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IR Blog

Why invest in Sampo?
IR Blog provides information about Sampo as an investment case and the Group's businesses and markets.

11 February 2021

Results for 2020 – Q&A

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

Key figures, EURm 2020 2019 Change,
%
10-12/
2020
10-12/
2019
Change,
%
Profit before taxes* 380 1,541 -75 -675 468 -
If 901 884 2 285 228 25
Topdanmark 167 238 -30 82 58 41
Hastings -16 - - -16 - -
Associates* -722 298 - -1,030 143 -
Mandatum 154 280 -45 54 68 -20
Holding (excl. associates) -103 -4 - -50 -29 69
Profit for the period 112 1,237 -91 -769 389 -
      Change     Change
Earnings per share, EUR 0.07 2.04 -1.97 -1.44 0.66 -2.10
EPS (without eo. items) EUR 2.16 2.31 -0.15 - - -
EPS (based on OCI), EUR 0.65 2.63 -1.88 -0.47 1.19 -1.63
NAV per share, EUR 19.82 20.71 -0.89 - - -
Average number of staff, FTE 13,227 9,813 3,414 - - -
Group solvency ratio, % 176 174 2 - - -
RoE, % 3.1 12.0 -8.9 - - -

*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.

Nordea.jpg

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.

If_keyfig1.jpg

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.

If_keyfig2.jpg

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.

If_GWP.jpg

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.

Osinko.jpg

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.

 

Mirko Hurmerinta

IR and Communications Specialist, Sampo plc