-
60
60
1,458
56
1,514
-
60
60
Summary of transactions with associated companies within the White mountains Group
Group / 2011
Services
purchased
Receivables
Liabilities
from
associated
associated
Indemni-
associated
parties per
parties per
Premium
income,
net
fication
parties
December 31
December 31
Sirius America Insurance – assumed reinsurance 2)
Sirius America Insurance – ceded reinsurance 2)
Sirius America Insurance – administrative services 2)
Esurance – assumed reinsurance
WM Life Re – ceded reinsurance
Sirius Global Services – administrative services 2)
Sirius International Holding - administrative services
Sirius International Financial Services LLC – financial services
Sirius Insurance Holding Sweden AB – group contributions -
Fund American Holdings AB – group contributions
White Mountains Advisors LLC – financial services
White Mountains Capital Inc – administrative services
Sirius International Insurance Group Ltd –administrative services
Sirius International Group Ltd. – administrative services
White Mountains International S.à.r.l. – administrative services
OneBeacon Insurance Group Ltd. – dividends
Symetra Financial Services Ltd. – dividends
122
-22
-
- 42
-209
-
-
-
-
-
-
-
-
-
-
-
-
21
19
-
44
857
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2
-
-
5
5
-1
-
-
25
-
-5
-
-
71
12
-
-
-
-
5,253 1)
-
-
1,021
-
-
-
-
2
-
-
-
-
-
-
-
-
16
-
1
13
374
190
11
1
-
3
1
-
-
Total
-151 941
114 6,276 610
74
Annual Report 2011
Parent Company / 2011
Services
Premium
income,
purchased
Receivables
Liabilities
from
associated
associated
Indemni-
associated
parties per
parties per
net
fication
parties
December 31
December 31
Sirius America Insurance – assumed reinsurance
Sirius America Insurance – ceded reinsurance
Sirius America Insurance – administrative services
Esurance – assumed reinsurance
WM Life Re – ceded reinsurance
Sirius Global Services – administrative services
Sirius International Holding - administrative services
Sirius International Financial Services LLC – financial services
Sirius Insurance Holding Sweden AB – group contributions-
Fund American Holdings AB – group contributions
White Mountains Advisors LLC – financial services
Sirius International Holding NL (BV) – anticipated dividend
Syndicate 1945 – intra group receivables
White Mountains Re Sirius Capital Ltd. – intra group receivables
Sirius Rückversicherungs Service GmbH - intra group payables
Sirius Belgium Réassurances S.A - intra group payables
147
-25
-
- 42
-209
-
-
-
-
-
-
-
-
-
-
-
26
22
-
44
857
-
-
-
-
-
-
-
-
-
-
-
-
-
3
-
-
7
5
-1
-
-
19
-
-
-
-
-
499
1
-
-
5,253 1)
-
-
-
-
-
-
205
32
7
-
-
Total
-129
949
33
5,997
-
-
-
-
16
2
1
13
374
190
5
-
-
-
22
1
624
Group and Parent Company / 2010
Services
Premium
income,
purchased
Receivables
Liabilities
from
associated
associated
Indemni-
associated
parties per
parties per
net
fication
parties
December 31
December 31
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
512
- 56
-
727
-216
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
-
-
-
-
-
-
-
- 465
56
-
- 713
1,306
-
-
-
-
-
-
-
Total
967
184
-
-
-1
-
-
-11
-2
-
-17
-
-
-20
-51
819
-
-
181
4,093 1)
-
-
-
-
-
-
-
5,093
-
7
-
-
13
14
-
2
7
323
170
5
541
1) Refers to reinsurer’s share of outstanding claims.
2) Refers to reinsurance and services purchased during 9 months 2011. As of October 1, 2011, all companies within the White Mountains Phoenix (Luxembourg)
S.à.r.l. Group are consolidated and the reinsurance and services are eliminated.
75
Annual Report 2011
Note 32 • Average number of employees, salaries and other remuneration
Average number of employees / Group
men
Women
Total
men
Women
Total
2011
2010
Parent Company
Employees in Subsidiaries
Germany
UK
USA 1)
Canada 1)
Total
132
140
272
131
136
4
1
20
1
8
1
18
1
12
2
38
2
5
-
-
-
7
-
-
-
267
12
-
-
-
158
168
326
136
143
279
Average number of employees / Parent Company
men
Women
Total
men
Women
Total
2011
2010
Sweden
UK
Belgium
Switzerland
Singapore
Denmark
Bermuda
Total
68
22
22
4
5
4
7
70
19
23
5
10
2
11
138
41
45
9
15
6
18
63
23
24
4
5
4
8
70
19
20
5
10
1
11
133
42
44
9
15
5
19
132
140
272
131
136
267
Senior management / Group and Parent Company
men
Women
Total
men
Women
Total
2011
2010
Board and CEO
Other senior members of management
Total
4
2
6
-
-
-
4
2
6
3
3
6
1
-
1
4
3
7
1) Average number of employees in USA and Canada for 2011 only refers to the period October 1 – December 31, 2011.
76
Annual Report 2011
Remuneration to employees
Group
Parent Company
2011
2010
2011
2010
Salaries including bonuses
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
299
52
71
70
1
78
448
273
80
62
43
19
76
411
248
44
68
69
-1
76
392
261
77
56
43
13
76
393
Of which paid remuneration for the year to:
Group
Parent Company
CEO
2011
2010
2011
2010
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
-
15
11
6
2
2
-
13
12
8
3
3
-
15
12
7
3
3
-
15
12
8
3
3
-
15
11
6
2
2
-
13
12
8
3
3
-
15
12
7
3
3
-
15
Salaries and remuneration
The Board receives remunerations in accordance with the resolutions of the Annual General Meeting. Board fees are not paid to individuals
employed in the company. No Board fees were paid in 2010 and 2011.
Remuneration policy
Sirius International’s remuneration policy is available on the Company’s homepage, which follows FFFS 2009:7.
Note 33 • Fees and reimbursements to auditors
PriceWaterhouseCoopers (PWC)
Audit services
Tax counseling
Total
Group
Parent Company
2011
2010
2011
2010
7
1
8
4
1
5
4
1
5
4
1
5
Audit assignment refers to the examination of the annual report and accounting records, as well as the administration of the Board of
Directors and CEO, other duties which are the responsibility of the Company’s auditors to execute and the provision of advisory services
or other assistance resulting from observations made during such an examination or the implementation of such other duties. Other
services than those included in the audit agreement are classified as audit services in addition to audit agreement, tax counseling and
other services.
77
Annual Report 2011
Note 34 • Operational leasing
Non-cancellable leases
Group
Parent Company
2011
2010
2011
2010
Due for payment within one year
Due for payment later than one year but within five years
Due for payment after five years
Total
56
146
25
227
32
40
7
79
31
101
5
137
31
35
7
73
Note 35 • Class analysis
Profit/loss per insurance class
Group / 2011
Personal
marine,
fire and
other
accident and
aviation and
property
Credit
Total direct
Assumed
health
transport
damage
insurance
miscellaneous
insurance
reinsurance
Premium income, gross
Premium earned, gross
Incurred claims, gross
Operating expenses, gross
Result, ceded reinsurance
Technical result
651
599
-337
-272
-5
-15
75
58
-38
-29
4
-5
83
87
-98
-40
0
-51
0
0
-2
0
0
-2
91
86
-40
-33
0
13
900
830
-515
-374
-1
-60
5,055
5,319
-4,005
-1,385
129
58
Parent Company / 2011
Personal
marine,
fire and
other
accident and
aviation and
property
Credit
Total direct
Assumed
health
transport
damage
insurance
miscellaneous
insurance
reinsurance
Premium income, gross
Premium earned, gross
Incurred claims, gross
Operating expenses, gross
Result, ceded reinsurance
Equalization provision
Technical result
635
596
-335
-264
-4
0
-7
75
58
-38
-30
4
0
-6
83
87
-97
-40
0
0
-50
0
0
-3
0
0
0
-3
82
83
-39
-29
0
0
15
876
824
-512
-363
0
0
-51
4,471
4,772
-3,511
-1,173
53
-49
92
Parent Company / 2010
Personal
marine,
fire and
other
accident and
aviation and
property
Credit
Total direct
Assumed
health
transport
damage
insurance
miscellaneous
insurance
reinsurance
Premium income, gross
Premium earned, gross
Incurred claims, gross
Operating expenses, gross
Result, ceded reinsurance
Equalization provision
Technical result
637
630
-337
-277
-17
0
-1
57
55
-17
-24
-5
0
9
89
79
-33
-39
0
0
7
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
The class analysis is substantially the same for the Group and Parent Company for 2010.
Total
5,955
6,149
-4,520
-1,759
128
-2
Total
5,347
5,596
-4,023
-1,536
53
-49
41
Total
7,395
7,441
-6,016
-1,960
1,169
-9
625
78
Annual Report 2011
Stockholm, March 6, 2012
Allan Waters
Chairman of the Board of Directors
Brian Kensil
Lars Ek
Göran Thorstensson
President & CEO
Our Auditors’ Report was submitted on March 6, 2012
Anna Hesselman
Authorized Public Accountant
Morgan Sandström
Authorized Public Accountant
79
Annual Report 2011
Audit Report
To the annual meeting of the shareholders
of Sirius International Insurance Corpo-
ration (publ) corporate identity number
516401-8136
and disclosures in the annual accounts and
consolidated accounts. The procedures se-
lected depend on the auditor’s judgment, in-
cluding the assessment of the risks of material
misstatement of the annual accounts and con-
solidated accounts, whether due to fraud or
error. In making those risk assessments, the
Report on the annual accounts
auditor considers internal control relevant to
and consolidated accounts
the company’s preparation and fair presenta-
We have audited the annual accounts and con-
tion of the annual accounts and consolidated
solidated accounts of Sirius International Insur-
accounts in order to design audit procedures
ance Corporation (publ) for the year 2011.
that are appropriate in the circumstances, but
Responsibilities of the Board of Directors
not for the purpose of expressing an opinion
and the Managing Director for the annual ac-
on the effectiveness of the company’s internal
counts and consolidated accounts
control. An audit also includes evaluating the
The Board of Directors and the Managing
appropriateness of accounting policies used
Director are responsible for the preparation
and the reasonableness of accounting esti-
and fair presentation of these annual accounts
mates made by the Board of Directors and the
and consolidated accounts in accordance with
Managing Director, as well as evaluating the
International Financial Reporting Standards, as
overall presentation of the annual accounts
adopted by the EU, and the Annual Accounts
and consolidated accounts.
Act for Insurance Companies, and for such
We believe that the audit evidence we
internal control as the Board of Directors and
have obtained is sufficient and appropriate to
the Managing Director determine is necessary
provide a basis for our audit opinion.
to enable the preparation of annual accounts
and consolidated accounts that are free from
Opinions
material misstatement, whether due to fraud or
In our opinion, the annual accounts have
error.
been prepared in accordance with the An-
nual Accounts Act for Insurance Companies
Auditor’s r esponsibility
and present fairly, in all material respects, the
Our responsibility is to express an opinion
financial position of the parent company as of
on these annual accounts and consolidated
31 December 2011 and of its financial per-
accounts based on our audit. We conducted
formance and its cash flows for the year then
our audit in accordance with International
ended in accordance with the Annual Ac-
Standards on Auditing and generally accepted
counts Act for Insurance Companies, and the
auditing standards in Sweden. Those standards
consolidated accounts have been prepared in
require that we comply with ethical require-
accordance with the Annual Accounts Act for
ments and plan and perform the audit to obtain
Insurance Companies and present fairly, in all
reasonable assurance about whether the annual
material respects, the financial position of the
accounts and consolidated accounts are free
group as of 31 December 2011 and of their
from material misstatement.
financial performance and cash flows in ac-
An audit involves performing procedures
cordance with International Financial Report-
to obtain audit evidence about the amounts
ing Standards, as adopted by the EU, and the
80
Annual Report 2011
Annual Accounts Act for Insurance Compa-
As a basis for our opinion on the Board
nies. The statutory administration report is
of Directors’ proposed appropriations of the
consistent with the other parts of the annual
company’s profit or loss, we examined the
accounts and consolidated accounts.
Board of Directors’ reasoned statement and a
We therefore recommend that the annual
selection of supporting evidence in order to
meeting of shareholders adopt the income
be able to assess whether the proposal is in
statement and balance sheet for the parent
accordance with the Companies Act and the
company and the group.
Insurance Business Act.
As a basis for our opinion concerning dis-
Report on other legal and r egulatory
charge from liability, in addition to our audit
r equir ements
of the annual accounts and consolidated ac-
In addition to our audit of the annual ac-
counts, we examined significant decisions, ac-
counts and consolidated accounts, we have
tions taken and circumstances of the company
examined the proposed appropriations of the
in order to determine whether any member of
company’s profit or loss and the administra-
the Board of Directors or the Managing Direc-
tion of the Board of Directors and the Manag-
tor is liable to the company. We also examined
ing Director of Sirius International Insurance
whether any member of the Board of Directors
Corporation (publ) for the year 2011.
or the Managing Director has, in any other
way, acted in contravention of the Companies
Responsibilities of the Board of Dir ectors
Act, the Insurance Business Act, the Annual
and the Managing Dir ector
Accounts Act for Insurance Companies or the
The Board of Directors is responsible for the
Articles of Association.
proposal for appropriations of the company’s
We believe that the audit evidence we
profit or loss, and the Board of Directors and
have obtained is sufficient and appropriate to
the Managing Director are responsible for
provide a basis for our opinion.
administration under the Companies Act and
the Insurance Business Act.
Opinions
We recommend to the annual meeting of
Auditor’s r esponsibility
shareholders that the profit be appropriated in
Our responsibility is to express an opinion
accordance with the proposal in the statutory
with reasonable assurance on the proposed
administration report and that the members
appropriations of the company’s profit or
of the Board of Directors and the Managing
loss and on the administration based on our
Director be discharged from liability for the
audit. We conducted the audit in accordance
financial year.
with generally accepted auditing standards in
Sweden.
Stockholm, 6 March, 2012
Anna Hesselman
Authorized Public Accountant
Morgan Sandström
Authorized Public Accountant
81
Annual Report 2011
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 2011.
The audited Swedish version is the binding
version.
82
Annual Report 2011
83
Annual Report 2011
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 indus-
trial 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 business 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 compa-
nies 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.
In 2011 on July 1 the wholly owned Syndicate 1945 started to underwrite. In the autumn Sirius America
(former White Mountains Re America) became part of the Sirius Group.
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 reinsur-
ance 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 86% and
cumulative underwriting profits in excess of $500 million. This long-term track record is perhaps
unparalleled.
84
Annual Report 2011
Art and pr oduction: Studio Ringvall
85