IR Blog

Sampo’s first quarter of 2021 was very strong across the Group. Profit before taxes amounted to EUR 632 million (162) and earnings per share was EUR 0.82 (0.26). It was the best-ever Q1 in the Group’s history, if the sale of Sampo Bank in 2007 is not taken into account.

Sampo’s core business, P&C insurance, reported its best-ever operational results. The Group’s underwriting profit was EUR 317 million and combined ratio 81.2 per cent.

Sampo’s largest subsidiary, If reported a profit before taxes of EUR 257 million (129) and an underwriting profit of EUR 213 million (180). If’s combined ratio improved to 81.5 per cent (83.7). Following the strong performance in the first quarter, If’s combined ratio outlook for 2021 improved to 82 – 84 per cent from below 85 per cent.

*) Comparison figures of 31 December 2020.
The figures have not been audited.

How did the coronavirus pandemic affect If’s business in the first quarter?

The pandemic continued to lower the claims frequency, which decreased claims costs especially in motor and travel insurance. The effect of the pandemic on If’s risk ratio was approximately 3 percentage points positive in the first quarter.

In terms of premium income, the sale of travel insurances decreased significantly due to the pandemic. In addition, the premium effect in the corporate segments was noticeable and mainly related to workers’ compensation insurance in Finland. For If as a whole, the pandemic had not a significant effect on premium volume.

What were the drivers behind If’s strong results in the first quarter?

The result was partly supported by lower claims costs due to the pandemic and partly by investment income boosted by a good momentum in the markets, but even without these factors, If’s performance was strong. This is the result of If’s continuous and determined improvements of operational efficiency and investments in digitalization.

Combined ratio was 81.5 per cent. Without the approximately 3 per cent positive COVID-19 effect, it would have been 84.5 per cent, which is an excellent performance in the quite wintry first quarter.

If’s premiums grew 2.6 per cent in local currency in the first quarter. What were the drivers behind that?

The main driver was the strong 3.9 per cent growth in BA Private, If’s largest business area. One of the factors supporting the growth in BA Private was the increased new cars sales, in which If is the leading insurer supported by its strong partnership network.

In addition, the first quarter is important for corporate segments since large part of insurance contracts are renewed on the first day of the year. The premium growth within corporate segments was characterized by stable retention and selective rate actions.

Picture from Supplementary Financial Information presentation

Why did the premium decrease by 3.0 per cent in Finland?

In Finland, the coronavirus pandemic had a negative effect on volume of workers’ compensation insurances as wages decreased due to lower economic activity.

What were the drivers behind Mandatum’s strong results?

Of Sampo’s businesses, the development in the equity and fixed income markets affect Mandatum the most, since vast majority of its results comes from investment income. In addition to the general market development, Mandatum’s results were supported by a quite large capital gain related to the takeover bid for Tikkurila.

Mandatum’s profit before taxes was very strong, EUR 76 million, despite the fact that the profit included a negative impact of EUR 31 million from lowering the discount rate for 2024 to 1.5 per cent.

Mandatum Life’s unit-linked technical reserves were supported by the good momentum in the markets and increased to a new record of EUR 9.24 billion.

Picture from Supplementary Financial Information presentation

How did Hastings first full quarter as a part of Sampo Group go?

Hastings reported strong results in a somewhat challenging market environment. In the UK, the coronavirus pandemic pushed the claims frequency down, but at the same time, average premiums decreased, and price competition increased.

Hastings has taken a disciplined approach and did not participate the aggressive price competition, keeping its number of live customer policies and market share stable at year-end 2020 level. Hastings’ profit before taxes amounted to EUR 46 million, including EUR 10 million charge for amortization of non-operational intangibles, which will continue for the next seven years.

Hastings operating ratio was very strong, 75.1 per cent. The ratio includes a 3.4 percentage points benefit from acquisition accounting across revenue and operating expenses for deferred acquisition costs and other fair value adjustments that will continue until the end of 2021.

Picture from Supplementary Financial Information presentation

How did Sampo’s solvency and financial leverage develop in the first quarter?

Sampo Group’s Solvency II ratio was strong, 189 per cent at the end of March, well in line with the target range of 170 – 190 per cent for 2021 – 2023. Financial leverage was 28.0 per cent, in line with the target level of below 30 per cent for 2021 – 2023. 

Sampo’s lock-up period for Nordea shares ends on 9 May 2021. When will Sampo continue to reduce its ownership in Nordea?

As we communicated at the Capital Markets Day in February, Sampo will materially reduce its ownership in Nordea over the next 18 months (approximately over 15 months at the time of writing this). The schedule of next actions depends on many things, of which the share price of Nordea is naturally the most important one.

At the Capital Markets Day, Sampo estimated that after exiting Nordea and other financial investments it would have approximately EUR 5-6 per share excess capital. Is this estimate still valid?

That estimate presented at the Capital Markets Day was round and based on figures at the end of 2020. The biggest factor is the share price of Nordea, which was EUR 6.67 per share at the end of 2020. Favorable market development will naturally increase the amount of potential excess capital.

Picture from Capital Markets Day presentation (24 February 2021)

Sustainalytics, an ESG-focused research company, upgraded Sampo to Low Risk. What does this mean?

The rating change made by Sustainalytics proves that our continuous and determined work on corporate responsibility bears fruit. Sampo is now in the top five of the 71 insurers rated by Sustainalytics and the number one with a market cap of EUR 20 – 40 billion. We are pleased with this achievement but there is still room to further improve and the work on that field continues.

Picture from Supplementary Financial Information presentation

What would you like to ask Sampo’s managers?

Sampo will hold a Q&A session in connection with its Annual General Meeting on 19.5. In the Q&A session, the Group CEO Torbjörn Magnusson and Group CFO Knut Arne Alsaker will answer shareholders questions. Questions can be presented during the live event, but we would like to receive those in advance as well.

Questions can be sent by email to ir@sampo.fi.

Bitcoin is a so-called cryptocurrency that has attracted growing enthusiasm since its creation in 2008. More and more parties have recently begun to recommend its suitability as a small part of a well-diversified investment portfolio. On these grounds alone, Bitcoin could be expected to have potential for further positive value development if its demand indeed increases. So why doesn't Bitcoin fit into Sampo's investment portfolio?

Valuation of investments

When estimating the expected return of an asset, it is useful to distinguish the cash flows of the asset from the factors that affect the valuation of these cash flows. The basic premise for any investment is that its value is built on the cash flows it generates over its life cycle. An investor can also get value from an investment asset if she manages to sell this asset to another party at a higher price than what she has originally paid for it. However, this may not be the result of an increase in the expected cash flows generated by the asset itself. In addition to the cash flows generated by the asset, its market valuation is affected by the factors by which these cash flows, which will only be received in the future, are converted to present value. These factors include, besides the general level of interest rates, also risk premia, which are added on top of risk-free interest rates and depend on the level of systematic risk in the asset itself. Risk premia are driven by the general market sentiment together with structural market factors, ultimately by supply and demand.

For Bitcoin, none of this seems very relevant, as it does not in itself generate any kind of cash flows, unlike equities, bonds, and real estate in the form of dividends, interest payments and rental income. Bitcoin is therefore not a cash flow -generating asset, and hence over time, Bitcoin itself can’t be expected to generate any sort of returns. Indeed, the prospective return expectations placed on it are based on speculation, reckoning that others are looking to buy more of it and its market price would thus rise, allowing it to be sold to another eager buyer.

Items without cashflows

Of course, there are items in the world that have value even if they do not generate cash flows. Factors of production, such as natural resources, infrastructure and production equipment, can be seen as part of the actual investment project, which, of course, is intended to generate cash flows for the investor. But items that do not generate cash flows and still have value for the buyer include especially items such as services and consumer goods. Their value is based on the utility gained from consumption - they are not bought for the purpose of generating returns on investment. If consumer goods that have been purchased are not consumed, their value can be expected to decrease as the item in question decays over time.

But there are also non-cash-generating imperishable items that are not intended for consumption and at the same time have an indisputable and lasting value, such as e.g. art, gold and cash. It is obvious that their value isn’t based solely on speculation. However, these items can’t be expected to generate a real rate of interest, i.e. a return in excess of inflation, as they do not generate any cash flows that would represent a return. The return on cash doesn’t match even the rate of inflation, as inflation erodes at its value by definition. But the real value of art and gold as imperishable objects could be expected to be preserved as long as these objects have a permanent use case and thus a permanent use value.

Bitcoin cannot be consumed or used as a factor of production or to make anything concrete like jewelry, for example. It is also difficult to see that Bitcoin would produce a similar kind of enjoyment for its buyer as art does. How could a value higher than zero be justified for Bitcoin at all?

Bitcoin as a medium of exchange 

A natural comparison for cryptocurrencies is in fact funds on a bank account, or money, in the euro area the euro. Bitcoin does not have the status of a legal tender, meaning that no one can oblige another party, such as a counterparty or a creditor, to receive a payment in Bitcoin. However, it acts as a medium of exchange and as means of payment in some online stores, online services and physical stores, and of course, between those who are willing to make and receive a payment in Bitcoin.

Money is a liability to the central bank and owed to its holder. Money is a liability on the central bank's balance sheet and matched by assets in the form of securities investments and gold. At the time of the gold standard, the central bank promised to exchange banknotes for gold at a fixed exchange rate. Today, the gold standard has been abandoned and the objective of the central bank is simply to maintain the purchasing power of money, or its real value, instead of exchanging money for gold, in other words, to keep inflation low. 1)

The central bank has the means to achieve this as it is able to control prevailing market interest rates and to influence commercial bank lending. Indeed, the central banks in developed countries have been successful in stabilizing the value of money in recent decades, with inflation remaining low, in the view of some, too low. 2)

There are no guarantees or commitments by anyone for Bitcoin to retain its value, as there are for money. Bitcoin is nobody’s liability to anyone, and no party is committed to guaranteeing the stability of its value. Indeed, the value of Bitcoin has been highly volatile over its life cycle. This makes it a poor medium of exchange - it is difficult for a buyer or seller to know in advance how many Bitcoins (or parts of it, satoshi) are needed to pay for the object in the transaction.

Bitcoin’s suitability for Sampo as an investment 

Recently, also many incumbents in the financial markets have begun to view Bitcoin as an inflation-hedge 3) and plausible investment asset. Such perspectives can easily be seen to reflect a general mistrust in the monetary economy and in the monetary policy pursued by central banks during recent years. In addition, Bitcoin is surrounded by a hype regarding its blockchain 4) technology, which, however, cannot be justified in terms of the non-existent cash flows it generates or its poor characteristics as a medium of exchange. Unless the anonymity offered by Bitcoin is seen as providing value for illegal use cases. From this perspective, however, Bitcoin cannot be recommended to be a part of a responsible investor’s portfolio. In addition, the amount of energy consumed for “mining” Bitcoin currently exceeds, for example, the entire energy consumption of Finland, meaning that it is not suitable as part of responsible investments from this point of view either.

According to the prudent person principle laid down in Solvency II and in the Insurance Companies Act in Finland, insurance companies may only invest in assets the risks of which they can identify, measure, monitor, manage, control and report properly. The company must take these risks into account when assessing its overall solvency needs. An insurance company is required to invest its assets in a way which ensures their security, convertibility to cash, returns, and accessibility. Bitcoin does not meet these requirements applicable to Sampo as the ultimate parent company of an insurance group.

1) The value of so-called fiat (Latin “let it be done”) money is not based on its convertibility to gold, for example, but on the credibility of the monetary policy pursued by the central bank in preserving the real value of money.

2) In recent years, it has often been read that central banks are pumping more and more money into the markets. However, central banks do not give away money to anyone, but exchange their own liabilities for the liabilities of others - either by buying government and corporate bonds or by lending to banks against securities collateral. In addition, central bank refinancing operations do not affect the real economy or inflation without the efforts of commercial banks to expand their lending. When a central bank buys securities and thus increases the supply of money, only the amount of commercial bank deposits held in the central bank (so-called central bank money) increases. In other words, from the point of view of consumers and businesses, the supply of money will not increase at all as a result of central bank measures alone. Indeed, central bank money is a closed system, and money can’t leak out of it to consumers and businesses without commercial banks increasing the amount of loans they grant to consumers and businesses. The low level of inflation in the 2010s has been partly explained by the moderate growth of commercial bank lending. However, during the Covid-19 pandemic, the amount of loans raised by businesses and consumers has started to grow faster. During recent months, this has raised concerns of a possible acceleration in inflation. Manufacturing capacity in the pandemic-weakened economy has been lost, and some fear it will be incapable of responding to a surge in demand following the end of the lockdown measures imposed by the authorities, which would lead to an increase in the level of prices.

3) see e.g. Bitcoin – At the Tipping Point, Citi, March 2021

4) a blockchain is a decentralized, and oftentimes public, digital ledger

Despite the challenging environment, the year 2020 was good for Sampo. If, the Group’s largest business area, reported its best-ever technical result. In addition, investment income was supported by the fast recovery in the capital markets after the turmoil last spring.

The Group’s profit before taxes decreased to EUR 380 million from EUR 1,541 million a year ago. The reported result was negatively affected by the sale loss of EUR 262 million related to the Nordea sale in Q4 and the impairment of EUR 899 million for the rest of the Nordea shares held. Without these extraordinary items, the profit before taxes would be almost at the same level as a year ago.

Read more about Sampo’s January-December 2020 results

*The reported loss related to the sale of Nordea shares in November 2020 and the impairment of Nordea holding made in the consolidated Group accounts 2020, together EUR 1,161 million is included in the 2020 figure. The comparison figure includes a valuation loss of EUR 155 million related to Nordea shares.

The figures have not been audited.

Why did Sampo make an impairment to Nordea’s book value?

Nordea is Sampo’s associated company and its book value is based on equity accounting. To simplify, Sampo’s share of Nordea’s quarterly profits increase the book value and paid dividends decrease it. In addition, the book value is affected by certain, more technical items, such as amortization of goodwill and share of Nordea’s other comprehensive income.

The book value is tested regularly and compared to the recoverable amount for the investment by using a discounted cash flow model, where the cash flows are based on the public information on Nordea. Based on the latest test, the recoverable amount was EUR 7.50 per share.

Nordea’s market price has for a protracted period been under the Group’s book value for the Nordea shares. Thus, the Board decided, after applying management judgement, to impair the book value of Nordea to EUR 7.50 per share from EUR 8.90 per share at the end of December 2020. 

As a result, the impairment had a negative effect of EUR 899 million for the Q4 result.

Picture from Supplementary financial information presentation

Does the impairment loss affect Sampo’s solvency and NAV calculations?

No, it does not, since both calculations are based on the market value of Nordea. The impairment loss does not affect Sampo’s liquidity position either, and therefore nor on ability to pay dividend.

Does the impairment loss affect Sampo’s plans for Nordea?

No, it does not. Even though the regulatory and macroeconomic uncertainty weight Nordea’s share price, the company has continued its positive performance. Sampo continues to see upside in Nordea’s 2022 plans but the group will, over time, explore options to reduce its exposure to banking.

How did the coronavirus pandemic affect Sampo’s business in the fourth quarter?

Vast majority of Sampo plc’s and the subsidiary’s personnel has continued to work from home. Despite of this, the Group companies have succeeded to serve their customers normally.

Various restrictions and the decrease in general activity continued to lower the claims frequency, particularly within motor insurance, which supported the technical results. The effect of the pandemic on If’s combined ratio was approximately 4 percentage points positive in the fourth quarter and approximately 3 percentage points for the full year.

Partly due to the positive effects related to the pandemic, If reported its best-ever combined ratio. The combined ratio was 81.3 per cent in the fourth quarter and 82.1 per cent for the full-year 2020.

How did the technical profitability develop by business areas and markets?

Geographically, If’s combined ratio improved in all markets, except in Finland, where the discount rate was lowered in the third quarter. The development was strongest in Sweden, If’s largest market, where the combined ratio improved to 72.3 per cent (76.5) in 2020.

Picture from Supplementary financial information presentation

By business areas, the combined ratio increased only in BA Industrial due to higher large claims than expected in 2020. In the largest business area, BA Private, the technical development was excellent and supported by fewer claims due to the pandemic.

Picture from Supplementary financial information presentation

How did If’s premiums develop in 2020?

If reported strong premium growth in 2020, although the growth slowed down a bit towards the end of the year. In local currency, premiums grew by 4.7 per cent in 2020. Geographically, the growth was strongest in Denmark, where If focuses more on larger corporate customers.

Picture from Supplementary financial information presentation

Customer retention continued to be high and stable across all business areas. In the largest business area, BA Private, the customer base increased for the third year in a row and was approximately 3,142,000 at the end of 2020.

How did the landslide in Gjerdrum, Norway at the end of the year affect If’s results?

The tragic landslide in Norway was classified as a natural peril and the damages will be covered by the national Natural Perils Pool, whose costs will be shared among the P&C insurers operating in Norway in proportion to their market shares. If’s claims related to the landslide were EUR 18 million in the fourth quarter.

How has the continued good momentum in the capital markets impacted the Group’s investment income?

Both If and Mandatum Life have reported good investment returns after the market turmoil last spring. Especially, the fourth quarter was strong. However, the full-year figures were still impacted by the EUR 191 impairments booked in January-March (If EUR 94 million, Mandatum Life EUR 61 million and Sampo plc 36 million).

In the fourth quarter, If’s net investment income was EUR 76 million (71). Mandatum Life, which has clearly higher equity exposure than If, reported EUR 108 million (78) net investment income excluding income on unit-linked contracts. When looking at investment income, it is good to note that only realized profits are included in it. Changes in market values, on the other hand, are included in the Group’s comprehensive total income.

The good momentum in the capital markets also supported Mandatum Life’s unit-linked technical reserves, which were at all-time high level of EUR 8.8 billion (8.1) at the end of 2020. With-profit reserves linked to higher guarantees (3.5% and 4.5%) continued to shrink and decreased by EUR 268 million to EUR 1.9 billion.

Why did Mandatum Life’s profit before taxes decrease in the fourth quarter despite the strong investment returns?

Mandatum Life has further strengthened its technical provision in response to the continued period of low interest rates. In the final quarter, Mandatum Life lowered its discount rate to 0.25 per cent for the years 2022 and 2023. This had a negative impact of EUR 77 million on the profit.

How did Hastings’ last quarter go?

Hastings has been consolidated as a subsidiary of Sampo since mid-November. Thus, only the figures for the last 6 weeks are included in the Group’s income statement. In addition, these figures include a group of extraordinary items related to the Hastings acquisition and the delisting process. Therefore, the reported figures do not give an accurate picture of Hastings’ operational performance.

In general, the full-year 2020 and the fourth quarter were good for Hastings despite the challenging environment and the company’s customer base continued to grow steadily. Hastings’ business will be presented in more detail at Sampo’s Capital Markets Day on 24 February 2021.

Nordea has, in line with ECB’s recommendations, postponed its dividends. Is the Board’s dividend proposal of EUR 1.70 per share on a solid base?

Yes, it is, since the dividend is primarily funded by internal dividends from insurance operations.

If paid a dividend of approximately EUR 600 million in the fourth quarter to Sampo and Mandatum is expected to pay EUR 200 and Topdanmark EUR 113 million in spring. These internal dividends exceed EUR 1.6 per Sampo share. In addition, after the Nordea share sale in November, Sampo’s liquidity position is strong.

Picture from Supplementary financial information presentation

The dividend proposal is 79 per cent of the Group’s net profit excluding extraordinary items related to Nordea (EUR 2.16 per share) and therefore in line with Sampo’s dividend policy (at least 70 per cent of the Group’s net profit excluding extraordinary items).

Investment company Elliott has publicly expressed its views on Sampo’s strategy. How would you comment on these views?

Sampo’s strategy is on the agenda at the Capital Markets Day on 24 February 2021.

We appreciate investors providing clear and forthright feedback. Elliott happens to be an investor that also shares this feedback publicly.

Sampo announced on 10 November 2020 that it has reduced its ownership in Nordea in line with its strategy. Sampo sold 162 million Nordea shares in an accelerated bookbuild offering to institutional investors.

The transaction price was EUR 7.25 per share, resulting in gross proceeds of approximately EUR 1,174 million. Sampo will incur an accounting loss of EUR 222 million from the transaction for the last quarter of 2020.

After the transaction, Sampo holds 642,924,782 Nordea shares, corresponding to 15.9 per cent of all shares and voting rights in Nordea. Sampo has entered into a lock-up undertaking, under which it has, subject to certain exceptions, agreed not to sell any Nordea shares for a period ending at 9 May 2021.

Sale release
Result of the sale

Questions and answers

Why did you decide to reduce your ownership in Nordea?

Sampo’s strategy is to focus on its core competence area, P&C insurance, as this is where we think we can add most shareholder value. The Hastings acquisition offer was the first step towards that direction and reducing ownership in Nordea is another. The transaction adjusts the balance between P&C insurance operations and our other assets.

Have you lost your faith in Nordea’s turnaround process?

No, we definitely have not. Nordea remains committed to achieve its financial targets for 2022 and has shown very positive signs of progress during the last couple of quarters. With 15.9 per cent ownership, Sampo still remains the largest shareholder of Nordea and we are confident that Nordea will meet its targets. The sale reflects our strategic ambitions towards P&C insurance.

Will you continue to sell Nordea after the lock-up period ends?

We review our holdings continuously and will align these with our P&C focused strategy as and when we think this makes sense for the group. This process is driven by how we see each asset contributing to the group, its financial performance and overall impact on shareholder value rather than practical factors such as the lock-up.

What are you going to do with the proceeds?

Part of the proceeds will be used to reduce Sampo’s leverage and the rest will further strengthen Sampo’s liquidity position and ability to respond to future opportunities.

The market is full of cheap debt capital, why are you worried about your leverage?

We are not worried, but after the Hastings offer, the leverage rose a bit too high for our taste.

Are there any M&A opportunities in sight?

We always keep our eyes open for opportunities, but at the moment we are not in an acquisition mode as we focus on closing the Hastings deal.

Does the sale affect Sampo’s dividend policy?

It does not. The accounting loss from the transaction will be treated as an extraordinary item in calculating the dividend paid for 2020 and it will therefore not impact the dividend. Sampo’s dividend policy, adopted on 6 February 2020, is to pay total annual dividends of at least 70 per cent of Group’s net profit (excluding extraordinary items) and that share buy-backs can be used to complement the cash dividend.

Nordea will still be an associate of Sampo. At what point the position must be changed?

The position as an associated company is based on Sampo’s influence in Nordea. Sampo is still the largest shareholder of Nordea by a margin and Torbjörn is the Chairman of the Board there. The position is something that must be discussed with the FSA and auditors. There is no exact percentage for that.

Are you going to exit your financial and fintech assets as well? (Saxo Bank, Nets, Nordax, Bank Norwegian and Enento Group)

These are financial investments for Sampo. Thus, it’s likely that we will eventually divest these investments, but we have no need to make any sudden moves. These are all different investment cases at different stages of development, and all of them are generally performing well at the moment.

Sampo Group’s profit before taxes for January-September 2020 amounted to EUR 1,054 million (1 073) and earnings per share was EUR 1.51 (1.38).

Results were driven by If’s very strong performance in the third quarter. In addition, investment income was supported by the continued positive development in the capital markets. Meanwhile, associated company Nordea showed more solid signs of progress towards its financial targets for 2022.

With the strong development in the P&C insurance operations, outlook for If’s combined ratio for 2020 was improved to 82-84 per cent from the previous 82-85 per cent.

Interim report for January-September 2020 and the supplementary financial information are available at www.sampo.com/result.

* The valuation loss of EUR -155 million on distribution of Nordea shares in Q3/2019 is included in the comparison figures.
** Comparison figure from 31 December 2019
The figures are not audited. Income statement items are compared on a year-on-year basis and comparison figures for balance sheet items are from 31 December 2019 unless otherwise stated.

How did the coronavirus pandemic affect Sampo’s business in the third quarter?

Sampo’s subsidiaries have been able to continue their operations normally despite the challenging environment. At the end of September, around 70 per cent of If’s and Mandatum Life’s personnel worked from home and recommendations for remote work continue.

In the short-term, the P&C insurance businesses have been positively affected by the coronavirus pandemic as claims have decreased due to slower economic activity and, in particular, lower traffic. During the third quarter, claims frequency returned to somewhat more normalized level as restrictions were eased, however with some variation between countries and business lines. The effect of the coronavirus pandemic on If’s risk ratio was approximately 3 percentage points positive in the third quarter.

Since last spring market turmoil, the coronavirus pandemic has not had a significant impact on Mandatum Life’s daily business.

If’s combined ratio was 82.9 per cent in the third quarter but 80.5 per cent in the second quarter. Why did the combined ratio deteriorate from the second quarter?

If’s combined ratio was negatively affected by the reduction of the discount rate used to discount the annuity reserves in Finland from 0.95 per cent to 0.75 per cent.

Long-term pension liabilities are discounted to present value. Such liabilities are common especially in workers compensation insurance and motor insurance. Discounting must be carried out in a safe manner. In addition, the returns of long-term high-quality bonds or government bonds must be taken into account when deciding the discount rate.

The lower the discount rate, the greater the present value of technical provisions is. Thus, lowering the discount rate will increase claims. The reduction of the discount rate used in Finland had a negative impact of EUR 51 million on the profit. Excluding this effect, If’s combined ratio was 80.9 per cent in January-September and 78.3 per cent in the third quarter. Even including the negative effect, If reported its best-ever third quarter combined ratio.

If’s premium growth was 5.2 per cent for January-September in local currencies. What were the growth drivers?

If reported a solid, organic premium growth in all Business Areas and markets with continued increase in number of customers and a stable retention throughout all segments. The growth has been supported by If being well positioned in the continued digitalization during these exceptional times.

The premium growth was strongest within corporate customers (BA Industrial 11.0% and BA Commercial 5.3%). In addition, the growth in If’s largest segment, BA Private, was very solid and accelerated in the third quarter compared to the second quarter.

Picture from January-September Supplementary Financial Information package.

Why did Topdanmark’s technical result decreased clearly in the third quarter compared to last year?

Topdanmark’s technical result was affected, among other reasons, by increased claims in house insurance, which had a negative impact of 2.1 percentage points on claims trend. Among the reasons are a higher level of water claims due to the rainy start of the year, COVID-19 has caused a higher level of refurbishment on houses increasing the number of water pipe and fungus claims and a couple of very large fire claims.

It is good to note that unlike If, Topdanmark operates only in Denmark. Thus, the volatility in claims frequency can be higher compared to a company that operates in multiple markets.

Further information on Topdanmark and its January–September 2020 Interim Report is available at www.topdanmark.com.

Mandatum Life’s technical with-profit portfolio related to higher guarantees (3.5% and 4.5%) dropped below EUR 2 billion for the first time. Why is this noteworthy?

Mandatum Life’s old with-profit portfolio has been in a run-off stage, because it ties a lot of capital and the company’s focus area is in wealth management and unit-linked products. In 2010, technical reserves of 3.5 and 4.5 per cent guarantees were over EUR 4 billion, and that figure is now halved. The decrease of with-profit portfolio improves Mandatum Life’s ability to pay dividend and releases capital to be re-allocated into more attractive assets.

The unit-linked portfolio, i.e. Mandatum Life’s focus area, continued its positive development and increased close to all-time high figure of EUR 8.1 billion at the end of September. Since the end of March, unit-linked reserves have increased by EUR 850 million.

Mandatum Life’s premiums decreased clearly in the third quarter compared to last year. What explains the drop?

The large difference is explained by the strong comparison period. 2019 was a record year for Mandatum Life’s unit-linked premiums. In addition, in the third quarter of 2019, premium income was driven mainly by couple of large contracts with corporate clients. Despite the coronavirus pandemic, Mandatum Life’s unit-linked premiums in January-September were at the same level as in 2018, which is the second-best year so far.

If decided to pay a dividend of approximately EUR 600 million, in December. What is the situation of Sampo’s other internal dividends?

Mandatum Life usually pays its dividend in the first quarter and the Board’s proposal is usually announced in the full-year financial statement. Mandatum’s dividend capacity is strong.

Both Nordea and Topdanmark has expressed their desire to distribute the undistributed dividends for 2019 but they will follow authorities’ regulations and recommendations.

How did Sampo’s investments develop in the third quarter?

The continued positive development in the capital markets increased investment income in the third quarter. If’s net investment income was EUR 46 million (38) and Mandatum Life’s net investment income, excluding income from unit-linked investments, was EUR 53 million (77) in the third quarter.

There were no major changes in the Group’s investment allocation during the third quarter.

Picture from January-September Supplementary Financial Information package.

What is the situation of Sampo’s Hastings deal?

In September, Hastings’ shareholders accepted the offer made by Sampo and RMI as expected. At the end of October, Sampo announced that it has received all the regulatory approvals for the transaction. The next step is the Court Hearing procedure, which is anticipated to be held on 13 November 2020, after which the deal will be closed. Sampo will announce the completion of the transaction and the consolidation of the figures later.