SAMPO PLC HALF-YEAR FINANCIAL REPORT 7 August 2024 at 9:40 am
Sampo Group’s results for January–June 2024
• Sampo Group achieved top line growth of 11 per cent in the first half on a currency adjusted basis, driven by continued strong development in all business areas
• The underwriting result decreased to EUR 580 million (598) and the combined ratio increased to 85.8 per cent (83.8) due to harsh Nordic winter conditions and elevated large claims experience
• The Group underlying combined ratio improved by 1.5 percentage points, driven by positive development across the Nordics and the UK only partly offset by a weakening in Topdanmark
• Profit before taxes increased to EUR 909 million (722), supported by strong investment returns and robust underwriting performance in the UK, while operating EPS was up 2 per cent to EUR 1.09 (1.07)
• Solvency II coverage remained strong at 179 per cent, net of announced capital deployment and dividend accrual, and financial leverage amounted to 26.1 per cent
• On 17 June 2024, Sampo announced a recommended public exchange offer for Topdanmark and a related EUR 800 million deployment of capital in share buybacks and a potential squeeze-out
Key figures
| EURm | 1–6/ 2024 | 1–6/ 2023 | Change, % | 4–6/ 2024 | 4–6/ 2023 | Change, % |
| Profit before taxes | 909 | 722 | 26 | 444 | 363 | 22 |
| If | 735 | 657 | 12 | 379 | 320 | 18 |
| Topdanmark | 112 | 105 | 7 | 49 | 42 | 17 |
| Hastings | 71 | 27 | 163 | 45 | 17 | 155 |
| Holding | -10 | -60 | — | -29 | -15 | — |
| Net profit for the equity holders | 653 | 575 | 13 | 310 | 304 | 2 |
| Operating result | 549 | 546 | 1 | 296 | 285 | 4 |
| Underwriting result | 580 | 598 | -3 | 321 | 306 | 5 |
| Change, % | Change, % | |||||
| Earnings per share (EUR) | 1.30 | 1.13 | 15 | 0.62 | 0.60 | 3 |
| Operational result per share (EUR) | 1.09 | 1.07 | 2 | 0.59 | 0.56 | 5 |
Net profit for the equity holders and earnings per share for January–June 2023 include result from life operations.
The figures in this report have not been audited.
Sampo Group key financial targets for 2024–2026
| Target | 1–6/2024 |
| Operating EPS growth: over 7% (period average) | 2% |
| Group combined ratio: below 85% | 85.8% |
| Solvency ratio: 150-190% | 179% (including dividend accrual) |
| Financial leverage: below 30% | 26.1% |
Financial targets for 2024–2026 announced at the Capital Markets Day on 6 March 2024.
GROUP CEO’S COMMENT
Sampo’s solid second quarter performance ran along the now-familiar themes of strong premium growth and positive underlying margin development, driven by underwriting discipline and execution on our key operational initiatives. Profit before taxes was up 22 per cent year-on-year. The announced offer for the remaining shares in Topdanmark is another milestone on our journey that unlocks new levers for operational value creation.
The second quarter saw a continuation of the bifurcation in performance amongst the Nordic P&C insurers, with the large, pan-regional groups, including Sampo, delivering strong results despite pockets of challenging claims trends. It is tempting to attribute of our strength squarely to scale and diversification, but these qualities only provide a firm basis for value creation when paired with operational excellence. As I explain below, our success rests on long-term investments into our operational capabilities and customer offering, and on the underwriting and customer service cultures that we foster.
Let me start with growth. Sampo delivered FX-adjusted top line growth of 11 per cent in the quarter, despite continued low new car sales volumes, on the back of investments made into areas such as the UK, personal insurance and SME. Premium growth was also supported by continued very high retention, reflecting the competitiveness of our prices and services and the stability of the Nordic market. Notably, customers with claims are often amongst our most satisfied. We work closely with our claims partners and invest heavily in our cooperation with these to enable us to fulfil our customer promise with speed and efficiency. On the sales side, we continue to leverage our unique capabilities to win major motor insurance distribution partnerships as these come up for renewal, including one of the largest agreements in Sweden in the second quarter.
Turning to margins, P&C insurance growth requires technical excellence, so I am pleased to report another set of solid underwriting results. In the Nordics, it is the stability of margins across business areas that really stands out; despite a harsh winter and heavy large claims burden, the first half combined ratios of our four business areas fit within 5 percentage points. This reflects the constant focus that we have in every part of the business on ensuring technical excellence. For example, we have been early to adjust prices and deductibles in Norway in response to shifting claims trends. Our stable result further illustrates our commitment to giving customers the right price, which we see as key to building long term relationships.
The second quarter underlying combined ratio improved by almost 2 percentage points, despite softening in Topdanmark, helped by strong development in the UK, where we grew the underwriting result by 37 per cent. Our UK business is benefiting from early rate increases in response to claims inflation and investments in anti-fraud and enhanced risk mix that, together with benign weather, have reduced claims frequency. However, please remember that our objective in the UK is to drive higher profits through customer and premium growth at attractive returns, not by widening margins. I am therefore delighted to see that the UK motor book returned to customer growth in the quarter. Looking ahead, underlying UK margins could both rise and fall as we adjust rates to grow profits.
Ending on a strategic note, we expect to initiate the acceptance period on the offer for Topdanmark on 9 August. The transaction would complete our transformation from a financial conglomerate to a unified P&C insurance group and represents an operational investment that enables us to improve our competitive positioning in Denmark. We aim to deliver annual pre-tax synergies of EUR 95 million that neither company can realise on its own, and to sharpen our customer proposition through complementary product and distribution expertise. The deal represents another avenue for operational value creation, to be enriched by our scale and diversification, and our financial strength will remain comfortably within target-levels, even after adjusting for the related deployment of EUR 800 million into buybacks and the potential squeeze-out.
Torbjörn Magnusson
Group CEO
OUTLOOK FOR 2024
Following the first half result, Sampo has maintained its 2024 outlook for a Group combined ratio of 83–85 per cent. The outlook excludes potential one-off integration costs related to the realisation of synergies with Topdanmark.
Sampo Group’s combined ratio is subject to volatility driven by, among other factors, seasonal weather patterns, large claims and prior year development. The net financial result will be significantly influenced by capital markets’ developments.
PUBLIC EXCHANGE OFFER FOR TOPDANMARK
On 17 June 2024, Sampo announced that Sampo and Topdanmark have entered into a combination agreement, pursuant to which Sampo will make a recommended best and final public exchange offer to acquire all of the outstanding shares in Topdanmark not already owned by Sampo. Under the terms of the offer, Topdanmark shareholders will receive 1.25 newly issued Sampo A shares in exchange for each share held in Topdanmark. The consideration represents a premium of 27 per cent to the closing share price of Topdanmark on Nasdaq Copenhagen on 14 June 2024.
In aggregate, up to a total of 57,468,782 new A shares in Sampo will be issued as share consideration. Subject to all Topdanmark shares (not including Topdanmark shares already owned by Sampo) being tendered in the offer, the Topdanmark shareholders will receive new A shares representing in aggregate an approximate ownership of up to 10.3 per cent of Sampo.
The offer period is expected to be launched on 9 August 2024 and to expire on 9 September 2024. Sampo reserves the right to extend the offer period. Settlement and completion of the offer are expected to occur during September. All necessary regulatory approvals have been obtained for the exchange offer.
Following completion of the offer, Sampo intends to integrate Topdanmark into If P&C to strengthen its position as one of the leading insurers in the Danish P&C insurance market and to consolidate Sampo Group’s leadership position in the Nordics.
The total annual pre-tax run-rate cost and revenue synergies are expected to amount to approximately EUR 95 million and expected to drive EPS accretion of approximately 6 per cent, based on 2025 consensus earnings expectations. Approximately two-thirds of the EPS accretion relates to the EUR 800 million deployed to offset share count dilution through buybacks, and for the potential squeeze out, and approximately one-third relates to pure transaction effects.
Further information on the offer is available at www.sampo.com/topdanmark.
SAMPO PLC
Board of Directors
The Half-Year Financial Report for January-June 2024, Investor Presentation and a video review with Group CEO Torbjörn Magnusson are available at www.sampo.com/result.
Conference call
A conference call for investors and analysts will be arranged at 2:30 pm Finnish time (12:30 pm UK time). Please call tel. +1 786 697 3501, +44 (0) 33 0551 0200, +46 (0) 8 5052 0424, or +358 9 2319 5437.
Conference passcode: Sampo Q2
The conference call can also be followed live at www.sampo.com/result. A recorded version will later be available at the same address.
Sampo will publish the Interim Statement for January-September 2024 on 6 November 2024.
For further information, please contact:
Knut Arne Alsaker, Group CFO, tel. +358 10 516 0010
Sami Taipalus, Head of Investor Relations, tel. +358 10 516 0030
Maria Silander, Communications Manager, Media Relations, tel. +358 10 516 0031
Distribution:
Nasdaq Helsinki
Nasdaq Stockholm
London Stock Exchange
FIN-FSA
The principal media
www.sampo.com
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