Sampo Group’s results for 2022

SAMPO PLC FINANCIAL STATEMENT RELEASE 10 February 2023 at 9:35 am

Sampo Group’s results for 2022

• Group P&C gross written premiums increased by 6 per cent year-on-year to EUR 8,136 million. The Group combined ratio was strong at 82.1 per cent (81.4).

• Underwriting profit increased by 2 per cent to EUR 1,314 million (1,282). Excluding COVID-19 effects reported in 2021, underwriting profit grew 13 per cent.

• The Board proposes a EUR 2.60 per share (4.10) dividend, including a regular dividend of EUR 1.80 per share (1.70). In addition, management is to propose a new EUR 400 million buyback programme.

• The strategic review of Mandatum is ongoing, with all options still available. An update is expected to be provided by the end of the first quarter.

• Group Solvency II coverage stood at 210 per cent (185), after allowing for all the capital management actions outlined above. Financial leverage was 25.6 per cent (23.8).

Key figures

EURm	2022	2021	Change, %	10–12/2022	10–12/2021	Change, %
Profit before taxes	1,863	3,171	-41	390	1,197	-67
If	1,217	1,077	13	285	260	10
Topdanmark	220	346	-36	128	89	44
Hastings	73	127	-43	7	11	-34
Mandatum *)	207	291	-29	18	91	-80
Holding *)	146	1,331	-89	-48	746	-
Profit for the period	1,541	2,748	-44	323	1,086	-70
Underwriting profit	1,314	1,282	2	304	297	2
		Change			Change
Earnings per share, EUR	2.69	4.63	-1.94	0.50	1.89	-1.39
EPS (without eo. items), EUR **)	2.41	2.86	-0.45	0.41	0.55	-0.14
EPS (including OCI), EUR ***)	-0.26	5.90	-6.16	0.71	2.22	-1.63
RoE (including OCI), %	-1.3	26.8	-28.1	-	-	-

*) After Mandatum’s group contribution of EUR 29 million in Q4/2022 and EUR 15 million in Q4/2021 to Sampo plc.

**) The accounting effects treated as extraordinary items in accordance with Sampo Group’s dividend policy amounted to EUR 138 million in 2022 and EUR 35 million in Q4/2022. In the comparison period, extraordinary items were EUR 982 million in 2021 and EUR 746 million in Q4/2021.

***) OCI refers to Other comprehensive income.

The figures in this report have not been audited.

Sampo Group financial targets for 2021–2023

	Target	2022
Group	Mid-single digit UW profit growth annually on average (excluding COVID-19 effects)	13% (2% on a reported basis)
	Group combined ratio: below 86%	82.1%
	Solvency ratio: 170-190%	210%
	Financial leverage: below 30%	25.6%
If	Combined ratio: below 85%	80.3%
Hastings	Operating ratio: below 88%	89.7%
	Loss ratio: below 76%	83.7%

Year 2022 effects related to the COVID-19 pandemic have been very limited; hence, these will not be reported separately.
For further information, please see section Other developments.

FINANCIAL HIGHLIGHTS FOR 2022

Sampo Group’s core business, P&C insurance delivered strong results in 2022. Underwriting profit amounted to EUR 1,314 million (1,282), representing year-on-year growth of 2 per cent or 13 per cent adjusted for COVID-19 effects reported in 2021. The Group combined ratio was solid at 82.1 per cent (81.4), supported by excellent performance in Nordic P&C and benefits from higher discount rates. Excluding the reported COVID-19 effects in 2021, the combined ratio would have improved by 1.0 percentage points year-on-year. Gross written premiums increased by 6 per cent to EUR 8,136 million (7,644), driven by strong renewals, high retention and disciplined pricing. Sampo targets mid-single digit per cent underwriting profit growth on average and a combined ratio below 86 per cent for 2021-2023.

If P&C’s underwriting profit increased 11 per cent to EUR 985 million (891) and the combined ratio improved to 80.3 per cent (81.3). The result was driven by a 7.2 per cent currency adjusted premium growth and continued strong underlying performance. Premium development was supported by broad-based growth across all business areas, with Industrial and the Baltics seeing the most notable positive development. In the largest business area, Private, currency adjusted premium growth remained solid at 3.5 per cent despite a decline in Nordic new car sales. The adjusted risk ratio improved by approximately 0.5 percentage points year-on-year. In addition to the strong underwriting development, the significant changes in the interest rate environment during 2022 increased If’s fixed income running yield to 3.2 per cent (1.5). Profit before taxes increased to EUR 1,217 million (1,077).

Topdanmark’s profit before taxes for 2022 in Sampo Group’s profit and loss account decreased to EUR 220 million (346), as the investment result was affected by the adverse market environment. The sale of Topdanmark life insurance business in the fourth quarter of 2022 supported the result by EUR 72 million. The combined ratio stood at 83.1 per cent (82.3).

Hastings reported solid top-line growth with resilient margins in a challenging UK motor insurance market, in which the claims inflation remained elevated throughout the year. Gross written premiums grew by 15 per cent on a currency adjusted basis in 2022, supported by high retention and disciplined pricing. Live customer policies increased 2 per cent year-on-year to over 3.2 million, driven by a 33 per cent growth in home insurance, while motor policy count was stable. Hastings’ operating ratio increased to 89.7 per cent (80.3). Profit before taxes amounted to EUR 73 million (127), or EUR 131 million (168) excluding the non-operational depreciation and amortisation.

The Mandatum segment’s profit before taxes for 2022 decreased to EUR 207 million (291), reflecting lower realised gains and an increase in the group contribution to Sampo plc to EUR 29 million (15). Mandatum’s net flows in third-party assets remained positive in every quarter, but were outweighed by the decline in market values, leading to assets under management of EUR 10.3 billion at the end of 2022, down from EUR 11.1 billion at the year-end 2021. Mandatum Life’s Solvency II ratio increased to 248 per cent (190), driven by higher interest rates and lower solvency capital requirement.

The profit before taxes of EUR 1,863 million (3,171) for 2022 includes accounting effects of EUR 138 million (982) defined as extraordinary items in accordance with Sampo Group’s dividend policy. Of the total amount, EUR 103 million related to the sale of Nordea shares, EUR 72 million to the sale of Topdanmark Life and EUR -37 million to the reclassification of Nordax from an associated company to fair value investment. Excluding these items, the profit before taxes declined to EUR 1,725 million (2,189), mainly as a result of Nordea no longer being consolidated as an associate. The total comprehensive income, which takes changes in the market values of assets into account, was affected by the adverse capital markets environment and amounted to EUR -26 million (3,448).

Sampo Group’s year-end 2022 Solvency II ratio stood at 210 per cent, up from 185 per cent at the year-end 2021, but down from 256 per cent at the end of the third quarter. The decrease over the third quarter was primarily driven by the inclusion of the dividend proposal and the planned new buyback programme. Sampo targets a solvency ratio of 170–190 per cent.

Sampo Group’s financial leverage was 25.6 per cent at the end of 2022, up from 23.8 per cent at the end of 2021, but slightly down from 25.9 per cent at the end of the third quarter. Sampo targets a financial leverage ratio below 30 per cent.

Sampo plc’s Board of Directors proposes a dividend of EUR 2.60 per share for the 2022 financial year to the Annual General Meeting to be held on 17 May 2023. This consists of a regular dividend (formerly known as the insurance dividend as introduced at the 2021 CMD) of EUR 1.80 per share (1.70), representing growth of 6 per cent, and an extra dividend of EUR 0.80 per share. In addition to the dividend, management is to propose to the Board a new EUR 400 million buyback programme.

The implementation of IFRS 17 and 9 on 1 January 2023 will bring asset and liability side mark-to-market effects into Sampo’s reported net income. As a result, the Sampo Board has decided to adjust the Group’s dividend policy, such that the payout ratio is measured against a newly defined operational result rather than net profit excluding items defined as extraordinary, as previously. The change is not expected to have any significant effect on the size and trajectory of dividends. The adjusted dividend policy is described in the section Dividend proposal.

On 7 December 2022, Sampo plc announced that the Board of Directors had decided to undertake a strategic review of Mandatum in line with Sampo’s strategic focus on P&C insurance. The Board continues to review a number of different options, with the aim to evaluate whether a separation of Mandatum could create shareholder value. Sampo expects to provide a further update on the strategic review by the end of the first quarter of 2023.

In 2022, Sampo repurchased its own shares through three buyback programmes. Of the latest buyback programme of EUR 1 billion, launched on 9 June 2022, EUR 845 million had been executed at year-end 2022. The programme was completed on 8 February 2023. In total, Sampo repurchased 32 million shares for a total of EUR 1.4 billion in 2022.

FOURTH QUARTER 2022 IN BRIEF

In October-December 2022, Sampo Group reported profit before taxes of EUR 390 million (1,197). Excluding accounting effects treated as extraordinary items in accordance with Sampo Group’s dividend policy, profit before taxes amounted to EUR 355 million (452). Earnings per share amounted to EUR 0.50 (1.89), or EUR 0.41 (0.55) excluding extraordinary items. Total comprehensive income, which takes changes in the market values of assets into account, amounted to EUR 448 million (1,269).

Group underwriting profit increased to EUR 304 million (297). Excluding COVID-19 effects reported in the comparison period, underwriting profit grew by 12 per cent. The Group combined ratio amounted to 83.7 per cent (83.0).

If P&C reported profit before taxes of EUR 285 million (260) and underwriting profit of EUR 229 million (210). The combined ratio was 81.7 per cent (82.9) and gross written premium growth 7.8 per cent on a currency adjusted basis. The adjusted risk ratio, which excludes the impact of large losses, severe weather, reported COVID-19 effects and prior year development, improved by 0.2 percentage points year-on-year.

Topdanmark’s profit before taxes amounted to EUR 128 million (89) and combined ratio was 82.1 per cent (80.6).

Hastings profit before taxes amounted to EUR 7 million (11). The operating ratio deteriorated to 94.0 per cent (87.9), driven by increased claims frequency due to harsh weather conditions particularly in December. Gross written premiums increased by 31 per cent year-on-year on a currency adjusted basis. Live customer policy count remained stable, supported by continued strong growth in home insurance.

The Mandatum segment’s profit before taxes amounted to EUR 18 million (91), net of a profit contribution to Sampo plc of EUR 29 million (15). Excluding the profit contribution, profit before taxes stood at EUR 47 million (106). Mandatum’s third-party assets under management increased to EUR 10.3 billion from EUR 10.1 billion at the end of the third quarter, supported by strong net flows of EUR 213 million during the quarter.

GROUP CEO’S COMMENT

Sampo’s fourth quarter was characterised by strong operational execution, robust financial results and further steps on our strategic agenda. As we conclude a successful year, I am delighted that we are announcing EUR 1.7 billion (EUR 3.40 per share) of planned capital returns to shareholders.

Sampo’s P&C insurance operations delivered excellent fourth quarter underwriting results of EUR 304 million, representing 13 per cent year-on-year growth, after adjusting for COVID-19 effects in the prior year. Notably, this result was achieved despite adverse weather in the form of heavy snowfall and cold weather. As always, our focus has been on assisting affected customers through superior service, which is a cornerstone of our strategy and instrumental in securing high retention rates over the long term.

The result was driven mainly by our Nordic P&C business, where If grew underwriting profit excluding COVID-19 effects by 23 per cent, supported by an excellent fourth quarter combined ratio of 81.7 per cent and currency adjusted premium growth of 7.8 per cent. Importantly, our Nordic customer retention has remained high as we continue to cover claims inflation of 4–5 per cent with rate increases. The strongest pricing momentum is observed in Industrial, but fourth quarter premium growth also benefited from a stabilisation of new cars sales, albeit at a relatively low level, including support from high electric vehicle sales.

In the UK, market conditions remained challenging, but Hastings achieved premium growth of 15 per cent over 2022 as it implemented significant rate increases to cover claims inflation of 12 per cent. Adverse weather had a negative impact on Hastings’ operating ratio, pushing this to 89.7 per cent for 2022 as a whole. Although above our annual 88 per cent target, Hastings has delivered a relatively resilient result in what has been a challenging year for the UK motor market. I believe this reflects skilful operational execution and the company’s strong positioning and capabilities, which I expect will enable attractive profit growth as market conditions improve.

In the capital markets, the fourth quarter saw further increases in interest rates and positive development in equity markets. Due to the short duration of our fixed income portfolio, we were able to continue to rapidly increase our running yield. Over 2022, higher running yields have added roughly EUR 230 million to Sampo’s annual pre-tax earning power, with the largest contribution coming from If P&C, which has more than doubled its running yield to 3.2 per cent (1.5).

In December, Sampo’s Board of Directors launched a strategic review of Mandatum to evaluate whether separating the entity from the Group could add shareholder value. As a pure P&C insurer, Sampo could deliver higher and more resilient returns on capital, while an independent Mandatum would enjoy greater strategic flexibility to invest in growth. On the other hand, Mandatum makes an attractive contribution to the Group’s cash flow that supports value creation over time. We expect to provide an update on the review by the end of the first quarter of 2023.

Turning to capital management, Sampo remains committed to capital discipline with a EUR 2.60 per share dividend proposal for 2022 and a EUR 400 million share buyback programme, which management is to propose. Adjusting for these actions, the Group retains EUR 2 per share of excess capital above the needs of the insurance operations, most of which is tied into private equity investments held in Sampo plc.

Torbjörn Magnusson
Group CEO

OUTLOOK

Outlook for 2023

Sampo Group’s P&C insurance operations are expected to achieve underwriting margins that meet the annual targets set for 2021–2023. At Group level, Sampo targets a combined ratio of below 86 per cent, while the target for its largest subsidiary, If P&C, is below 85 per cent. Hastings targets an operating ratio of below 88 per cent.

The combined and operating ratios of Sampo Group’s P&C insurance operations are subject to volatility driven by, among other factors, seasonal weather patterns, large claims and prior year development. These effects are particularly relevant for individual segments and business areas, such as the Danish and UK operations.

The mark-to-market component of the net financial result will be significantly influenced by capital markets’ developments, particularly in life insurance.

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

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 major business units.

Major risks affecting the Group companies’ profitability and its variation are market, credit, insurance and operational risks. 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. During 2022 the global economy was hit by the war in Ukraine and at the same time, inflation pressures intensified and broadened forcing central banks to raise interest rates sharply. This may lead to both a further significant slowdown in economic growth and a deterioration in the debt service capacity of businesses, households and governments. Furthermore, the re-alignment of energy supplies in Europe takes time and the energy crisis could continue for several years. These developments are currently causing significant uncertainties in economic and capital market development. At the same time rapidly evolving hybrid threats create new challenges for states and businesses. 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 identified trends are demographic changes, sustainability issues, and technological developments in areas such as artificial intelligence and digitalisation including threats posed by cybercrime.

DIVIDEND PROPOSAL

Dividend

Under Sampo Group’s capital management framework, Sampo will return ongoing surplus capital generation from its insurance operations through a regular dividend. Other forms of surplus capital generation, including possible proceeds from disposals of financial investments, are returned through additional dividends and/or buybacks, to the extent that the funds are not utilised to support business development. Sampo targets a Solvency II ratio of 170–190 per cent and financial leverage below 30 per cent.

According to Sampo plc’s Dividend Policy applied for distribution of 2022 earnings, total annual dividends paid shall represent at least 70 per cent of Sampo Group’s net profit for the year (excluding extraordinary items). In 2022, accounting items related to the sale of Nordea shares, the sale of Topdanmark life insurance operations and the reclassification of Nordax from an associated company to fair value investment have been defined as extraordinary in accordance with Sampo’s dividend policy.

The parent company’s distributable capital and reserves totalled EUR 6,716 million of which profit for the financial year 2022 was EUR 1,780 million. Based on the policies outlined above, the Board proposes to the Annual General Meeting that a total dividend of EUR 2.60 per share be paid to all shares except for the shares held by Sampo plc on the dividend record date of 22 May 2023. The total dividend includes a regular dividend of EUR 1.80 per share as well as an extra dividend of EUR 0.80 per share.

As earnings per share excluding extraordinary items amounted to EUR 2.41 per share, the payout ratio for the total dividend equates to 108 per cent. The remainder of the distributable funds are left in the company’s equity capital. After adjusting for the proposed dividend, Sampo Group’s 2022 year-end distributable funds amounted to EUR 5,378 million, Group Solvency II ratio to 210 per cent and financial leverage to 28.6 per cent.

Dividend payment

The dividend is proposed to be paid to the shareholders registered in the register of shareholders held by Euroclear Finland Oy as at the record date of 22 May 2023. The Board proposes that the dividends be paid on 31 May 2023.

The issuer of the Swedish depository receipts shall ensure that the dividend is paid to the depository receipt holders registered in the securities depository and settlement register maintained by Euroclear Sweden AB as at the record date of 22 May 2023, which payment shall be made in Swedish kronor.

Financial position

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 distributions do not jeopardise the company's ability to fulfil its obligations.

Adjustment to Sampo Group’s dividend policy

The implementation of IFRS 17 and 9 on 1 January 2023 will bring asset and liability side mark-to-market effects into Sampo’s reported net income. As a result, the Sampo Board has decided to adjust the Group’s dividend policy, such that the minimum payout ratio of 70 per cent is measured against a newly defined operational result rather than net profit excluding items defined as extraordinary, as previously. The change is not expected to have any significant effect on the size and trajectory of dividends. The adjustment is effective to payouts made in respect of the 2023 and later financial years’.

According to the updated dividend policy, Sampo is to pay a stable and sustainable regular dividend that grows in line with the Group’s earnings over time. Total annual dividends paid will be at least 70 per cent of Group’s operational result.

The operational result is similar to net profit excluding items defined as extraordinary used under IFRS 4, with the main differences being that it excludes all result effects from discount rate changes as well as non-operational amortisation in Sampo’s P&C operations, and that Mandatum’s profit is replaced with the dividend stream that it provides to Sampo plc. The full definition of the operational result can be found at www.sampo.com/dividend.

Sampo is committed to operating a strong and efficient balance sheet, as defined by the Group’s capital management framework. To enable this, regular dividends can be complemented with distributions of excess capital via share buybacks and/or extra dividends.

OTHER DEVELOPMENTS

Strategic review of Mandatum

The Board of Directors of Sampo plc is content with the current Group structure as it offers diversification in terms of business exposures as well as capital and cash generation. Sampo expects to provide a further update on the strategic review by the end of the first quarter of 2023.

EVENTS AFTER THE END OF THE REPORTING PERIOD

Share buyback programme

Sampo’s share buyback programme of EUR 1 billion announced on 9 June 2022 continued after the end of the reporting period. The buyback programme was completed on 8 February 2023, when at market close, the company held, after cancellation of the own shares on 8 December 2022, in total 5.4 million Sampo A shares representing 1.05 per cent of the total number of shares in Sampo plc. Sampo had bought altogether 22.1 million A shares under the share buyback programme between 10 June 2022 and 8 February 2023, of which 16.7 million shares were cancelled on 8 December 2022. Further information on the buyback programme is available on www.sampo.com/sharebuyback.

Proposal for the new Chair of the Board

Sampo disclosed on 30 January 2023 that its Nomination and Remuneration Committee plans to propose previous Board member Antti Mäkinen as a new member of the Board of Directors of Sampo plc at the Annual General Meeting on 17 May 2023, and to nominate him as Chair of the Board of Directors. Björn Wahlroos, the current Chair of the Board of Directors, has previously notified that he is not available for re-election.

Mäkinen has managerial experience of over 20 years in the financial services industry, including Nordea, eQ plc and SEB Enskilda Securities. He was previously CEO of Solidium, and he has been on the Board of Directors of e.g. Sampo and Metso Outotec and the Chair of Stora Enso. Mäkinen was born in 1961 and holds a diploma of Master of Laws from University of Helsinki.

SAMPO PLC
Board of Directors

For further information, please contact:

Knut Arne Alsaker, Group CFO, tel. +358 10 516 0010
Sami Taipalus, Head of Investor Relations, tel. +358 10 516 0030
Maria Silander, Communications Manager, Media Relations, tel. +358 10 516 0031

Conference call

A conference call for investors and analysts will be arranged at 2 pm Finnish time (12 pm UK time). Please call tel. +1 786 697 3501, +44 33 0551 0200, +46 8 5052 0424, or +358 9 2319 5437.

Conference passcode: Sampo.

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 Investor Presentation is available at www.sampo.com/result.

Sampo will publish the Interim Statement for January - March 2023 on 10 May 2023.

Distribution:
Nasdaq Helsinki
Nasdaq Stockholm
London Stock Exchange
The principal media
FIN-FSA
www.sampo.com

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