IR Blog

In this blog entry, we answer investors questions collected from different channels. Thank you for the good questions!

In January-March 2020, Sampo’s profit included an impairment of investment assets of EUR 191 million. What are the principals for these kind impairments?

Impairments are booked on a case-by-case basis and are based on accounting principles. The main rule is that impairment is assessed if significant or prolonged. In Sampo Group, e.g. for listed equities, the impairment is normally assessed to be significant if the fair value decreases below the average acquisition cost by 20 per cent and prolonged, when the fair value has been lower than the acquisition cost for over 12 months.

Value of an equity that has already been impaired cannot be increased later even if the fair value has recovered. However, values of fixed income investments can be increased to the original acquisition cost.

Who decides on the direct financial investments made from the parent company (e.g. the purchase and sale of Intrum shares)?

Investments are made in accordance with Sampo’s investment policy, and Patrick Lapveteläinen, Group Chief Investment Officer, is responsible for the decisions. Some, especially larger investments may require the Board’s approval.

Why did Sampo decide to sell its ownership in Intrum in February 2020?

Sampo does not usually comment on its individual financial investments. The sale of Intrum shares was a part of our normal investment operations.

If’s premiums increased 7.0 per cent in January-March. How much of the growth was explained by price increases and how much by new customers?

Roughly 60 per cent of growth came from price increases and 40 per cent from new customers. Premiums increased in all business areas and markets, but in Denmark and Norway, the growth was very strong.

Why did If’s combined ratio weaken so much in Norway in January-March from a year ago?

In Norway, the combined ratio was burdened by two very large claims. One of these was the fire in the parking garage at Stavanger Airport, which also gained some attention in the news headlines. If has limited its risk in individual large claims to approximately EUR 25 million through re-insurance.

How does inflation affect If’s business?

Very high inflation would create pressure on profitability as the increase in claims costs cannot be passed on to insurance prices between contract periods. So-called “normal” inflation does not have a large impact on business.

Does Sampo favor certain sectors or geographical areas in its investments?

Geographically we prefer the Nordic countries, where we know the markets, companies and people. Other main principle is that we like to keep our investments and technical reserves in substantially the same currency in order to avoid extra currency risk.

The Group’s investments by sectors and equities by geographical areas are described in the risk management report.

Has the coronavirus crisis affected Sampo’s investment policy? Has Sampo’s risk appetite increased or decreased during the crisis?

Sampo is a conservative investor and thus careful. We monitor the situation. No major allocation changes have been made.

Some investors feel betrayed as Sampo cut its dividend twice during the past year. How is Sampo going to regain their trust?

Investors’ trust can be earned sustainably only through deeds, not words. Sampo’s objective is to create shareholder value and success in this will play a crucial role in investor confidence.

In your view, how Sampo succeeded in its communication regarding the dividend during the past year?

There’s always room for improvement and, in retrospect, it is easy to see what could have been done differently. However, it is good to remember that all decisions and comments are always based on the best available information.

Has Sampo considered paying dividends quarterly?

There have been discussions about it every now and then. Such change would be decided by the Annual General Meeting and it would be good if the proposal came from the shareholders.

Would it be time for Sampo to sell Nordea?

As we stated many times, all of Sampo’s businesses and investments are for sale if the price is right. However, It is noteworthy that the sale of a nearly 20 per cent ownership in the largest bank in the Nordics cannot be conducted simply by pressing the sell button.

In autumn 2019, Nordea published its new financial targets for 2022. We consider the first steps encouraging and we believe that Nordea will achieve these targets. It is reasonable to expect that the success in the turnaround will also be reflected in Nordea’s share price.

Electric cars are becoming more and more common. In addition, cars will become more autonomous in the future. How these trends will affect insurance business?

Patrik Duraj, If’s Project Manager, Corporate Control & Strategy, answers this question.

“The automotive industry is presently undergoing structural change, driven by a long-term shift towards a more convenient, safer and cleaner mobility future. Two of the key technological trends fueling this transformation is vehicle autonomy and electrification, which we will hereby explore in more detail.

The term ‘autonomous vehicles’ emerged into the mainstream after the US military’s Defense Advanced Research Projects Agency in the early 2000’s showcased how new sensors, connectivity and computing technology could be merged to enable self-driving or even driverless vehicles. The trials induced the private sector to enter the race, most famously Google’s self-driving car project (now: Waymo) in 2008. The initial technological leap spurred aggressive deployment timelines, suggesting widespread deployment in just under five years – an outlook which since has been modified as the broader scope and complexity of the problem has been understood. Increasingly non-technological factors, namely ethical issues, costs, new insights on human-machine interaction, liability and legal obstacles has further prolonged development. Today, the leading players foresee a more gradual roll-out of self-driving functions, and signal that widespread adaptation of full self-driving systems (i.e. Level 5, according to SAE J3016) is likely still decades away.

Nevertheless, Advanced Driver Assistance Systems (ADAS) have gradually trickled down to vehicles available to consumers. Already today the most advanced vehicles are able to accelerate, change gears, steer and break under predefined conditions. This provides insights on how the computerization of vehicles influence driving behavior and risk, under real-life traffic scenarios. On the one hand, systems may be effective in limiting certain accidents. On the other hand, new accidents emerge from lacking user understanding of the systems’ capability, user error or sensor malfunction. Furthermore repair of even trivial accidents has increasingly become costly due to exposed expensive sensory equipment and evolving vehicle design.

Over the recent years, the push for electrification has overshadowed most of the other trends in the automotive industry. With the help from new lithium-ion batteries Tesla redefined the electric vehicle formula, showing how Electric Vehicles (EVs) could match fossil fueled cars on performance and luxury. Despite facing ever more stringent emission regulations, such as EU’s 2019/631, high battery costs proved prohibitive for most automakers. However, the Dieselgate-scandal fundamentally altered the narrative, as the targets were proven to no longer be achievable with fossil fuel drivetrains alone. As a consequence, most major OEMs are presently heavily focused on electrifying their line-ups, with disruptive implications on the automotive value chain as a whole.

One of Ifs home markets, Norway, has been a leader in electromobility, after introducing special incentives already in the late 1990s. Norway therefore is today by far the most electrified car market in the world per capita, with 42% of all new cars delivered in 2019 being fully electrified and even 9,3% of the total car stock being fully electrified.  This provides If with an unique insight into how electromobility affects risk. On the one hand, electric vehicles induce new driving behavior, be it if you aim to drive efficiently (‘hypermile’) or enjoy the performance embedded in the vehicle (e.g. 0-100 in 2,5 seconds). On the other hand, electric vehicles diverge from traditional vehicles in construction, for example through the use of exotic materials (e.g. aluminum, carbon) or parts (e.g. batteries, electromotors, sensors), which affect repairability, repair methods and lead times.

As with fossil fuel equivalents, there are differences among both models and users, calling for close-knit risk models. Rooted in our Best In Risk culture, If has continuously evolved its tariffs and claim processes to accommodate the shift towards green mobility, and is already distributing the insights gathered in Norway to prepare for more electrification in the rest of the Nordic markets.

As an end-note, it is important to highlight how the long-term trends are constantly moderated by the industry’s need to meet short-term obligations. Already prior to Covid-19, industry headlines were dominated by stagnating global demand and profitability pressures. These pushed some OEMs into cost-cutting mode even prior to Covid-19, with “moonshot” innovation projects typically being the easiest to scale back on. Although still early to conclude, it seems evident that timelines could be affected as the long-term consequences from the supply- and demand side disruptions caused from the ongoing pandemic are made clear.”

What are Sampo’s largest equity investments after Nordea? Which have performed best?

At the end of 2019, the Group’s largest listed equity investments were Intrum (EUR 184 million), Volvo (134), Nobia (122), Norwegian Finans Holding (114) and Asiakastieto (92). Of these, Intrum was sold in February 2020 with a profit of approximately EUR 30 million.

In addition, Sampo has invested EUR 284 million in Saxo Bank, EUR 230 million in Nets through a private equity fund, and EUR 245 million in Nordax, which is an associated company.

Sampo will not report the performance of its individual investments.

In what situation and at what price would Sampo buy its own shares?

Share buybacks are decided by the Board, which is traditionally authorized by the AGM to buy a maximum of 50 million own shares. However, Sampo’s primary method of profit distribution, also preferred by the shareholders, is paying dividends.

Why have Sampo’s insiders hardly bought any shares recently?

Naturally, we do not comment on the personal investments of the company employees or board members.

Has Sampo’s solvency been a limiting factor in seizing opportunities during the past corona-related market turmoil? How could Sampo be better positioned for similar events in the future?

Last year, Sampo’s solvency decreased below our comfort zone, but after the issuance of the hybrid loan and the extra dividend in the form of Nordea shares, solvency returned to a solid level, which allows enough room for our investment activities. During the market turmoil, our solvency was at a strong level and was not a limiting factor.

For possible larger mergers and acquisitions, Sampo can back its solvency for example by issuing more hybrid capital. However, it is worth noticing that larger-scale moves require lots of time and planning. Thus, it’s difficult to take the advantage of these kind short-term dips.   

What are Sampo’s key growth drivers in the coming years?

We answered this questions on our IR Blog on 17 December 2019.

“Insurance business is rather defensive and steady and one should not expect any rapid growth leaps. In P&C insurance, premiums can be expected to grow roughly at the same pace as GDP. However, If’s growth has been exceptionally strong recently, partly due to the favorable competitive environment in the Nordics. Low interest rates make it difficult to achieve good investment returns, which has forced all insurance companies to focus on technical profitability. This has reduced the aggressive price competition, which has positively reflected in If’s premium and customer volume growth.

In life insurance, the premium growth can be expected to be faster than the GDP growth. For the coming years, one key growth driver is the increasing importance of personal savings and financial safety net as unfavorable demographic trend create pressure on the public social security and pension system.

In the short-term, the biggest single profit potential relates to Nordea’s new business plan and targets.”

Could If seek growth from the healthcare sector?

If has no such plans at the moment and providing healthcare services is not within the company’s core competence.

Nordea will refrain from paying dividend at least until 1 October 2020 as the ECB recommends. If Nordea decides to pay the dividend after that, what will Sampo do with its share?

Sampo has no plans for the dividend it possibly receives from Nordea later this year.

Why is Sampo’s dividend policy so different (inconsistent according to the questioner, referring the decision to cut the dividend) than, for example, many American companies that have been increasing dividends every year for decades?

The dividend policy is decided by the Board elected by the AGM. Sampo’s shareholders have traditionally wanted to receive stable and high dividend, which is why the dividend payout ratio has been relatively high. Due to the high payout ratio, the dividend is more susceptible to significant changes, such as the change in Nordea’s dividend policy last year.

Some analysts have argued that there’s a “conglomerate discount” in Sampo’s share price, i.e. the share trades below Sampo’s sum of parts mainly due to Nordea. Does Sampo acknowledge such a discount and is it in the interest of shareholders? By what means could Sampo resolve the current situation?

Naturally, we do not comment on the valuation of our share, although Nordea-related questions have played a key role over the past couple of years, and that cannot be denied.

Sampo’s objective is to create shareholders’ value through its profitable businesses, investments and potential M&As. It’s reasonable to assume that in the longer-term, the valuation and share price will reflect our success in this. The fact is that Nordea’s success in achieving its new financial targets has a key role in creating shareholders value.

The first quarter of 2020 will be remembered as a very exceptional period as the whole world suddenly stopped. The coronavirus pandemic (COVID-19) and the massive containment measures have directly or indirectly affected everyone’s lives.

The biggest effect of the coronavirus to Sampo Group has come through its investments. In March, the financial markets experienced an extreme turmoil, which took its toll on Sampo’s investment income. The Group’s total comprehensive income, taking changes in the market value of assets into account, plunged to a loss of EUR 954 million from a profit of 561 million a year ago. In addition, Sampo’s NAV per share decreased to EUR 15.36 from 20.71 at the end of 2019. After the first quarter, markets have somewhat recovered and lifted Sampo’s key figures as well.

Sampo’s insurance businesses have been affected by the coronavirus both negatively and positively. For example, If received about 26,000 claims in January-March, mostly related to travel. By the end of April, the figure had already increased to almost 48,000 claims. On the other hand, in motor insurance, the sharp decline in traffic due to the restrictions has naturally reduced the number of claims.

The overall effect of the coronavirus on Sampo Group’s insurance businesses was limited during the first quarter. However, the longer the crisis will last, the more it will drag down the economic activity and affect insurance companies as well.

Most of the Group’s over 10,000 professionals have worked from home in the past weeks, which has required adjustments. Despite that, our subsidiaries have been able to serve our customers almost normally throughout the crisis, and we have received lots of positive customer feedback. The effects of the coronavirus on Sampo Group’s operations are described in the interim report.

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.

Sampo Group's profit before taxes amounted to EUR 162 million (475) and earnings per share to EUR 0.26 (0.64) in January-March. The profit included impairments of investments assets worth almost EUR 200 million.

If’s profit before taxes decreased to EUR 129 million (198) due to poor investment income. However, from a technical point of view, the first quarter was excellent. Technical result strengthened to EUR 180 million (147) and for the first quarter, combined ratio was record-strong at 83.7 per cent (86.5).

In addition, If’s strong premium growth continued during the first quarter. In local currency, premium growth was 7.0 per cent (3.9). Premiums increased in all markets and business areas. The growth was exceptionally strong in Denmark and Norway.

Topdanmark’s result before taxes amounted EUR -13 million (92) and combined ratio was 88.7 per cent (78.2).

In addition to weak investment income, Topdanmark’s result was burdened by lower run-off gains, increased claims due to coronavirus and weather-related claims above normal level.

Mandatum Life’s result before taxes for January-March decreased to EUR -16 million (72) due to poor investment income.

Thanks to strong January-February, Mandatum Life’s premiums increased to EUR 287 million (238), although it decreased in March.

Mandatum Life’s technical reserves were burdened by the market turmoil and amounted to EUR 11.0 billion from EUR 12.0 billion at the end of 2019. Unit-linked reserves were EUR 7.2 billion (8.1). The with-profit portfolio with higher guarantees (3.5% and 4.5%) continued to shrink as planned and decreased by EUR 65 million to EUR 2.1 billion.

Sampo’s share of Nordea’s net profit amounted to EUR 84 million. Despite the significantly changed market environment, Nordea’s businesses continued to develop in the right direction and towards the targets set for 2022.

Sampo expects its insurance businesses to report good insurance technical results for 2020. The investment results are at this point in time more uncertain than usual. The mark-to-market results for 2020 are highly dependent on capital market developments, particularly in life insurance.

If is expected to reach a combined ratio of 84 - 87 per cent in 2020. Previous outlook, in February, was 85 - 89 per cent.

New dividend proposal of EUR 1.50 per share

Sampo’s Board has today decided to cancel its previous dividend proposal of EUR 2.20 per share and to announce a new proposal of EUR 1.50 per share. In total, the dividend is proposed to be EUR 883 million.

The decision was affected by the high level of uncertainty in the financial markets and changes in Sampo’s internal dividends. During 2020, Sampo has received internal dividends only from Topdanmark, EUR 48 million. Under normal circumstances, internal dividends would have been expected to be EUR 568 million at this stage.

Mandatum Life decided not to pay the dividend of EUR 150 million planned for March. In light of the ECB recommendation, Nordea plans to postpone the dividend until after 1 October 2020. Topdanmark paid half of its dividend and left the other half to be decided later this year, when there’s more clarity in the markets. If normally pays its dividend towards the end of the year.  

In its decision the Board has considered the recent statements by the supervisors. The Board’s view is that the proposed dividend will not jeopardize the company’s operations or ability to fulfill its obligations to the policyholders.

With the new dividend proposal, Sampo’s solvency will clearly improve. Based on preliminary figures, the Group’s solvency ratio was 187 per cent at the end of April 2020. Calculated with the previous dividend proposal, the solvency ratio would have been 178 per cent.

The ex-dividend date of the proposed dividend is 3 June 2020 and date of payment 11 June 2020.

The most boring AGM in Sampo’s history – and this time it is a good thing

Sampo’s Annual General Meeting has traditionally been very popular, especially among private investors, which makes us sincerely happy. It is gratifying that so many of our shareholders find the AGM interesting and worthwhile event. Unfortunately, this year’s AGM differs from the previous ones in almost every way.

Due to the prevailing coronavirus pandemic, on 24 April 2020, the Finnish Parliament passed a temporary law that allows for general meetings to be held as remote meetings only without shareholders’ presence. The purpose of the law is to enable the company to hold a quorate AGM, and at the same time, obey the current meeting restrictions and other recommendations in order to minimize the risk of infection.

Sampo’s Board has today decided that the AGM will be held as a remote only meeting based on the temporary law. In other words, it is going to be the most boring AGM in Sampo’s history – and it is a good thing for the health of the company’s shareholders, staff and other stakeholders.

AGM 2020 Q&A

When and where will the AGM be physically held?

The AGM will be held on 2 June 2020 at 2:00 pm Finnish time at Sampo’s headquarter in Helsinki.

Why will the AGM be held as a remote meeting?

The AGM will be held as a remote meeting in order to prevent the spread of the coronavirus and to ensure the health and safety of Sampo’s shareholders, staff and other stakeholders.

Is it legal to hold the AGM as a remote only meeting?

Yes, it is. The extraordinary procedures are based on the temporary legislation approved by the Finnish parliament on 24 April 2020.

Can I attend the AGM in person?

No, you cannot.That is best for your and others’ safety.

Will there be any addresses by members of the Board or the Management?

A pre-recorded address by the Chairman of the Board Björn Wahlroos will be published at www.sampo.com/agm on the day of the Annual General Meeting.

Will the members of Sampo’s Board or Management attend the AGM in person?

No, they will not. Many of the Board and Management members live abroad and traveling to Finland would be very difficult in these exceptional circumstances.   

Who will physically be present at the AGM?

Only the Chairman of the meeting, the secretary of the meeting and the scrutinizer of the minutes will physically be present at the meeting.

Will the AGM be webcasted?

No, it will not. Nothing that interesting will happen at the physical meeting place.

What will actually happen at the physical meeting place?

As all items on the agenda have already been voted on in advance and no addresses will be given at the meeting, the physical meeting will only be a technicality i.e. the legality of the AGM will be recorded, the voting results will be verified and the minutes will be scrutinized.

Can I use my voting rights?

Yes, you can. Shareholders may use the advance voting service or vote by way of proxy presentation. The voting will begin on 12 May 2020 at 10:00 am. Please see detailed instructions in the Notice to the AGM. 

Can I make counter-proposals?

Shareholders who hold at least one percent of all the company’s shares (i.e. at least 5,553,519 shares) are entitled to make counter-proposals subject for voting to the agenda points of the AGM. Please see detailed instructions in the Notice to the AGM. 

Can I ask questions?

Yes, you can. Shareholders may ask questions on topics included in the meeting agenda in advance until 18 May 2020 at 2:00 pm. Questions can be sent by email to agm@sampo.fi or by mail to Sampo plc, Fabianinkatu 27, 00100 Helsinki, Finland. Questions and answers will be published at www.sampo.com/agm at the latest on 22 May 2020.

What is the ex-dividend date and when will the dividend be paid?

The ex-dividend date will be 3 June 2020 and the dividend will be paid on 11 June 2020.

In order to receive the dividend, when I must own Sampo’s shares?

The dividend will be paid to shareholder who owns the shares as at the AGM date i.e. 2 June 2020.

The coronavirus (COVID-19) pandemic is causing concern and turbulence around the world affecting the economy, financial markets and everyone’s daily life. Sampo plc and its subsidiaries monitor the situation closely and have taken actions to protect its personnel, customers and other stakeholders while continuing its businesses as normally as possible in these exceptional circumstances.

Our shareholders are naturally concerned about the possible effects of the coronavirus on Sampo Group and we have received lots of questions. In this blog entry we try to clarify the exposures to the coronavirus and the mechanics of the possible effects. However, it is important to note that due to the nature of the Group’s businesses and wide geographical presence in the Nordics, it is not possible to give detailed estimates or a firm view at this stage as the situation changes and evolves very fast.

This blog entry was published on 26 March 2020 and is based on information and views of the possible effects of the corona virus at the time of publishing.  All the pictures are from materials published at Sampo.com, except the simplified graph that illustrates Nordea’s effect on Sampo’s solvency.

How does the coronavirus affect Sampo Group?

With its investment portfolio of EUR 21.8 billion at the end of 2019, Sampo Group has a major exposure to the equity and bond markets. Thus, the market turmoil caused by the coronavirus is significantly impacting Sampo through its investments.

Picture from the Q4/2019 Supplementary Financial Information Package. 

The effects of market movements on Sampo’s investments are described in the sensitivity analysis below.

Picture from the Q4/2019 Supplementary Financial Information Package. 

Has Sampo invested in the oil and gas sector or leisure sector?

At the end of 2019, Sampo Group’s investments in the energy sector amounted to EUR 226 million. Of that, the share of oil and gas sector was roughly EUR 150 million, of which largely in bonds. Sampo’s exposure to airlines and other leisure sector is very limited.

Sampo’s exposures by sector, asset class and rating are specified in the table below.

Picture from the Board of Directors’ Report and Financial Statements 2019.

How do the value changes in investments affect Sampo’s solvency?

The impacts of different scenarios on the Group’s solvency are described in the sensitivity analysis below. Nordea shares are included in this analysis.

Picture from the Q4/2019 Supplementary Financial Information Package.

How do the changes in Nordea’s share price affect Sampo’s solvency?

In the Group’s solvency calculations, Nordea is treated as a normal equity investment. Thus, the changes in Nordea’s share price affect solvency. Nordea is included in the sensitivity analysis above.

The simplified graph below illustrates the impact of Nordea’s share price movements on Sampo’s solvency from the end of 2019, if all other factors remain unchanged and symmetric adjustments are not taken into account.

How does the coronavirus affect If’s insurance business?

As mentioned above, the most significant impact comes from the equity and bond markets. For insurance business, it is not possible to give detailed estimates at this stage because the whole coronavirus situation changes and evolves day by day.

On the private customer side, claims related to travel insurances obviously increase if flights get suddenly cancelled and people need hospitalization abroad. For If, travel insurance is not a very significant business line.

The coronavirus spreading in the Nordics may affect health insurances as well, although the public healthcare system carries the heaviest burden. For If, health insurance is a fairly small business line.

On the corporate side, the coronavirus may cause claims pressure for example through business interruption insurances depending on the cause of the interruption and how comprehensive insurance the customer has bought. Since the terms and conditions vary between countries, sectors and customers, it is not possible to estimate the total impact for If at this stage.

However, for some insurance products, the coronavirus may have a positive short-term effect on results due to lower number of claims. For example, within motor insurance, the claims usually decrease if there is less traffic on the road.

More information about the effects of coronavirus on insurances can be found at If’s website.

How does the coronavirus affect Mandatum Life’s business?

The market turmoil naturally affects Mandatum Life’s investments and solvency.

Within personal risk insurance, the impact on the number of claims is not likely to be significant. In the field of wealth management, drastic market movements increase clients’ interest to contact and talk about their investments and possible actions.

On the corporate side, new deals are being made but the risk of delays in payments from some customers has increased as many companies face challenges during in these exceptional circumstances.

How does the coronavirus affect Topdanmark’s insurance business?

Topdanmark published a stock exchange release about the effects of the coronavirus on 23 March 2020.

How does the coronavirus affect the daily work of Sampo Group’s personnel?

As recommended by the authorities, the personnel of both Sampo plc and the Group’s subsidiaries work from home as much as possible in order to protect the health of personnel, customers and other stakeholders. Otherwise, all operations continue normally despite these exceptional circumstances.

How is Sampo prepared for members of the management, board or other key employees to become infected by the coronavirus?

Sampo Group has a continuity plan to ensure the continuity of operations in the event of exceptional and crisis situations.

How does the coronavirus affect Sampo’s Annual General Meeting?

On 25 March 2020, Sampo decided to postpone the Annual General Meeting scheduled to be held on 23 April 2020. Sampo now intends to hold the Annual General Meeting on 2 June 2020. Notice to the Annual General Meetings will be published in May.

The Finnish Tax Administration will send pre-completed tax returns for 2019 to its individual clients resident in Finland in March or April 2020. We kindly ask our shareholders to check the information regarding the extra dividend paid in August 2019 in the form of Nordea shares, and correct the information if needed.

Sampo has sent the information regarding the share dividend and the transfer tax paid on behalf of the shareholders to the Finnish Tax Administration. Thus, in principle, the information should be on the pre-completed tax return.

We have today published instructions on payment of the tax for Individuals resident in Finland and nonresident individuals. 

Instructions

For more information, we kindly ask our shareholders to contact directly The Finnish Tax Administration.

In this blog entry we answer investors questions collected from different channels. Thank you for the good questions!

How will Sampo create shareholder value over the next ten years?

Sampo creates shareholder value through its profitable businesses. Particularly, in P&C business, digitalization and economies of scale create favorable opportunities for steady improvement trend. Sampo’s ability to participate in mergers and acquisitions remains good.

What are Sampo’s key growth drivers in the coming years?

Insurance business is rather defensive and steady and one should not expect any rapid growth leaps. In P&C insurance, premiums can be expected to grow roughly at the same pace as GDP. However, If’s growth has been exceptionally strong recently, partly due to the favorable competitive environment in the Nordics. Low interest rates make it difficult to achieve good investment returns, which has forced all insurance companies to focus on technical profitability. This has reduced the aggressive price competition, which has positively reflected in If’s premium and customer volume growth.

In life insurance, the premium growth can be expected to be faster than the GDP growth. For the coming years, one key growth driver is the increasing importance of personal savings and financial safety net as unfavorable demographic trend create pressure on the public social security and pension system.

In the short-term, the biggest single profit potential relates to Nordea’s new business plan and targets.

What is Sampo’s strategy in Nordea? Is the intention to exit the investment at some point?

We welcome Nordea’s business plan and targets announced in October. Nordea, like Sampo’s all holdings, is for sale if the price is right.

Could Sampo exit Nordea by distributing the whole ownership in dividends to its shareholders?

In theory, yes, but it would have a significant negative impact on the Group’s solvency. In addition, it would cause noteworthy one-off tax consequences for the shareholders. 

What kind of M&A opportunities does Sampo see in its core markets?

We are constantly looking at potential M&A projects that could create shareholder value. Because Sampo is a big investor, various opportunities are presented to us regularly. However, it is hard to say anything concrete about this subject because opportunities can come quickly and unexpectedly and must always be considered case-by-case.

On a general level, it is clear that large-scale M&As are unlikely in the Nordics in both insurance and banking sector. In insurance sector, all the big players are currently in quite good shape and company valuations are high, and this reduces the likelihood of M&As. In both the insurance and banking sectors, competition regulations can come into play for larger deals. On the other hand, smaller deals, where a small player merges with another or a larger player takes over smaller players, may well continue to occur in both sectors.

What kind of value creation potential does Sampo plc’s direct financial investments have?

The direct financial investments made by the parent company Sampo plc (Saxo Bank, Nets, Nordax, Asiakastieto, Intrum and Bank Norwegian) are normal investments from which Sampo will exit at some point. What unites all the companies is that they operate in the financial sector and fintech sector, which Sampo knows well. There are also a lot of consolidation taking place within the sector and Sampo can give its own contribution and create shareholder value. For example, Sampo participated Saxo Bank’s takeover bid for BinckBank corresponding to its ownership.

The value creation potential and exit points vary case by case. Of these investments, Saxo Bank, Nets and Nordax are private equity investments, where the investment horizon is usually longer than in publicly traded investments.

Why has Sampo invested in Nordax and Bank Norwegian, which are specialized in consumer credit? Are these investments in conflict with Sampo’s responsibility considerations?

We have invested in Nordax and Bank Norwegian because we see them as interesting players in the changing financial sector and see potential for value creation.

The investments are not in conflict with our responsibility considerations. We are aware that the companies operate in a sector, where is a lot of problems and negative attitude. However, both Nordax and Bank Norwegian operate by all the laws and regulations. The companies have clear requirements and conditions under which loans can be granted to clients.

To which companies does Sampo compare itself and its businesses?

Sampo’s primary benchmark companies are other major P&C insurers in the Nordics. These include, for example, Tryg, Gjensidige, LF, OP and LähiTapiola. Due to the large ownership in Nordea, we usually use benchmark indices that include both insurance and banking companies when comparing stock price development.

Why was Sampo so strongly speaking for increasing the dividend instead of taking more cautious approach in August?

Two key events occurred after the Q2 results in August. Nordea announced its new dividend policy, which will have a significant impact on Sampo’s internal dividends in the coming years. In addition, interest rates fell sharply after the ECB meeting in September and markets expect them to remain low for even longer period of time than previously expected, which affects Sampo’s investment activities. If these things had been known in August, the communication would certainly have been different. Thanks to our strong balance sheet, it would be possible to increase the dividend in spring 2020, but would not serve our shareholders nor the company’s interest because the matters will have a longer-term effect on ability to pay dividend.

Is Sampo going to renew its dividend possibility and if so, how?

Sampo’s Board will review the company’s dividend policy in February 2020. No comments can be given before that.

Can If still be more efficient or is the profit growth only dependent on premiums growth?

If has successfully reduced its cost ratio (operating expenses and claims adjustment expenses divided by premiums earned) by at least 0.1 percentage points for several consecutive years. In 2018, the cost ratio was 21.9 per cent compared to, for example, 23.5 per cent in 2011. Such steady improvements can be expected in the future as well. The trend is supported by digitalization and economies of scale.

If focuses on profitability and does not seek growth at the expense of profitability. Growth must always be profitable, and If’s premium growth has been very strong recently. In January-September 2019, If’s premium growth was 5.0 per cent in local currency.

At what point will Sampo reach the limits of growth in its current markets?

As mentioned above, Sampo will focus on profitability rather than in growth in its businesses and growth must be profitable. In terms of market shares, there are no limits in sight for organic growth. On the other hand, bigger single growth leaps through M&As are less likely due to competition regulations.

Why wouldn’t If expand its operations, for example, to Central Europe?

We constantly monitor developments in other markets and in the insurance industry if there are opportunities to enter new markets. However, expanding into a new market always involves a lot of risks and we only take risks that are manageable and justified from the point of view of shareholder value. There is no reason to expand just for the joy of expansion. In addition, we want to be a major player in every market in order to be able to benefit from economies of scale. Thus, any expansion into new markets would more likely to take place through an acquisition, which involve its own risks.

What kind of added value the Viking acquisition announced on November brings to If?

The Viking acquisition is relatively small for If (the enterprise value is EUR 114 million), but it adds value in many ways. Through the acquisition, If can offer more comprehensive service to its customers and partners such as car manufacturers that includes both insurance and roadside assistance. A more comprehensive service enables better customer contact in the events of accident, which makes processes more efficient and faster for both If and the customer. In the event of accident, the information reaches both the roadside assistance company and If at the same time, which makes it easier, for example, to arrange a rental car, recommend a suitable repair shop and start the claim procedure.

What is Sampo’s view of the consolidation development in the Nordic financial sector?

At a general level, it is likely that there will be consolidation, particularly amongst small and medium-sized players, which are subject to regulatory pressure. However, consolidation between the big players is less likely due to competition regulations.

What is Sampo’s view of the future interest rate development? How has Sampo positioned itself against the changes?

We do not know in which direction interest rates will go, nor can we forecast the weather for the next Summer. The duration of our fixed income investments is still short. Thus, rising interest rates would have only a small momentary negative impact on our portfolio and we would benefit from higher interest rates faster. Higher interest rates would therefore be very positive for Sampo.

Sampo’s subsidiaries If and Topdanmark compete with each other in Denmark. Is there a contradiction?

If and Topdanmark are both independent companies and compete with each other as they as they should do. However, their target customers are somewhat different, which reduces the overlapping. Topdanmark is strong on the household and agricultural side, whereas If focuses more on the corporate side in Denmark.

How often does Sampo attend IR events and meet foreign investors?

About 65 per cent of Sampo’s shares are foreign-owned, which means a lot of meetings abroad. Sampo’s management and IR have approximately 250-300 meetings with foreign investors and analysts each year. This will be followed by numerous meetings with domestic institutional investors. In addition, we do our best to serve our domestic private shareholders through investor events and increasingly through social media.

How does Sampo use its owner’s control in companies, in which it’s a minority shareholder?

Sampo is an active owner and exercises its voting rights trough Board work. For example, three of the six members elected by the AGM of Topdanmark are representative of Sampo, including the Chairman. In Nordea, Torbjörn Magnusson, the Group CEO and President of Sampo as of 1 January 2020, is the Chairman of the Board. In addition, Sampo has a representative in several companies in which we have invested by the parent company Sampo plc.

Does Sampo any short-term trades or short sell assets?

No.