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Sampo Group’s profit before taxes for 2019 amounted to EUR 1,541 million (2,094). The profit includes a loss of EUR 155 million incurred when distributing Nordea shares as dividends in the third quarter of 2019. The profit for the comparison year contains a positive non-recurring item of EUR 197 million from the Danske Bank co-operation agreement that Mandatum Life completed in the second quarter of 2018. The total comprehensive income for the period, taking changes in the market value of assets into account, rose to EUR 1,565 million (1,034).
|KEY FIGURES||2019||2018||Change, %||10-12/|
|Profit before taxes *)||1,541||2,094||-26||468||451||4|
|Associates (Nordea & NDX Intressenter)||298||621||-52||143||97||47|
|Holding (excl. Associates)||-159||-3||-||-29||38||-|
|Profit for the period **)||1,237||1,778||-30||389||381||2|
|Earnings per share, EUR||2.04||3.04||-1.00||0.66||0.66||0|
|EPS (incl. change in FVR) EUR||2.63||1.70||0.93||1.19||-0.17||1.36|
|NAV per share, EUR||20.71||20.60||0.11||-||-||-|
|Average number of staff (FTE)||9,813||9,509||304||-||-||-|
|Group solvency ratio, %||167||140||27||-||-||-|
*) the comparison year includes the contribution of EUR 197 million from the Danske Bank co-operation agreement in the second quarter of 2018.
**) of which non-controlling interests are EUR 107 million (91) for 2019 and EUR 26 million (14) for the fourth quarter of 2019.
The figures in this report are not audited. Income statement items are compared on a year-on-year basis whereas comparison figures for balance sheet items are from 31 December 2018 unless otherwise stated.
Sampo follows the disclosure procedure enabled by the Finnish Financial Supervisory Authority and hereby publishes its Full-Year Financial Report attached as a PDF file to this stock exchange release. The Full-Year Financial Report is also available at www.sampo.com/result.
|Exchange rates used in reporting||1-12/2019||1-9/2019||1-6/2019||1-3/2019||1-12/2018|
|Income statement (average)||10.5853||10.5679||10.5181||10.4187||10.2583|
|Balance sheet (at end of period)||10.4468||10.6958||10.5633||10.3980||10.2548|
|Income statement (average)||1.4183||1.4158||1.4090||1.3959||1.3764|
|Balance sheet (at end of period)||1.3982||1.4326||1.4153||1.3929||1.3733|
|Income statement (average)||1.0749||1.0816||1.0810||1.0694||1.0688|
|Balance sheet (at end of period)||1.0591||1.0809||1.0897||1.0765||1.0308|
|Income statement (average)||7.4661||7.4644||7.4651||7.4637||7.4533|
|Balance sheet (at end of period)||7.4715||7.4662||7.4636||7.4652||7.4673|
GROUP CEO’S COMMENT
The insurance group Sampo had quite a challenging but successful year 2019. Despite the lower for longer interest rate environment and some headwinds in our banking associate Nordea, the Group performed well in most of its businesses. The Group’s P&C insurance operations continued to show very high quality in underwriting. If P&C had a strong combination of premium growth and low combined ratios. Digital investments over several years together with very competitive cost levels supported this development. Sampo’s other P&C operation, Topdanmark, also reported strong results. The company continued to invest in modern digital channels, and as usual with Topdanmark’s underwriting abilities, I expect the Q4 challenges in the I/A business to be dealt with rapidly.
All our insurance operations, not least Mandatum Life, were helped by favourable development in the equity markets. Mandatum’s unit-linked savings reached an all-time high as equity values appreciated substantially during 2019. At the same time the efforts to shrink the with-profit book bore fruit and the book is now almost EUR 300 million smaller than a year ago.
Sampo’s associated company Nordea faced headwinds during the year in the difficult banking environment. The new management adopted revised financial targets in October 2019 and has already shown great determination to take tough decisions and work hard to develop towards those targets. The bank’s fourth quarter 2019 results is the first encouraging step in this process.
As the new CEO I am looking optimistically at the coming period. Sampo will prosper through its underwriting focus, our in-depth knowledge about our markets and our strong balance sheet. I expect the operating environment to provide both challenges and opportunities and look forward to meeting these with enthusiasm and confidence.
Group CEO and President
FOURTH QUARTER 2019 IN BRIEF
Sampo Group’s profit before taxes for the fourth quarter of 2019 amounted to EUR 468 million (451). Earnings per share was EUR 0.66 (0.66) and mark-to-market earnings per share EUR 1.19 (-0.17).
Net asset value per share increased EUR 1.81 during the fourth quarter of 2019 and amounted to EUR 20.71.
If’s combined ratio for the fourth quarter of 2019 amounted to 85.0 per cent (83.5). Profit before taxes amounted to EUR 228 million (221). The discount rate applied in Finland was lowered from 1.2 per cent to 0.95 per cent with a negative impact of EUR 62 million on the results.
Topdanmark’s combined ratio for the fourth quarter was 87.1 per cent (81.1) and profit before taxes EUR 58 million (29).
Sampo’s share of Nordea’s fourth quarter 2019 net profit was EUR 143 million (98) and EUR 0 million (-1) of NDX Intressenter’s profit in the same period of time.
Profit before taxes for Mandatum amounted to EUR 68 million (66). Premiums written grew to EUR 772 million (394). A significant part of the growth was due to one-off items caused by changes in tax treatment of life insurance products.
Profit before taxes for 2019 for the If segment was EUR 884 million (848). Combined ratio amounted to 84.5 per cent (85.2) and risk ratio to 62.7 per cent (63.3).
In 2019 EUR 190 million (173) was released from technical reserves relating to prior year claims. Return on equity increased to 34.5 per cent (11.2) and the fair value reserve on 31 December 2019 amounted to EUR 457 million (234).
Technical result was EUR 685 million (643). Insurance margin (technical result in relation to net premiums earned) rose to 15.9 per cent (15.1).
Large claims for If were EUR 4 million (29) worse than expected for the full-year 2019. In BA Industrial they were EUR 8 million better and in BA Commercial EUR 13 million worse than expected in 2019. In the fourth quarter of 2019 the large claims were EUR 13 million better than expected.
The Swedish discount rate used to discount the annuity reserves was -0.77 per cent (-0.41) at the end of 2019 and had a negative effect on the full-year results of EUR 22 million. The impact on fourth quarter results was EUR 17 million positive. In Finland the discount rate for annuities was lowered from 1.2 per cent to 0.95 during the fourth quarter which had a negative effect of EUR 62 million on the results.
Gross written premiums amounted to EUR 4,675 million (4,502) in 2019. With fixed currency rates premiums grew 5.7 per cent in January – December 2019 and during the fourth quarter premium growth accelerated to 8.5 per cent. All business areas had growth. The growth was highest in the BA Industrial, at 16.5 per cent. In BA Private the premium growth amounted to 5.1 per cent and in BA Commercial 2.8 per cent. Gross written premiums grew by 5.1 per cent in Sweden, 9.5 per cent in Norway, 2.2 per cent in Finland and 5.0 per cent in Denmark. Positive customer development continued in all business areas in 2019, the customer base in BA Private increased by 2 per cent.
The cost ratio was 21.8 per cent (21.9) and expense ratio 16.1 per cent (16.4).
On 31 December 2019, the total investment assets of If amounted to EUR 10.8 billion (10.9), of which fixed income investments constituted 86 per cent (88), money market 2 per cent (2) and equity 12 per cent (10). Net income from investments amounted to EUR 229 million (229). Investment return marked-to-market for the full-year 2019 was 5.0 per cent (-0.8). Duration for interest bearing assets was 1.3 years (1.4) and average maturity 2.8 years (2.7). Fixed income running yield without taking into account the FX hedging cost as at 31 December 2019 was 1.8 per cent (1.7).
If’s solvency position is described in the section Solvency.
At the end of 2019 Sampo plc held 41,997,070 Topdanmark shares, corresponding to 46.7 per cent of all shares and 48.2 per cent of related voting rights in the company. The market value of the holding was EUR 1,846 million on 31 December 2019.
The Board of Directors recommends to the AGM of 2020 a dividend of DKK 1,530 million (EUR 205 million), i.e. DKK 17 per share. If the AGM approves the proposal, Sampo plc’s share of the dividend payment is EUR 96 million.
Topdanmark’s profit before taxes for 2019 increased in Sampo Group’s profit and loss account to EUR 238 million (199). The combined ratio amounted to 82.1 per cent (82.3) in 2019. The expense ratio was 16.0 per cent (16.3).
The following text is based on Topdanmark’s full-year 2019 result release published on 23 January 2020.
In non-life insurance, result was positively impacted by higher run-off profit and an improved claims trend in the SME and the agricultural business. On the other hand, the result from illness and accident and lower yield curve had a negative impact on results. In the life insurance, result was impacted positively by improved investment returns.
Topdanmark’s premium income increased by 2.9 per cent in non-life insurance and by 9.8 per cent in life insurance.
In non-life insurance, the run-off profit of EUR 58 was primarily generated in motor third-party liability, in workers’ compensation, and in illness and accident. Weather-related claims were EUR 13 million below normal level and amounted to EUR 10 million. Large claims were EUR 6 million below normal level and amounted to EUR 7 million.
Topdanmark’s solvency position is described in the section Solvency.
Further information on Topdanmark A/S and its January-December 2019 result is available at www.topdanmark.com.
Associated company Nordea
Nordea is the largest bank in the Nordic region and among the ten largest financial groups in Europe in terms of total market capitalization with around 11 million customers. Nordea’s shares are listed on the Nasdaq exchanges in Stockholm, Helsinki and Copenhagen. In Sampo Group’s reporting Nordea is treated as an associated company and is included in the segment Holding.
On 31 December 2019 Sampo plc held 804,922,858 Nordea shares corresponding to a holding of 19.87 per cent. The average price paid per share amounted to EUR 6.46 and the book value in the Group accounts was EUR 8.34 per share. The closing price as at 31 December 2019 was EUR 7.24.
Nordea targets a dividend of EUR 0.40 per share (0.69) for 2019. Sampo plc’s share amounts to EUR 322 million (594) if approved by the AGM.
Sampo’s share of Nordea’s 2019 profit before taxes amounted to EUR 290 million (625).
Profit before taxes for Mandatum Life in 2019 amounted to EUR 280 million (450). The comparison figure includes the contribution of EUR 197 million from the Danske Bank co-operation agreement in the second quarter of 2018. The total comprehensive income for the period after tax reflecting the changes in market values of assets, increased to EUR 308 million (112). Return on equity amounted to 23.5 per cent (8.7).
Premium income on own account increased to EUR 1,596 million (1,074). Premiums from unit-linked policies increased to EUR 1,476 million (976). Claims incurred increased to EUR 1,492 million (1,116). Both premium income and claims paid include around EUR 400 million one-off items caused by changes in the tax treatment of life insurance products.
Net investment income, excluding income on unit-linked contracts, increased to EUR 358 million (232). Net income from unit-linked contracts was EUR 908 million (-259). During 2019 the fair value reserve increased to EUR 438 million (352).
The expense result decreased to EUR 24 million (35). The risk result increased to EUR 35 million (33).
The total technical reserves of Mandatum Life Group were EUR 12.0 billion (11.2). The unit-linked reserves exceeded EUR 8 billion for the first time and were EUR 8.1 billion (7.0) at the end of 2019. Unit-linked reserves corresponded to 67 per cent (62) of total technical reserves.
With-profit reserves decreased as planned during 2019 and amounted to EUR 3.9 billion (4.2) on 31 December 2019. With-profit reserves related to the higher guarantees of 4.5 and 3.5 per cent decreased by EUR 264 million to EUR 2.2 billion at the end of 2019.
Mandatum Life has overall supplemented its technical reserves with a total of EUR 230 million (232), of which EUR 189 million is allocated to years 2020 – 2022. The figure does not take into account the reserves relating to the segregated fund. The discount rate used for 2020 and 2021 is 0.25 per cent. In the fourth quarter of 2019, the rate used for 2022 was lowered from 2.50 per cent to 1.25 per cent.
Discount rate of segregated liabilities was decreased from 0.50 per cent to 0.0 per cent and discount rate reserve of segregated liabilities amounted to EUR 263 million (250).
At the end of 2019 Mandatum Life Group’s investment assets, excluding the assets of EUR 8.2 billion (7.0) covering unit-linked liabilities, amounted to EUR 5.7 billion (5.6) at market values.
Mandatum Life’s solvency position is described in the section Solvency.
Holding segment’s profit before taxes for January - December 2019 amounted to EUR 139 million (618), which includes EUR 155 million loss incurred when distributing Nordea shares as dividends in the third quarter of 2019. Sampo’s share of profits of associated companies Nordea and NDX Intressenter for January – December 2019 amounted to EUR 298 million (621) of which Nordea’s share was EUR 290 million (625) and NDX Intressenter’s EUR 8 million (-4). Nordea’s result in the third quarter of 2019 was impacted by one-off items amounting to EUR 1.3 billion.
The segment’s profit before taxes excluding the associates for January – December 2019 was EUR -159 million (-3).
Changes in market values of derivative instruments and currency exchange rates can cause volatility in the net investment income and finance cost lines.
Sampo plc’s holding in Nordea was booked in the consolidated balance sheet at EUR 6.7 billion, i.e. EUR 8.34 per share. The market value of the holding was EUR 5.8 billion, i.e. EUR 7.24 per share, on 31 December 2019.
Changes in the Group structure
If P&C Insurance Holding Ltd (publ) signed on 28 November 2019 an agreement to buy Viking Redningstjeneste TOPCO A/S. The acquisition price for 100 per cent ownership was EUR 32 million (NOK 325 million) which was paid in cash. The enterprise value amounted to EUR 114 million.
Viking is a Nordic roadside assistance company headquartered in Norway. It serves its customers through an extensive nationwide network of stations in Norway, Sweden, Denmark and Finland. The acquisition of Viking will strengthen If’s offering towards its partners and further improve If’s position as the leading Nordic insurance and service provider within the mobility area.
With this strategic acquisition If strengthens its position in the Nordics by providing more comprehensive service for its insurance customers and partners such as carmakers. The financial effect of the acquisition on Sampo Group is not expected to be significant.
The transaction was subject to approval by competition authorities in Norway and Sweden which were received in early January 2020 and the transaction was completed.
Changes in Group Management
On 6 November 2019 Ricard Wennerklint, 50, was appointed Chief of Strategy in Sampo Group as of 1 January 2020. He has held various positions in Sampo Group since 2002 and been a member of the Sampo Group Executive Committee since 2005.
In 2019 EUR 18 million (23), including social cost, was paid on the basis of the long-term incentive schemes. EUR 40 million (36), including social costs, was paid as short-term incentives during the same period. The result impact of the long-term incentive schemes in force in 2019 was EUR 12 million (5).
Shares and shareholders
The Annual General Meeting authorized the Board to repurchase a maximum of 50,000,000 Sampo A shares. The price paid for the shares repurchased under the authorization shall be based on the current market price of Sampo A shares on the securities market. The authorization will be valid until the close of the next Annual General Meeting, nevertheless not more than 18 months after AGM's decision.
Sampo plc made no repurchases during 2019 and has not purchased its own shares after the end of the reporting period.
Sampo plc, Sampo Group’s parent company, received more than EUR 1.5 billion in dividends from its subsidiaries and associated company Nordea during 2019. The following dividend payments were received:
- Mandatum Life; EUR 150 million in March 2019,
- Nordea; EUR 594 million in April 2019,
- Topdanmark; EUR 84 million in April 2019 and
- If; SEK 7.5 billion (EUR 710 million) in December 2019
Nordea targets a dividend of EUR 0.40 per share for 2019. Sampo plc’s share amounts to EUR 322 million if approved by the AGM on 25 March 2020.
Topdanmark’s Board of Directors proposed to the Annual General Meeting of 2 April 2020 a dividend of DKK 17 per share. If the AGM approves the proposal, Sampo’s share of the Topdanmark’s total dividend amounts to EUR 96 million.
Mandatum Life’s Board proposes a dividend of EUR 150 million to be paid to Sampo plc in the first quarter of 2020. If normally pays its dividend towards the end of the calendar year.
Relevant ratings for Sampo Group companies on 31 December 2019 are presented in the table below.
|Rated company||Moody’s||Standard & Poor’s|
Sampo plc – Issuer Credit Rating
|If P&C Insurance Ltd – Insurance Financial Strength Rating||A1||Stable||A+||Stable|
|If P&C Insurance Holding Ltd (publ)|
- Issuer Credit Rating
|Mandatum Life Insurance Company Ltd – Issuer Credit Rating||-||-||A+||Stable|
Sampo’s capital requirement on Nordea holding increased more than EUR 800 million during the first half of 2019 although the underlying risks for Sampo’s holding in Nordea did not change. Sampo took active measures to counter the negative impact by issuing EUR 500 million of hybrid capital in May 2019. More importantly, the Board received from the AGM in April 2019 an authorization to distribute an extra dividend either in cash and/or in financial instruments held by Sampo plc and announced on 13 June 2019 that it planned to resolve on the distribution of an extra dividend in the form of Nordea shares in its meeting scheduled 7 August 2019.
On 7 August 2019 Sampo Board made the formal decision to distribute a total of 55,517,639 shares of Nordea Bank Abp as an extra dividend. As a result of the dividend, Sampo’s ownership in Nordea decreased below 20 per cent.
Hence, the conglomerate rules (FICO) solvency calculation was terminated by a formal approval by the Finnish FSA received on 21 October 2019. After the approval Sampo Group calculates its group solvency only under the Solvency II rules and Nordea is treated as an equity investment. Sampo Group’s solvency ratio according to the Solvency II directive amounted to 167 per cent (140) at the end of December 2019. The proposed dividend has been deducted from own funds in the Solvency II calculation.
The consolidation of Nordea as an associated company in Sampo Group’s Financial Statements (IFRS) will remain unchanged.
Solvency position in the subsidiaries
The insurance subsidiaries apply Solvency II rules in their regulatory solvency calculations. If Group companies use either partial internal models or standard model for calculation of their solo solvency position. Mandatum Life reports in accordance with standard formula for Solvency II. Topdanmark uses a partial internal model to report its stand-alone solvency position.
If Group has an A+ rating from S&P which will continue to require significantly more capital than the standard formula and therefore the use of standard formula has no practical implications on If Group’s capital position. On 31 December 2019 If Group’s Solvency II capital requirement under standard formula amounted to EUR 1,890 million (1,833) and own funds to EUR 3,592 million (3,599). The solvency ratio amounted to 190 per cent (196).
The S&P A+ rating capital requirement for If Group amounted to EUR 3,083 million (2,949) on 31 December 2019 and the capital base was EUR 3,151 million (3,149).
Topdanmark calculates most of its non-life and health risks and their respective solvency capital requirement by a partial internal model approved by the DFSA. Other risks are calculated by Solvency II SCR standard formula. Topdanmark’s solvency ratio under the partial internal model was 177 per cent (196) at the end of December 2019.
Mandatum Life’s solvency ratio after transitional measures amounted to 176 per cent (176) on 31 December 2019. Own funds were EUR 2,117 million (1,740) and Solvency Capital Requirement (SCR) was EUR 1,204 million (990). The increase in own funds is mainly due to the Tier 2 issue of EUR 250 million in September 2019 and the positive equity market development during the reporting year. SCR grew because of increased market risk due to positive equity market development, a change in the symmetrical adjustment and changes in contract boundary interpretations applied in calculating technical provisions. Without transitional measures, own funds would have amounted to EUR 1,756 million (1,348) and the solvency capital requirement to EUR 1,234 million (1,030) leading to a solvency ratio of 142 per cent (131).
Sampo plc’s debt financing on 31 December 2019 amounted to EUR 3,908 million (4,067) and interest bearing assets to EUR 1,725 million (1,959). Interest bearing assets include bank accounts, fixed income instruments and EUR 359 million (489) of hybrid capital and subordinated debt instruments issued by the subsidiaries and associated companies.
At the end of 2019 the interest bearing net debt of Sampo plc amounted to EUR 2,183 million (2,108). The net debt calculation takes into account interest bearing assets and liabilities. Gross debt to Sampo plc’s equity was 51 per cent (52) and financial leverage 34 per cent (34).
On 23 May 2019 Sampo plc issued 30NC10 Fixed/Floating rate subordinated notes of EUR 500 million due 23 May 2049.
On 24 May 2019 Sampo plc repaid EUR 500 million senior notes maturing on that date.
On 26 September 2019 Mandatum Life issued 30NC5 Tier 2 notes of EUR 250 million due 4 October 2049.
On 31 December 2019 financial liabilities in Sampo plc’s balance sheet consisted of issued senior bonds and notes of EUR 3,414 million (3,943). In addition Sampo plc has issued subordinated notes of EUR 494 million. No CPs were outstanding (124). The average interest, net of interest rate swaps, on Sampo plc’s debt as of 31 December 2019 was 1.2 per cent (0.8).
More information on Sampo Group’s outstanding debt issues is available at www.sampo.com/debtfinancing.
Outlook for 2020
Sampo Group’s business areas are expected to report good operating results for 2020.
However, the marked-to-market results are, particularly in life insurance, highly dependent on capital market developments. The continuing low interest rate level also creates a challenging environment for reinvestment in fixed income instruments.
If P&C is expected to reach a combined ratio of 85 – 89 per cent in 2020.
With regard to Topdanmark reference is made to the profit forecast model that the company publishes quarterly.
Nordea’s contribution to the Group’s profit is expected to be significant.
The major risks and uncertainties to the Group in the near-term
In its current day-to-day business activities Sampo Group is exposed to various risks and uncertainties mainly through its separately managed major business units.
Major risks affecting the Group companies’ profitability and its variation are market, credit, insurance and operational risks that are quantified independently by the major business units. At the group level sources of risks are the same, but they are not directly additive because of diversification effects.
Uncertainties in the form of major unforeseen events may have an immediate impact on the Group’s profitability. Identification of unforeseen events is easier than estimation of their probabilities, timing and potential outcomes. Currently there are a number of widely identified macro-economic, political and other sources of uncertainty which can, in various ways, affect the financial services industry negatively. In particular the political risks are at an elevated level at the moment.
Other sources of uncertainty are unforeseen structural changes in the business environment and already identified trends and potential wide-impact events. These external drivers may have long-term impacts on how business shall be conducted. Examples of already identified trends are technological development in areas such as artificial intelligence and digitalization, demographic changes and sustainability issues that may have profound effects on financial sector companies as well.
The new dividend policy
Sampo has for several years had the ambition of annually increasing its nominal dividend per share. On 24 October 2019 Sampo management, however, concluded that in the present operating environment and with government bond yields expected to remain negative for some time to come, an increase in the dividend would not best serve the company or its shareholders. This view was further reinforced by a change in Nordea’s dividend policy announced earlier on the same day.
Sampo plc’s Board of Directors has today approved a new dividend policy according to which total annual dividends paid will be at least 70 per cent of Group's net profit for the year (excluding extraordinary items). In addition share buy-backs can be used to complement the cash dividend.
The parent company’s distributable capital and reserves totalled EUR 7,383,547,646.18 of which profit for the financial year was EUR 1,489,678,098.42.
The Board proposes to the Annual General Meeting a dividend of EUR 2.20 per share to company’s 555,351,850 shares. The dividends to be paid are EUR 1,221,774,070.00 in total. The remainder of funds are left in the equity capital.
The dividend will be paid to shareholders registered in the Register of Shareholders held by Euroclear Finland Ltd as at the record date of 27 April 2020. The Board proposes that the dividend be paid on 5 May 2020.
No significant changes have taken place in the company’s financial position since the end of the financial year. The company’s liquidity position is good and in the view of the Board, the proposed distribution does not jeopardize the company’s ability to fulfill its obligations.
Board of Directors
For more information, please contact:
Knut Arne Alsaker, Group CFO, tel. +358 10 516 0010
Jarmo Salonen, Head of Investor Relations and Group Communications, tel. +358 10 516 0030
Maria Silander, Communications Manager, Media Relations, tel. +358 10 516 0031
A press conference will be held in English on 6 February at 12:30 pm Finnish time (10:30 am UK time) at Symposion, Kämp, (2nd floor), Pohjoisesplanadi 29, Helsinki.
The press conference can be followed as a live webcast at www.sampo.com/result. A recorded version will later be available at the same address.
An English-language conference call for investors and analysts will be arranged at 4 pm Finnish time (2 pm UK time). Please call tel. +1 855 857 0686, +44 333 300 0804, +46 856 642 651, or +358 981 710 310. The conference code is 75249242#.
The conference call can also be followed live at www.sampo.com/result. A recorded version will later be available at the same address.
In addition, the Supplementary Financial Information Package is available at www.sampo.com/result.
Sampo will publish the Interim Statement for January - March 2020 on 6 May 2020.
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