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Sampo Group’s Results for January – June 2020

Sampo Group’s profit before taxes for the first half of 2020 was EUR 569 million (981). The Group’s insurance technical performance continued to excel and a large part of the decrease in the market values of investment assets in March – April 2020 was recovered. The total comprehensive income, taking changes in the market value of assets into account, amounted to EUR 34 million (995) for the first half of 2020 and EUR 987 million (434) for the second quarter of 2020.

  • Earnings per share was EUR 0.81 (1.37) and mark-to-market earnings per share was EUR 0.02 (1.68). Return on equity for the Group amounted to 0.2 per cent (15.4) for the first half of 2020. Meanwhile, the net asset value per share on 30 June 2020 was EUR 16.99 (20.71).
  • Sampo confirmed on 29 July 2020 after market rumours started to circulate that it is, together with Rand Merchant Investment Holdings Limited (RMI), in discussions with Hastings Group Holdings Plc regarding a possible cash offer to acquire the issued and to be issued share capital of Hastings not already owned or controlled by Sampo and RMI. Today Sampo and RMI have announced a recommended cash offer, through a newly-formed jointly owned company, to acquire Hastings.
  • If segment’s profit before taxes was EUR 383 million (440). The insurance technical result increased to EUR 398 million (334) and the combined ratio for January – June 2020 amounted to 82.1 per cent (84.7). Premiums grew by 5 per cent on a fixed currency basis. Furthermore, all business areas and all markets recorded growth.
  • Topdanmark segment’s profit before taxes decreased to EUR 38 million (146). Meanwhile, the combined ratio amounted to 84.2 per cent (79.0).
  • Sampo’s share of Nordea’s net profit for January – June 2020 amounted to EUR 132 million (222). With regard to segment reporting, the share of Nordea’s profit is included in the segment entitled ‘Holding’.
  • Profit before taxes for the Mandatum segment amounted to EUR 39 million (137). Meanwhile, premiums decreased to EUR 498 million (529).

Key figures 1-6/
2020
1-6/
2019
Change, % 4-6/
2020
4-6/
2019
Change, %
EURm            
Profit before taxes 569 981 -42 407 506 -19
  If 383 440 -13 254 242 5
  Topdanmark 38 146 -74 52 53 -3
  Associates 137 226 -39 51 143 -64
  Mandatum 39 137 -71 55 65 -15
  Holding (excl. associates) -29 31 - -5 2 -
Profit for the period 469 826 -45 330 428 -23
      Change     Change
Earnings per share, EUR 0.81 1.37 -0.56 0.55 0.73 -0.18
EPS (based on OCI) EUR 0.02 1.68 -1.66 1.73 0.74 0.99
NAV per share, EUR  *) 16.99 20.71 -3.72 - - -
Average number of staff (FTE) 10,322 9,734 588 - - -
Group solvency ratio, %  *) 187 167 20 - - -
RoE, % 0.2 15.4 -15.2 - - -

*) comparison figure from 31.12.2019

The figures in this report have not been 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 follows the disclosure procedure enabled by the Finnish Financial Supervisory Authority and hereby publishes its Interim Statement attached as a PDF file to this stock exchange release. The Interim Statement is also available at www.sampo.com/result.

EXCHANGE RATES USED IN REPORTING 1-6/
2020
1-3/
2020
1-12/
2019
1-9/
2019
1-6/
2019
EURSEK          
Income statement (average) 10.6621 10.6649 10.5853 10.5679 10.5181
Balance sheet (at end of period) 10.4948 11.0613 10.4468 10.6958 10.5633
DKKSEK          
Income statement (average) 1.4280 1.4279 1.4183 1.4158 1.4090
Balance sheet (at end of period) 1.4813 1.4813 1.3982 1.4326 1.4153
NOKSEK          
Income statement (average) 0.9932 1.0195 1.0749 1.0816 1.0810
Balance sheet (at end of period) 0.9618 0.9610 1.0591 1.0809 1.0897
EURDKK          
Income statement (average) 7.4648 7.4714 7.4661 7.4644 7.4651
Balance sheet (at end of period) 7.4526 7.4674 7.4715 7.4662 7.4636

GROUP CEO’S COMMENT

The second quarter was a strong quarter for Sampo Group, despite the uncertainty related to COVID-19. Firstly, we continued to excel in P&C insurance underwriting, the backbone of our profit generation, and secondly, the investment markets reversed the negative experience from March and April, as the equity markets surged and bond spreads narrowed during May and June.

Business has been stable during the summer months, and we have also been able to focus on project Dorset. The code name refers to the offer we have published today, together with RMI, to acquire all shares in the UK motor insurance company Hastings Group Holdings Plc.

The offer is of course a step in the strategy to allocate more capital to P&C insurance, and Hastings is a unique company which we have followed for some time. It operates in the large UK motor insurance market and, more importantly, in the fast-growing segment of modern digital distribution which continues to take market share from the traditional operators. Hastings results have been impressive since the IPO in 2015.

The UK is certainly an interesting insurance market. It is not only very large, but also very advanced in digital terms. I am excited about the opportunities to develop Sampo with these digital capabilities, at the same time as our Nordic expertise in other areas like retention techniques and car manufacturer collaboration can support Hasting’s future development.

The fact that we do this together with RMI, a long-term shareholder in Hastings, reduces the acquisition risks significantly. RMI is a South African financial services investment holding company and has been the largest shareholder in Hastings since 2017.

Coming back to our existing businesses, If P&C posted a technical result that improved further from the already excellent level. Stable operations where premium increases corresponded well to claims inflation. Topdanmark also recovered from the difficult first quarter of this year.

Nordea’s progress in the second quarter was encouraging. The bank remains committed to meeting the financial targets 2022, and leading indicators on cost and customer satisfaction developed strongly. It has maintained the strong financial position it had when entering the COVID-19 crisis and with its high equity tier 1 ratio and ample credit loss buffers, the bank is well prepared to meet the challenges ahead.

Of all our business areas, Mandatum Life is the most exposed to the volatility in the financial markets. At the same time Mandatum is the one to benefit most from the upturn in the equity markets as witnessed in the second quarter of this year when the other comprehensive income rose to EUR 234 million. The company’s Solvency II ratio continues to be solid at 201 per cent.

Torbjörn Magnusson
Group CEO and President

SECOND QUARTER 2020 IN BRIEF

Sampo Group’s profit before taxes for the second quarter of 2020 was EUR 407 million (506). Earnings per share was EUR 0.55 (0.73) and mark-to-market earnings per share EUR 1.73 (0.74).

Net asset value per share increased EUR 1.63 during the second quarter of 2020 and was EUR 16.99. The net asset value increased mainly because of equity market recovery, and particularly, the increase in Nordea’s share price.

If’s combined ratio for the second quarter of 2020 amounted to 80.5 per cent (83.0). Profit before taxes amounted to EUR 254 million (242).

Topdanmark’s combined ratio for the second quarter 2020 amounted to 79.7 per cent (79.8) and profit before taxes to EUR 52 million (53).

Sampo’s share of Nordea’s second quarter 2020 net profit was EUR 48 million (140).

Profit before taxes for Mandatum amounted to EUR 55 million (65). Premiums written decreased to EUR 210 million (291).

EFFECTS OF COVID-19 ON SAMPO GROUP

Personnel and customer relations

Sampo Group has followed the recommendations from authorities in its respective countries both during the lock-down in the acute phase of the crisis as well as now that societies are gradually re-opening in The Nordic and Baltic countries.

In Sampo Group’s biggest subsidiary If P&C, 6,000 of more than 7,000 employees have been working remotely during the crisis and the remainder have been working in offices where social distancing measures have been observed. Mandatum Life also has followed the government advice and continues with remote work. Only a few percent of employees are working at the office premises. Also, in Topdanmark 95 per cent of employees have been working remotely.

When the COVID-19 pandemic reached the Nordic countries in mid-March 2020 priority was given to continuity and continued service and support to customers in the best way in the changed working conditions.

Operational efficiency and availability have been good and early indications show sick leave to have declined during the crisis.

Physical customer visits to our offices have been stopped or are subject to extra precautions. Business travel and conferences have also been halted. During this period subsidiaries have been able to offer a normal service level and customer satisfaction has remained on a high level. There has been no disruption in the customer service.

Insurance business

If’s claims cost for the first six months of 2020 was negatively impacted from travel insurance policies primarily following imposed government travel restrictions due to COVID-19. At the end of the reporting period, the total number of reported claims amounted to just over 50 000, corresponding to a gross claims cost of approximately SEK 400 million (EUR 38 million) mostly in BA Private and Norway. The net claims cost is expected to be significantly reduced by a reinsurance cover with a net retention for this event of SEK 100 million (EUR 9 million).

The lock down activities in the Nordic countries had a positive effect on claims cost especially at the beginning of the second quarter of 2020. The largest factor being reduced traffic on the roads that resulted in an extraordinary and temporary decrease in motor claims. Towards the end of the period, as governments started to reopen societies, claims frequency also returned to a more normal level. At the same time an increase in repair costs is likely because of lack of material, delays in transportation of material or shortage of personnel following implemented government travel restrictions.

During the second quarter of 2020 there was a clear negative impact on premium volume because of the COVID-19 situation. This was a result of many variables including fewer new cars sold, decommissioning of vehicles and lower insurable sums and goods.

Mandatum Life’s claims cost in January-June 2020 was in line with the previous year. Premium income was 6 per cent, EUR 32 million, below the previous year in January-June, but in April-June both claims paid and premium income were around EUR 80 million below the previous year.

In its Half-year Report for 2020 published on 17 July 2020 Topdanmark described the impact COVID-19 had on its operations. The report is available at www.topdanmark.com.

Investment activities

The swift monetary responses by central banks and governments have helped to stabilize the financial markets after the initial shock reaction in March 2020. Leading equity indices have rebounded strongly and credit spreads on bonds have narrowed since then.

Companies in Sampo Group have enjoyed good returns in the second quarter of 2020. However, the mark-to-market losses in the investment portfolio suffered during March – April 2020 had not been fully recovered by the end of the quarter.

Solvency positions

The solvency positions of Sampo Group and its subsidiaries remained robust in the second quarter of 2020. More information is available in the section Solvency.

Impacts on future operating models

As Sampo Group’s personnel gradually returns to the offices, the Group follows the recommendations of authorities in individual countries. This means that operations are returning to normal step by step and with somewhat varying speed in each country. Social distancing measures are still in effect also during the re-opening phase and the principle is to offer employees the flexibility to continue working from home for the foreseeable future, while re-opening the offices for those employees who wish to return.

The COVID-19 pandemic will have lasting effects on how operations are organized in the Group. The crisis has accelerated the digitalization of work life. Remote work has proven itself both effective and to be an important tool for handling unexpected crises. Going forward, increased flexibility will be expected by employees and recruitment candidates.

Group companies have started several “Post Corona” initiatives relating to the use of remote work in the future and the required changes in HR and employment relations.

BUSINESS AREAS

If

Profit before taxes for January – June 2020 for the If segment was EUR 383 million (440). The total comprehensive income for the period after tax was EUR 106 million (462). The combined ratio for the period was 82.1 per cent (84.7) and the risk ratio was 61.4 per cent (63.0).

Net releases from the technical reserves relating to the prior year claims were EUR 103 million (108) in January-June. The technical result increased to EUR 398 million (334). The insurance margin (the technical result in relation to the net premiums earned) increased to 18.3 per cent (15.7).

Large claims were EUR 47 million worse than expected in the first half of 2020. The Norwegian market was particularly impacted by large loss development in the first half.

The Swedish discount rate used to discount the annuity reserves was -0.81 per cent and had a negative effect of EUR 2 million on the profit in the first half of 2020.

Gross written premiums increased to EUR 2,846 million (2,772) in January – June 2020. Adjusted for currency, premium growth was 5.2 per cent compared to the corresponding period a year ago. Furthermore, growth was positive in all business and market areas – it was highest in Denmark where it accelerated to 12.0 per cent. Gross written premiums grew by 6.6 per cent in Norway, 4.6 per cent in Sweden, and 2.0 per cent in Finland. In BA Industrial, premium growth amounted to 9.4 per cent, in BA Commercial it was 6.6 per cent, in BA Baltic it reached 2.1 per cent, and in BA Private 3.2 per cent.

The risk ratio 59.3 (61.2) for the second quarter improved compared to last year. This was driven by an underlying improvement from implemented actions over a longer period as well as an extraordinary benign frequency situation in the second quarter due to the COVID-19 which resulted in a significant reduction in traffic and lower activity especially at the beginning of the quarter. Towards the end of the period claims returned to more normal levels. The positive effect on the net risk ratio in the second quarter was approximately 4 percentage points.

The cost ratio was 20.8 per cent (21.7) and the expense ratio was 15.2 per cent (16.2).

On 30 June 2020, the total investment assets of If amounted to EUR 10.8 billion (10.8).

If’s solvency position is described in the section entitled ‘Solvency’.

Topdanmark

At the end of June 2020, Sampo plc held 41,997,070 Topdanmark shares, which corresponds to 46.7 per cent of all shares and 48.1 per cent of related voting rights in the company. The market value of the holding was EUR 1,544 million on 30 June 2020.

As a consequence of the COVID-19 situation, only DKK 8.5 of the previously announced dividend of DKK 17 per share was paid following the AGM on 2 April 2020. Consequently, Sampo received EUR 48 million in dividends from Topdanmark on 7 April.

Topdanmark’s Board of Directors has decided to postpone payment of the remainder of the dividend for 2019 until the AGM on 25 March 2021. It is still the intention to distribute in part or in full the remaining DKK 8.5 of the previously announced dividend.

Topdanmark’s profit before taxes for January–June 2020 amounted to EUR 38 million (146). During the second quarter of 2020, Topdanmark’s profit before taxes was almost unchanged despite a lower life result.

The combined ratio amounted to 84.2 per cent (79.0). The expense ratio was almost unchanged at 16.7 per cent.

The following text is based on Topdanmark’s Half-year report 2020 report, which was published on 17 July 2020.

During the first half of 2020, Topdanmark’s premiums increased 2.7 per cent in non-life insurance and 20.7 per cent in life insurance. In the private segment, premiums were negatively impacted by the termination of the distribution agreement with Danske Bank at the end of the first half of 2019. From 2021, it is expected that the Nordea agreement will compensate fully for the terminated distribution agreement with Danske Bank in terms of premiums.

During the first half of 2020, Topdanmark’s technical result decreased due to lower run-off, and by a higher level of weather-related claims. During the second quarter, however, the technical result increased.

In the first half of 2020, weather-related claims represented a 1.0 percentage point deterioration of the claims trend. Thereby, the level of weather-related claims was EUR 1 million below the assumed normal level.

The level of large claims represented a 0.1 percentage point deterioration of the claims trend in the first half of 2020.

Topdanmark’s solvency position is described in the section entitled ‘Solvency’.

Further information on Topdanmark A/S and its January – June 2020 results is available at www.topdanmark.com.

NORDEA (associated company)

On 30 June 2020, Sampo plc held 804,922,858 Nordea shares, which corresponds 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 8.42 per share. The closing price as at 30 June 2020 was EUR 6.15.

The AGM on 28 May 2020 mandated the Board of Directors to decide on a dividend payment of a maximum of EUR 0.40 per share for the financial year 2019 to be distributed in one or several instalments. The Board of Directors intends to follow the recommendation adopted by the ECB and refrain from deciding on a dividend payment based on the authorization before 1 October 2020.

The following text is based on Nordea’s Half-Year Financial Report 2020 published on 17 July 2020.

Nordea reported a solid result with revenues largely unchanged. Net interest income increased by 2 per cent, supported by volume growth, especially in mortgages, in all countries. Operating profit was EUR 306 million − significantly impacted by loan loss provisions.

Nordea estimates total net loan losses for the full year 2020 to be below EUR 1 billion.

In the quarter underlying net loan losses were EUR 310 million. On top of that Nordea has made additional management judgement allowances of EUR 388 million leading to total Q2 net loan losses of EUR 698 million. Nordea now has a management judgement buffer of EUR 650 million in place to cover for future loan losses, IFRS 9 model improvements and the European Central Bank’s new guidance on non-performing loans.

Nordea’s capital position remains very strong with a common equity tier 1 ratio of 15.8 per cent, which is 5.6 percentage points above the requirement.

Sampo’s share of Nordea’s profit before taxes for January–June 2020 amounted to EUR 132 million (222).

Mandatum Life

Mandatum segment’s profit before taxes for January - June 2020 amounted to EUR 39 million (137). The total comprehensive income for the period after tax reflecting the changes in market values of assets decreased to EUR -90 million (190). Return on equity was -13.3 per cent (30.1).

Mandatum Life Group’s premium income amounted to EUR 498 million (529) for the first half of 2020 Unit-linked premiums were EUR 439 million, i.e. 88 per cent of total premiums.

Net investment income, excluding income on unit-linked contracts, decreased to EUR 30 million (203) due to the market turmoil in the first quarter of 2020. In April - June, net investment income, excluding unit-linked contracts, was EUR 53 million.

Net income from unit-linked contracts decreased to EUR -312 million (523). In the second quarter of 2020, net income from unit-linked contracts amounted to EUR 572 million. In January - June of 2020 fair value reserve decreased to EUR 316 million (438).

Mandatum Life Group’s total technical reserves amounted to EUR 11.5 billion (12.0). Unit-linked reserves decreased to EUR 7.8 billion (8.1) at the end of June 2020. The amount corresponds to 67 percent (68) of total technical reserves. Since the end of March 2020, unit-linked reserves increased by almost EUR 600 million.

At the end of June 2020, with-profit reserves decreased to EUR 3.7 billion (3.9). Reserves related to the higher guarantees of 4.5 and 3.5 per cent decreased by EUR 149 million to EUR 2.0 billion in January - June 2020.

Mandatum Life has overall supplemented its technical reserves with a total of EUR 184 million (230) due to low level of interest rates. The figure does not take into account the reserves relating to the segregated fund. The discount rate used for the years 2020 and 2021 is 0.25 per cent. The rate used for 2022 is 1.25 per cent.

The discount rate for segregated liabilities is 0.0 per cent and the discount rate reserve of segregated liabilities amounted to EUR 250 (263) at the end of June 2020.

At the end of June 2020, Mandatum Life’s investment assets, excluding the assets of EUR 7.8 billion (8.1) covering unit-linked liabilities, amounted to EUR 5.3 billion (5.7) at market values.

The expense result in the first half of 2020 amounted to EUR 10 million (7). Risk result was EUR 11 million (10).

Mandatum Life’s solvency position is described in the section Solvency.


Holding 

Profit before taxes for January – June 2020 for the Holding segment amounted to EUR 109 million (258). Sampo’s share of profits for the associated companies Nordea and NDX Intressenter for January – June 2020 amounted to EUR 137 million (226), of which Nordea’s share was EUR 132 million (222) and NDX Intressenter’s share was EUR 5 million (4).

The Holding segment’s profit before taxes, excluding the associates for January – June 2020, was EUR -29 million (31).

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 6.8 billion, i.e. EUR 8.42 per share. The market value of the holding was EUR 4.9 billion, i.e. EUR 6.15 per share, on 30 June 2020.

OTHER DEVELOPMENTS

Events after the end of the reporting period

Sampo confirmed on 29 July 2020 after market rumours started to circulate that it is, together with a South-African financial services investment holding company Rand Merchant Investment Holdings Limited (RMI), in discussions with the UK P&C insurance company Hastings Group Holdings Plc (Hastings) regarding a possible cash offer to acquire the issued and to be issued share capital of Hastings not already owned or controlled by Sampo and RMI.

Following the announcement on 29 July 2020, Sampo and RMI have today announced a recommended cash offer, through a newly-formed jointly owned company, to acquire all issued and to be issued shares Hastings not already owned or controlled by Sampo and RMI.

The cash offer price is GBp 250 for each Hastings share, valuing Hastings’ entire issued and to be issued share capital at approximately GBP 1.66 billion or approximately EUR 1.84 billion.

The cash offer represents a premium of approximately 37.5 per cent to volume-weighted average price of GBp 182 per Hastings share for the three-month period ended on 4 August 2020, the last business day before of the date of the offer announcement.

Following the completion of the offer, Sampo and RMI will own and control 70 per cent and 30 per cent of the shares and votes in the jointly owned company, respectively.

The size of Sampo’s investment, based on its 70 per cent stake, would be GBP 1.16 billion or EUR 1.29 billion valued at the offer price. Sampo expects to fund its part of the acquisition with approximately EUR 1 billion of newly issued hybrid Tier 2 capital with the residual coming from existing cash resources.

Sampo estimates that the acquisition of Hastings will have a positive impact on its earnings per share in the mid-single digits. The acquisition is not expected to impact on Sampo’s dividend policy in the short term but is expected to enhance the dividend potential in the long term.

Meanwhile it is expected that Sampo’s solvency position will remain robust at approximately 175 per cent (post planned issuance of approximately EUR 1 billion of hybrid Tier 2 capital). Sampo does not believe that the transaction will lead to a change in the Group’s credit ratings subject to the planned financing structure.

The independent directors of Hastings intend to recommend unanimously that Hastings’ shareholders approve the offer and have entered into irrevocable undertakings to do so in an amount of 0.33 per cent of the company’s issued share capital.

The transaction is subject to Hastings’ shareholder approval and regulatory approvals and is expected to be closed by the end of 2020.

More information on the offer at www.sampo.com/offer and www.hastingsplc.com.

Annual General Meeting

The Board of Directors of Sampo plc decided on 25 March 2020 to postpone the Annual General Meeting that was scheduled to be held on 23 April 2020. The postponement was made in order to ensure the safety and well-being of Sampo’s shareholders, Sampo’s employees, and other stakeholders, in light of the COVID-19 outbreak and the related health threat.

On 6 May 2020 Sampo Board decided to cancel the previous dividend proposal of EUR 2.20 per share and announce a new proposal of EUR 1.50 per share. The Annual General Meeting, held on 2 June 2020, decided to distribute the proposed dividend of EUR 1.50 per share for 2019. The record date for dividend payment was 4 June 2020 and the dividend was paid on 11 June 2020. The Annual General Meeting adopted the financial accounts for 2019 and discharged the Board of Directors and the CEO from liability for the financial year.

The Annual General Meeting elected eight members to the Board of Directors. The following members were re-elected to the Board: Christian Clausen, Fiona Clutterbuck, Jannica Fagerholm, Johanna Lamminen, Risto Murto, Antti Mäkinen and Björn Wahlroos. Georg Ehrnrooth was elected as a new member to the Board. The Members of the Board were elected for a term continuing until the close of the next Annual General Meeting.

At its organizational meeting, the Board elected Björn Wahlroos as Chair of the Board and Jannica Fagerholm as Vice Chair. Christian Clausen, Risto Murto, Antti Mäkinen and Björn Wahlroos (Chair) were elected to the Nomination and Remuneration Committee. Fiona Clutterbuck, Georg Ehrnrooth, Jannica Fagerholm (Chair) and Johanna Lamminen were elected to the Audit Committee.

All the proposed Board members have been determined to be independent of the company and its major shareholders under the rules of the Finnish Corporate Governance Code 2020. The curriculum vitaes of the Board Members are available at www.sampo.com/board.

The Annual General Meeting decided to pay the following fees to the members of the Board of Directors until the close of the 2021 Annual General Meeting: the Chair of the Board will be paid an annual fee of EUR 180,000 and other members of the Board will be paid EUR 93,000 each. Furthermore, the members of the Board and its Committees will be paid the following annual fees: the Vice Chair of the Board EUR 26,000, the Chair of the Audit Committee EUR 26,000 and the member of the Audit Committee EUR 6,000. A Board member shall in accordance with the resolution of the Annual General Meeting acquire Sampo plc’s A shares at the price paid in public trading for 50 per cent of his/her annual fee excluding taxes and similar payments.

The Annual General Meeting accepted Sampo plc’s Remuneration Policy for Governing Bodies. The resolution on the Remuneration Policy was advisory.

Ernst & Young Oy was elected as Auditor. The Auditor will be paid a fee determined by an invoice approved by Sampo. Kristina Sandin, APA, will act as the principally responsible auditor.

At the general meeting 320,359,477 shares (57.7 per cent of shares) and 325,159,477 votes (58.0 per cent of all votes) were represented, including advance voting and a proxy representation.

The minutes of the Annual General Meeting are available for viewing at www.sampo.com/agm and at Sampo plc's head office at Fabianinkatu 27, Helsinki, Finland.

Shares and shareholders

The Annual General Meeting held on 2 June 2020 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.

During January – June 2020 Sampo plc made no repurchases of its own shares and it has not purchased any shares after the end of the reporting period. Furthermore, Sampo plc and its subsidiaries did not hold any Sampo shares as at 30 June 2020.

Internal dividends

Topdanmark’s Annual General Meeting on 2 April 2020 decided to pay one-half of the planned dividend and postpone the decision on the payment of the other half until autumn. Sampo received EUR 48 million on 7 April in dividends from Topdanmark. On 17 July 2020 Topdanmark’s Board of Directors decided to follow the recommendation by the Danish FSA and postpone the payment of the remainder of the dividend until the AGM on 25 March 2021.

Mandatum Life decided not to pay the dividend of EUR 150 million planned for March 2020.

Nordea’s AGM on 28 May 2020 mandated the Board of Directors to decide on a dividend payment for the financial year 2019. The Board of Directors intends to follow the recommendation adopted by the ECB and refrain from deciding on a dividend payment based on the authorization before 1 October 2020.

If normally pays its dividend at the end of each year. The company had already paid a dividend of SEK 7.5 billion (EUR 710 million) in December 2019.

Ratings

The relevant ratings for Sampo Group companies did not change in the first half of 2020. The ratings at the end of June 2020 are presented in the table below.

Rated company Moody’s Standard & Poor’s
  Rating Outlook  Rating Outlook
Sampo plc – Issuer Credit Rating A3 Stable A Stable
If P&C Insurance Ltd – Insurance Financial Strength Rating A1 Stable A+ Stable
If P&C Insurance Holding Ltd (publ) – Issuer Credit Rating - - A Stable
Mandatum Life Insurance Company Ltd – Issuer Credit Rating - - A+ Stable

Group solvency

Sampo Group calculates its group solvency under the Solvency II rules. In this calculation Nordea is treated as an equity investment. According to the Solvency II directive, Sampo Group’s solvency ratio amounted to 187 per cent (167) at the end of June 2020. Had the year-end 2019 solvency been calculated taking into account the revised dividend proposal, the adjusted solvency ratio would have been 174 per cent.

Positive development in the equity market, strong underwriting result and the narrowing of bond spreads increased Sampo Group’s own funds. On the other hand, changes in the symmetric adjustment and the volatility adjustment increased SCR (Solvency Capital Requirement) and reduced the solvency level. The volatility adjustment changes also decreased Group’s Own funds. The rise in Nordea’s share price during the second quarter of 2020 increased SCR, but had, in aggregate, a positive impact on the solvency by increasing the own funds even more.

Solvency position in the subsidiaries

The insurance subsidiaries apply Solvency II rules in their regulatory solvency calculations. The If Group companies use either partial internal models or the standard model for the calculation of their solo solvency position. Mandatum Life reports in accordance with the standard formula for Solvency II. Meanwhile, 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 the standard formula has no practical implications on If Group’s capital position. On 30 June 2020, If Group’s Solvency II capital requirement under the standard formula amounted to EUR 1,794 million (1,890) and own funds amounted to EUR 3,474 million (3,592). The solvency ratio amounted to 194 per cent (190).

The S&P single-A capital requirement for If Group amounted to EUR 2,939 million (3,083) on 30 June 2020 and the capital base was EUR 3,121 million (3,151).

Topdanmark calculates most of its non-life and health risks and their respective solvency capital requirement by applying a partial internal model approved by the DFSA. Other risks are calculated by the Solvency II SCR standard formula. Topdanmark’s solvency ratio under the partial internal model was 197 per cent (177) at the end of June 2020.

Mandatum Life’s solvency ratio after transitional measures amounted to 201 per cent (176) on 30 June 2020. The comparison figure would have increased from 176 per cent to 194 per cent if the cancellation of the EUR 150 million dividend payment in March 2020 was taken into account. Own funds were EUR 2,127 million (2,117) and the Solvency Capital Requirement (SCR) was EUR 1,058 million (1,204). The strong investment returns and growth in unit-linked savings increased own funds. On the other hand, tightening volatility adjustment intensified the negative effect of the decreased interest rate level. SCR increased because of the higher equity risk exposure and the change in the symmetric adjustment factor.

Without transitional measures, own funds would have amounted to EUR 1,781 million (1,756) and the solvency capital requirement would have amounted to EUR 1,070 million (1,234), leading to a solvency ratio of 166 per cent (142).

Debt financing

On 30 June 2020, Sampo plc’s debt financing amounted to EUR 3,659 million (3,908) and interest bearing assets amounted to EUR 787 million (1,725). Interest bearing assets include bank accounts, fixed income instruments and EUR 351 million (359) of hybrid capital and subordinated debt instruments issued by the subsidiaries and associated companies.

Sampo plc’s net debt amounted to EUR 2,797 million (2,183). The net debt calculation takes into account interest bearing assets and liabilities. Gross debt to Sampo plc’s equity was 54 per cent (51) and financial leverage was 35 per cent (34).

On 28 May 2020 Sampo plc repaid SEK 3,000 million senior notes maturing on that date.

On 30 June 2020, financial liabilities in Sampo plc’s balance sheet consisted of issued senior bonds and notes of EUR 3,109 million (3,414). In addition, Sampo plc has issued subordinated notes of EUR 495 million (494). Outstanding commercial papers amounted to EUR 50 million (0). The average interest, net of interest rate swaps, on Sampo plc’s debt as of 30 June 2020 was 1.3 per cent (1.3).

More information on Sampo Group’s outstanding debt issues is available at: www.sampo.com/debtfinancing.

OUTLOOK

Outlook for 2020

Sampo Group’s insurance businesses are expected to report good insurance technical results for 2020. However, 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 P&C is expected to reach a combined ratio of 82 – 85 per cent in 2020.

With regard to Topdanmark, reference is made to the profit forecast model that the company publishes on a quarterly basis.

Nordea’s contribution to the Group’s profit is expected to be significant.

The major risks and uncertainties for 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, although they are not directly additive due to the effects of diversification.

Uncertainties in the form of major unforeseen events may have an immediate impact on the Group’s profitability. The identification of unforeseen events is easier than the estimation of their probabilities, timing, and potential outcomes. Currently, the COVID-19 pandemic is causing significant negative effects on the Nordic economies. The duration of the measures taken to contain the virus and their effects on economic and capital market development are uncertain. There are also a number of widely identified macroeconomic, political and other sources of uncertainty which can, in various ways, affect the financial services industry in a negative manner.

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 a long-term impact on how Sampo Group’s business will be conducted. Examples of already identified trends are technological developments in areas such as artificial intelligence and digitalization, demographic changes, and sustainability issues that may also have profound effects on companies from the financial sector.

SAMPO PLC
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

Conference call

An English language conference call for investors, analysts and the media will be arranged today at 1 pm Finnish time (11 am UK time). To participate, please call one of the following telephone numbers: +1 631 913 1422, +44 333 300 0804, +46 856 642 651, or +358 981 710 310. The conference code is 25893753#.

The conference call can also be followed live at: www.sampo.com/result. A recorded version will be available later 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 the period January–September 2020 on 4 November 2020.

Distribution:
Nasdaq Helsinki
London Stock Exchange
The principal media
Financial Supervisory Authority
www.sampo.com

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