IR Blog

In this blog entry we address the questions regarding the sale of Sampo’s entire holding in Nordea announced today. 

Release

Why did you decide to sell the entire stake instead of the originally announced 100 million shares?

The strong market demand offered us an opportunity to reduce our holding to zero, which is in line with our P&C focused strategy.

The total remaining holding was 200 million shares. Does this mean that Sampo had already sold around 46 million shares between year-end 2021 and the final sale?

Yes. Around 19 million shares were sold in the open market in Q1 and 27 million in April.

Sampo’s management intends to propose that a new buyback programme is launched after the AGM. What will be the size of the programme?

The current programme of EUR 250 million launched in March is still ongoing and will end by latest 17 May 2022. Details of the new programme will be announced after the current programme is completed.

How will the sale affect Sampo Group’s solvency?

The positive effect from selling the entire stake, including previous sales in 2022, will be around 30 percentage points on the Group’s Solvency II ratio.

How will the sale affect Sampo Group’s financial leverage?

The effect will not be material, however slightly positive.

Do you have to use some of the proceeds for decreasing the financial leverage?

No, we don’t need the money for deleveraging. Funds for that purpose had already been secured with the Nordea disposals in 2021.

In this blog entry, we address questions we have received from investors and analysts during the first quarter.

Why did Sampo decide to launch a new buyback programme straight after the previous one and before the AGM in May?

The buyback was launched to return excess capital to shareholders, in line with our commitment to capital discipline. Sampo Group’s solvency balance sheet remained robust in the first quarter.

What was the COVID-19 situation like in Q1?

In January, there were still some restriction measures in place but in February and March general activity levels were more or less normal.

What were the weather conditions like in Q1 in the Nordics and the UK?

The Nordic region was affected by winter storms typical for the season, and in Finland the winter has been more snowy than usual. Temperatures have been in the normal range.

Like in the Nordics, the winter quarters (Q1 and Q4) in the UK tend to see relatively higher levels of motor and property insurance claims than the summer quarters (Q2 and Q3). In Q1 2022, the UK has been affected by a number of storm events.

How is the increase in inflation affecting Sampo’s P&C operations?

As stated with FY 2021 results, our Nordic business was not materially impacted by the increased rate of inflation in 2021, as was relatively brief and contained. Overall claims inflation across If’s operations stood at around 3 per cent at the end of 2021.  In the UK, we highlighted high single digit inflation in the severity of motor insurance claims with our FY 2021 and we note that a number of our peers have made similar, or more cautious, comments recently.

A potential prolonged period of broadly based inflation, including wage inflation, would likely lead to increased claims inflation across all our geographies. Hence, we are monitoring the situation carefully and taking a very disciplined approach to pricing.

How has the new car sales developed in the Nordics?

The weak trend seen in Q4/2021 continued in January-February with new registrations declining in all countries, most notably in Finland and Norway.

How did the volatile capital markets develop during Q1 affect Sampo?

Sampo Group does not have any direct investments in Russia or Ukraine but we do hold a small amount of instruments issued by Nordic companies with exposure to the region (see recent IR blog). Since the start of the war, Sampo has reduced its ownership in such assets.

The increase in interest rates over the quarter is supportive of higher reinvestment rates and an increase in the solvency ratio (see sensitivities chart below). Although a reduction in equity markets has a negative economic impact on Sampo, the effect on solvency is substantially moderated by the symmetric adjustment (a countercyclical buffer applied to the capital charge for equities).

Was Nordea’s dividend booked in Sampo’s P&L for Q1?

Yes. Dividends are booked on the ex-dividend date, which for Nordea was 25 March 2022. Nordea’s dividend will be included in the Holding segment’s Net income from investments line. The share of Nordea’s result is no longer consolidated in Sampo’s P&L.

In this blog, we address questions we have received from investors and analysts about the war in Ukraine and its potential effects on Sampo Group.

Does Sampo Group have business operations in Russia or Ukraine?

The Group does not have any business operations in Russia or Ukraine. Sampo’s subsidiaries operate in the Nordics, in the Baltics and in the UK.

The Group have employees with background and ties to Russia and Ukraine that we support in these difficult and sad times.

Does If have any underwriting exposure to Russia or Ukraine?

If’s underwriting exposure to Russia and Ukraine is very limited and mainly within Business Area Industrial. If monitors the situation closely and has taken action to minimise the risks.

In its largest business area, BA Private, If does not have any material underwriting exposure to Russia or Ukraine.

However, rising energy and raw material prices, supply chain shortages and exchange rate fluctuations could be reflected in the claims inflation.

How will the changing economic outlook in Europe affect Sampo Group?

P&C insurance is stable and defensive business by nature, and not directly linked to short-term fluctuations in economic output or commodity prices. However, longer-term economic developments, could affect the demand and supply of P&C insurance. Of the Group’s core markets, the Baltics and Finland with close trade relations with Russia are could be directly more affected than other countries.

Does Sampo Group have investments in Russia or Ukraine?

The Group has no direct equity or fixed income investments in Russia or Ukraine. However, the Group does hold investments worth of double-digit million euros with material Russia/Ukraine exposures, such as shares in listed Nordic companies with Russian/Ukrainian operations.

How does the general market turbulence affect Sampo Group’s investments?

The market turbulence naturally has an impact on Sampo’s investment portfolio. However, the Group’s solvency (185% at the end of 2021) and liquidity positions are strong. In addition, the symmetric adjustment used in Solvency II calculation will absorb the impact from falling equity prices in the short-term, as shown in the sensitivity chart below.

Sampo has today signed an agreement with Rand Merchant Investment Holdings Limited (RMI) to acquire its ownership in Hastings.

Under the terms of the agreement, Sampo will pay GBP 685 million for RMI’s 30 per cent minority interest in Hastings and the option held by RMI to acquire 10 per cent of Hastings’ share capital from Sampo by May 2022.

The total acquisition price of GBP 685 million, or approximately EUR 806 million, will be funded with internal cash resources. Combined with the initial acquisition in November 2020, the agreement implies that Sampo will pay a total of GBP 1,851 million for 100 per cent of the share capital in Hastings.

Release

Why did Sampo want to acquire the rest of Hastings?

Hastings is a high-quality company with leading digital capabilities and fits well in our P&C focused strategy. Since the initial acquisition in 2020, we have been very impressed by company’s performance and we are convinced that it’s a long-term winner in the UK digital motor & home insurance market. Hastings has a great track-record on profitable growth and there’s plenty more to achieve.

Full ownership will enable faster decision making and more flexibility around changes in capital structure. It will also be to share knowledge and technology freely across the group.

Why now?

We got an opportunity to acquire the full ownership from RMI sooner than expected.

Why didn’t Sampo buy the whole company already last year?

We felt that it was good to cooperate with RMI initially, to ensure continuity and to have a highly informed and capable operator with us. The initial transaction was very much a partnership with RMI and they were not a seller at that time.

Why is the valuation of the minority shares higher than the initial acquisition in 2020?

The increase in the acquisition price mainly reflects growth in Hastings’ book value, improved certainty over Hastings reserving position and increased in reserve strength, enhanced visibility on synergies and higher expected forward earnings.

How the acquisition will affect Sampo’s earnings?

Since Hastings profit and loss items are already recognized line-by-line in the Group’s financial reporting, the effect will be shown only in the Group’s net income. Based on consensus estimates, the deal would have an earnings accretion of approximately 4 per cent in 2022.

Is the acquisition more attractive than doing buybacks?

Yes. We see both greater earnings accretion and return on investment from 2023 onward.

How will the deal affect Sampo’s solvency and financial leverage?

The acquisition is estimated to have a negative 14 percentage points impact on Sampo’s Solvency II ratio and to increase financial leverage by approximately 1 percentage point.

Will the acquisition affect Sampo’s buyback program or the announced management’s proposal of an extra dividend?

The deal will not affect Sampo’s ongoing EUR 750 million buyback program or the previously announced management proposal for an extra dividend of at least EUR 2.00 per share.

In connection with the Q3 results, you estimated that Sampo would have excess capital approximately EUR 10 per share, including already announced and ongoing actions, as well as the current holdings. What is the figure after this acquisition?

Approximately EUR 8.5 per share.

Will Sampo make any changes to Hastings’ long-term strategy that was initially agreed with RMI?

There will not be any immediate changes to strategy, but obviously some things like knowledge sharing becomes easier.

Will the acquisition mean that Sampo intends do further acquisitions in the UK?

Our UK M&A ambitions are unchanged. As we have stated, we could consider only some smaller insurance portfolios, mainly in home insurance, that would supplement Hastings existing business.

Does the acquisition require any regulatory approvals?

No but we have obviously informed the regulator, as we have a good dialogue with them.

Sampo announced today that it will return excess capital to its shareholders by launching a share buyback programme. 

Release

The aggregate purchase price of all Sampo A shares to be acquired under the buyback programme shall not exceed EUR 750 million. The maximum amount of Sampo A shares that can be repurchased is 20,000,000 shares corresponding to approximately 3.6 per cent of the total number of shares in Sampo.

The share repurchases will start on 4 October 2021 at the earliest and end by 18 May 2022.

The purpose of the buyback programme is to return excess capital to shareholders by reducing Sampo plc’s capital, as the repurchased shares will be cancelled. The repurchases will reduce funds available for distribution of profit.

Why did Sampo choose buybacks instead of dividends?

As always, we listen to our shareholders carefully and base our actions on their feedback. Naturally, some shareholders prefer dividends whereas others prefer buybacks. This time we decided to use the proceeds from the latest Nordea sale for buybacks, which is a tax-friendly way of returning excess capital for many institutional and private investors.

Will Sampo later distribute excess capital also in dividends?

The decisions on the distribution method of any potential excess capital will be made over time as we continue to reduce our ownership in Nordea and other financial investments. However, it is likely that both dividends and buybacks would be used if Sampo decided to further return excess capital to shareholders.

How will Sampo’s shareholders benefit from buybacks?

By returning excess capital via buybacks, Sampo delivers on its commitment to disciplined capital management while at the same time reducing its total share count, which enhances earnings per share and dividends per share growth. The buybacks allow shareholders to choose between receiving cash returns by selling shares or increasing their stake in the company.

Instead of cancelling the repurchased shares, can Sampo use them for other purposes, for example management’s compensation?

No. According to the authorization by the AGM, all repurchased shares must be cancelled.

From which market will the shares be acquired?

Shares will be acquired through public trading on Nasdaq Helsinki, CBOE, Turquoise and Aquis.

Which bank will acquire the shares?

The shares will be acquired by Exane BNP Paribas. The repurchases will be made in accordance with the safe harbour arrangement of Article 5 of the EU Market Abuse Regulation. This means that Exane BNP Paribas will act independently in accordance with its mandate without Sampo’s influence. Thus, the programme can also be run during Sampo’s silent period.

How many shares can be repurchased per day?

Based on regulation (MAR), the maximum number of shares that can be repurchased is 25 per cent of the average daily volume per each market.

Is it possible to acquire a larger block of shares from a single shareholder?

Block trades are not allowed in this programme.

How will the buybacks affect Sampo’s solvency and leverage?

Buybacks will affect the same way as dividends, i.e. decrease Solvency II ratio and increase financial leverage ratio.

At the end of June 2021, Sampo’s Solvency II ratio was 209 per cent and financial leverage 28.4 per cent. If both the latest Nordea share sale and the whole EUR 750 share buyback had taken place at the end of June, Sampo’s Solvency II ratio would have been 207 per cent and financial leverage 29.4 per cent.

Will the buybacks affect Sampo’s dividend policy?

Buybacks will not affect Sampo’s dividend policy, according to which the total annual dividends paid will be at least 70 per cent of Group's net profit for the year (excluding extraordinary items).