January-September 2024 results - Q&A

Sampo Group’s top line growth remained strong and underlying trends positive in January-September 2024, driving underwriting profit growth in a mixed claims environment.

Profit before taxes increased by 20 per cent to EUR 1,340 million (1,113) in January-September 2024, driven by higher underwriting result as well as increased net financial result due to strong mark-to-market gains. In the third quarter, profit before taxes increased by 11 per cent to EUR 432 million (391).

Earnings per share amounted to EUR 1.94 (1.86). Operating EPS increased by 2 per cent to EUR 1.68 (1.65), driven by higher underwriting result and buybacks. In the third quarter, EPS amounted to EUR 0.64 (0.73) and operating EPS to EUR 0.59 (0.58).

The Group combined ratio was 84.6 per cent (84.2) in January-September 2024 and 82.5 per cent (85.1) in the third quarter. Following the nine-month result, Sampo has maintained its 2024 outlook for a Group combined ratio of 83–85 per cent.

Net profit for the equity holders and earnings per share for January–September 2023 include result from life operations. The figures in this report have not been audited.

The Group top line growth amounted to 8 per cent on a currency adjusted basis in Q3. What were the main growth drivers?

The growth continued to be supported by all business areas, but particularly UK stood out in Q3, as it has been doing throughout the year.

In the Nordics, our largest business area Private saw currency adjusted growth of 4.3 per cent. This was supported by continued good progress on operational ambitions – for example, personal insurance grew by 8 per cent and digital sales increased by 13 per cent. Meanwhile, motor insurance was still affected by weak new car sales during the quarter.

In Commercial, currency adjusted growth amounted to 3.7 per cent, driven by SME but partly offset by sluggish development in workers’ compensation in Finland. Industrial GWP decreased by 33 per cent on a currency adjusted basis as the inception date for a small group of large contracts was moved from the third quarter to the fourth quarter. Excluding this, currency adjusted growth in Industrial would have been 3.7 per cent. 

Topdanmark achieved solid top line growth of 12 per cent, driven by the acquisition of Oona Health, and 8 per cent organic growth.

In the UK, the pricing environment has remained fairly stable in 2024, hence supportive for growth. In Q3, Hastings’ live customer policies increased by 11 per cent year-on-year to 3.8 million, up from 3.6 million in Q2. This was driven by 8 per cent growth in motor insurance and 30 per cent growth in home insurance. Strong policy count growth, combined with material price actions taken in 2023, translated to 28 per cent GWP growth on a local currency basis.

How did Sampo’s underwriting profitability develop in Q3?

The third quarter saw normal weather conditions, whereas the prior year comparison period was materially affected by multiple weather events, of which the most significant were the storm Hans and the cloudburst in Oslo, Norway. Hence, severe weather had only 0.7 percentage points impact on Group combined ratio, whereas the comparison period saw an impact of 4.8 percentage points.

However, benefits from more favourable weather conditions were partly offset by an elevated large claims outcome, which had 2.8 percentage points negative effect on Group combined ratio. 

In total, the Group underlying combined ratio improved by 1.7 percentage points, driven by strong performance in the UK and continued stable development in the Nordics. 

The underwriting result increased by 31 per cent on a currency adjusted basis and by 32 per cent on a reported basis to EUR 374 million (284), driven by strong topline growth and solid underlying performance. 

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

Claims inflation continued to slightly slow down both in the Nordics and in the UK. 

In the Nordics, the claims inflation stands now at around 4 per cent, with moderate development in property, while still somewhat elevated claims inflation in motor. In the UK, the motor claims inflation has slowed to high-single digit levels from around 12 per cent observed during 2023.

How did the sharp decline in interest rates affect Sampo’s results in Q3?

For the underwriting result, lower interest rates meant lower discounting benefit. In Q3, the discounting effect was 2.4 percentage points on the Group combined ratio, down 0.7 percentage points from the prior year comparison period. This translated to approximately EUR 15 million lower discounting benefit.

On the net financial result, lower interest rates had a positive effect on the asset side through higher market values for fixed income instruments, and a negative effect on the liability side, as discount rates reduced. Since the lower-end of the yield curve saw a sharper decline than the longer-end, the net effect on Sampo’s net financial result was positive, as our fixed income portfolio has a shorter duration than our liabilities. 

The net investment income increased to EUR 340 million (127), of which EUR 201 million was from mark-to-market gains from fixed income. The Group running yield remained stable at 4.0 per cent, while the mark-to-market yield amounted to 4.1 per cent, down from 4.7 per cent at the end of Q2.

On the liability side, insurance finance income or expense (IFIE) saw a big swing to EUR -212 million (29), because changes in discount rates had a negative effect of EUR -156 million, while in the comparison period the effect was 102 million positive. 

Sampo’s reported EPS decreased by 12 per cent to EUR 0.64 in Q3, while the operating EPS increased by 2 per cent to EUR 0.59. What explains the difference?

The decline in the reported EPS was explained by the fact that the comparison period was the last quarter including Mandatum before the demerger. The comparison figure was EUR 0.73, of which EUR 0.59 was from continuing operations, while Mandatum’s share was EUR 0.14. This means that the reported EPS from continuing operations actually increased by 8 per cent.

The operating EPS acts as the base for the dividend payout ratio and it is adjusted for unrealised investment gains or losses and mark-to-market movements on the liability side as well as certain technical effects. In Q3, the operating EPS was supported by higher underwriting result, but this was partly offset by lower realised gains, which can vary on a quarterly basis depending on investment actions. 

What is the status on the Topdanmark integration?

The Exchange offer was successfully completed in September and the squeeze-out of Topdanmark’s minority shares in October. The integration process is already well underway, as the estimated run-rate synergies of EUR 95 million have been validated and the new Nordic management team has been established.

Sampo will begin to report on the delivery of the synergies from Q1/2025. In addition, new reporting segments in the Group’s financial reporting will be introduced for the first quarter. For Q4 and full-year 2024, Topdanmark will remain its own segment.