Inside information: Sampo Group announces financial targets for the 2024-2026 strategic period

SAMPO PLC                        INSIDE INFORMATION          6 March 2024 at 9:20 am

Inside information: Sampo Group announces financial targets for the 2024-2026 strategic period

Sampo Group remains focused on increasing shareholder value by growing underwriting profits and managing capital in a disciplined manner. Sampo’s Board of Directors has today approved a new set of financial targets under which the Group will aim to achieve operating EPS (Op EPS) growth of more than 7 per cent on average over 2024–2026, while maintaining a combined ratio below 85 per cent, and to generate more than EUR 4 billion of deployable capital.

- In the last three years we have completed the transformation of Sampo into a pure P&C insurance group and delivered against our Group-level financial targets. Looking ahead, we aim to leverage our unique position as the largest P&C insurer in the Nordics, and a leader in digital retail P&C insurance in the UK, to deliver attractive earnings growth. We expect digital sales to support attractive premium growth across private property insurance, personal insurance, UK motor insurance and SME, and to enable us to extend our 14-year track record of annual productivity improvements, says Group CEO Torbjörn Magnusson.

- We will continue to be disciplined stewards of shareholders’ capital, as we have been in the 2021–2023 strategic period, during which we returned EUR 7 billion through dividends and buybacks. Our M&A appetite remains limited to bolt-on transactions in markets where we are already present, says Magnusson.

Sampo management will present the Group’s strategy and financial targets at the Capital Markets Day in London today, starting at 14:00 CET (13:00 UK time). The event is webcast live at www.sampo.com.

Sampo Group’s targets for 2024–2026
Financial targets	Operating EPS growth (period average): >7% Combined ratio (annual): <85% Deployable capital generation: >EUR 4 bn
Capital management framework	Solvency II ratio: 150–190% Financial leverage: <30% Capital optimisation: ≤EUR 1.2 billion deployable capital

Financial targets for 2024-2026

Sampo’s financial targets for 2024-2026 primarily reflect the Group’s ambition to organically increase underwriting profits in the Nordics and the UK by leveraging its digital and other operational capabilities. The Group targets Op EPS growth of more than 7 per cent on average in 2024–2026, driven mainly by growth in underwriting profits and potential capital management actions, with the UK expected to be accretive to the Group growth rate.

Underwriting discipline is a core part of Sampo’s strategy. The Group targets an annual group combined ratio below 85 per cent in 2024–2026, representing a 1 percentage point improvement from the below 86 per cent target for 2021–2023. The new target assumes a discount rate benefit of 2 percentage points.

Sampo’s business is highly cash generative. The Group aims to generate more than EUR 4 billion of deployable capital in the 2024–2026 strategic period through a combination of cumulative operating results and planned capital optimisation.

Updated capital management framework

Sampo is committed to a strong but efficient balance sheet, calibrated to reflect the Group’s risk exposures. The transformation of Sampo into a pure P&C insurance group has materially reduced the Group’s exposure to market risk. Hence, Sampo has adjusted its solvency ratio target to 150–190 per cent (from 170–190 per cent), representing a 10-percentage point reduction in the mid-point of the target range, while keeping its financial leverage target unchanged at below 30 per cent.

The focus towards P&C insurance has driven an increase in Sampo’s return on own funds from 12 per cent in 2020 to 18 per cent in 2023. Nonetheless, Sampo sees further opportunities for capital optimisation from:  the 10-percentage point reduction in the mid-point of the solvency target range; a potential implementation of a Group’s Partial Internal Model (PIM) for calculating the solvency capital requirement; and disposals of the Group’s stakes in Nexi and NOBA. In total, capital optimisation actions are expected to drive deployable capital generation of up to EUR 1.2 billion.

Sampo’s dividend policy stipulates that at least 70 per cent of operating profits should be distributed as dividends, which sets a floor on capital returns. Excess capital generated from profits above the regular dividend, and from capital optimisation actions, will be returned to shareholders unless deployed into bolt-on M&A transactions.

SAMPO PLC
Board of Directors

For further information, please contact:

Sami Taipalus
Head of Investor Relations
tel. +358 10 516 0030

Media enquiries:

Maria Silander
Communications Manager, Media Relations
tel. +358 10 516 0031

APPENDIX:

Definitions and calculation formulas for key figures disclosed in this release

The operating result:
+ net income
- discontinued operations
- non-controlling interests
- unrealised gains or losses
- effects from changes in discount rates
- non-operational amortisations
- non-recurring items.

In 2023, operating EPS amounted to EUR 2.07.

Combined ratio:
Claims incurred + operating expenses / insurance revenue, net (including brokerage) x 100%
The target assumes a discounting effect of 2 percentage points. In 2023, the effect was 3 percentage points.

Deployable capital generation:
Cumulative operating results + own funds released through capital optimisation actions

Solvency II ratio:
Own funds / solvency capital requirement

Financial leverage:
Group financial debt / (Group financial debt + IFRS equity)

Return on own funds for 2020:
net income excluding extraordinary items / average own funds

Return on own funds for 2023:
operating result / average own funds

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

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