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Why invest in Sampo?
IR Blog provides information about Sampo as an investment case and the Group's businesses and markets.
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.
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.
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.
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.
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.
We are not worried, but after the Hastings offer, the leverage rose a bit too high for our taste.
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.
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.
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.
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.
IR and Communications Specialist, Sampo plc
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.
|Key figures, EURm||1-9/
|Profit before taxes||1,054||1,073||-2||485||92||425|
|Holding (excl. associates)||-53||26||-||-25||-6||-333|
|Profit for the period||881||848||4||412||22||1,777|
|Earnings per share, EUR||1.51||1.38||0.13||0.70||0.01||0.69|
|EPS (based on OCI), EUR||1.12||1.44||-0.32||1.10||-0.24||1.34|
|NAV per share, EUR**||18.63||20.71||-2.08||-||-||-|
|Average number of staff, FTE||10,309||9,769||540||-||-||-|
|Group solvency ratio, %**||214||167||47||-||-||-|
* 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.
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 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 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.
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 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.
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.
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.
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.
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.
IR and Communications Specialist, Sampo plc
Companies generally use both equity and debt to finance their investments and operations in order to keep their capital structure optimal and return on equity attractive. Debt can be obtained directly from a bank in the form of a bank loan or from the financial markets by issuing bonds.
Due to regulatory and practical reasons, usually only institutional investors and private investors classified as professional investors can make orders for corporate bonds in the primary market. The minimum settlement amount is usually EUR 100,000.
This blog entry opens up the process behind the bond issuance with using Sampo’s EUR 1 billion Tier2 hybrid bond issued at the end of August to fund the Hastings acquisition offer as an example.
The management of the company makes the decision on raising debt capital from the financial markets, but the bond issue usually also requires a Board approval. The type of a bond that the company decides to issue depends on many factors, but the company’s current debt structure and the maturity profile of its bonds issued are key factors when deciding on the maturity of a new bond – and of course the interest rate levels.
From the balance sheet and cash management point of view, it is desirable that the maturity profile of the bonds is smooth over the coming years. The first call date for Sampo’s new EUR 1 billion hybrid bond is 12 years from the issue date, i.e. in 2032, which is currently the longest-maturity bond for Sampo.
Maturity profile of Sampo’s debt instruments prior the new issue (30 June 2020)
Once management has decided to issue a bond, the next step is to select the bookrunner banks for the issue and to start preparing the legal documentation required for the issue. The extent of the documentation process depends on whether the bond is issued under an existing bond program or under separate documentation. Sampo’s EUR 1 billion hybrid bond was issued under its existing EUR 4.5 billion EMTN (Euro Medium Term Note) program.
At this stage, the company is also typically in contact with the credit rating agencies, assuming the bond will be rated. Credit rating is a key factor for the spread level of the bond and determines what kind of investors will be interested in investing in the bond. Many investors require that the bond has at least an investment grade rating from the leading credit rating agencies (S&P/Fitch BBB- and Moody’s Baa3). In addition, some investors favor bonds that have a rating from two different agencies. Sampo’s hybrid bond has BBB+ rating from S&P and Baa1 rating from Moody’s.
Once the documentation is completed and the expected ratings are confirmed, markets will be informed about the planned issuance. In practice, this means that the preliminary information about the bond will appear on Bloomberg screens or will be sent to investors in the form of a mandate announcement.
At the same time, the bookrunner banks begin marketing the bond and survey investors’ interest and preliminary thoughts on the spread level. The bookrunners usually have a good idea of the type of investors that might be interested in investing in the bond. Also, investors are often in direct contact with the bookrunners after seeing the preliminary details of the bond. These initial discussions with potential investors give an idea of the initial spread level and the size of the order book.
In case the company has not previously issued similar bonds or the company is less familiar to international investors, views on attractive spread levels may vary a lot. As Sampo is a well-known company in the market and issued a EUR 500 million hybrid bond in the Spring 2019, it was easier for the bookrunners to gather the feedback on pricing from investors. Comments on pricing may be quite general or very precise and are usually expressed as a credit spread to the reference rate (Euro Mid-Swap rate).
The feedback given by the investor could be, for example: “I’m interested, if the rate is MS + 270-280 basis points and I could invest EUR 20-30 million.”
Concurrently with the process of gathering feedback, meetings with the company’s management are arranged for the interested investors. During the pandemic, these meetings are held by telephone or via virtual events. In normal times, the company would also arrange roadshows in the major financial hubs. Prior to this year’s issue, Sampo held virtual roadshows with over 50 investors within two days.
Since fixed income investors have a somewhat different risk tolerance level compared with equity investors, their questions also differ from equity investors’ questions. Balance sheet, debt coverage and capital structure are usually the key factors for fixed income investors to focus on, whereas expectations on next year’s dividend does not raise that much attention.
Once the investor roadshows are done and there’s a good view on the initial investor demand, the books are ready to be opened for investors’ orders. As orders are received in one day and the whole process takes only a few hours, the issue must be carefully planned and the prevailing market sentiment well-observed. However, sometimes, issuers are forced to move ahead with issuance even if the time is not optimal from their perspective.
When the Covid-19 crisis hit the market with full force in the spring, plummeting stocks filled the news headlines in financial media. However, less attention was paid to the fact that at the same time, credit spreads of corporate bonds shot up and the new issue market was totally stalled. For example, the credit spread of Sampo’s hybrid bond issued last year rose from below 200 basis points at the end of February to almost 400 basis points at its worst.
For a while, it was almost impossible for companies to issue new bonds. No investor really dared to make bids or if dared, the rate demands were very high. The general market sentiment can therefore significantly affect investors’ appetite and the required rate of return. When talking about bonds worth hundreds of millions or billions, even small movements in rates matter.
In the morning of the planned bond issue, the bookrunners have a so-called ‘Go’ or ‘No-go’ call with the issuer, during which final decision to open the books for the bond is made.
When the books are opened for investors’ orders, the bookrunners announce the preliminary spread level based on the investor feedback. In the case of Sampo’s hybrid bond, the books opened on 27 August 2020 at 10:15 am with initial price talk of MS+300 basis points area.
The orders received during the first hours play an important role for the final pricing as attention generates more attention. For Sampo’s bond, there were orders worth over EUR 2 billion received during the first hour. After two hours, the price guidance was lowered to MS + 270 basis points (+/- 5) area. When the books are open, investors can withdraw their bids at any time. Thus, one must be very careful when setting the price guidance so that that investors will not lose their interest in the bond if the spread falls too low. At 1:55 pm, the book exceeded EUR 5 billion and was closed and the final spread was set at MS + 260 basis points. Over 350 investors participated in the issue and most orders were received from the UK/Ireland, German-speaking Europe and the Nordics.
The coupon rate of Sampo's hybrid bond maturing in September 2052 was set at 2.50 per cent, payable until 3 September 2032, which is the first date for the bond. If the bond is not redeemed at its first call date, the coupon rate will step up to 3m Euribor + 360 basis points until the final maturity.
As the size of Sampo’s hybrid bond was EUR 1 billion and the book was 5 times oversubscribed, investors’ orders had to be scaled back. The allocation of the bond is decided by the company together with the bookrunners in accordance with pre-defined allocation principles.
In the event of an oversubscription, priority is normally given to investors who have given constructive feedback during the process, i.e. shown meaningful interest with preliminary orders at reasonable price level during the roadshow, which has helped the company and the bookrunners to form a better view on pricing as well as investors who were among the first to give their orders to the bookrunners when the books were opened.
Once the allocation is complete and trades are settled, the bond will be listed on a stock exchange. Sampo’s hybrid bond was listed on the London Stock Exchange on 3 September 2020.
Issuing new debt in Sampo
IR and Communications Specialist, Sampo plc
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.
IR and Communications Specialist, Sampo plc
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.
|Key figures, EURm||1-3/2020||1-3/2019||Change, %|
|Profit before taxes||162||475||-66|
|Holding (excl. associates)||-24||29||-|
|Profit for the period||139||398||-65|
|Earnings per share, EUR||0.26||0.64||-0.38|
|EPS (incl. change in FVR), EUR||-1.71||0.94||-2.65|
|NAV per share, EUR*||15.36||20.71||-5.35|
|Average number of staff, FTE||10,303||9,670||633|
|Group solvency ratio, %*||179||167||12|
|* 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.
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.
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.
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.
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 firstname.lastname@example.org 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.
IR and Communications Specialist, Sampo plc