HEAD OFFICE
Sirius International Insurance Corporation (publ)
SE-113 96 Stockholm, Sweden.
Visiting address: Birger Jarlsgatan 57B
Telephone: +46 8 458 5500
Telefax:
+46 8 458 5599 (Reinsurance)
+46 8 458 5595 (Corp. Accounting &
Control)
Sirius International Insurance Corporation (publ)
Belgian Branch
Mont Saint Martin 62B/2
BE-4000 Liège, Belgium
Telephone: +32 4 220 8611
Telefax:
+32 4 232 1999 (Underwriting)
+32 4 232 1998 (Accounting/Claims)
+32 4 232 1994 (Finance)
Sirus Internationl Insurance Corporation (publ)
Bermuda Branch
Hamilton HMJX, Bermuda
Visiting address; 14 Wesley Street; 5th floor
Telephone: +1 441 278 3140
Telefax:
+1 441 278 3145
Sirius International Danish Branch,
filial av Sirius International Försäkringsaktiebolag
(publ), Sverige
Nyhavn 43, 2nd floor
DK-1051 Copenhagen, Denmark
Telephone: +45 88 807 100
Telefax:
+45 88 807 111
www.siriusaviationinsurance.com
Sirius Rückversicherungs Service GmbH
Neuer Wall 52/Entrance: Bleichenbrücke 1-7
DE-20354 Hamburg, Germany
Telephone: +49 40 30 95 19-0
Telefax:
+49 40 30 95 19-21
Sirius International Insurance Corporation
(publ) UK Branch
The London Underwriting Centre,
3 Minster Court, Mincing Lane
London EC3R 7DD, Great Britain
Telephone: +44 20 7617 4900
Telefax:
+44 20 7617 4919
Sirius International Insurance Corporation
(publ) (Asia Branch) Singapore
24 Raffles Place #10-01/02, Clifford Centre
048 621 Singapore, Singapore
Telephone: +65 6435 0052
Telefax:
+65 6435 0053
Sirius International Insurance Corporation
(publ) Labuan Branch
c/o MNI Offshore Insurance (L) Ltd
Level 11 (B) Block 4 Office Tower
Financial Park Labuan Complex
Jalan Merdeka
87000 FT Labuan, Malaysia
Telephone: +60 87 417 672 73
Telefax:
+60 87 417 675
Sirius International Insurance Corporation
(publ) Stockholm, Zurich Branch
P.O. Box 2807
CH-8022, Zurich, Switzerland
Visiting address: Dreikönigstrasse 12
Telephone: +41 43 443 0180
Telefax:
+41 43 443 0189
www.siriusgroup.com
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Contents
White Mountains Insurance Group
Comments from the President and CEO
Board of Directors’ Report
Income Statement - Group
Statement of Comprehensive Income - Group
Balance Sheet - Group
Change in Shareholders’ Equity - Group
Cash flow Statement - Group
Performance Analysis – Group
Income Statement – Parent Company
Statement of Comprehensive Income – Parent Company
Balance Sheet – Parent Company
Change in Shareholders’ Equity – Parent Company
Cash flow Statement – Parent Company
Performance Analysis – Parent Company
Note 1 Accounting principles
Note 2 Information on risks
Note 3 Premium income
Note 4 Claims incurred, for own account
Note 5 Operating costs
Note 6 Investment income
Note 7 Unrealized gains and losses on investments
Note 8 Investment expenses and charges
Note 9 Net profit or net loss per category of
financial instruments
Note 10 Taxes
Note 11 Intangible assets
Note 12 Land and buildings
Note 13 Shares and participations in group companies
Note 14 Investments in shares and participations
Note 15 Bonds and other interest-bearing securities
Note 16 Derivative financial instruments
Note 17 Other debtors
Note 18 Categories of financial assets and liabilities
and their fair value
Note 19 Tangible assets
Note 20 Deferred acquisition costs
Note 21 Untaxed reserves
Note 22 Provisions for unearned
premiums and unexpired risks
Note 23 Claims reserve
Note 24 Equalization provision
Note 25 Claims handling provision
Note 26 Employee benefits
Note 27 Other creditors
Note 28 Contingent liabilities and commitments
Note 29 Associated parties
Note 30 Average number of employees,
salaries and other remunerations
Note 31 Fees and reimbursements to auditors
Note 32 Operational leasing
Note 33 Class analysis
Auditor’s report
Definitions
History
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1
Annual Report 2012
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 International 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 offices in Australia, Bermuda, Copenha-
Specialty insurance. OneBeacon’s common
gen, Hamburg, Liège, London, Singapore
shares are listed on the New York Stock
and Zürich.
Exchange under the symbol “OB”. White
Mountains owns 75% of OneBeacon.
Sirius America Insurance Company
HG Global
A U.S.-based, international, (re)insurance
company that focuses on the property and
U.S. municipal bond reinsurance.
accident & health lines in North and Latin
White Mountains Advisors
New York with branch offices in Miami and
America. Sirius America’s home office is in
Investment management with $34 billion of
Toronto.
assets under management.
Sirius Syndicate 1945
White Mountains’ common shares are listed
A Lloyd’s syndicate that began writing busi-
on the New York Stock Exchange and the
ness at July 1, 2011 with initial stamp capac-
Bermuda Stock Exchange under the symbol
ity of £93 million and focus on accident &
“WTM”. Market capitalization as of December
health, contingency, property and marine.
31, 2012 was $3.2 billion. As of December
31, 2012, White Mountains reported total
White Mountains Solutions Inc.
assets of $12.9 billion, adjusted shareholders’
A Connecticut-based professional team spe-
equity NGM of $3.7 billion, and adjusted book
cializing in opportunistic structured acquisi-
value per share NGM of $588.
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.
1
Annual Report 2012 Comments
from the
President
and CEO
Last year saw a marked improvement in the
natural catastrophes in the United States.
business environment for the reinsurance
This was the first full year since Sirius
industry. Whereas total losses in 2011 had
America became part of the Sirius internation-
been the second highest ever, 2012 proved
al Group, making a direct comparison with
to be relatively benign at a time of slightly
previous results more complicated. Nonethe-
harder rates. Sirius International was able
less, there is no disguising the fact that we
to increase its underwriting profits sig-
were successful, with a combined ratio of
nificantly despite some heavy claims from
90% and an underwriting profit of $89 million.
2
Annual Report 2012 Although 2012 was better than our
Sirius America has since added direct Ac-
long-term average, it should be seen as
cident and Health to its book, and we see
part of a pattern of profitability. We have
this becoming an important pillar of the
now returned positive figures for every
business.
one of the last eleven years, even when
We appear to be further away from im-
things have been difficult. In the period
plementation of Solvency II than we were
since 1997 our combined ratio has been
this time last year, now that the measure
93%. As I have said before, this stability is
has been put back yet again, probably at
one of the factors that make Sirius Interna-
least to 2016. We continue, though, to be
tional a reliable long-term trading partner.
well prepared for the changes when they
At $1,197 m, premium income was
eventually arrive.
flat in comparison with last year if one
Looking ahead to the rest of 2013, we
includes Sirius America for the full year,
saw a very small increase in rates overall
reflecting our selective underwriting and
at the end-of-year renewal after taking
the shortage of profitable opportunities in
into account the usual variations between
what continues to be a soft market. The
different classes and geographies. Yet it
increase in profits was driven by a drop
is very difficult to see the hard market re-
in claims. The only two losses of any size
turning in the immediate future. The rein-
were from storm Sandy (nearly $100 m)
surance industry continues to attract new
and the drought in Mid-West United States
entrants, and there is already too much
($35 million).
capital chasing too little premium.
As ever, our diversity and spread of
Nonetheless, our track record speaks
risk have made possible our consistently
for itself and justifies our confidence that
strong performance. Whereas in 2011 a
we can meet whatever challenges may
benign loss experience in the western
lie ahead. As ever, I would like to thank
hemisphere kept us profitable at a time of
all our staff for their loyalty and profes-
heavy losses elsewhere, this time it was
sionalism, and our brokers and customers
the other way around.
for enabling us to build strong long-term
Our new Lloyd’s operation Syndicate
relationships for our mutual benefit.
1945 completed its first full year in good
shape, achieving the primary objective of
modest profitable growth. We have now
added our London Marine book and some
Property business to the portfolio, which
already included Accident and Health and
Contingency.
The integration of Sirius America into
the group has gone to plan. Last year I
wrote that a top priority was to ensure
that their arrival benefited customers, bro-
kers and shareholders alike, enabling us
to provide an enhanced, seamless service.
I believe this objective has been achieved.
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
3
Annual Report 2012 At a glance (Parent)
2012
2011
Net premium income
$595 million
$583 million
Claims net of reinsurance
$315 million
$419 million
Underwriting profit
$122 million
$14 million
Combined Ratio
80%
97%
Income before tax
$183 million
$68 million
Combined Ratio (Parent)
96%
93%
99%
80%
88%
87%
86%
89%
97%
80%
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
2 0 1 2
Solvency Capital (Group), MSEK
8 780
9 364
8 182
9 893
10 399
10 455
16 011
14 150
12 544
12 516
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
2 0 1 2
4
Annual Report 2012 Board of Directors’ Report
The Board of Directors and Managing
from these two events will, in total, cost
Director of Sirius International Försäkrings-
approximately MSEK 800. Further cata-
aktiebolag (publ), (Sirius International),
strophe events which have taken place are
Corporate Identity Number 516401-8136,
the two earthquakes in Italy, which it is
hereby present the Annual Report for 2012.
estimated to cost the Group approximately
MSEK 50.
General information regarding
The major catastrophe claims from the
the company
previous accident years have had a posi-
Sirius International operates within inter-
tive development during the year, with a
national insurance and reinsurance. Sirius
positive run-off result for 2012. The price
International was established in 1989. Ho-
levels in the insurance portfolio have been
wever, the operations were initially started
satisfactory on the majority of markets and
within Sirius Insurance in 1945. In 1989,
classes of business. The portion of the
the reinsurance operations were transferred
insurance portfolio renewed at the begin-
to Sirius International. Sirius International
ning of 2013 show continued satisfactory
has been the Parent Company in the Group
pricing.
since 1992.
2012 was the first full year of operation
for Syndicate 1945 at Lloyd’s. Syndicate
Development of the Company’s operations,
1945 writes primarily Accident & Health in-
income and financial position
surance. In 2012, The Syndicate has enab-
After 2011, which was one of the most
led us to write profitable new business that
expensive years for insurance companies,
earlier was out of reach as Lloyd’s security
2012 proved to be favorable for the in-
was required. In 2013 Syndicate 1945 is
dustry. This is, of course, primarily due
planned to expand its business portfolio,
to the absence of any major earthquakes,
mainly into assumed Property and Marine
hurricanes, typhoons or floods during the
reinsurance.
year. Only two major catastrophe events of
Furthermore, the integration of the
significance affecting the market and the
subsidiary WM Phoenix acquired in 2011,
industry as a whole took place during the
with insurance business mainly concentra-
year, which also impacted Sirius Interna-
ted to the Group company, Sirius America
tional. These were the crop losses in a
Insurance Company, continued in 2012,
number of states in the American Midwest,
focusing on the adoption on systems and
which were hit by major droughts during
on business and administrative processes
long periods of consistently high tempera-
alignments.
tures without precipitation, as well as the
Gross premium income amounted to
“Superstorm”, Hurricane Sandy, which rip-
MSEK 8,081 (5,955) for the Group and
ped through, mainly, New York and New
MSEK 5,779 (5,347) for the Parent Com-
Jersey during the final days of October,
pany. The Group’s premium income for
causing huge material damages. For the
own account amounted to MSEK 6,304
Group, it is estimated that claims arising
(4,363), and MSEK 4,014 (3,768) for the
5
Annual Report 2012 Parent Company. The increase in premium
through the American Taxpayer Relief Act,
volume compared with the previous year is
which subdued the concerns in the market.
due, primarily, to the fact that the Group
The stock markets have been characte-
company, WM Phoenix, contributed with
rized by an upswing during the year, with
12 months’ earnings in 2012, while in
the exception of the US stock markets,
2011, only earnings from the acquisition
which stagnated somewhat during the final
date on September 30, 2011 were reported.
quarter. S&P 500 in the US increased by
Discounting these one-off effects, gross
13%, and the leading continental European
premium income increased by approxima-
stock markets rose by between 15-29%, es-
tely 5% compared with the previous year.
pecially the German DAX exchange, which
Increases have been noted, primarily,
increased by 29% compared with December
within the traditionally dominant classes of
2011. The Swedish OMX30 increased by
business assumed Property reinsurance and
12% during the year. The Japanese Nikkei
direct Accident & Health insurance, while
225 increased by 23% during 2012 thanks
the volumes for assumed Credit and Avia-
to the new government’s introduction of
tion reinsurance have decreased somewhat.
reforms to increase exports and to improve
The Group’s operating profit from insu-
the business climate in the country. The
rance operations amounted to MSEK 1,058
British FTSE 100 increased by 6% which is
(223) and to MSEK 1,104 (266) for the Pa-
slightly lower than the rest of Europe.
rent Company. The combined ratio amoun-
In terms of the bond portfolio, the US,
ted to 90% (99%) for the Group and 80%
Swedish, German and British markets are
(97%) for the Parent Company. The strong
the most important. The interest levels on
insurance operating result is very gratify-
government securities have experienced
ing and reflects the Company’s successful
a further decrease in 2012, with a slight
strategy, with a well-diversified insurance
recovery during the fourth quarter; the US
portfolio and good spread of risk.
government bonds in particular, have seen
The financial markets in 2012 were
a rise in interest rates at the end of the
characterized by concerns regarding the
year.
Greek economy and its effect on the rest
Overall, yield on the bond portfolio was
of Europe. Ireland, Spain and Portugal’s
4.3% adjusted for exchange rate effects.
budget deficits also had a big impact on
As regards the share portfolio, including
the outlook for the European economy at
investments in Hedge Funds and Private
the beginning of the year. Following the
Equity investments, the yield amounted to
successful introduction of fiscal and struc-
7.9%, adjusted for exchange rate effects.
tural reforms in these countries, the situa-
The realized and unrealized exchange rate
tion stabilized and the European interest
result, net after currency hedging and in-
rates went down, leading to a more posi-
cluding translation differences from foreign
tive development in the Eurozone during
subsidiaries, amounted to a loss of MSEK
the second part of the year. There have
333. The exchange rate loss is mainly due
also been considerable concerns regarding
to the strengthening of the SEK against
the US economy, with elections in Novem-
the USD and EUR. During the year, further
ber and the impending risk of the fiscal
exchange rate hedging against the USD
cliff which was averted at the last minute
has been undertaken. The nominal value
6
Annual Report 2012 of the currency hedges is now MUSD 600.
White Mountains Re Bermuda Ltd., Hamil-
The portion of the solvency capital that is
ton, Bermuda, was completed in January
exposed to foreign currency is somewhat
2012. In December 2012, Sirius Internatio-
lower than during the previous year.
nal received a capital contribution from its
The Investment result for the Group,
parent company Fund American Holdings
after exchange rate hedging including
AB, consisting of the remainder of the out-
unrealized gains and losses from the bond
standing shares in White Sands Holdings
portfolio accounted for in Other compre-
(Luxembourg) S.à r.l. with the wholly-ow-
hensive income but before allocation of
ned subsidiary S.I. Holdings (Luxembourg)
interest to the insurance operations, shows
S.à r.l.
a profit of MSEK 1,413 (MSEK 542). The
At the end of the year 2012, the Group
Group’s direct yield was 2.3% (2.2%) and
comprised the Parent Company, Sirius
the total yield was 5.4% (2.2%). The direct
International Försäkringsaktiebolag (publ),
and total yields are calculated according to
with the subsidiaries Sirius Belgium Ré-
the recommendations of The Swedish Fi-
assurances S.A. (in liquidation), Liège,
nancial Supervisory Authority. The invest-
Belgium, Sirius Rückversicherungs Service
ment portfolio’s concentration and com-
GmbH, Hamburg, Germany, Sirius Inter-
position are largely unchanged compared
national Holdings (NL) BV, Amsterdam,
with the previous year. At year-end, the
Holland, Passage2Health Ltd, London, UK,
consolidated investment portfolio had the
White Mountains Re Sirius Capital Ltd,
following composition: Bonds and other
London, UK, WM Phoenix (Luxembourg)
interest bearing securities 76%, Shares and
S.à r.l. and White Sands Holdings (Luxem-
participations 15%, Bank funds 8% and
bourg) S.à r.l.
Currency related derivatives 1%.
In addition, Sirius International has
Other events regarding the changes in
eight branch offices outside Sweden. These
the Group’s structure are described prima-
are Sirius International Insurance Corpora-
rily under the section “Ownership struc-
tion (publ) UK branch, London, UK, Sirius
ture” below.
International Insurance Corporation (publ)
Stockholm Zürich branch, Zürich, Switzer-
Ownership structure
land, Sirius International Insurance Corpo-
Sirius International Försäkringsaktiebolag
ration (publ) Asia branch, Singapore, Sirius
(publ) is a wholly-owned subsidiary of
International Insurance Corporation (publ)
Fund American Holdings AB (Corporate
Labuan branch, Labuan, Malaysia, Sirius
Identity Number 556651-1084), Stockholm,
International Insurance Corporation (publ)
Sweden. Fund American Holdings AB is a
Belgian branch, Liège, Belgium, Sirius
wholly-owned subsidiary of Sirius Insuran-
International Danish Branch, filial af Sirius
ce Holding Sweden AB (Corporate Identity
International Försäkringsaktiebolag (publ),
Number 556635-9724), Stockholm, Sweden,
Copenhagen, Denmark, Sirius Internatio-
which is the ultimate entity in the Swedish
nal Insurance Corporation (publ) Bermuda
Group structure and which is, in turn, ow-
Branch, Hamilton, Bermuda and Sirius
ned by White Mountains Insurance Group
International Insurance Corporation (publ)
Ltd, Hamilton, Bermuda.
Australian Branch, Australia.
The previously initiated liquidation of
During 2001, Sirius Belgium Réassuran-
7
Annual Report 2012 ces S.A. (in liquidation), Liège, Belgium
Financial instr uments and risk management
commenced voluntary liquidation procee-
See Note 1, Accounting Principles, and
dings, as the company had ceased to con-
Note 2, Information on Risks.
duct operations. The liquidation remains
incomplete, as the result of a tax dispute.
Remuneration and benefits to senior
The outcome of the dispute will not impact
executives
the company’s financial position.
See Note 30, Average number of employ-
ees, salaries and other remuneration.
Significant events during and after the
financial year
Insurance contracts with insufficient
In March 2012, Sirius International received
insurance risk
a shareholders’ contribution of MSEK 245
The Company retains only a few contracts
which was subsequently contributed down-
in which insufficient insurance risk is as-
stream to its subsidiary Sirius International
sessed to exist, and which, thereby, do not
Holdings (NL) BV.
qualify as insurance contract. These cont-
As part of the continuing restructuring
racts are classified as investment contracts.
work within the Group, on December 21,
For further details, refer to Note 1, Accoun-
2012, Sirius International received, in the
ting Principles.
form of a shareholders’ contribution, the
outstanding shares in White Sands Hol-
Expected future developments
dings (Luxembourg) S.à r.l. These shares
The underlying profitability in the insu-
were valued at fair value. The total value
rance operations is good, despite increased
of the transaction amounted to MSEK 714.
competition on the market, and the diver-
The valuation of the shares is based on a
sified investment portfolio is expected to
projection of the entity’s discounted future
provide a stable yield. However, the fierce
cash flows, whereby the discount rate has
competition requires stringent pricing and
been determined based on the Company’s
underwriting, continued efficiency im-
Weighted Average Cost of Capital (WACC).
provements and sound balancing of risks
On January 25, 2013, Sirius Internatio-
between the insurance and investment
nal, acquired the outstanding shares in S.I.
operations, in order to ensure long-term
Holdings (Luxembourg) S.à r.l. from White
profitability. Sirius International’s targets
Sands Holdings (Luxembourg) S.à r.l. On
for 2013 are to achieve a combined ratio
the same day Sirius International contribu-
below 91% and an Underwriting Return On
ted MSEK 1,955 to S.I. Holdings (Luxem-
Capital (UROC) of 10%.
bourg) S.à r.l. in exchange for new prefe-
rence shares in the company.
Infor mation regarding risks and factors of
uncer tainty
See Note 1, Accounting Principles, and
Note 2, Information on Risks.
8
Annual Report 2012 Five-year Summary
GROUP
(MSEK)
Net premium income
Net premiums earned
Other technical income
Allocated investment return
Net claims incurred
Net operating expenses
Insurance operating result
Investment operating result
Other expenses
Net income for the year
2012
2011
2010
20093)
2008
6,304
6,293
0
547
-3,692
-2,090
1,058
784
0
2,831
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
Net technical provisions
Market value on investment assets4)
13,347
25,601
14,743
26,094
7,221
18,480
7,883
18,449
7,992
16,743
Insurance operating profit, 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 base 1)
Required solvency capital
Group based values2)
Capital base
Solvency requirement
59%
32%
90%
2%
5%
13,828
2,128
55
0
16,011
254%
15,185
1,621
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
17,698
1,621
13,792
1,872
16,315
2,255
17,544
2,350
17,236
2,566
1) Include Sirius International with subsidiaries.
2) Include WM Caleta (Gibraltar) Ltd. For 2011-2008 the Group-based values include Sirius International Insurance Group Ltd.
3) For the comparison year 2009 IFRS has been applied. Solvency capital and required solvency capital have not been converted.
4) Includes Investment assets and Cash and bank balances.
PARENT COMPANY
(MSEK)
Net premium income
Net premiums earned
Allocated investment return
Net claims incurred
Net operating expenses
Insurance operating result
Investment operating result
Other expenses
Net income for the year
2012
2011
2010
2009
2008
4,014
4,196
280
-2,126
-1,221
1,104
129
-4
932
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
Net technical provisions
Market value on investment assets1)
6,048
20,692
6,922
19,678
7,233
18,155
7,886
18,379
7,992
16,882
Insurance operating profit, 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) Include Investment assets and Cash and bank balances.
51%
29%
80%
1%
2%
5,117
9,672
54
14,843
370%
14,265
710
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
9
Annual Report 2012
Proposed appropriation of profits
For 2012, the Parent Company recorded
income of MSEK 1,229 (MSEK 437) before
appropriations and taxes. Net income for
the year amounted to MSEK 932 (MSEK
321). As of December 31, 2012 retained
earnings in the Group amounted to MSEK
5,484.
The following profits are at the disposal
of the general meeting of shareholders in
the Parent Company Sirius International:
- Retained earnings
- Non-Restricted reserves
- Dividends paid, as resolved by the general meeting
of shareholders and extraordinary general meeting
of shareholders
- Received shareholders’ contribution
- Group contribution
- Net income for the year
- Total
The Board of Directors and the President
propose that the amount be appropriated
as follows:
- Dividend to the owner
- To be carried forward
SEK in
thousands
3,534,512
71,345
-652,442
959,326
-527,642
932,058
4,317,157
325,000
3,992,157
4,317,157
The Company’s financial position does not
Regarding the Company’s and the Group’s
give rise to any assessment other than that
results and financial position, please refer to
the Company can be expected to fulfill
the attached income statements and balance
its obligations in both the short-term and
sheets, cash flow statements and statements
in the long-term. It is the opinion of the
of changes in shareholders' equity, with ac-
Board of Directors that the solvency capital
companying notes.
of the Company, as it has been reported in
the annual report, is adequate in relation
to the scope and risks of the operations.
10
Annual Report 2012
"We have now returned
positive figures
for every one of the last
eleven years,
even when things have
been difficult"
11
Annual Report 2012 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
Net income of the year
Net income attributable to:
Owner of the parent
Minority interest
Total
12
Note
2012
2011
3
3
4
4
5
9
6
7
8
7
10
8,081
-1,777
-47
36
6,293
5,955
-1,592
194
27
4,584
547
225
-5,261
763
-4,498
2,673
-1,867
-3,692
-2,090
1,058
1,058
1,047
652
-368
-
-
-547
784
1,842
987
2,829
2,831
-2
2,829
-4,190
736
-3,454
-330
659
-3,125
-1,461
223
223
764
-
-132
-269
81
-225
219
442
-123
319
320
-1
319
Annual Report 2012 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 in fair value on bonds
- Currency translation differences
- Tax on items to be reclassified to income statement
- Items reclassified to income statement:
- Change in fair value on bonds
- Tax on items reclassified to income statement
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Comprehensive income attributable to:
Owner of the parent
Minority interest
Total
Note
10
10
2012
2,829
184
-413
-36
-102
26
-341
2,488
2,490
-2
2,488
2011
319
141
84
-37
-43
11
156
475
476
-1
475
13
Annual Report 2012 Balance Sheet - Group
December 31
(MSEK)
ASSETS
Intangible assets
Goodwill
Other intangible assets
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 balances
Total other assets
Prepayments and accrued income
Accrued interest
Deferred acquisition costs
Other prepayments and accrued income
Total prepayments and accrued income
Note
2012
2011
11
291
124
415
296
47
343
12
13
11
-
966
966
3,567
18,235
326
22,128
543
23,650
524
4,942
5,466
105
1,993
330
2,668
312
5,408
54
1,951
2,005
191
439
19
649
0
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
14, 18
15, 18
16, 18
22
23
10
17
19
20
TOTAl ASSETS
37,593
39,411
14
Annual Report 2012 December 31
Note
2012
2011
ShAREhOlDERS’ EQUITY AND lIABIlITIES
Shareholders’ equity
Shareholders’ equity attributable to the owner of the parent
- 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
800
5,318
-564
7,544
730
800
4,359
-266
7,135
-468
Total shareholders’ equity attributable to the owner of the parent
13,828
11,560
Minority interest
Total shareholders’ equity
liabilities
Technical provisions
Provisions for unearned premiums
Claims outstanding
Total technical provisions
Other liabilities
Employee benefits
Current tax liabilities
Deferred tax liabilities
Deposits received from reinsurers
Creditors arising out of direct insurance operations
Creditors arising out of reinsurance operations
Other liabilities
Accrued expenses and deferred income
Total other liabilities
2
4
13,830
11,564
2,201
16,612
18,813
2,300
20,554
22,854
5
14
2
-
2,422
2,820
158
48
582
1,400
321
4,950
201
1
805
814
350
4,993
22
23, 25
26
10
18, 27
18
TOTAl ShAREhOlDERS’ EQUITY AND lIABIlITIES
37,593
39,411
Pledged assets and other comparable collaterals for own debts
and provisions recorded as insurance liabilities
Other pledged assets and comparable collaterals
Contingent liabilities
Commitments
28
28
28
28
8,870
-
1,970
161
9,751
-
1,458
174
15
Annual Report 2012 Change in Shareholders’ Equity - Group
(MSEK)
Amount January 1, 2012
Comprehensive income
Net profit/loss for the year
Other comprehensive income, 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)
Total transactions with owners
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 5)
Group contribution provided 3)
Dividend paid 2)
Effects from internal restructuring 5)
Transaction with owners of the minority
Total transactions with owners
Share
Additional
Reserves
Retained
Capital 4)
paid in
capital
earnings
– restricted 4)
Retained
earnings
– non-
restricted
Total
Minority
interest
Total
Share-
holders’
equity
800
4,359
-266
7,135
-468
11,560
4
11,564
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
959
-
-
959
-
72
43
-413
-298
-298
-
-
-
-
-
-
409
-
409
409
-
-
-
-
2,831
2,831
-
-452
-
-452
2,379
-
-528
-653
-1,181
72
0
-413
-341
2,490
959
-528
-653
-222
800
1,424
-354
7,139
941
9,950
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,935
-
-
-
-
2,935
4,359
-
72
-1
84
155
155
-
-
-
-67
-
-67
-
-
-4
-
-4
-4
-
-
-
-
-
-
-266
7,135
320
-
5
-
5
325
-
-414
-1,143
-177
-
-1,734
-468
320
72
0
84
156
476
2,935
-414
-1,143
-244
-
1,134
11,560
-2
-
-
0
0
-2
-
-
-
-
2
-
-1
-
-
0
0
-1
-
-
-
-
5
5
4
2,829
72
0
-413
-341
2,488
959
-528
-653
-222
13,830
9,950
319
72
0
84
156
475
2,935
-414
-1,143
-244
5
1,139
11,564
Amount December 31, 2012
800
5,318
-564
7,544
730
13,828
Amount December 31, 2011
800
1) Capital contributions received from Fund American Holdings AB in form of shares in White Sands Holdings (Luxembourg) S.à r.l. and shares in Symetra Financial Corporation.
2) Dividend paid to the parent company Fund American Holdings AB. The dividend is equal to 82 SEK (143 SEK) per share.
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 WM Phoenix (Luxembourg) S.à r.l. The shares have therefore been reclassi
fied from associated company to a group company and were consolidated at December 31, 2011 for the first time. The MSEK -244 is the effect from this restructuring.
16
Annual Report 2012 ShARE CAPITAl
Number of shares
Issued per January 1
Issued per December 31
2012
2011
8,000,000
8,000,000
8,000,000
8,000,000
Per December 31, 2012 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 reserve
Opening tax on fair value reserve
Effect from change in tax rate
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
Effect from change in tax rate
Change in excess depreciations
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
Effect from change in tax rate
Dividend paid
Group contribution provided 73.7%
Closing retained earnings – non-restricted
2012
2011
4,359
959
5,318
1,424
2,935
4,359
165
82
247
-44
7
-17
-54
121
72
193
-387
43
-
-413
-757
7,135
416
-7
7,544
-468
2,831
-
-36
-416
-653
-528
730
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
17
Annual Report 2012
Cash flow statement - Group
(MSEK)
Note
2012
2011
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, acquired Cash and cash equivalents
Net investment of intangible assets
Net investments of tangible assets
Cash flow from investing activities
fINANCING ACTIvITIES
Dividends received
Group contributions paid
Cash flow from financing activities
Cash flow for the year
Cash and bank balances at beginning of year
Cash flow for the year
Translation difference on Cash and bank balances
Cash and bank balances at end of year 2)
1) Specification of non-cash items
Depreciations
Capital gains on foreign exchange
Capital losses on foreign exchange
Capital gains
Capital losses
Unrealized gains
Interest income
Interest expenses
Dividends received
11, 12, 19
6
8
6
8
7
6
8
6
1,842
514
-3
81
-30
-39
2,365
-
609
2,772
-5,130
616
1
-102
-33
-134
-163
-557
-720
-238
2,289
-238
-100
1,951
50
-
260
-453
73
-652
-514
2
-81
Change in provisions for outstanding claims
23
1,290
Pension provisions
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
18
3
-8
-
-30
483
1,468
1.951
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
-390
43
-113
-237
-
-244
84
-796
955
1,334
2,289
Annual Report 2012 Performance Analysis – Group
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 unexpired risks
Outstanding claims
Claims adjustment provision
Technical provisions
Reinsurers’ share of technical provisions
Unearned premiums and unexpired 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 2011 and earlier.
Direct
Swedish
risks,
Direct
Swedish
risks -
aviation
Financial
3
-
-3
-1
-1
-1
-1
-1
-
-2
-
0
0
3
-0
-
-
3
-4
0
-
1
-0
-3
1
-
0
-0
1
-0
-0
-0
-
-0
-
-
-
1
-
-0
-
1
-0
-
-
-
-
-0
Direct
Assumed
Total
foreign
reinsurance
risks
837
21
-499
-384
-25
-278
-468
-385
-13
-866
237
105
342
1,253
-413
-110
107
837
-570
128
-9
-72
24
5,452
526
-3,190
-1,705
1,083
2,259
6,293
547
-3,692
-2,090
1,058
1,980
-1,732
-2,201
-15,979
-16,365
-234
-247
-17,945
-18,813
287
4,837
5,124
6,824
-1,364
63
-71
524
4,942
5,466
8,081
-1,777
-47
36
5,452
6,293
-4,511
-5,085
635
-167
2,744
-1,891
763
-176
2,673
-1,867
-499
-3,190
-3,692
19
Annual Report 2012 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
Operating costs
Note
2012
2011
3
3
4
4
5
5,779
-1,765
152
30
4,196
5,347
-1,579
249
20
4,037
280
225
-3,258
684
-2,574
2,167
-1,719
-2,126
-3,603
650
-2,953
-420
665
-2,708
-1,221
-1,239
Change in equalization provision
24
-25
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
Change in appropriations
Result before taxes
Taxes
Net income for the year
1,104
1,104
467
363
-421
-
-280
129
-4
1,229
9
1,238
-306
932
9
6
7
8
7
11
10
-49
266
266
515
-
-56
-59
-225
175
-4
437
5
442
-121
321
20
Annual Report 2012 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 in fair value on bonds
- Tax on items to be reclassified to income statement
- Items reclassified to income statement:
- Change in fair value on bonds
- Tax on items reclassified to income statement
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Note
10
10
2012
932
184
-36
-102
26
72
1,004
2011
321
141
-37
-43
11
72
393
21
Annual Report 2012 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 balances
Total other assets
Prepayments and accrued income
Accrued interest
Deferred acquisition costs
Other prepayments and accrued income
Total prepayments and accrued income
Note
2012
2011
11
12
13
14, 18
15, 18
16, 18
22
23
10
17
19
20
198
55
253
203
45
248
13
11
8,254
-
8,254
549
10,041
326
10,916
554
19,737
517
3,985
4,502
28
1,582
276
20
202
7,317
0
7,317
667
9,472
30
10,169
770
18,267
529
6,545
7,074
2
1,880
125
41
293
2,108
2,341
50
955
1,005
124
266
19
409
40
1,411
1,451
131
341
20
492
TOTAl ASSETS
28,015
29,873
22
Annual Report 2012 December 31
Note
2012
2011
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
Deposits received from reinsurers
Creditors
Creditors arising out of direct insurance operations
Creditors arising out of reinsurance operations
Other creditors
Total creditors
Accrued expenses and deferred income
Accrued expenses and deferred income
Total accrued expenses and deferred income
TOTAl ShAREhOlDERS’ EQUITY, PROvISIONS AND lIABIlITIES
Pledged assets and other comparable collaterals for own debts and
provisions recorded as insurance liabilities
Other pledged assets and comparable collaterals
Contingent liabilities
Commitments
21
22
23, 25
24
26
10
18, 27
18
28
28
28
28
800
193
3,192
932
5,117
25
9,647
9,672
1,580
8,885
86
888 800
121
3,093
321
4,335
35
9,647
9,682
1,848
12,087
61
10,550
13,996
9
98
107
328
1
730
1,325
2,056
185
185
7
6
13
173
1
784
690
1,475
199
199
28,015
29,873
7,701
-
1,970
53
8,623
-
1,458
56
23
Annual Report 2012
Change in Shareholders’ Equity – Parent Company
(MSEK)
Share
Capital
Other
Retained
loss for the
reserves 4)
earnings 4)
year 4)
Net profit/
Amount January 1, 2012
800
121
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 1)
Group contribution provided 2)
Dividend paid 3)
Total transactions with owners
Amount December 31, 2012
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 5)
Group contribution provided 2)
Dividend paid 3)
Total transactions with owners
Amount December 31, 2011
Total
Shareholders’
equity
4,335
-
3,093
321
321
-321
-
-
-
-
959
-528
-653
-222
932
932
-
-
72
72
932
1,004
-
-
-
-
959
-528
-653
-222
-
-
-
-
-
-
-
-
-
-
-
72
72
72
-
-
-
-
800
193
3,192
932
5,117
800
49
-
-
-
-
-
-
-
-
-
-
-
72
72
72
-
-
-
-
800
121
1,193
522
-
-
-
522
-522
321
-
-
522
321
2,935
-414
-1,144
1,377
3,093
-
-
-
-
321
2,564
-
321
72
72
393
2,935
-414
-1,144
1,377
4,335
1) Capital contribution received from Fund American Holdings AB in form of shares in White Sands Holdings (Luxembourg) S.à r.l. and shares in
Symetra Financial Corporation.
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. Dividend is equal to SEK 82 (SEK 143) per share.
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.
5) Capital contribution received from Fund American Holdings AB in form of shares in WM Phoenix (Luxembourg) S.à r.l.
24
Annual Report 2012
ShARE CAPITAl
Number of shares
Issued per January 1
Issued per December 31
2012
2011
8,000,000
8,000,000
8,000,000
8,000,000
Per December 31, 2012 the share capital comprised 8,000,000 (8,000,000) ordinary shares.
The shares have a nominal value of 100 (100) SEK.
OThER RESERvES
fair value reserve
Opening fair value reserve
Change for the year
Closing fair value reserve
Tax on fair value reserve
Opening tax on fair value reserve
Effect from change in tax rate
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
2012
2011
165
82
247
-44
7
-17
-54
121
72
193
3,093
321
959
-653
-528
3,192
67
98
165
-18
-
-26
44
49
72
121
1,193
522
2,935
-1,144
-414
3,093
932
321
25
Annual Report 2012
Cash flow Statement – Parent Company
(MSEK)
Note
2012
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
fINANCIAl ACTIvITIES
Acquisition of subsidiary, effect on liquidity
Net investment of intangible assets
Net investments of tangible assets
Cash flow from investing activities
INvESTING ACTIvITIES
Shareholders´ contributions paid
Capital repayment
Dividend paid
Group contributions paid
Cash flow from financing activities
Cash flow for the year
Cash and bank balances at beginning of year
Cash flow for the year
Translation difference on Cash and bank balances
Cash and bank balances at end of year 2)
1) Specification of non-cash items:
Depreciations
Capital gains on foreign exchange
Capital losses on foreign exchange
Capital gains
Capital losses
Unrealized gains
Interest income
Interest paid
Dividends received
Change in provisions for outstanding claims
Pension provisions
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
26
11,12,19
6
8
6
8
7
6
8
6
23
1,228
265
-2
-
300
-167
1,624
-
-254
3,023
-4,009
384
-
-37
-33
-70
-
-
-163
-557
-720
-406
1,411
-406
-50
955
73
-
262
-203
160
-363
-265
3
-
631
2
300
238
716
955
2011
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
-314
2
-1
-126
-
-547
498
913
1 411
Annual Report 2012 Performance analysis - Parent Company
ANAlYSIS Of INSURANCE RESUlT
(MSEK)
Direct Swedish
risks - Aviation
Direct
Assumed
foreign risks
reinsurance
Total
Technical result insurance operations
Premiums earned, for own account
Allocated investment return transferred from the non-technical account
Claims incurred, for own account
Operating costs
Change of equalization provision
Technical result of insurance operation
Of which results from prior years, gross amounts 1)
Technical provisions
Unearned premiums and unexpired risks
Outstanding claims
Claims adjustment provision
Equalization provision
Technical provisions
Reinsurers’ share of technical provisions
Unearned premiums and unexpired 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 2011 and earlier.
3
-
-3
-1
-
-1
-1
-1
-1
-
-0
-2
0
0
0
3
-0
0
0
3
-4
0
-
1
-0
-3
664
21
-377
-295
-
13
-254
-393
-326
-11
-
-730
185
99
284
957
-349
3
53
664
-507
128
-7
-8
17
-377
3,529
259
-1,746
-925
-25
1,092
2,148
-1,186
-8,426
-121
-86
4,196
280
-2,126
-1,221
-25
1,104
1,893
-1,580
-8,753
-132
-86
-9,819
-10,551
332
3,886
4,218
4,819
-1,416
149
-23
517
3,985
4,502
5,779
-1,765
152
30
3,529
4,196
-2,619
-3,130
556
-121
2,174
-1,736
-1,746
684
-128
2,167
-1,719
-2,126
27
Annual Report 2012 Note 1 • Accounting Principles
General information
This annual report was issued per December 31, 2012 and refers to Sirius
International Försäkringsaktiebolag (publ), both the Group and the Parent
Company, which is an insurance company with its registered offices in
Stockholm. The address of the head office is Birger Jarlsgatan 57B,
Stockholm and the Corporate Identity Number is 516401-8136. The Group’s
ultimate owner is White Mountains Insurance Group Ltd, Hamilton, Bermuda.
The Group writes property and casualty insurance and reinsurance, see
Note 33 Class analysis for further information.
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 FFFS 2011:28 as well as 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, 2012 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 2012. 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, 2012 have had any signifi-
cant impact on the Group, or when applicable, on the Parent company.
New standards, amendments and interpretations of existing stan-
dards which have not yet entered into force and which have not been
adopted in advanced 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
5. The standard has not yet been adopted by the EU.
• IFRS 9 “Financial instruments” addresses the classification, valuation
and accounting of financial liabilities and assets. 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 in-
come 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, 2014 and has not yet assessed
the full effects on the financial statements.
• IFRS 12 “Disclosures of Interests in Other entities” includes disclosure
requirements for subsidiaries, joint arrangements, associated companies
and “structured entities” which have not been consolidated. The Group shall
evaluate the full impact of IFRS 12 on the consolidated financial statements
and intend to apply IFRS 12 on financial years starting on January 1, 2014.
• 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.
• 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.
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, or when
applicable, on the Parent company.
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
28
Annual Report 2012 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. For a sensitivity analysis of interest- and equity risk, see note 2
Information on risks.
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 5, 2013. The income statement and balance sheet will be
adopted at the General Meeting held in May 2013.
Consolidation principles
Subsidiaries
Subsidiaries are companies in which the Parent Company has a control-
ling 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
identification of the purchaser and the establishment of the acquisition date.
The purchase method further implies that the acquisition of subsidiaries 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 goodwill. When the
difference is negative, this is recorded directly in the income statement. The
subsidiary’s financial reports are included in the consolidated financial state-
ments 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 business combina-
tion under common control, such acquisitions are reported according to
the “predecessor accounting method” or at fair value. The “Predeces-
sor accounting 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 carried 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. Intra-group business combinations are valued
and accounted for according to IFRS 3. Subsidiaries’ financial statements
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.
29
Annual Report 2012 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
6.50
8.59
10.56
6.75
8.72
10.71
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.
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, such as
commissions, 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.
The income statement recognizes the change in provision for unearned
premium reserve and unexpired risks.
Provision for outstanding claims
This balance sheet item comprises of estimated nominal 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 nominal 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 recognizes the change in provision for in outstan-
ding claims for the period.
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
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
30
Annual Report 2012
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.
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.
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 reinsurance
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 2012
amounted to 5.43%.
Applied interest rates
%
EUR
GBP
SEK
USD
2012
2011
10.35%
8.75%
1.65%
3.85%
4.99%
0.61%
3.87%
3.75%
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.
Investment expenses and charges
Charges on investment assets are recorded under the item Investment
expenses and charges. The item comprises operating costs for land
and buildings, asset management costs, interest expense, net foreign
exchange losses, depreciations and impairments and net capital
losses.
Changes in realized and unrealized gains and losses
For investment assets valued at acquisition value, capital gain com-
prises 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 changes 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 accounting method. Currency translation effects are recorded
in Other comprehensive income.
Income tax
Income taxes are accounted according to IAS 12 and consist of cur-
rent 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
Current tax is tax to be paid or received regarding the current year,
with application of the tax rates which have been enacted or practically
enacted at balance sheet date, which also includes the adjustment of
current tax referring to previous periods.
Deffered tax
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 subsidiaries 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.
The Group recognizes deferred tax assets on each closing day to
31
Annual Report 2012 the extent that it is probable that they can be used against future taxable
income. This is based on assumptions on future profitability and earnings.
If these assumptions change it could imply future reductions in deferred tax
assets. Estimating future earnings, historical experience and assumptions
of the future development of the underlying asset is considered.
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 accumulated impairment losses. Impairment losses
of goodwill are not reversed. Profit or loss on the sale of a unit includes
the remaining carrying value of goodwill referring to the unit sold. Goodwill
is distributed to cash-generating units upon testing of any write-down
requirement.
Other intangible assets
Other intangible assets which have been acquired separately are reported
at acquisition cost. Other intangible assets acquired through a business
acquisition are reported at fair value as per the acquisition date. Acquired
Other intangible assets are 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. Accounting of an intangible asset is based on it useful life. An
intangible asset with a finite useful life is amortized while an intangible asset
with an indefinite is not amortized. Establishing the useful life is based on
an analysis of each acquired intangible asset. The amortized amount of an
intangible asset is periodized over the useful life.
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 pre-
viously been charged are not reported as an asset in the following period.
Development costs for software reported as an asset are amortized during
their assessed useful life, which does not exceed three years.
Licenses
Licenses, acquired or otherwise received, are accounted as an intagible
asset in accordance with IAS 36.
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 held for trading
and other financial assets that the Company had initially designated on initial
recognition as an asset to be measured at fair value trough the income
statement (according to the so-called Fair Value Option). Fair Value Option
is used in order to reduce mismatch between valuation and accounting of
financial assets. (i.e.accounting mismatch). Financial instruments in this
category are continually valued at fair value, with changes in value recorded
in the income statement. The first sub-group includes derivatives with a
positive fair value. The first sub-group includes derivatives with a positive
fair value. The second sub-group consists of financial investments in bonds
and other interest-bearing securities along with shares and participations,
with the exception of 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 254, while the
recorded value per balance sheet date of December 31, 2012 amounted to
MSEK 1,205.
32
Annual Report 2012
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,
where the yield granted by these instruments at the time of investment is of
significance for which investments shall be made.
Other financial liabilities
Borrowings and other financial liabilities, for example, accounts payable, are
included in this category. These liabilities are valued at fair value including
transaction costs and are subsequently accounted at amortized cost.
financial guarantees
Financial guarantee agreements are recorded as insurance contracts in ac-
cordance with the accounting principles described in the section Accounting
of insurance contracts, above.
Write-downs of financial instruments
Impairment testing of financial assets
At each reporting date, the Company assesses whether there exists any
objective evidence indicating that a financial asset or group of assets
requires impairment as a consequence of one or several events occurring
after the asset is reported for the first time and that these loss-making
events have an impact on the estimated future cash flows from the asset or
group of assets. If there is objective evidence indicating that an impairment
requirement may exist, the assets in question are considered to be doubtful.
Objective evidence is constituted both of observable conditions which have
arisen and which have a negative impact on the possibility of recovering the
acquisition cost, and of significant or extended reductions of the fair value
of a financial investment classified as an available-for-sale financial asset.
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
impairment of other assets included in the unit is subsequently performed.
The recoverable amount is the highest of fair value less selling expenses
and value in use. In the calculation of value in use, future cash flow is
discounted by a discount factor that considers the risk-free interest rate and
the risk associated with the specific asset.
Reversal of impairment
An impairment is reversed if an indication exists both that the impairment
requirement no longer exists and that a change has taken place in the as-
sumptions forming the basis of the estimation of the recoverable amount.
However, the impairment of goodwill is never reversed. Reversals are only
performed to the degree that the asset's reported value after reversal does
not exceed the reported value that should have been reported, with deduc-
tion for depreciation or amortization when appropriate, if no impairment had
been carried out.
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
33
Annual Report 2012
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 adjustments
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 projected unit credit
method. The current value of the defined benefit obligation is determined
through discounting of expected future cash flows, with the application of the
interest rate for first-class mortgage bonds issued in the same currency as that
in which the remuneration will be paid, with durations comparable with that of
the current pension obligation.
Costs referring to service during earlier periods are reported directly in
the income statement, unless the changes in the pension plan are conditional
on the employee remaining employed during a given period (earning period). In
this case, the cost referring to service during earlier periods is distributed on a
straight-line basis over the earning period.
For defined contribution pension plans, the Group pays fees to publicly or
privately administered pension insurance plans on an obligatory, contractual
or voluntary basis. The Group has no further payment obligations when all fees
are paid. The fees are reported as personnel costs at the point in time at which
they fall due for payment. Prepaid fees are reported as an asset to the extent
that cash repayment or reduction of future payments may benefit the Group.
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
employment is terminated by the Group before the normal retirement age
or when an employee voluntarily accepts the termination of employment in
exchange for such remuneration. The Group reports severance payments when
it is demonstrably obliged to terminate employees’ employment in accordance
with a detailed formal plan, without possibility of revocation. In the case that
the Company has submitted an offer to encourage voluntary termination of
employment, the calculation of severance payment is based on the number of
employees which it is estimated will accept this offer.
Contingent liabilities
A contingent liability is recognized when there is a possible obligation which ari-
ses 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 ge-
neral, 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
acquisitions 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
according 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.
In the Parent company’s financial statements transaction costs are ca-
pitalized in the balance sheet and are added to the total acquisition amount
booked as shares in subsidiaries. In the consolidated accounts transaction
costs are expensed according to IFRS 3.
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 deci-
sion on the dividend's amount before the Parent Company has published
its financial statements.
Taxes
Untaxed reserves are recorded in the Parent Company including deferred
income tax liabilities. However, untaxed reserves in the consolidated
accounts are allocated between deferred income tax liabilities and share-
holders' equity.
Pensions
The Parent Company applies a different form of reporting of defined bene-
fit 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 provision 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 become 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 22% of the untaxed reserves can be considered as a defer-
red tax liability and 78% as shareholders' equity. The deferred tax liabilities
34
Annual Report 2012 can be described as an interest-free liability with a non-defined duration. In
the group accounts, 22% of the untaxed reserves are allocated to deferred
tax liabilities and 78% 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 attribu-
table to untaxed reserves refers to the safety reserve. The safety reserve
forms a collective security-conditioned reinforcement of the technical
provisions. Accessibility is limited to loss coverage and otherwise requires
official 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
providing the contribution, to the extent that no impairment is required.
Group contributions are recorded according to their financial signi-
ficance. 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.
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.
35
Annual Report 2012 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 identifies, as-
sesses, controls, monitors, and discloses risks from all sources for the purpose
of increasing Sirius’ short- and long-term value to its stakeholders.
ERM is an ongoing process with the objective of creating a risk management
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 respon-
sibilities. 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 management response
- Provide stakeholders with transparent risk management information
- Comply with Solvency II and other regulatory requirements
Risk strategy and the company’s risk tolerance
Risk strategy and risk tolerance comprise the foundation of the risk management
processes. Sirius' risk strategy and risk tolerance 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 process, strategic limits are ex-
plicitly discussed and specified. The strategic risk tolerance 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
tolerance 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
• 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 and Sirius’ management has
the day-to-day responsibility for all ERM activities. To deploy these responsibili-
ties, different risk committees carry out certain pre-defined 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’ functions for risk control and compliance are responsible for the inde-
pendent 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 submitted annually to the
Board of Directors. Additionally, ad hoc reporting is done when deemed neces-
sary.
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 directly 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 success.
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 underwriting 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 selected
risk level. The anticipated profitability of each contract which is entered into
shall comprise the basic ground for decision making regarding all underwriting.
Other 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.
Sirius America is governed by similar underwriting guidelines as Sirius Internatio-
nal, as appropriate.
The insurance premiums for assumed business are to cover expected
losses and expenses as well as provide a reasonable return on deployed capital.
The premium risk is therefore associated with any possible level of losses
deviating from expected levels. The premium risk is generally managed through
the application of pricing models and underwriting procedures, but also through
a 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 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 underwriting
within Sirius complies with specific rules and procedures. Detailed underwriting
guidelines comprise the framework for all risk acceptances, and these guidelines
contain sections regarding, for example, limits, underwriting authorities and
restricted business. A Four-Eyes underwriting system, that is, a system in which
at least two individuals participate in each decision, is applied for the majority
of the business. The underwriting guidelines are reviewed at least annually and
36
Annual Report 2012 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 retrocessional reinsurance as a tool to manage net risk
and has a centralized 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, natural catastrophe exposure (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, multiple occurrences within one calendar year 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 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 also registers and monitors total exposed limits to wind and earth-
quake 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 2012 and 2011.
Through the use of these simulation models, the company can obtain an
estimation of catastrophe risk, both prior to and after retrocession.
Sensitivity analysis – losses divided by geographical area and return
periods for the Group
2012 2011
Once per
100 years
Once per
250 years
Once per
100 years
Once per
250 years
Global – Gross
Global – Net
3,734
3,169
Europe – Gross
3,108
Europe – Net
US – Gross
US – Net
1,432
3,277
3,103
4,206
3,641
4,019
1,865
3,725
3,590
3,667
2,793
3,204
1,348
2,964
2,737
4,509
3,247
4,429
1,854
3,476
3,221
In addition, to manage its aggregate exposure to very large catastrophe
events, among other measures Sirius has been monitoring the largest net
financial impact (“NFI”) that third-party models predict it would suffer in the
worst modeled aggregate loss year (i.e., the 10,000-year global annual ag-
gregate probable maximum loss (“PML”)). The calculation of the NFI begins with
the modeled 10,000-year global annual aggregate 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. In 2012, Sirius
started using a new proprietary property underwriting and pricing tool (“GPI”),
which consolidates and reports on all its worldwide property exposures. GPI
is used to calculate individual and aggregate PMLs by statistical blending of
multiple third-party and proprietary models. Sirius monitors multiple indicators
of catastrophe tail risk to measure its financial exposure to such scenarios.
Sirius focuses on monitoring NFI TVaR, including the 100, 250, 500 and 1,000
year return periods in order to manage the potential impact of remote events on
the Sirius financial position.
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.
37
Annual Report 2012
Group
Claims, gross
2004 and
Underwriting year
prior years
2005
2006
2007
2008
2009
2010
2011
2012
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
7 years later
Current estimate of total claims
Total paid
3,128
3,632
3,531
3,506
3,493
3,488
1,024
1,075
15,075
14,530
2,420
3,044
6,263
5,575
6,717
9,633
8,024
8,024
4,808
3,387
3,922
3,914
3,838
7,213
7,196
3,430
4,243
4,244
7,344
7,377
3,340
4,847
7,574
7,523
2,836
7,096
7,018
4,060
5,729
2,998
7,196
6,817
7,377
6,864
7,523
6,950
7,018
5,643
5,729
3,846
2,998
640
Claims outstanding1)
5,522
545
3,217
380
513
573
1,375
1,883
2,358
16,365
Claims net of reinsurance
2004 and
underwriting year
prior years
2005
2006
2007
2008
2009
2010
2011
2012
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
7 years later
Current estimate of total claims
Total paid
2,616
3,054
2,966
2,955
2,944
2,939
7,981
7,535
7,535
7,135
2,145
2,729
2,783
2,764
2,740
4,847
4,629
4,629
4,287
2,982
3,468
3,439
3,363
6,628
6,315
3,128
3,736
3,706
6,843
6,244
2,873
3,772
6,323
5,972
2,312
6,372
6,156
3,598
4,893
2,627
6,315
5,969
6,244
5,800
5,972
5,468
6,156
4,957
4,893
3,300
2,627
558
Claims outstanding1)
4,527
400
342
346
443
504
1,199
1,593
2,069
11,423
Parent Company
Claims, gross
2004 and
underwriting year
prior years
2005
2006
2007
2008
2009
2010
2011
2012
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
7 years later
Current estimate of total claims
Total paid
3,128
3,632
3,531
3,506
3,493
3,488
3,477
3,476
3,476
3,418
2,420
3,044
6,263
5,575
6,717
7,466
5,874
5,874
2,940
3,387
3,922
3,914
3,838
3,819
3,808
3,430
4,243
4,244
4,175
4,179
3,340
4,847
4,636
4,554
2,836
4,368
4,226
2,050
3,185
2,022
3,808
3,692
4,179
3,855
4,554
4,149
4,226
3,137
3,185
1,637
2,022
513
Claims outstanding1)
772
59
2,933
115
323
405
1,090
1,547
1,509
8,753
Claims net of reinsurance
2004 and
underwriting year
prior years
2005
2006
2007
2008
2009
2010
2011
2012
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
7 years later
Current estimate of total claims
Total paid
2,616
3,054
2,966
2,955
2,944
2,939
2,929
2,928
2,928
2,871
2,145
2,729
2,783
2,764
2,740
2,733
2,722
2,722
2,663
2,982
3,468
3,439
3,363
3,340
3,330
3,128
3,736
3,706
3,633
3,643
2,873
3,772
3,594
3,576
2,312
3,629
3,481
1,589
2,461
1,670
3,330
3,245
3,643
3,427
3,576
3,283
3,481
2,583
2,461
1,200
1,670
448
Claims outstanding1)
677
57
59
85
216
293
898
1,261
1,222
4,768
1) For reconciliation against Balance Sheet, see Note 23.
38
Annual Report 2012
financial Risk Management
Goals, principles and methods
In the company’s operation various types of financial risks arise, such as
market risks, credit risks and liquidity risks. In order to limit and control the
risk taking in the operations, Sirius’ Board of Directors, being ultimately re-
sponsible for the internal control in the company, has determined guidelines
for the financial operations.
The overall investment objective is to achieve consistent positive returns
and to maximize long-term after-tax return on invested assets within prudent
levels of risk, through a diversified portfolio of high-quality fixed income and
equity investments.
Sirius makes an important distinction between Policyholder Funds
Investments and Owners’ Funds Investments. Policyholder Funds are defined
as policyholder liabilities plus statutory minimum capital and surplus, less
policyholder assets. Policyholder liabilities are Net Technical Reserves as
defined by The Swedish Financial Supervisory Authority (FSA), Finansinspek-
tionen.
As regards Policyholder Funds Investments, at least 95 percent shall
be invested in fixed income securities at all times. Furthermore, at least 80
percent of the fixed income portfolio must be creditworthy and liquid; i.e.
consisting of securities with high credit ratings (investment grade).
To limit concentration risk, the guidelines also include restrictions on
exposures 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.
internally.
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 working group is responsible for the con-
tinuous management of market risks. The development of the market risks
is reported within the Currency and Market Risk working group on a monthly
basis. The working group consists of CFO’s and investment officers from
Investment assets, division by class of asset, percentage split
Group Parent Company
2012
2011
2012
2011
Bonds and other interest-bearing securities 76.67
77.93
Shares in Associated companies
-
-
Shares and participations
14.24
12.96
- whereof venture capital companies
Derivatives
Cash and bank balances
1.72
1.30
7.79
2.09
0.12
8.99
49.90
41.01
2.73
0.52
1.62
4.74
50.12
38.72
3.53
1.24
0.16
7.47
Total
100.00
100.00
100.00
100.00
Sirius International and Sirius America. The Currency & Market Risk working
group is reporting to the Investment Committee of Sirius.
The company’s investment operations during 2012 yielded a return of
2.3 percent (2.0 percent), expressed in SEK. The duration in the portfolio
with interest-bearing investments at the end of 2012 was 2.63 years which
was higher compared to 2011 (2.15 years). During the year, only minor
changes between different asset classes have been made. The table below
shows the investment assets divided by class of asset, excluding deposits in
companies that are reinsured by Sirius.
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,
2012 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 il-
lustrate, in absolute figures, the exposure to interest rate risk in accordance
with the risk scenarios per the Traffic Light model as per December 31,
2012 and December 31, 2011.
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)
2012
2011
2012
2011
2012
2011
2012
2011
Assets in SEK
Assets in EUR
2,689
3,540
1,470
1,406
Assets in USD and other currencies
14,076
13,873
Total
18,235
18,819
30%
25%
30%
30%
25%
30%
-
46
33
53
-
49
46
56
-
35
19
209
263
29
26
234
289
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)
2012
2011
2012
2011
2012
2011
2012
2011
Assets in SEK
Assets in EUR
2,690
3,540
1,471
1,409
Assets in USD and other currencies
5,885
4,550
Total
10,046
9,499
30%
25%
30%
30%
25%
30%
-
46
33
53
-
49
46
56
-
35
19
88
29
26
82
142
137
39
Annual Report 2012
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, 2012 and December 31, 2011.
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
Total
2012
3,567
3,567
2011
3,300
3,300
2012
35%
-
2011
35%
-
2012
1,248
1,248
2011
1,155
1,155
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 subsidiaries and associated companies
Total
2012
1,820
7,052
8,872
2011
1,702
6,324
8,026
2012
2011
35%
35%
-
35%
35%
-
2012
637
2,468
3,105
2011
596
2,213
2,809
Currency risk
Currency risk arises if assets and liabilities in the same foreign cur-
rency vary in amounts.
The Currency and Market Risk working group meets at least monthly in
order to monitor currency exposure and limit currency risk. Besides that, it
is the responsibility of the working group to review and update the Currency
Risk Policy and ensure it is approved by the Investment Committee and 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 cor-
responding assets, and exposure related to Owner’s Funds. Sirius’ net Po-
Exchange rate exposure – Investment assets / Group
licyholders Funds exposure for currency risk is marginal as the company’s
objective for managing currency risk is to match net insurance liabilities in
foreign currency with corresponding assets within very tight time frames.
The group’s total net exposure for currency risk, i.e. including both Policy-
holder and Owners Funds, before and after any hedging by derivatives is
shown in the table below (the table is only presented for the Group since the
exchange rate exposure, at large, is the same for the Parent company and
the Group since the subsidiaries are treated on a look through basis where
the subsidiaries’ valuation and exposure is taken into consideration).
2012
2011
Shares and participations
USD
3,526
EUR
37
Bonds and other interest-bearing securities
14,109
1,579
Other financial investment assets
Other assets and liabilities, net
Total assets
Technical provisions, net
Total liabilities and provisions
1,309
2,304
86
230
21,248
1,932
-10,401
-1,295
-10,401
-1,295
Net exposure before financial hedging with derivatives
10,847
637
Nominal value currency forwards
Net exposure after financial hedging with derivatives
-3,945
6,902
44
681
GBP
-
664
32
-31
665
-243
-243
422
-20
402
Other
-
526
291
100
917
-736
-736
181
-
181
USD
3,244
EUR
71
14,308
1,471
1,739
2,550
81
325
21,841
1,948
-11,926
-1,400
-11,926
-1,400
9,915
548
-3,432
6,483
-
548
GBP
20
629
58
23
730
-189
-189
541
-
541
Other
-
61
312
71
444
-437
-437
7
-
7
40
Annual Report 2012
In the table below, the effect on the group’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
2012
2011
Change 25 basis points
Change 10%
Change 25 basis points
Change 10%
266
690
236
648
20
68
15
55
10
40
12
54
-
18
-
1
296
816
263
758
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 December 31,
2012 and December 31, 2011.
Investment assets, credit spread risk according to the Traffic light model risk scenarios / Group
Exposure
(MSEK)
Average credit
spread
Scenario
impact
Capital
requirements (MSEK)
2012
2011
2012
2011
2012
2011
2012
2011
Assets in SEK
Assets in EUR
791
852
1,304
1,262
Assets in USD and other currencies
9,557
9,050
1.04
1.24
1.13
1.37
2.74
1.82
-2.5%
-3.4%
-4.6%
-10.3%
-3.2%
-5.5%
Total
11,652
11,164
1.14
1.93
-3.3%
-5.9%
20
61
304
385
29
130
496
655
Investment assets, credit spread risk according to the Traffic light model risk scenarios / Parent Company
Exposure
(MSEK)
Average credit
spread
Scenario
imapct
Capital
requirements (MSEK)
2012
2011
2012
2011
2012
2011
2012
2011
Assets in SEK
Assets in EUR
791
852
1,304
1,264
Assets in USD and other currencies
4,284
3,223
1.04
1.24
1.22
1.37
2.74
1.77
-2.5%
-3.4%
-4.6%
-10.3%
-3.4%
-5.7%
Total
6,379
5,339
1.21
2.01
-3.6%
-6.4%
20
61
147
228
29
130
183
342
41
Annual Report 2012
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.
Group Parent Company
Exposure Group
2012
2011
2012
2011
Bonds & other interest-bearing assets
18,235
19,840
10,041
- Governments
6,763
9,151
4004
- Swedish mortgage institutions
- Other Swedish issuers
- Other issuers
0
791
156
697
10,681
9,836
Shares in Associated Companies
-
-
9,472
4,840
156
697
3,779
7,317
667
30
0
791
5,246
8,254
549
326
Shares & participations
Derivatives
Total
3,567
3,300
326
30
22,128
23,170
19,170
17,486
The tables below lists the ten largest holdings. The table excludes
government bonds and other similar interest-bearing securities but
includes corporate bonds, shares and participations in associated
companies.
Group / 2012
Name of
security
Type
of security
Market value
% of financial
(MSEK)
assets
Sirius International Financial Services
Loan note to group company
Symetra Financial Corporation
One Beacon Insurance Group
Prospector Offshore Fund
Share
Share
Share
Sirius International Financial Services
Currency Derivative
Type
Market value
% of financial
of security
(MSEK)
966
949
662
346
326
264
197
178
178
177
4.4
4.3
3.0
1.6
1.5
1.2
0.9
0.8
0.8
0.8
4,243
19.3
assets
32.1
7.1
3.7
1.8
1.7
1.4
0.9
0.8
0.8
0.7
6,158
1,369
714
346
326
264
178
155
143
134
9,787
51.0
Bond
Share
Bond
Bond
Bond
Total Capital Canada Ltd
Ironshore
Rio Tinto Fin USA Ltd
Volkswagen Fin Serv. NV
Volkswagen Auto Loan Enh Trust
Total
Parent Company / 2012
Name of
security
WM Phoenix (Luxembourg) S.à r.l.
Shares in Subsidiary
Sirius International Holdings (NL) BV
Shares in Subsidiary
White Sands Holdings (Luxembourg) S.à r.l.
Shares in Subsidiary
Prospector Offshore Fund
Share
Sirius International Financial Services
Currency derivative
Total Capital Canada Ltd
Volkswagen Fin Serv NV
BMW Finance NV
Electrolux AB
Citigroup Inc
Total
Bond
Bond
Bond
Bond
Bond
42
Annual Report 2012
Group / 2011
Name of
security
Type
Market value
% of financial
of security
(MSEK)
assets
Sirius International
Loan note to
Financial Services
Group Company
1,021
One Beacon Insurance Group
Symetra Financial Corporation
Prospector Offshore Fund
Total Capital Canada Ltd
Ironshore Inc.
Volkswagen Fin Serv NV
Swedbank Hypotek AB
BMW Finance NV
Shering Plough
Total
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
Parent Company / 2011
Name of
security
WM Phoenix
(Luxembourg) S.à r.l.
Sirius International
Holdings (NL) BV
Prospector Offshore Fund
Total Capital Canada Ltd
Volkswagen Fin Serv NV
Swedbank Hypotek AB
BMW Finance NV
Pentelia Ltd
Permanent Master Issuer PLC
Type
Market value
% of financial
of security
(MSEK)
assets
Shares in
Subsidiary
Shares in
Subsidiary
Share
Bond
Bond
Bond
Share
Share
Bond
Bond
6,338
34.7
1,005
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
3,726
15.7
Atlas Copco AB
Total
8,759
48.0
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 (the table is only presented for the
Group since the distribution, at large, is the same for the Parent company).
Credit quality on classes
2012
2011
of investment assets, %
AAA
AA
A
BBB
CCC Not
Total
AAA
AA
A
BBB
BB
Not
Total
Rated
Rated
Bonds and other interest-bearing securities
- Swedish government
- Swedish mortgage institutions
- Other Swedish institutions
- Foreign governments
- Other foreign issuers
27
100
-
-
31
20
28
18
27
-
-
34
69
9
-
-
48
-
27
-
-
18
-
44
-
-
-
-
-
-
-
-
-
-
-
-
100
100
-
100
100
100
25
18
100
100
15
12
34
31
-
-
84
10
15
51
-
-
1
20
-
-
-
-
25
41
1
-
-
-
-
2
5
-
-
-
-
10
100
100
100
100
100
100
Equity investments, divided by geographical area %
Western Europe
North America
Other
Total
Group Parent company
2012
2.95
85.04
12.01
100
2011
2.60
79.13
18.27
100
2012
94.76
0.38
4.86
100
2011
92.69
0.12
7.19
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
2011
10.84
70.36
17.84
0.96
100
2012
20.64
47.40
26.78
5.18
100
2011
21.44
39.70
37.37
1.49
100
Group Parent company
2011
46.12
0.79
3.51
49.58
100
2012
39.88
0
7.88
52.24
100
2011
51.10
1.65
7.35
39.90
100
2012
11.36
71.00
14.75
2.89
100
2012
37.09
0
4.34
58.57
100
43
Annual Report 2012
Credit risk on receivables with reinsurers
Ageing balances
The credit risk resulting from reinsurance ceded by Sirius can be
divided into two separate components; reinsurers’ share of techni-
cal provisions as recorded on an ongoing basis under assets in the
balance sheet, and the potential exposure that would emerge in the
Receivables regarding both direct insurance as well as assumed
and ceded reinsurance are followed up on a quarterly basis.
Outstanding receivables are analyzed on the basis of the length of
time that has passed since the due date with the following distribu-
event of large claims in the insurance portfolio, for example, in the
tion: Less than 1 month, 1-3 months, 3-6 months, 6-9 months,
case of a severe European windstorm. An event like this would trig-
ger major portions of Sirius’ purchased reinsurance programme.
9-12 months and over 1 year. These analyses, together with the
assessment of the counterparty’s credit risk status, comprise the
Sirius’ Security Committee is responsible for managing the risk
basis for various collection activities and any write-down require-
of reinsurer insolvency. To mitigate this risk, we annually review
ments.
and periodically monitor our reinsurers’ financial condition.
The credit risk reserve for bad debts amounted, as per De-
cember 31, 2012, to MSEK 58 for the group, whereof MSEK 38
at Sirius International (2011 MSEK 62 for the Group, MSEK 44 at
Sirius International).
Group
Due for
<1 Month
1-3 Months
4-6 Months
7-9 Months
10-12 Months
>1 Year
2012
Net receivables
2011
Net receivables
556
580
79
185
36
60
8
-6
8
8
132
210
Total
819
1037
Parent Company
Due for
<1 Month
1-3 Months
4-6 Months
7-9 Months
10-12 Months
>1 Year
Total
2012
Net receivables
2011
Net receivables
276
114
34
58
11
40
5
-6
3
2
62
235
391
442
In accordance with Sirius International’s policy for write-downs of recei-
vables outstanding for more than 1 year, there is a specific reserve for
counterparties which are not classified as IDC companies (Insolvent and
Doubtful Companies) which totals MSEK 6 at December 31, 2012.
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
equivalent
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB or lower
Special approval
2012 2011
Gross Collateral Net Percentage split Gross Collateral Net Percentage split
162
75
367
108
290
214
316
101
632
355
0
0
1
0
0
1
19
0
182
115
162
3
75
366
108
290
213
297
101
450
240
0
1
7
2
5
4
6
2
12
6
52
210
0
241
45
307
470
253
62
849
420
5,253
8,111
0
0
2
0
0
4
67
0
96
119
4,831
5,119
210
0
239
45
307
466
187
62
754
301
421
2,992
3
0
3
1
4
6
3
1
10
5
65
100
Internal reinsurance
2,845
2,845
Total
5,466
3,164
2,302
100
44
Annual Report 2012
Parent Company
Rating –
Standard & Poor's
equivalent
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB or lower
Special approval
2012 2011
Gross Collateral Net Percentage split Gross Collateral Net Percentage split
0
75
156
108
290
66
403
91
113
355
0
0
0
0
0
0
19
0
10
115
2,845
0
0
75
156
108
290
66
384
91
103
240
0
2
3
2
6
1
9
2
3
8
63
118
0
173
45
307
109
222
59
369
420
5,253
7,074
0
0
0
0
0
0
66
0
11
119
4,831
5,027
118
0
173
45
307
109
155
59
358
301
421
2,047
2
0
2
1
4
2
3
1
5
6
74
100
Internal reinsurance
2,845
Total
4,502
2,989
1,514 100
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 unusually large and requent events.
The table below describes the assumed liabilities from Retrocessionaires (excluding costs
for reinstatements) and the distribution of credit ratings for Sirius’ 2012 Retrocession Program.
(The table only presents the Parent Company since external reinsurance, at large, not exist in other
parts of the group).
Rating / Parent Company
Standard & Poor's 2012
2011
or equivalent
MSEK Percentage split
MSEK
Percentage split
AA+
AA
AA-
A+
A
A-
BBB+
BBB or lower
Fully collateralized
Special approval
Total
0
96
873
825
103
620
53
54
29
255
0
3
30
28
4
21
2
2
1
9
0
374
489
953
152
930
127
0
185
122
0
11
15
29
5
28
4
0
6
4
2,908
100
3,331
100
45
Annual Report 2012
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.
interest-bearing investment assets was 2.63 years (2.15 years) and the
duration of insurance liabilities was 2.14 years (2.18 years). The liquidity
is monitored continuously and stress tests are performed for different
scenarios. The company’s claims payment capabilities are further
strengthened with its high portion of cash and bank deposits of the total
investment assets.
The cash flow analysis also provides an illustration of the company’s
The company’s strategy for dealing with liquidity risk aims to match
liquidity situation.
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 2012 the duration of
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) / 2012
Group
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
Cash & bank balances
Receivables, direct insurance
Receivables, reinsurance
Other debtors
Prepayments and accrued income
Total
-
-
1,951
-
311
-
-
2,262
746
-
-
-
45
132
-
923
762
-
-
77
1,589
68
208
2,704
9,781
6,946
-
-
-
50
69
2
-
-
-
1
-
-
-
3,567
-
28
-4
43
-
18,235
3,567
1,951
105
1,993
312
210
9,902
6,947
3,634
26,373
liquidity profile – financial assets (Contractual inflows) / 2011
Group
On demand
<3 months 3 months –1 year
1-5 years
>5 years
No duration
Total
291
2,957
6,985
8,585
-
-
762
117
9
-
-
1,052
2
215
4,226
-
-
211
-
-
-
-
-
-
-
1,021
3,300
2
398
70
-
19,839
3,300
2,289
2
2,423
189
224
7,196
8,585
5,791
28,266
Bonds and other interest-bearing
securities (discounted amounts)
Shares & participations
Cash & bank balances
Receivables, direct insurance
Receivables, reinsurance
Other debtors
Prepayments and accrued income
-
-
2,289
-
-
-
-
Total
2,289
1,179
46
Annual Report 2012
liquidity profile – financial assets (Contractual inflows) / 2012
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 group companies
Shares & participations
Cash & bank balances
Receivables, direct insurance
Receivables, reinsurance
Other debtors
Prepayments and accrued income
-
-
-
955
-
-
77
-
36
587
6,734
2,684
-
-
-
-
-
-
-
-
-
-
-
1,605
56
141
2,389
-
-
-
-
-
69
2
-
-
-
-
-
-
-
-
8,254
549
-
28
-23
-
-
10,041
8,254
549
955
28
1,582
202
143
21,754
Total
1 032
36
6,805
2,684
8,808
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 group companies
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
-
9,472
7,317
667
1,411
2
1,880
293
151
4,323
2,913
8,464
21,193
liquidity profile – financial debts (Contractual outflows) / 2012
Group
On demand
<3 months 3 months –1 year
1-5 years
>5 years
No duration
Payables, direct insurance
Payables, reinsurance
Other creditors
Accrued expenses and deferred income
Total
-
-
-26
-
-26
-
-
110
110
41
189
1 426
101
1 757
-
-
-
90
90
-
-
-
19
19
7
393
-
1
401
Total
48
582
1 400
321
2 351
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
47
Annual Report 2012
liquidity profile – financial debts (Contractual outflows) / 2012
Parent Company
On demand
<3 months 3 months –1 year
1-5 years
>5 years
No duration
Payables, direct insurance
Payables, reinsurance
Other creditors
Accrued expenses and deferred income
Total
-
-
-
-
-
-
-
-
104
104
-
337
1,325
35
1,697
-
-
-
45
45
-
-
-
-
-
1
393
-
1
395
Total
1
730
1,325
185
2,241
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 – Technical provisions
Estimated claim payments, net, excluding ULAE
Group
2012
2011
Parent Company
<3 months
3 months–1 year
1-5 year
>5 year
Total
1,038
1,172
3,144
3,565
4,658
5,433
3,469
3,715
<3 months
3 months–1 year
1-5 year
>5 year
2012
2011
552
628
1,684
1,935
2,219
2,599
907
1,113
12,309
13,885
Total
5,362
6,275
Operational Risk Management
Sirius has defined operational risks as “the risk of loss arising from inade-
quate or failed internal processes, personnel or systems or from external
events. Operational risk includes legal risk and excludes risks arising from
strategic decisions, as well as reputation risks".
All employees within Sirius are responsible for the contribution to a well
functioning process for operational risk management and shall see them-
selves as risk managers. The function for Risk Control is 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 reviews. Operational risks are also identified and
managed by defining controls within the processes and through follow up
and testing of the effectiveness of the key controls.
Sirius always aims at reducing the operational risks to acceptable levels.
48
Annual Report 2012
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 upcoming Solvency II regulation.
The company has a project in place with several defined subprojects. The
subprojects are covering all three Pillars. The project has a dedicated Pro-
ject 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 Solvency II manager reports about Solvency II at all Risk Management
Committee meetings.
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 to be economically solvent over a
one year period within 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
• 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 according to the risk tolerance levels established by the
Board of Directors
• 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 aims at maintaining
a capital base corresponding to not less than an A-rating level as defined by
the rating agencies.
Sirius has during 2012 been participating in 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 sub-
mitted. 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.
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, 2012 and 2011.
Total capital requirement according to the Traffic light model
Total capital net requirement
Capital buffer
Surplus
2012
4,065
14,973
10,908
2011
4,691
14,096
9,405
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
2012
2011
S&P 1)
A.M. Best 2)
Moody’s 3)
S&P 1)
A.M. Best 2)
Moody’s 3)
Financial Strength Rating
Outlook
A-
Stable
A
Stable
A3
Stable
A-
Stable
A
Stable
A3
Stable
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.
49
Annual Report 2012
50
Annual Report 2012 Note 3 • Premium income
Premium income, geographical allocation
Group
Parent Company
2012
2011
2012
2011
Direct insurance, Sweden
Direct insurance, other EES
Direct insurance, other countries
Premiums for assumed reinsurance
Premium income before ceded reinsurance
Premium for ceded reinsurance
Premium income after ceded reinsurance
4
339
915
6,823
8,081
-1,777
6,304
8
213
655
5,079
5,955
-1,592
4,363
3
221
736
4,819
5,779
-1,765
4,014
8
213
655
4,471
5,347
-1,579
3,768
Note 4 • Claims incurred for own account
Claims incurred for the year´s operations / Group
2012
2011
Gross
Ceded
Net
Gross
Ceded
Net
Claims paid
Loss portfolios
Change in provision for incurred and reported claims
-474
41
-695
Change in provision for incurred but not reported claims (IBNR)
-1,729
Claims handling expenses
Total claims incurred for the year’s operations
-176
-3,033
64
0
117
177
0
358
-410
41
-578
-1,552
-176
-447
35
-832
-1,211
-170
-2,675
-2,625
73
0
194
210
0
477
-374
35
-638
-1,001
-170
-2,148
Claims incurred for previous years´operations / Group
2012
2011
Gross
Ceded
Net
Gross
Ceded
Net
Claims paid
Loss portfolios
Change in provision for incurred and reported claims
-4,341
-311
1,127
699
0
-191
Change in provision for incurred but not reported claims (IBNR)
3,970
-1,970
-3,642
-3,105
-311
936
2,000
-503
1,554
159
Total claims incurred for previous year’s operations
445
-1,462
-1,017
-1,895
667
-4
-433
688
918
-2,438
-507
1,121
847
-977
Total claims incurred
-2,588
-1,104
-3,692
-4,520
1,395
-3,125
Total claims paid / Group
2012
2011
Claims paid
Loss portfolios
Claims handling expenses
Total claims paid
Gross
Ceded
Net
Gross
Ceded
Net
-4,815
763
-4,052
-3,552
740
-2,812
-270
-176
0
0
-270
-176
-468
-170
-4
0
-472
-170
-5,261
763
-4,498
-4,190
736
-3,454
Change in provision for outstanding claims / Group
2012
2011
Gross
Ceded
Net
Gross
Ceded
Net
Change in provision for incurred and reported claims
432
-74
Change in provision for incurred but not reported claims (IBNR)
2,241
-1,793
Total change in provisions for outstanding claims
2,673
-1,867
358
448
806
722
-1,052
-330
-239
898
659
483
-154
329
51
Annual Report 2012
Claims incurred for the year´s operations / Parent Company
2012
2011
Gross
Ceded
Net
Gross
Ceded
Net
Claims paid
Loss portfolios
Change in provision for incurred and reported claims
Change in provision for incurred but not reported claims (IBNR)
Claims handling expenses
-362
40
-549
-991
-128
Total claims for the year’s operations
-1,990
66
0
122
170
0
358
-296
40
-427
-821
-128
-273
35
-767
-1,074
-159
-1,632
-2,238
72
0
194
210
0
476
-201
35
-573
-864
-159
-1,762
Claims incurred for previous years´operations / Parent Company
2012
2011
Gross
Ceded
Net
Gross
Ceded
Net
Claims paid
Loss portfolios
Change in provision for incurred and reported claims
-2,497
-311
679
618
0
-131
Change in provision for incurred but not reported claims (IBNR)
3,028
-1,880
Total claims incurred for previous year’s operations
899
-1,393
-1,879
-311
548
1,148
-494
-2,703
-503
1,355
66
-1,785
582
-4
-400
661
839
-2,121
-507
955
727
-946
Total claims incurred
-1,091
-1,035
-2,126
-4,023
1,315
-2,708
Total claims paid / Parent Company
2012
2011
Claims paid
Loss portfolios
Claims handling expenses
Total claims paid
Gross
Ceded
Net
Gross
Ceded
Net
-2,859
684
-2,175
-2,976
654
-2,322
-271
-128
0
0
-271
-128
-468
-159
-4
0
-472
-159
-3,258
684
-2,574
-3,603
650
-2,953
Change in provision for outstanding claims / Parent Company
2012
2011
Gross
Ceded
Net
Gross
Ceded
Net
Change in provision for incurred and reported claims
130
-9
Change in provision for incurred but not reported claims (IBNR)
2,037
-1,710
Total change in provision for outstanding claims
2,167
-1,719
121
327
448
588
-1,008
-420
-205
870
665
383
-138
245
52
Annual Report 2012
Note 5 • Operating costs
Specification of income statement item operating costs
Group
Parent Company
2012
2011
2012
2011
Acquisition costs
-1,615
-1,136
-1,045
-1,015
Change in prepaid acquisition costs (+/–)
Administrative expenses
Provisions and profit shares in ceded reinsurance (–)
-6
-871
402
-42
-573
290
-58
-518
400
-30
-509
315
Total operating costs
-2,090
-1,461
-1,221
-1,239
Other operating costs
Group
Parent Company
2012
2011
2012
2011
Operating costs
Claims handling expenses included in claims paid
-2,090
-192
Asset management costs included in Investment expenses
-79
Expenses for land and buildings included
in Investment expenses, net
Total other operating costs
-2
-2,363
-1,461
-170
-64
-1
-1,696
-1,221
-144
-44
-2
-1,411
-1,239
-159
-53
-1
-1,452
Total operating costs per type
Group
Parent Company
2012
2011
2012
2011
Direct and indirect personnel costs
Premises costs
Depreciation/amortization
Other expenses related to operations
Total other operating costs
-691
-68
-52
-1,552
-2,363
-469
-48
-31
-1,148
-1,696
-432
-44
-49
-886
-414
-41
-29
-968
-1,411
-1,452
Note 6 • Investment income
Group
Parent Company
2012
2011
2012
2011
Dividend income from:
Foreign shares and participations
Interest income
Bonds and other interest-bearing securities
Other interest income
- of which from financial assets not valued at fair value
with changes in value reported in the income statement
Capital gains on foreign exchange, net
Capital gains and reversed write-downs (net)
Foreign shares
Group and associated companies
Interest-bearing securities
Total return on capital, income
80
455
59
-
-
-
199
254
1,047
113
360
30
-
126
89
-
46
764
-
248
16
-
-
-
101
102
467
1
293
21
-
130
27
-
43
515
Realized gains from associated companies in the Parent company derive from sale of shares in IMG which per December 31, 2011 were
written down and valued to MSEK 0. In the group accounts, gains from acquisition of subsidiareis have been realized and accounted in
accordance with IFRS 3.
53
Annual Report 2012
Note 7 • Unrealised gains and losses on investments
Group
Parent Company
2012
2011
2012
2011
Foreign shares and participations
Bonds and other interest-bearing securities
Derivative financial instruments
Total unrealized gains on investments
334
25
293
652
-117
-18
134
-269
70
-
293
363
-59
-
-
-59
Note 8 • Investment expenses and charges
Group
Parent Company
2012
2011
2012
2011
Operating expenses for land and buildings
Asset management costs
Interest expenses
Other interest expenses
-2
-79
-3
- of which from financial assets not valued at fair value
with changes in value reported in the income statement
-
Capital losses on foreign exchange, net
-211
Capital losses
Foreign shares and participations
Group and associated companies
Derivative financial instruments
Total
-71
-
-2
-368
-1
-64
-43
-37
-
-
-
-24
-132
-2
-44
-3
-
-212
-138
-20
-2
-421
-1
-53
-2
-
-
-
-
-
-56
54
Annual Report 2012
Note 9 • Net profit or net loss per category of financial instrument
financial assets / Group 2012
financial assets
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
541
-
383
-
-
924
-
291
-
-
-
291
-
-
492
-
-
492
-
-
-
13
13
26
541
291
875
13
13
1,733
financial assets / Parent Company 2012
financial assets
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
13
-
-
-
-
-
291
-
-
-
13
291
-
-
448
-
-
448
-
-
-
13
3
16
13
291
448
13
3
768
financial assets / Group 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
Other debts
Total
84
-
-18
-
-
-
-
-157
-
-
-
-
-
-
488
-
-
-
66
-157
488
-
-
-
17
6
-36
-13
84
-157
470
17
6
-36
384
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
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 80 (126) for the Group, of which -97 (256) refer to exchange rate losses on financial assets. Exchange rate losses on liabilities and
other assets amount to 177 (-130).
55
Annual Report 2012
Note 10 • Taxes
Income tax recognized in income statement
Current tax expense (-)[/tax revenue (+)]
Current tax expenses
Tax adjustment attributable to previous years
Deferred tax expense (-)[/tax revenue (+)]
Deferred taxes
Total reported tax
Reconciliation of effective tax
Group
Parent Company
2012
2011
2012
2011
-206
26
1,167
987
-147
41
-17
-123
-202
-2
-102
-306
-147
-
26
-121
Reconciliation of effective income tax rate for the Group and Parent Company to the Swedish income tax rate:
Group
Parent Company
2012
2011
2012
2011
Tax according to applicable tax rate for the Parent Company
-26.3%
Effects of foreign tax rates
Effects from change in tax rates
Tax effect from non-deductible expenses
Tax effect from non-taxable income
Current tax regarding previous years
Recognition of tax loss carry-forwards
related to previous years
Reported effective tax
-1.2%
23.0%
-1.4%
7.1%
-1.6%
54.0%
53.6%
-26.3 %
-0.2 %
-
-12.9 %
8.6 %
9.3 %
-26.3%
-26.3 %
-
0.4%
-1.1%
2.2%
-0.2%
-
-
-1.6 %
0.5 %
0 %
-6.3 %
-27.8 %
0.3%
-24.7%
0 %
-27.4 %
On November 21, 2012 the Swedish Parliament decided to reduce the corporate tax rate from 26.3 percent to 22 percent applicable from January 1, 2013. The new tax
rate has affected the calculation of deferred tax assets and liabilities on December 31, 2012.
Reported deferred tax assets and deferred tax liabilities / Group
Deferred tax assets
Deferred tax liabilities
Net
2012
2011
2012
2011
2012
2011
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
Deferred tax balances, net
39
266
9
-
3
2,351
2,668
45
361
56
118
-
653
-
-
-57
-233
-2,132
-
-
-38
-52
-180
-2,550
-
39
266
-48
-233
-2,129
2,351
45
323
4
-62
-2,550
653
1,233
-2,422
-2,820
246
-1,587
Deferred tax assets are only recognized to the extent that realization of the related tax benefit through future taxable profits is probable. Significant tax loss carry-forwards
are related to countries with long or indefinite periods of utilization, mainly the US and Luxembourg. The most part of the deferred tax assets and liabilities will not be
recognized within 12 months.
Reported deferred tax assets and deferred tax liabilities / Parent Company
Personnel-related provisions
Other provisions
Surplus value of securities
Tax loss carry-forwards
Deferred tax balances, net
Deferred tax assets
Deferred tax liabilities
Net
2012
2011
2012
2011
2012
2011
12
8
-
-
20
14
12
-
15
41
-
-
-98
-
-98
-
-
-6
-
-6
12
8
-98
-
-78
14
12
-6
15
35
Unreported deferred tax assets
Unreported deferred tax assets for deductible temporary differences and tax loss carry-forwards amount to 1 (1)
56
Annual Report 2012
Changes in deferred tax
Group
Parent Company
2012
2011
2012
2011
Opening balance
Acquisition of subsidiaries
Recognized in income statement
Recognized in other comprehensive income
Tax loss carry-forwards
Closing balance
-1,587
656
1,167
-11
21
246
-2,519
982
-17
-29
-4
-1,587
35
-
-102
-11
-
-78
35
-
26
-26
-
35
Taxes recognized in other comprehensive income mainly refer to available-for-sale financial assets -11 (-26).
Note 11 • Intangible assets
Group
Parent Company
Intangible assets
-IT
Capitalized
Acquired
Other
expenditure for
intangible
acquired
development
assets
intangible
Intangible assets
-IT
Capitalized
expenditure for
development
Acquired
intangible
assets
work
Goodwill 1)
assets
Total
work
Goodwill 1)
Total
Accumulated acquisition value
Opening balance January 1, 2011
Acquisitions for the year
Closing balance December 31, 2011
Opening balance January 1, 2012
Acquisitions for the year
Write-downs for the year
Reclassification of goodwill
Currency reevaluation effects
93
38
131
131
37
-
-
0
Closing balance December 31, 2012
168
Accumulated amortization
Opening balance January 1, 2011
Depreciation for the year
Closing balance December 31, 2011
Opening balance January 1, 2012
Depreciation for the year
Reclassification of goodwill
-71
-15
-86
-86
-28
-
Closing balance December 31, 2012
-114
Carrying amount
Per January 1, 2011
Per December 31, 2011
Per January 1, 2012
Per December 31, 2012
22
45
45
54
Amortization for the year is included in the
following rows of the income statement for 2011:
Operating costs
Other costs
Total
-15
-
-15
Amortization for the year is included in the
following rows of the income statement for 2012:
Operating costs
Other costs
Total
-28
-
-28
615
5
620
620
-
-5
-43
-
572
-324
-
-324
-324
-
43
-281
291
296
296
291
-
-
-
-5
-
-5
-
2
2
2
67
-
-
-
69
-
-
-
-
-
-
-
-
2
2
69
-
-
-
-
-
-
708
46
754
754
104
-5
-43
0
810
-395
-15
-410
-410
-28
43
-395
313
343
343
415
-15
-
-15
-33
-
-33
93
38
131
131
37
-
-
-
460
-
460
460
-
-
-
-
553
38
591
591
37
-
-
-
168
460
628
-71
-15
-86
-86
-28
-
-114
22
45
45
54
-15
-
-15
-28
-
-28
-252
-4
-257
-257
-4
-
-261
207
203
203
199
-
-4
-4
-
-4
-4
-323
-20
-343
-343
-32
-
-375
229
248
248
253
-15
-4
-19
-28
-4
-32
57
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 have been discounted to present value and are based on a conservative assessment without any
growth of the unit’s earnings, based on historical and future earning patterns. The discount rate has been determined based on a market rate of return, i.e. WACC. The forecasted
profit margin is currently equal to a combined ratio of approximately 95 %.
IT-related intangible assets include acquired licenses and capitalized expenses for development of business-critical systems. Other intangible assets mainly include insurance
licenses, for a number of American states, identified at the acquisition of subsidiaries. The licenses have been valued at fair vaule by an independent advisory firm.
For the group, no depreciation is made on goodwill, the MSEK 324 is accumulated depreciations up to January 1, 2009 when IFRS was adopted. Write-down for the year of MSEK
5 is a write-down of goodwill for the holding in Passage2Health Ltd. For further information regarding depreciation, see Note 1, Accounting principles.
Annual Report 2012
Note 12 • Land and Buildings
Group and Parent Company
Acquisition cost
Opening balance January 1, 2011
Disposals
Acquisitions
Closing balance December 31, 2011
Opening balance January 1, 2012
Disposals
Acquisitions
Closing balance December 31, 2012
Depreciation
Opening balance January 1, 2011
Disposals
Depreciation for the year
Closing balance December 31, 2011
Opening balance January 1, 2012
Disposals
Depreciation for the year
Closing balance December 31, 2012
Carrying amount
Per January 1, 2011
Per December 31, 2011
Per January 1, 2012
Per December 31, 2012
18
-1
10
27
27
-
3
30
-16
1
-1
-16
-16
-
-1
-17
2
11
11
13
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 13 • Shares and participations in group companies
Name of subsidiary Registered offices, country
Participating interest, %
2012
2011
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.
WM Phoenix (Luxembourg) S.à r.l.
Hamilton, Bermuda
Luxembourg
White Mountains Re Sirius Capital Ltd.
London, Great Britain
White Sands Holdings (Luxembourg) S.à r.l.
Luxembourg
75
100
100
100
-
100
100
100
75
100
100
100
100
100
100
-
Accumulated acquisition cost
Beginning of year
Acquisitions
Liquidations
Capital contribution
Repayment of paid-up capital
Reclassification from associated companies
End of year
Accumulated write-downs
Beginning of year
Liquidations
Write-downs for the year
End of year
Carrying amount December 31
58
Parent Company
2012
2011
8,098
-
-185
959
-2
-
8,870
-781
185
-20
-616
8,254
1,862
1,185
-
3,028
-35
2,058
8,098
-781
-
-
-781
7,317
-
Write down of shares in subsidiaries is related to the holding
of Passage2Health Ltd. which has been written down with
MSEK 20 to a book value of SEK 0.
Annual Report 2012
Subsidiaries' shareholders´equity
2012
Name of subsidiary
Shareholders’ equity
Shares %
Number of shares
Book value
Profit/loss
Passage2Health Ltd.
Sirius Rückversicherungs Service GmbH
6
23
75
100
Share capital total GBP 6,800 consisting of
6,800 shares with nom. GBP 1 per share
Share capital total EUR 51,129 consisting
of 1 share nom. value EUR 51,129
Sirius Belgium Réassurances S.A.
11
100
Share capital total EUR 1,245,681 consisting
of 700,000 shares without nom. value
0
1
13
-10
4
0
Sirius International Holdings (NL) B.V.
1,306
100
Share capital total EUR 18,000 consisting
of 180 shares with nom. EUR 100 per share
1,369
119
White Mountains Re Sirius Capital Ltd.
36
100
Share capital total GBP 1 consisting of 1
share with nom. GBP 1 per share
0
36
WM Phoenix (Luxembourg) S.à r.l.
6,281
100
Share capital total USD 42,266,200 consisting of
1,690,648 shares with nom. USD 25 per share
6,158
347
White Sands Holdings (Luxembourg) S.à r.l.
2
1
Share capital total SEK 145,055 consisting of
145,055 shares with nom. SEK
714
-1
Total
2011
7,665
8,254
495
Name of subsidiary
Shareholders’ equity
Shares %
Number of shares
Book value
Profit/loss
Passage2Health Ltd.
16
75
Sirius Rückversicherungs Service GmbH
Sirius Belgium Réassurances S.A
15
11
Sirius International Holdings (NL) B.V.
1,005
White Mountains Re Bermuda Ltd.
White Mountains Re Sirius Capital Ltd.
2
1
White Mountains Phoenix (Luxembourg) S.à r.l.
6,338
100
100
100
100
100
100
Share capital total GBP 6,800 consisting of
6,800 shares with nom. GBP 1 per share
Share capital total EUR 51,129 consisting
of 1 share nom. value EUR 51,129
Share capital total EUR 1,245,681 consisting
of 700,000 shares without nom. value
20
1
13
-4
4
0
Share capital total EUR 18,000 consisting of
180 shares with nom. EUR 100 per share
1,124
-159
Share capital total 120,000 USD consists of
120,000 shares nom. USD 1 per share
Share capital total GBP 1 consisting of 1
share with nom. GBP 1 per share
Share capital total USD 42,266,200
consisting of 1,690,648 shares with nom.
USD 25 per share
1
0
-1
-1
6,158
10
Total
7,388
7,317
-151
Note 14 • Investments in shares and participations
Group
3,567
3,300
3,527
3,575
fair value
Acquisition cost
2012
2011
2012
2011
fair value
Acquisition cost
2012
2011
2012
2011
Parent Company
549
667
613
783
Further information on financial instruments can be found in Note 18.
59
Annual Report 2012
60
Annual Report 2012 Note 15 • Bonds and other interest-bearing securities
fair value
Acquisition cost
Group
2012
2011
2012
2011
Swedish government
Swedish mortgage institutions
Other Swedish issuers
Foreign governments
Other foreign issuers
Total
1,175
0
791
5,588
10,681
18,235
2,688
156
696
6,463
8,816
18,819
1,148
0
764
5,541
10,345
17,798
2,632
152
675
6,381
8,640
18,480
Of which listed
18,235
18,731
17,798
18,391
Difference compared to nominal value
Total excess amount
Total shortfall
1,154
24
1,111
95
812
3
753
75
fair value
Acquisition cost
Parent Company
2012
2011
2012
2011
Swedish government
Swedish mortgage institutions
Other Swedish issuers
Foreign governments
Other foreign issuers
Total
1,175
0
791
2,829
5,246
10,041
2,687
156
696
2,128
3,805
9,472
1,148
0
764
2,803
5,078
9,793
2, 632
152
675
2,102
3,746
9,307
Of which listed
10,041
9,472
9,793
9,307
Difference compared to nominal value
Total excess amount
Total shortfall
640
6
503
33
398
1
323
17
Note 16 • Derivative financial instruments
Group
Parent Company
2012
2011
2012
2011
Derivatives with underlying security currency
Total
326
326
30
30
326
326
30
30
Currency derivatives of nominal MUSD 600 against SEK mainly concern contracts with internal counterparties. The company has entered into three internal
currency hedging agreements with Sirius International Financial Services LTD, in order to adjust the company’s currency exposure against USD in accordance with
established limits.
Trough foreign exchange options, the currency futures transactions are settled on the basis of an exchange rate cap and exchange rate floor (average rate
5.02 SEK/USD and 11.73 SEK/USD). The remaining average term is 17 months.
The currency hedge agreements are valued monthly.
Currency hedging with external counterparts occurs to a limited extent for the currencies USD, EUR and GBP.
61
Annual Report 2012
Note 17 • Other debtors
Group
Parent Company
2012
2011
2012
2011
Other debtors, group companies 1)
Other debtors
Total
127
185
312
2
187
189
125
77
202
244
49
293
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 18 • Categories of financial assets and liabilitities and their fair values
financial
loan
assets valued
finansial assets
Group 2012
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
Derivative financial instruments 1)
Bonds and other interest-bearing securities
Accrued income
Other debtors
Total
-
-
-
459
379
838
3,567
326
8,193
66
-
-
-
3,567
326
3,567
326
10,041
18,234
18,234
124
-
649
379
649
379
3,527
16
18,162
649
379
12,152
10,165
23,155
23,155
22,733
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
Derivative financial instruments 1)
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
62
Annual Report 2012
financial
loan
assets valued
receivables and
at fair value
Available-for-
Total
Parent Company 2012
accounts
via the income
sale financial
carrying
Acquisition
receivables
statement
assets
amount
fair value
value
Shares and participations
Derivative financial instruments 1)
Bonds and other interest-bearing securities
Accrued income
Other debtors
Total
-
-
-
285
202
487
549
326
-
-
-
-
-
549
326
549
326
613
16
10,041
10,041
10,041
10,159
124
-
409
202
409
202
409
202
875
10,165
11,527
11,527
11,399
Parent Company 2011
accounts
via the income
sale financial
financial
loan
assets valued
receivables and
at fair value
Available-for-
Total
carrying
Acquisition
receivables
statement
assets
amount
fair value
value
Shares and participations
Derivative financial instruments 1)
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
1) Derivatives are classified as Financial instruments held for trading.
financial liabilities
Group 2012
Other liabilities
Accrued expenses
Total
Group 2011
Other liabilities
Accrued expenses
Total
Other financial
Carrying
liabilities
amount
fair value
1,400
321
1,721
1,400
321
1,721
1,400
321
1,721
Other financial
Carrying
liabilities
amount
fair value
814
350
814
350
814
350
1,164
1,164
1,164
Parent Company 2012
liabilities
amount
fair value
Other financial
Carrying
Other liabilities
Accrued expenses
Total
1,325
185
1,510
1,325
185
1,510
1,325
185
1,510
Parent Company 2011
liabilities
amount
fair value
Other financial
Carrying
Other liabilities
Accrued expenses
Total
690
199
889
690
199
889
690
199
889
63
Annual Report 2012
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 / 2012
level 1
level 2
level 3
Total
Shares and participations
Derivatives
Bonds and other interest-bearing securities
Total
2,324
-
4,220
6,544
363
-
14,015
14,378
879
326
-
1,205
3,566
326
18,235
22,127
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
Parent Company / 2012
level 1
level 2
level 3
Total
Shares and participations
Derivatives
Bonds and other interest-bearing securities
Total
-
-
3,190
3,190
360
-
6,851
7,211
189
326
-
515
549
326
10,041
10,916
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
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.
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.
64
Annual Report 2012
The tables 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 / 2012
participations
Derivatives
Bonds
Total
Shares and
Opening balance January 1, 2012
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, 2012
Profit/loss reported in profit/loss for the
year for assets included in the closing
993
-46
53
-82
-
-
-39
879
30
294
-
2
-
-
-
326
balance December 31, 2012 1)
-46
294
88
6
-
-89
-
-
-5
0
6
1,111
254
53
-169
-
-
-44
1,205
254
Parent Company / 2012
participations
Derivatives
Bonds
Total
Shares and
Opening balance January 1, 2012
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
319
-118
-
-12
-
-
30
294
-
2
-
-
Closing balance December 31, 2012
189
326
Profit/loss reported in profit/loss for the
year for assets included in the closing
balance December 31, 2012 1)
-118
294
-
-
-
-
-
-
-
-
349
176
-
-10
-
-
515
176
65
Annual Report 2012
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 balance
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
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
-
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.
-
-
-
-
-
-
-
-
553
-33
6
-180
-
3
349
-33
66
Annual Report 2012
Note 19 • Tangible assets
Acquisition cost
Opening balance January 1, 2011
Acquisition
Acquired balances
Disposals
Currency reevaluation effect
Closing balance December 31, 2011
Opening balance January 1, 2012
Acquisition
Disposals
Currency reevaluation effect
Closing balance December 31, 2012
Depreciations
Opening balance January 1, 2011
Acquired balances
Depreciation for the year
Disposals
Currency reevaluation effect
Closing balance December 31, 2011
Opening balance January 1, 2012
Depreciation for the year
Disposals
Currency reevaluation effect
Closing balance December 31, 2012
Carrying amount
Per January 1, 2011
Per December 31, 2011
Per January 1, 2012
Per December 31, 2012
Group
Parent Company
Equipment
Equipment
86
23
59
-16
0
152
152
34
-9
-3
174
-54
-52
-13
14
0
-105
-105
-25
8
2
-120
32
47
47
54
85
23
-
-8
-
100
100
32
-8
-
124
-54
-
-13
7
-
-60
-60
-21
7
-
-74
31
40
40
50
Note 20 • Deferred acquisition costs
Opening balance
Acquired portfolio
Capitalization for the year
Depreciation/amortization for the year
Exchange rate gains/losses
Closing balance
Note 21 • Untaxed reserves
Parent Company
Group
Parent Company
2012
2011
2012
2011
471
0
351
-357
-26
439
386
118
323
-359
3
471
341
-
252
-310
-17
266
386
-
296
-344
3
341
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
2012
2011
35
-10
25
9,647
-
9,647
9,672
40
-5
35
9,647
-
9,647
9,682
67
Annual Report 2012
Note 22 • Provisions for unearned premiums and unexpired risks
Provisions for unearned premiums / Group
2012
Gross
Reinsurers’
2011
Reinsurers’
share
Net
Gross
share
Net
Opening balance
Acquired portfolio
Insurance policies signed during period
Earned premiums for the period
Currency effect
Closing balance
2,182
3
1,718
-1,640
-143
2,120
Provisions for unexpired risks / Group
-439
-3
-437
379
37
-463
2012
Gross
Reinsurers’
1,743
0
1,281
- 1,261
-106
1,657
1,936
395
1,479
-1,663
35
2,182
-403
11
-289
254
-12
-439
1,533
406
1,190
-1,409
23
1,743
2011
Reinsurers’
Opening balance
Previous year’s provisions included in profit/loss
Currency effect
Closing balance
118
-31
-6
81
-87
22
4
-61
31
-9
-2
20
126
-10
2
118
-93
8
-2
-87
33
-2
-
31
share
Net
Gross
share
Net
Provisions for unearned premiums / Parent Company
2012
Gross
Reinsurers’
2011
Reinsurers’
share
Net
Gross
share
Net
Opening balance
Insurance policies signed during period
Earned premiums for the period
Currency effect
Closing balance
1,730
1,456
-1,577
-111
1,498
Provisions for unexpired risks / Parent Company
-442
-441
389
38
-456
2012
Gross
Reinsurers’
1,288
1,015
-1,188
-73
1,042
1,936
1,487
-1,726
33
1,730
-403
-369
341
-11
-442
1,533
1,118
-1,385
22
1,288
2011
Reinsurers’
Opening balance
Previous year’s provisions included in profit/loss
Currency effect
Closing balance
118
-31
-5
82
-87
22
4
-61
31
-9
-1
21
126
-10
2
118
-93
8
-2
-87
33
-2
-
31
share
Net
Gross
share
Net
68
Annual Report 2012
Note 23 • Claims reserve
Group
Gross
share
Net
Gross
share
Net
2012
Reinsurers´
2011
Reinsurers´
Opening balance, reported claims
Opening balance, incurred but not reported claims (IBNR)
Opening balance
Acquired portfolio
Cost for claims incurred - current year
Cost for claims incurred - prior years
Claims handling expense
Paid claims
Currency effect
Closing balance
Closing balance, reported claims
Closing balance, incurred but not reported claims (IBNR)
7,882
12,418
20,300
190
3,003
-415
176
5,085
-1,452
16,365
7,264
9,101
-1,454
-6,131
-7,585
-91
-359
1,463
0
-763
867
-4,942
-1,359
-3,583
2012
Reinsurers´
6,428
6,287
12,715
99
2,644
1,048
176
4,322
-585
11,423
5,905
5,518
4,831
6,251
11,082
8,475
2,625
1,895
170
4,020
413
20,300
7,882
12,418
-1,124
-4,432
-5,556
-1,049
-477
-918
-
-736
-321
-7,585
-1,454
-6,131
2011
Reinsurers´
3,707
1,819
5,526
7,426
2,148
977
170
3,284
92
12,715
6,428
6,287
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 - current year
Cost for claims incurred - prior years
Claims handling expense
Paid claims
Currency effect
Closing balance
Closing balance, reported claims
Closing balance, incurred but not reported claims (IBNR)
4,272
7,673
11,945
1,990
-899
128
3,130
-1,025
8,753
3,985
4,768
-908
-5,637
-6,545
-358
1,393
0
-684
841
-3,985
-861
-3,124
3,364
2,036
5,400
1,632
494
128
2,446
-184
4,768
3,124
1,644
4,831
6,251
11,082
2,238
1,785
159
3,444
443
11,945
4,272
7,673
-1,124
-4,432
-5,556
-476
-839
-
-650
-324
-6,545
-908
-5,637
3,707
1,819
5,526
1,762
946
159
2,794
119
5,400
3,364
2,036
Note 24 • Equalisation provision
Opening balance
Provision for the year
Closing balance
Parent Company
2012
2011
61
25
86
12
49
61
69
Annual Report 2012
Note 25 • Claims handling provision
Opening balance
Acquired portfolio
Release of provision made in prior years
Provision for the year
Currency effect
Closing balance
Note 26 • Employee benefits
Group
Parent Company
2012
2011
2012
2011
254
16
-66
51
-8
247
129
115
-34
44
0
254
142
0
-39
31
-2
132
129
-
-28
41
0
142
Group
Parent Company
Pension provisions
2012
2011
2012
2011
Pension provision – defined benefit plans Sweden
Pension provision – other defined benefit plans
Total
-3
8
5
-4
6
2
9
-
9
7
-
7
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 be-
nefit 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
2012
2011
Defined benefit obligations
Fair value of plan assets
Sub-total
Net cumulative unrecognized actuarial losses
Provisions for defined benefit plans
79
-69
10
-5
5
67
-61
6
-4
2
70
Annual Report 2012
Pension cost recognized in the income statement / Group
2012
2011
Current service cost
Interest cost
Expected return on plan assets
Amortization of actuarial net loss
Pension cost for defined benefit plans
Paid premiums, defined contribution plans
Total pension cost 1)
7
2
-2
-
7
51
58
1
2
-2
-
1
70
71
1) The pension cost for the year does not include special salary tax, which is disclosed in note 30 in the table ”Remuneration to employees”.
Changes in defined benefit obligations / Group
2012
2011
Opening balance pension obligation
Current service cost
Interest cost, pension obligation
Actuarial gains and losses, net
Release of obligation by payment
Transition
Exchange differences on foreign plans
Closing balance pension obligation
67
7
2
6
-3
-
0
79
59
1
3
3
-2
3
0
67
Changes in plan assets / Group
2012
2011
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
61
1
5
4
-2
0
69
53
2
-1
8
-2
1
61
The investment assets’ fair value, as per December 31, 2012,
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
2012
2011
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
4
6
-
-5
-
5
1
3
-
0
-
4
71
Annual Report 2012
Corridor method / Group
2013
2012
2011
Opening balance actuarial net losses
Corridor amount
Expected remaining service time (years)
Gains/losses subject to amortization
5
7
14.0
-
4
6
14.7
-
1
5
14.9
-
Actuarial assumptions, percentages / Group
2012
2011
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
3.7 %
3.3 %
3.0 %
2.9 %
3.0 %
1.5 %
2.4 %
2.5 %
3.0 %
5.0 %
3.7 %
3.0 %
2.9 %
2.9 %
1.4 %
2.4 %
2.4 %
3.0 %
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
2012
2011
2010
Defined benefit obligations
Fair value of plan assets
Total
Actuarial gains (-) losses (+) for the year
Pension obligations
Plan assets
Note 27 • Other creditors
-79
69
-10
6
-5
-67
61
-6
3
0
-59
53
-6
1
-
Group
Parent Company
2012
2011
2012
2011
Amounts due to group companies 1)
Other debtors
Total 2)
1,231
169
1,400
595
219
814
1,257
68
1,325
609
81
690
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.
72
Annual Report 2012
Note 28 • Contingent liabilities and commitments
Group
Parent Company
Pledged assets for own liabilities and provisions
2012
2011
2012
2011
Bonds and other interest-bearing securities
Cash and bank
8,675
195
Assets for which policy holders have preferential rights 8,870
9,528
223
9,751
7,559
142
7,701
8,453
170
8,623
On the basis of the stipulations in Chapter 7, Section 11 of the Insurance Business Act, registered assets amount to MSEK 6,460. 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
2012
2011
2012
2011
Group
Parent Company
Nominal amount
Guarantees on behalf of subsidiary
1,970
1,458
1,970
1,458
Future commitments for investments
in private equity companies
Total
161
2,131
174
1,632
53
2,023
56
1,514
Note 29 • Associated parties
Summary of transactions with associated companies within the White Mountains Group
Group / 2012
Premium
income,
net
Indemni-
fication
Purchased
sold
services
Receivables
liabilities
White Mountains Life Re Ltd. – ceded reinsurance
-213
-1,582
Sirius International Holding - administrative services
Sirius International Financial Services LLC – financial services
Sirius Insurance Holding Sweden AB – group contributions
and short-term receivables
Fund American Holdings AB – group contributions and dividends
White Mountains Advisors LLC – financial services
White Mountains Capital Inc – administrative services
White Mountains Insurance Group – administrative services
Scandinavian Reinsurance Company Ltd. – 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. – liability insurance and dividends
Symetra Financial Corporation – dividends
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
-213
-1,582
-
-3
-
-
-
-41
3
2
2
14
-
-
40
20
37
2,845 1)
-
1,292
49
-
-
-
2
-
-
-
-
-
-
14
-
16
533
680
4
-
-
-
-
25
1
-
-
4,188
1,273
73
Annual Report 2012
Purchased
sold
services
Receivables
liabilities
-
-
-5
-
-3
-
-
-
-21
2
-
-
-24
-
-1
-52
210
-
-
2,845 1)
-
326
49
-
-
-
69
7
-
-
-
-
89
-4
14
1
16
533
680
4
-
-
-
26
1
-
3,506
1,360
Purchased
sold
services
Receivables
liabilities
-
-
2
-
-
5
5
-1
-
-
-25
-
-5
-
-
71
12
64
-
-
-
-
5,253 1)
-
-
1,021
-
-
-
-
2
-
-
-
-
-
-
-
-
16
-
1
13
374
190
11
1
-
3
1
-
-
6,276
610
Parent Company / 2012
Sirius America Insurance Company – assumed reinsurance
Sirius America Insurance Company – ceded reinsurance
Sirius America Insurance Company – administrative services
White Mountains Life Re Ltd. – ceded reinsurance
Sirius International Holdings Ltd. - administrative services
Sirius International Financial Services LLC – financial services
Sirius Insurance Holding Sweden AB – group contributions
and short-term receivables
Fund American Holdings AB – group contributions and dividends
White Mountains Advisors LLC – financial services
Scandinavian Reinsurance Company Ltd. – administrative services
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
OneBeacon Insurance Group Ltd. - liability insurance
Premium
income,
net
185
-4
0
-213
Indemni-
fication
-318
21
0
-1,582
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
Group / 2011
Sirius America Insurance – assumed reinsurance 2)
Sirius America Insurance – ceded reinsurance 2)
Sirius America Insurance – administrative services 2)
Esurance – assumed reinsurance
White Mountains Life Re Ltd. – ceded reinsurance
Sirius Global Services – administrative services 2)
Sirius International Holdings Ltd. - 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 Corporation – dividends
-32
-1,879
Premium
income,
net
122
-22
-
- 42
-209
Indemni-
fication
21
19
-
44
857
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
-151
941
74
Annual Report 2012
Parent Company / 2011
Sirius America Insurance – assumed reinsurance
Sirius America Insurance – ceded reinsurance
Sirius America Insurance – administrative services
Esurance – assumed reinsurance
White Mountains Life Re Ltd. – ceded reinsurance
Sirius Global Services – administrative services
Sirius International Holdings Ltd. - 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
Premium
income,
net
147
-25
-
-42
-209
-
-
-
-
-
-
-
-
-
-
-
Indemni-
fication
Purchased
sold
services
Receivables
liabilities
26
22
-
44
857
-
-
-
-
-
-
-
-
-
-
-
-
-
3
-
-
7
5
-1
-
-
19
-
-
-
-
-
499
1
-
-
5,253 1)
-
-
-
-
-
-
205
32
7
-
-
-
-
-
-
16
2
1
13
374
190
5
-
-
-
22
1
624
Total
-129
949
-5
5,997
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.
Note 30 • Average number of employees, salaries and other remuneration
Average number of employees / Group
Men
Women
Total
Men
Women
Total
2012
2011
Parent Company
Germany
UK
USA
Canada
Total
136
4
2
59
4
205
143
9
2
55
2
211
2012
279
13
4
114
6
416
132
4
1
20
1
158
272
12
2
38
2
326
140
8
1
18
1
168
2011
Average number of employees / Parent Company
Men
Women
Total
Men
Women
Total
Sweden
UK
Belgium
Switzerland
Singapore
Denmark
Bermuda
Total
71
23
23
4
4
5
6
71
20
24
5
10
2
11
142
43
47
9
14
7
17
68
22
22
4
5
4
7
70
19
23
5
10
2
11
138
41
45
9
15
6
18
136
143
279
132
140
272
2012
2011
Senior management / Group and Parent Company
Men
Women
Total
Men
Women
Total
Board and CEO
Other senior members of management
Total
4
2
6
-
-
-
4
2
6
3
3
6
1
-
1
4
3
7
75
Annual Report 2012
Remuneration to employees
Group
Parent Company
2012
2011
2012
2011
Salaries including bonuses
Of which expenses bonus and other similar remunerations
Pension expenses
- Defined contribution plans
- Defined benefit plans (Note 26)
Social security contributions,
special employer’s contributions on pensions
Total
520
147
58
51
7
78
656
299
52
71
70
1
78
448
302
87
49
47
2
72
423
248
44
68
69
-1
76
392
Of which paid remuneration for the year to:
Group
Parent Company
CEO
2012
2011
2012
2011
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
18
14
3
3
-
21
14
9
2
2
-
16
12
8
3
3
-
15
11
6
2
2
-
13
18
14
3
3
-
21
14
9
2
2
-
16
12
8
3
3
-
15
11
6
2
2
-
13
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 2012 and 2011.
Remuneration policy
Sirius International’s remuneration policy is available on the Company’s homepage, which follows FFFS 2011:2.
Note 31 • Fees and reimbursements to auditors
PwC
Audit assignment
Tax counseling
Other services
Total
Group
Parent Company
2012
2011
2012
2011
11
1
1
13
7
1
-
8
4
1
1
6
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 Managing Director, 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.
76
Annual Report 2012
Note 32 • Operational leasing
Non-cancellable leases
Group
Parent Company
2012
2011
2012
2011
Due for payment within one year
Due for payment later than one year but within five years
Due for payment after five years
Total
45
129
51
225
56
146
25
227
31
74
3
108
31
101
5
137
Note 33 • Class analysis
Profit/loss per insurance class
Group / 2012
Personal
Marine,
fire and
other
Premium income, gross
Premium earned, gross
Incurred claims, gross
Operating expenses, gross
Result, ceded reinsurance
Technical result
Parent Company / 2012
Premium income, gross
Premium earned, gross
Incurred claims, gross
Operating expenses, gross
Result, ceded reinsurance
Equalization provision
Technical result
Group / 2012
Premium income, gross
Premium earned, gross
Incurred claims, gross
Operating expenses, gross
Result, ceded reinsurance
Technical result
Parent Company / 2011
accident and
aviation and
property
Total direct
Assumed
health
transport
damage
Miscellaneous
insurance
reinsurance
970
885
-499
-377
-44
-35
88
81
-44
-37
4
4
110
94
-64
-42
-
-12
89
87
-47
-43
-
-3
1,257
1,147
-654
-499
-40
-46
6,824
6,887
-1,934
-2,027
-2,369
557
Personal
Marine,
fire and
other
accident and
aviation and
property
Total direct
Assumed
health
transport
damage
Miscellaneous
insurance
reinsurance
723
736
-412
-303
-42
-
-21
88
81
-44
-37
4
-
4
110
95
-64
-42
-
-
-11
39
51
-5
-27
-
-
19
960
963
-525
-409
-38
-
-9
4,819
4,968
-566
-1,198
-2,346
-25
833
Total
8,081
8,034
-2,588
-2,526
-2,409
511
Total
5,779
5,931
-1,091
-1,607
-2,384
-25
824
Personal
Marine,
fire and
other
accident and
aviation and
property
Credit
Total direct
Assumed
health
transport
damage
insurance
Miscellaneous
insurance
reinsurance
Total
651
599
-337
-272
-5
-15
75
58
-38
-29
4
-5
83
87
-98
-40
-
-51
-
-
-2
-
-
-2
91
86
-40
-33
-
13
900
830
-515
-374
-1
-60
5,055
5,319
-4,005
-1,385
129
58
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
-
-7
75
58
-38
-30
4
-
-6
83
87
-97
-40
-
-
-50
-
-
-3
-
-
-
-3
82
83
-39
-29
-
-
15
876
824
-512
-363
-
-
-51
4,471
4,772
-3,511
-1,173
53
-49
92
5,955
6,149
-4,520
-1,759
128
-2
Total
5,347
5,596
-4,023
-1,536
53
-49
41
77
Annual Report 2012
Stockholm, March 5, 2013
Allan Waters
Chairman of the Board of Directors
Brian Kensil
Lars Ek
Göran Thorstensson
President & CEO
Our Auditors’ Report was submitted on March 7, 2013
Anna Hesselman
Authorized Public Accountant
Morgan Sandström
Authorized Public Accountant
78
Annual Report 2012
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 2012.
that are appropriate in the circumstances, but
Responsibilities of the Board of Directors and
not for the purpose of expressing an opinion
the Managing Director for the annual accounts
on the effectiveness of the company’s internal
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,
Our responsibility is to express an opinion
the financial position of the parent company
on these annual accounts and consolidated
as of December 31, 2012 and of its financial
accounts based on our audit. We conducted
performance and its cash flows for the year
our audit in accordance with International
then ended in accordance with the Annual
Standards on Auditing and generally accepted
Accounts Act for Insurance Companies. 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 December 31, 2012 and of their
from material misstatement.
financial performance and cash flows for the
An audit involves performing procedures
year ended in accordance with International
to obtain audit evidence about the amounts
Financial Reporting Standards, as adopted
79
Annual Report 2012 by the EU, and the Annual Accounts Act for
As a basis for our opinion on the Board of Di-
Insurance Companies. The statutory admin-
rectors’ proposed appropriations of the compa-
istration report is consistent with the other
ny’s profit or loss, we examined the Board of
parts of the annual accounts and consolidated
Directors’ reasoned statement and a selection
accounts.
of supporting evidence in order to be able to
We therefore recommend that the annual
assess whether the proposal is in accordance
meeting of shareholders adopt the income
with the Companies Act and the Insurance
statement and balance sheet for the parent
Business Act.
company and the group.
As a basis for our opinion concerning dis-
charge from liability, in addition to our audit
Report on other legal and r egulatory
of the annual accounts and consolidated ac-
r equir ements
counts, we examined significant decisions, ac-
In addition to our audit of the annual ac-
tions taken and circumstances of the company
counts and consolidated accounts, we have
in order to determine whether any member of
also audited the proposed appropriations of
the Board of Directors or the Managing Direc-
the company’s profit or loss and the adminis-
tor is liable to the company. We also examined
tration of the Board of Directors and the Man-
whether any member of the Board of Directors
aging Director of Sirius International Insur-
or the Managing Director has, in any other
ance Corporation (publ) for the year 2012.
way, acted in contravention of the Companies
Act, the Insurance Business Act, the Annual
Responsibilities of the Board of
Accounts Act for Insurance Companies or the
Dir ectors and the Managing Dir ector
Articles of Association.
The Board of Directors is responsible for the
We believe that the audit evidence we
proposal for appropriations of the company’s
have obtained is sufficient and appropriate to
profit or loss, and the Board of Directors and
provide a basis for our opinion.
the Managing Director are responsible for
administration under the Companies Act and
Opinions
the Insurance Business Act.
We recommend to the annual meeting of
shareholders that the profit be appropriated in
Auditor’s r esponsibility
accordance with the proposal in the statutory
Our responsibility is to express an opinion
administration report and that the members
with reasonable assurance on the proposed
of the Board of Directors and the Managing
appropriations of the company’s profit or
Director be discharged from liability for the
loss and on the administration based on our
financial year.
audit. We conducted the audit in accordance
with generally accepted auditing standards in
Sweden.
Stockholm, 7 March, 2013
Anna Hesselman
Authorized Public Accountant
Morgan Sandström
Authorized Public Accountant
80
Annual Report 2012
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 2012.
The audited Swedish version is the binding
version.
81
Annual Report 2012 82
Annual Report 2012 hISTORY
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 $600 million. This long-term track record is perhaps
unparalleled.
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Annual Report 2012 Art and pr oduction: Studio Ringvall
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Annual Report 2012