January-September 2023 results - Q&A

Sampo Group reported solid results in January-September 2023, driven by continued strong premium growth and disciplined underwriting. However, this was partly offset by elevated severe weather and large claims as well as continued currency headwind.

Profit before taxes amounted to EUR 1,113 million in January-September 2023, representing an increase of 77 per cent after adjusting for IFRS 9 (627). Earnings per share amounted to EUR 1.86 (3.83), of which EUR 1.58 was from continuing operations. 

In Q3, profit before taxes increased to EUR 391 million after adjusting for IFRS 9 (342). Earnings per share amounted to EUR 0.73 (0.75), of which EUR 0.59 was from continuing operations.

The Group underwriting result grew by 1 per cent on a currency adjusted basis. On a reported basis, underwriting profit declined by 4 per cent to EUR 882 million (923). The Group combined ratio weakened to 84.2 per cent (83.0).

In Q3, the Group underwriting profit amounted to EUR 284 million (312) and the Group combined ratio was 85.1 per cent (83.2). 

The comparison figures for 2022 have been restated for IFRS 17 but not for IFRS 9, meaning some figures, such as investment income, are not presented on a comparable basis between the reporting periods. Net profit for the equity holders, EPS and return on equity figures include results from life operations. Mandatum was classified as discontinued operations as of 31 March 2023. 
*) To enhance comparability, a Group profit before taxes (P&C operations) figure adjusted for IFRS 9, reflecting market value movements, has been provided for the prior year.
The figures in this report have not been audited.

 

The Group top line growth accelerated to 12 per cent on a currency adjusted basis in Q3. What were the main growth drivers?

The top line growth was driven by continued strong performance both in the Nordics and in the UK.

In the Nordics, growth in Private accelerated to 6.3 per cent from 5.1 per cent in Q2, driven by the strong development in non-motor lines, particularly in personal insurance, but also by stabilising new car sales. Industrial saw gross written premium growth of 41.3 per cent in a seasonally low volume quarter, driven by a small number of larger new contracts.

In the UK, the improving trend in the motor pricing environment seen in H1 continued during Q3. This enabled Hastings to continue material price increases while gaining some new customers. In total, UK premiums grew by 24 per cent on a local currency basis. 

The Group underwriting result decreased by 9 per cent in Q3. What explained this development?

The underwriting profit was negatively affected by adverse severe weather and large claims experience as well as continued currency headwind due to the weakening of the Swedish Krona and Norwegian Krone against the Euro. These offset the strong growth and solid underlying improvement during the quarter.

The main reason for the elevated severe weather claims was the storm Hans that hit all Nordic countries in August. In total, severe weather claims amounted to EUR 90 million in Q3.

On a currency adjusted basis, underwriting profit decreased by 4 per cent in Q3 and as mentioned, the underlying trend remained positive as If’s undiscounted adjusted risk ratio improved by 0.4 percentage points year-on-year. 

Do you see severe weather as an increasing risk due to climate change?

Severe weather events are part of our business, and our job is to protect and help our customers. However, climate risk cannot be ignored. We monitor claims trends vigilantly and underwrite and price the risks conservatively. It is important to remember that we provide coverage for 12 months periods, allowing us to review price adequacy annually.

How did the claims inflation develop in Sampo’s core markets?

In the Nordics, claims inflation showed signs of moderation in the third quarter as it fell to the lower end of the 4-5 per cent range observed over 2023. The moderation was particularly driven by property lines. 

In the UK, market wide motor claims inflation remained high, but stable at around 12%.

How did Sampo’s investment portfolio perform during Q3?

We continued to benefit from rising interest rates as our short duration has allowed us to reinvest quickly into higher yielding instruments. 

The Group net investment income amounted to EUR 119 million in Q3. Of this, EUR 114 came from interest income on fixed income instruments, which offset the softness in the equity markets during the quarter. If’s fixed income running yield increased to 4.1 per cent at the end of Q3, up from 3.8 per cent at the end of Q2. Since the end of 2021, the running yield has more than doubled. 

The demerger was successfully completed on 1 October 2023. How did this affect Sampo?

Mandatum was consolidated in Sampo Group’s P&L and balance sheet until the end of September. In the Interim Report we illustrate the financial effects of the demerger on Sampo Group with pro forma figures before and after taking the demerger effects and related transactions into account.

*) Pro forma figures related to solvency and financial leverage exclude all demerger effects and related transactions. 
**) Pro forma figures related to solvency and financial leverage include all demerger effects and related transactions. Dividend accrual is based on the regular dividend of EUR 1.50 per share for 2022, i.e. excluding Mandatum’s contribution.

 

When will the Finnish Tax Authority confirm the acquisition cost allocation between Sampo and Mandatum shares?

The Finnish Tax Authority is expected to confirm the allocation and give further instructions in November 2023.

Will my bank/broker adjust the acquisition cost for Sampo and Mandatum automatically?

Unfortunately, we don’t have control on banks’ and brokers’ practices. We recommend shareholders to contact directly to their bank/broker regarding this.