January-March 2023 results - Q&A
Sampo had a good start to 2023 with solid results across all operations.
The profit before taxes amounted to EUR 359 million, representing an increase of 30 per cent year-on-year after adjusting for IFRS 9 (277) but a decline on a reported basis (more about the comparability between reporting periods below). Earnings per share amounted EUR 0.53 (1.42).
The Group underwriting profit increased to EUR 292 million (242) and the combined ratio improved to 84.0 per cent (86.2).
|Key figures, EURm||1-3/2023||1-3/2022||Change, %|
|Profit before taxes (P&C Operations)||359||692||-48|
|Net pofit for the equity holders||271||773||-65|
|Earnings per share (EUR)||0.53||1.42||-0.90|
|Operational result per share (EUR)||0.51||N/A||-|
|Return on equity, %||8.6||7.3||1.3|
|Profit before taxes (adjusted for IFRS 9), EURm*||359||277||30%|
The comparison figures for 2022 have been restated for IFRS 17 but not for IFRS 9, meaning some figures, such as investment
income, are not fully comparable between the reporting periods. Net profit for the equity holders, EPS and return on equity figures include results from life operations. Mandatum is classified as discontinued operations as of 31 March 2023.
*) To enhance comparability, a Group profit before taxes (P&C operations) figure adjusted for IFRS 9, reflecting market value
movements, has been provided for the prior year.
The figures in this report have not been audited.
Sampo Group key financial targets for 2021-2023
|Group||Mid-single digit UW profit growth annually on average||21%|
|Group combined ratio: below 86%||84.0%|
|Solvency ratio: 170-190%||213% (208% including dividend accrual)|
|Financial leverage: below 30%||23.7% (27.2% including announced capital returns)|
|If||Combined ratio: below 85%||82.4%|
|Hastings||Operating ratio: below 88%||93.3%|
This was the first quarter reported under IFRS 17 and IFRS 9 accounting standards. How does this affect the comparability between Q1/2023 and Q1/2022?
The comparison figures for Q1/2022 have been restated for “IFRS 17: Insurance contracts” but not for “IFRS 9: Financial instruments”, meaning some figures are not fully comparable between the reporting periods.
The figures related to the underwriting performance, i.e. P&L figures from insurance revenue all the way to the underwriting result, are fully comparable. However, the figures related to net investment income, which fall under the net financial result in the P&L, are not fully comparable. Under IFRS 9, the net investment income includes the mark-to-market effect of changes in asset values, whereas under the old standard, only realised gains and losses went through the P&L.
To enhance comparability, we have provided a Group profit before taxes figure adjusted for IFRS 9, reflecting market value movements, for the prior year. The IFRS 9 -adjusted profit before taxes for the comparison period Q1/2022 amounted to EUR 277 million, whereas the reported figure was EUR 692 million.
The Group underwriting profit increased by 21 per cent year-on-year and clearly exceeded the financial target of mid-single digit growth annually on average. What were the drivers behind the strong underwriting performance?
The underwriting profit growth was driven by a solid top line growth across the Group, combined with strong margins.
Gross written premiums (GWP) and other income increased by 5 per cent year-on-year despite some headwind from currency movements. In the Nordics, top line growth continued to be good on a currency adjusted basis, due to price increases and continued high retention. UK premium growth stood out as particularly strong in the first quarter, with a 39 per cent increase on a local currency.
Underwriting profitability was supported by positive development in the Nordics, whereas weather-related claims and continued high claims inflation weighed on margins in the UK.
If reported a FX-adjusted GWP growth of 6.1 per cent. What were the main growth drivers during the quarter?
If saw a positive development in all business areas, mainly driven by rate actions across the business.
Growth was particularly strong in Industrial and Commercial, supported by rate actions and strong renewals. The largest business area, Private, enjoyed solid growth in personal insurance and property, but this was partly offset by weak new car sales especially in Sweden.
If’s combined ratio improved to 82.4 per cent from 83.9 per cent a year ago. What drove this improvement?
The 1.5 percentage points improvement was driven by favourable large claims outcome and discounting effect, partly offset by lower prior year gains and severe weather.
The adjusted risk ratio, which excludes the impact of large losses and severe weather, prior year development and risk adjustment and other technical effects improved by 1.3 percentage points. The adjusted risk ratio excluding discounting effect improved by 0.3 percentage points year-on-year.
Hastings reported stellar top line development as GWP increased by 39 per cent in local currency. What were the main drivers for this growth?
Hastings GWP growth was driven by higher average premiums and an increase in live customer policies in selected products.
In Motor insurance, live customer policies remained broadly flat, reflecting the challenging market environment, but the strong growth trend in Home insurance continued during the first quarter.
What explains the big year-on-year swing in the Holding segment’s profit before taxes?
Holding segment’s profit before taxes of EUR -45 million was mainly a result of market value losses of EUR -40 million in Nexi and Enento.
The prior year profit before taxes of EUR 164 million included EUR 157 million dividend from Nordea and EUR 28 million gain from the sale of Nordea shares.
Sampo plans to sell its stakes in Saxo Bank and Enento as well as some other smaller assets (e.g. Terrafame and the guarantee shares of Kaleva) to Mandatum in connection with the demerger. What is the rationale behind these transactions?
The assets are more closely related to Mandatum's operations and fit better into its investment portfolio than Sampo's strategy based on its non-life insurance business. In addition, Mandatum cooperates closely with Saxo Bank, for example, by offering Mandatum’s clients the possibility to use Saxo Bank’s trading platform.
What is Sampo’s excess capital position at the moment?
Sampo announced plans to return EUR 800 million of excess capital with full-year 2022 results in February, split equally between an extra dividend and a buyback programme that extends close to the expected effective date (1 October 2023) of the proposed demerger. Hence, Sampo will update on excess capital once the demerger has been completed.
The Annual General Meeting will decide on authorising the Board to resolve upon a share issue without payment, in other words share split. When would the share split happen?
The Board could resolve upon the timing and execution of the split at its discretion and based on the then prevailing market conditions. There is no affirmed plan for the potential share split nor the split ratio. The share is not expected to be split before the proposed demerger.
It is important to note that a share split is a just a technical procedure, which could enhance share liquidity. It would not affect Sampo’s business or its value by any means.