Proposed separation of Mandatum through a partial demerger - Q&A

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On 7 December 2022, Sampo announced that its Board of Directors decided to undertake a strategic review of Mandatum. The objective of the review was to explore if a separation of Mandatum from the rest of the Group could be in the best interest of Sampo’s shareholders.

Following an assessment of options, the Board has resolved to propose a partial demerger of Sampo plc to separate Mandatum from the Sampo Group.

To implement the partial demerger, the Board of Directors proposes that the Annual General Meeting on 17 May 2023 resolves to approve the partial demerger of Sampo plc as set forth in the demerger plan approved by the Board on 29 March 2023.

In the partial demerger, all of the shares in Mandatum Holding Ltd (a wholly-owned direct subsidiary of Sampo plc) and related assets and liabilities will transfer without a liquidation procedure to Mandatum plc, a company to be incorporated in the demerger on the effective date, which is expected to be 1 October 2023, as set forth in the demerger plan.

Below we address the questions regarding the proposed partial demerger. All the published materials regarding the demerger can be found at www.sampo.com/demerger. All the future materials will be added to this page as well.

What is the rationale for the proposed separation of Mandatum from the rest of the Group?

By separating Mandatum, Sampo would become a pure-play P&C insurance group operating in the Nordic and UK digital personal lines markets. As a pure-play P&C insurer, Sampo expects to be able to enhance returns on capital with reduced market risk.

The separation of Mandatum would drive a reduction in Sampo’s exposure to market risk through a fall in the Group’s exposure to risk assets and with-profit insurance liabilities, supporting a reduction in the volatility of earnings and capital. With reduced exposure to market stress events, Sampo could be able to operate with lower financial buffers.

Building on its strong track record as an investment manager, an independently listed Mandatum would have the opportunity to grow by organically broadening its offering to new client groups, including outside Finland, or by consolidation in its home market. However, such growth would require commitments from Sampo that go beyond what the Board deems to be appropriate under the Group’s P&C insurance focused strategy.

What makes the partial demerger an attractive way to separate Mandatum?

A partial demerger is a well-established and financially efficient process in Finland and the proposed demerger should be treated as a tax neutral transaction for Finnish tax purposes. A traditional IPO process would not enable separating Mandatum in one step.

How would the demerger affect Sampo’s results?

Sampo’s result would naturally decrease by the amount corresponding to Mandatum’s contribution to the Group profit following the demerger. In 2022, the Mandatum segment’s profit before taxes was EUR 236 million before the group contribution to Sampo plc, corresponding to 14 per cent of the Group’s profit before taxes excluding extraordinary items. Excluding the Mandatum segment, Sampo Group’s profit before taxes would have been EUR 1,627 million and earnings per share would have been EUR 2.33, instead of the reported EUR 2.69.

How would the demerger affect Sampo’s future dividends?

Sampo’s future dividends would be based on P&C insurance operations’ results. Sampo’s dividend policy is to pay a stable and sustainable regular dividend that grows in line with Group’s earnings over time. According to the dividend policy, the total annual dividends paid will be at least 70 per cent of Group’s operational result.

The Sampo Board of Directors has proposed that the AGM on 17 May 2023 approve a regular dividend per share of EUR 1.80 for the 2022 financial year. Mandatum contributed to this with an internal dividend of EUR 150 million, representing approximately EUR 0.30 per share, with the remainder being attributable to the Group’s P&C operations.

When will the demerger prospectus be published?

The prospectus will be published in May 2023, before the Annual General Meeting.

How large majority is required for the partial demerger proposal to be approved at the Annual General Meeting on 17 May 2023?

The Annual General Meeting may only approve or reject this proposal. To be approved, shareholders representing at least 2/3 of the votes cast and shares represented at the AGM (both A and B shares separately) need to vote in favor of the proposal.

Kaleva, the holder of all B-shares in Sampo, has already given its consent for the demerger.

However, despite the approval of the demerger at the AGM, the Board retains the option to discontinue the partial demerger process until the effective date, should this be considered to be in the interest of shareholders.

Why was the demerger not proposed already in February in connection with the full-year results?

The Board wanted to carefully evaluate all the options.

How would the demerger affect the management of Sampo’s investments?

Majority of the investments related to P&C insurance business have been managed internally by our portfolio managers in If, whereas Mandatum has been managing mainly the euro-denominated investments.

Would the demerger affect Mandatum’s customers?

No. Mandatum’s business would continue as usual.

What would happen to my current Sampo shares in a partial demerger?

Shareholdings in Sampo would remain unchanged. Sampo shareholders would receive new shares in Mandatum plc, (the company to be incorporated in the demerger on the effective date, which is expected to be 1 October 2023), in proportion to their Sampo shares (1:1). For example, if you own 20 Sampo shares you would receive 20 Mandatum shares.

When would the trading of Mandatum shares begin on Nasdaq Helsinki?

The effective date of the demerger is expected to be 1 October 2023. The trading of Mandatum shares is expected to begin as soon as feasible thereafter.

Would receiving Mandatum shares cost me?

Sampo will not charge any costs to shareholders in the proposed partial demerger. Account operators and other intermediaries may charge fees for the maintenance of book-entry accounts and for custody of shares.

What would be the tax consequences of the partial demerger for shareholders?

There should not be immediate tax consequences for Finnish-resident shareholders when receiving Mandatum shares as the demerger should be treated as a tax neutral transaction for Finnish tax purposes. Capital gains taxes would become payable if the shareholder sold the Mandatum shares received.

However, Sampo cannot give any detailed tax advice to shareholders, as the shareholders’ taxation depends, among other things, on shareholders’ domicile and legal status.

How would the purchase price of Sampo and Mandatum shares be determined following the partial demerger?

The original purchase price of Sampo would be split between Sampo and Mandatum. Further information will be provided later.

Stockholm-listed Sampo SDR holders

What would happen to my Sampo SDRs in a partial demerger?

Holdings in Sampo SDRs would remain unchanged.

Would I receive Mandatum shares?

The SDR issuer SEB is expected to provide the SDR holders an option to receive Mandatum shares if it’s technically possible for the SDR holder and if the SDR holder has provided SEB all the information required for the transaction. Further information will be provided later.

Annual General Meeting and registration

Where and when the AGM will be held?

The AGM will be held at Helsinki Exhibition and Convention Centre (halls 5ab, Messuaukio 1, Helsinki, Finland) on Wednesday 17 May 2023 at 2:00 pm Finnish time. The reception of registered shareholders will start at 12:00 pm.

How can I register myself to the AGM?

The registration for the AGM starts on 11 April 2023 at 10:00 am. Registration must be done by 10 May 2023 at 4:00 pm. Detailed registration instructions will be provided after the notice to the AGM has been published.

All the information and materials regarding the AGM will be available at www.sampo.com/agm.

 

Important notice

This publication is not an offer of securities for sale in the United States of America. The shares in Mandatum plc referred to herein have not been, and will not be, registered under the US Securities Act of 1933, as amended ("US Securities Act"), or with any regulatory authority of any state or other jurisdiction in the United States, and may only be offered, sold, exercised, transferred or delivered, directly or indirectly, in or into the United States pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with applicable state and other securities laws.

This publication shall not be published or disseminated, in whole or in part, directly or indirectly, in Australia, Canada, Hongkong, Japan, New Zealand, South Africa or Singapore or any other country where publication or dissemination would be unlawful. This publication is not an offer to sell or solicitation of an offer to buy securities in any such jurisdiction where such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any such jurisdiction.

The shares in Mandatum plc have not been and will not be listed on a US securities exchange or quoted on any inter-dealer quotation system in the United States. Neither Sampo plc nor Mandatum plc intends to take any action to facilitate a market in Mandatum plc shares in the United States. Consequently, it is unlikely that an active trading market in the United States will develop for the Mandatum plc shares.

The Mandatum plc shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission or any other regulatory authority in the United States, nor have any of the foregoing authorities passed comment upon, or endorsed the merit of, the partial demerger or the accuracy or the adequacy of this publication. Any representation to the contrary is a criminal offence in the United States.

This publication does not constitute a notice to convene a general meeting of shareholders nor does it constitute a demerger prospectus. Any decision with respect to the proposed partial demerger of Sampo plc should be made solely on the basis of information to be contained in the actual notice to convene the general meeting of shareholders of Sampo plc, and the demerger prospectus as well as on an independent assessment of the information contained therein. Investors are directed to consult the demerger prospectus for more comprehensive information on Mandatum plc.

This publication includes "forward-looking statements" that are based on present plans, estimates, projections and expectations and are not guarantees of future performance. They are based on certain expectations and assumptions, which, even though they seem to be reasonable at present, may turn out to be incorrect. Shareholders should not rely on these forward-looking statements. Numerous factors may cause the actual results of operations or financial condition of Sampo plc or Mandatum plc to differ materially from those expressed or implied in the forward-looking statements. Neither Sampo plc, nor any of its affiliates, advisors or representatives or any other person undertakes any obligation to review or confirm or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of this publication.

This publication contains financial information regarding the businesses and assets of Sampo plc and Mandatum plc and their consolidated subsidiaries. Such financial information may not have been audited, reviewed or verified by any independent auditor. Certain financial data included in this publication consists of "alternative performance measures." These alternative performance measures, as defined by Sampo plc and Mandatum plc, may not be comparable to similarly titled measures as presented by other companies, nor should they be considered as an alternative to the historical financial results or other indicators of Sampo plc's and Mandatum plc's cash flows based on IFRS. Even though the alternative performance measures are used by the management of Sampo plc and Mandatum plc to assess the financial position, financial results and liquidity and these types of measures are commonly used by investors, they have important limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of Sampo plc's or Mandatum plc's financial position or results of operations as reported under IFRS.

This publication includes estimates relating to the benefits expected to arise from the proposed partial demerger, which are based on a number of assumptions and judgments. The assumptions relating to the estimated benefits and costs arising from the proposed partial demerger are inherently uncertain and are subject to a wide variety of significant business, economic, regulatory and competitive risks and uncertainties that could cause the actual benefits and costs arising from the proposed partial demerger to differ materially from the estimates in this publication. Further, there can be no certainty that the proposed partial demerger will be completed in the manner and timeframe described in this publication, or at all.