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Sampo Group’s results for January–September 2021

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SAMPO PLC INTERIM STATEMENT                3 November 2021 at 9:30 am

Sampo Group’s results for January–September 2021

Sampo Group continued its strong performance in January–September 2021. Profit before taxes increased to EUR 1,974 million (1,054), or EUR 1,737 million excluding accounting effects related to Nordea disposals in the first nine months. Earnings per share rose to EUR 2.74 (1.51).

Sampo Group’s core business, P&C insurance, achieved an underwriting result of EUR 985 million (719) for the first nine months of 2021, representing year-on-year growth of 37 per cent. Adjusting for the Hastings acquisition and COVID-19 effects reported by If P&C and Topdanmark, underwriting profit growth was 19 per cent. The Group combined ratio improved by 2.3 percentage points year-on-year to 80.8 per cent (83.1). Excluding COVID-19 effects and adjusting for the Hastings acquisition, the combined ratio improved by 2.1 percentage points to 82.6 per cent (84.7). The strong result is well ahead of Sampo Group’s 2021–2023 annual financial targets of mid-single digit per cent growth in underwriting profits and a combined ratio below 86 per cent.

If P&C reported an underwriting profit of EUR 681 million (588) and a record-low combined ratio of 80.8 per cent (82.4) for January–September 2021. The result was supported by a solid 4.1 per cent currency adjusted premium growth and strong underlying performance. If’s risk ratio improved by 1.2 percentage points, excluding the impact of large losses and severe weather, prior year development and COVID-19 effects. Profit before taxes increased to EUR 818 million (616). Following the strong year-to-date performance, If’s combined ratio outlook has been narrowed to 81.5–82.5 per cent.

Topdanmark’s profit before taxes for January–September 2021 amounted in Sampo Group’s profit and loss account to EUR 256 million (85). The combined ratio improved to 82.9 per cent (85.7).

Hastings reported strong results in a competitive motor market as it remained disciplined in pricing. Hastings’ live customer policies were stable at 3.1 million and its private car market share stood at 8.3 per cent at the end of September 2021. Hastings’ operating ratio for January–September 2021 was 78.1 per cent, well below the annual target of 88 per cent, while profit before taxes amounted to EUR 115 million, net of EUR 30 million of non-operational depreciation and amortisation.

Mandatum’s profit before taxes for January–September 2021 increased to 201 million (100), net of the establishment of EUR 46 million of new discount rate reserves. The result was driven by continued good momentum in the investment markets. Mandatum’s Solvency II ratio was a record high at 214 per cent (188). Unit-linked and other client assets under management grew by 16 per cent to EUR 10,618 million from EUR 9,192 million at year end.

Sampo’s share of Nordea profits in January–September 2021 amounted to EUR 381 million (299). On 10 September 2021, Sampo sold 73 million Nordea shares to institutional investors. The transaction generated gross proceeds of EUR 745 million and a positive accounting effect of EUR 165 million that will be treated as an extraordinary item in the calculation of Sampo’s dividend payout ratio for the 2021 financial year. In connection with the share sale, Sampo announced a plan to launch a share buyback programme of EUR 750 million. The programme was launched on 1 October 2021 and share purchases started on 4 October 2021.

On 25 October 2021, Sampo launched a further sale of 162 million Nordea shares, generating gross proceeds of EUR 1,725 million. Group management has proposed that the proceeds of the sale are used for an extra dividend of at least EUR 2.00 per share, and that the group’s buyback programme is extended beyond the Annual General Meeting, expected to be held on 18 May 2022, to allow for more capital to be returned through share repurchases. Since the end of September 2020 Sampo has decreased its stake in Nordea from 19.9 per cent to 6.1 per cent as at the reporting date of 3 November 2021.

Sampo Group’s Solvency II ratio increased to 211 per cent from 176 per cent at year-end and 209 per cent at the end of the second quarter. The figure includes the effects of the Nordea share sales on 10 September 2021 and 26 May 2021, the buyback programme of EUR 750 million announced on 1 October 2021 and If P&C’s hybrid bonds that will be called in December 2021. After adjusting for dividend accrual based on the 2020 dividend per share of EUR 1.70, the Solvency II ratio was 199 per cent. Sampo targets a solvency ratio of 170–190 per cent.

Sampo Group’s financial leverage declined to 25.0 per cent from 28.4 per cent at the end of the second quarter, partly due to a EUR 631 million reduction in gross debt through maturities and a tender offer repurchase. Sampo Group targets financial leverage below 30 per cent.

KEY FIGURES1-9/20211-9/2020Change, %7-9/20217-9/2020Change, %
EURm
Profit before taxes1,9741,0548763248530
If818616332522338
   Topdanmark2568520248463
Hastings115--31--
Associates63230810526317055
Mandatum2011001015960-2
Holding (excl. Associates)-48-53-11-21-25-14
Profit for the period1,6628818955041233
Underwriting profit9857193732723042
ChangeChange
Earnings per share, EUR2.741.511.230.930.700.23
EPS (based on OCI) EUR3.671.122.551.011.10-0.09
RoE, %22.77.015.7---

The figures in this report have not been audited.

Sampo follows the disclosure procedure enabled by the Finnish Financial Supervisory Authority and hereby publishes its Interim Statement for January–September 2021 attached as a PDF file to this stock exchange release. The Interim Statement is also available at www.sampo.com/result.

Sampo Group financial targets for 2021–2023
Target1-9/2021
Group





Mid-single digit UW profit growth annually on average (excluding COVID-19 effects)37% (19% adjusting for the Hastings acquisition and COVID-19 effects in If P&C and Topdanmark)
Group combined ratio: below 86%80.8%
Solvency ratio: 170-190%211% (199% including dividend accrual)
Financial leverage: below 30%25.0%
IfCombined ratio: below 85%80.8% (83.1% excluding COVID-19 effects)
Hastings

Operating ratio: below 88%78.1%
Loss ratio: below 76%63.5%

Financial targets for 20212023 announced at the Capital Markets Day on 24 February 2021

THIRD QUARTER IN BRIEF

During July–September 2021, Sampo Group achieved profit before taxes of EUR 632 million (485). Excluding the Nordea-related positive accounting effect of EUR 144 million, profit before taxes amounted to EUR 488 million. Earnings per share increased to EUR 0.93 (0.70). Third quarter underwriting profit grew by 42 per cent year-on-year to EUR 327 million (230). Adjusting for the Hastings acquisition and COVID-19 effects reported by If P&C, underwriting profit increased by 34 per cent. However, the prior year comparison period included a negative effect of EUR 51 million from a reduction in the Finnish discount rate; allowing for this, year-on-year growth was 10 per cent.

If P&C reported profit before taxes of EUR 252 million (233) and underwriting profit of EUR 238 million (195). If’s combined ratio improved to 80.2 per cent (82.9) and gross written premiums grew by 3.3 per cent on a currency adjusted basis. COVID-19 had a positive effect of 1 percentage point on If’s risk ratio compared to a positive effect of 3 percentage points in the prior year. Excluding the impact of large losses and severe weather, prior year development and COVID-19 effects, the risk ratio improved by approximately 1.0 percentage point year-on-year.

Topdanmark’s profit before taxes was stable at EUR 48 million (46) and the combined ratio improved to 84.4 per cent (88.7).

Hastings’ live customer policies grew by 1 per cent to just above 3.1 million in the third quarter. Hastings’ profit before taxes amounted to EUR 31 million.

Mandatum’s profit before taxes was stable at EUR 59 million (60) in the third quarter. The profit included a negative effect of EUR 8 million from lowering the discount rate for 2024 to 0.5 per cent.

Sampo’s share of Nordea profits in the third quarter amounted to EUR 115 million (166). The sale of 73 million Nordea shares in September led to a positive accounting effect of EUR 144 million, attributable to the Holding segment.

GROUP CEO’S COMMENT

Building on a strong first half of the year, Sampo continued to deliver on its strategic agenda and to outperform its financial targets in the third quarter of 2021. Performance was strong across the board, but I would particularly like to highlight our excellent underwriting margins, the reduction in our Nordea stake to 6.1 per cent and the extensive capital returns we have subsequently set in motion.

Our P&C insurance operations achieved a 2.3 percentage point improvement in the nine-month group combined ratio to 80.8 per cent, which drove 37 per cent year-on-year growth in underwriting profit to EUR 985 million. Underlying development was also strong as underwriting profit grew by 19 per cent after adjusting for COVID-19 effects and the Hastings acquisition. Our largest business, If P&C, reported a record-breaking third quarter combined ratio of 80.2 per cent, despite major flood losses, as pricing and other actions continued to support profitability. In the UK, Hastings maintained its prudent approach to underwriting in a competitive motor market but still outperformed its financial targets while delivering a small increase in customer numbers. The integration of Hastings and the collaboration with If P&C is progressing according to plan.

Digital capabilities are increasingly central to our success as a P&C insurance group, both in the UK and the Nordic markets. The extensive investment made by If P&C has enabled it to attain a regional leadership role in digital insurance that is having a clear business impact. For example, online sales in Private have increased by a CAGR of 12 per cent in the last five years, supporting a rise in the number of Nordic households insured. Use of our digital services is also growing; we saw a 20 per cent year-on-year increase in logins on our online portal, MyPages, in the third quarter and the proportion of claims handled online has grown to 50 per cent. The growth of the digital channel is beneficial for our shareholders too, as the high customer satisfaction and cost efficiency achieved makes it profitable.

P&C claims inflation and severe weather losses have received much attention recently in discussions with investors and analysts. Over 2021, we have experienced major floods, large claims and sharp shifts in motor claims frequency. Overall claims inflation has remained within expected levels, with some normal volatility between lines of business. As ever, we vigilantly observe all claims developments, including the possible impact of rising building materials costs, but do not currently see any areas of material concern. Fundamentally, shifting claims trends are natural part of the P&C business and it is our job to manage them through pricing, underwriting, claims handling and diversification. Our long track record of strong profitability shows that we are able to do this successfully.

Nordea has continued to perform well, allowing us to reduce our stake in the bank to 6.1 per cent through disposals in September and October, in line with our strategic agenda. The sales simplify the group and reduce our exposure to market risk, which in turn frees up capital to be redeployed. Having strengthened our balance sheet with funds released through previous disposals, we were able to launch a EUR 750 million buyback programme with the proceeds from the sale in September. Management has further proposed that the proceeds from the October sale will be used for an extra dividend of at least EUR 2.00 per share, and to extend and increase the existing buyback programme. These actions are fully in line with the framework we outlined at our February Capital Markets Day, which commits us to disciplined capital management and a selective M&A appetite, limited to bolt-ons in P&C insurance.

Our work on sustainability has also taken significant steps forward recently. If P&C has committed to set science-based climate targets aligned with the Paris Climate Agreement and introduced ESG criteria based on the UN Global Compact in its underwriting processes. As a major risk transfer and capital provider in the Nordic region, Sampo is determined to be a positive influence where it can.

Sampo Group’s strategy aims to provide investors with more direct access to our unique P&C operations and the high and stable returns that they provide. Over 2021, we have made strong progress toward achieving this ambition, while delivering excellent financial results. I am confident that we can maintain this momentum through the rest of the year.

Torbjörn Magnusson
Group CEO and President


OUTLOOK

Outlook for 2021

Sampo Group’s insurance businesses are expected to report good insurance technical results for 2021, although the mark-to-market component of investment returns will be significantly influenced by capital markets’ developments, particularly in life insurance.

If P&C is expected to reach a combined ratio of 81.5 – 82.5 per cent in 2021.

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

Hastings is on track to deliver against its financial targets but uncertainties relating to COVID-19 development and regulatory reform remain.

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. 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 and the measures taken to contain the virus are causing significant uncertainties on economic and capital market development. These have recently appeared also as supply bottlenecks and for example rising energy and oil prices. 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 digitalization including threats posed by cybercrime.

BUSINESS AREAS

If

If P&C reported an underwriting result of EUR 681 million (588) for the first nine months of the year, representing 16 per cent growth year-on-year. This was driven by a 1.6 percentage points improvement in the combined ratio to 80.8 per cent (82.4) and FX-adjusted premium growth of 4.1 per cent. Excluding COVID-19 effects, year-on-year underwriting profits grew by 17 per cent as the combined ratio improved by 1.6 percentage points to 83.1 per cent. As such, If P&C’s results are materially ahead of its financial targets of mid-single digit growth in underwriting profit and a combined ratio below 85 per cent.

In the third quarter, If P&C delivered underwriting profit of EUR 238 million (195) – a 22 per cent increase year-on-year. Premiums grew by 3.3 per cent on an FX-adjusted basis while the combined ratio improved by 2.7 percentage points to 80.2 per cent (82.9). Excluding COVID-19 effects, third quarter underwriting profits grew by approximately 40 per cent year-on-year or 7 per cent, adjusting for the negative effect from lowering the Finnish discount rate in the comparison period.

If P&C reported gross written premiums, GWP, of EUR 4,076 million (3,840) in the first nine months. Excluding currency effects, premiums grew by 4.1 per cent, driven by strong development in Baltic and Norway, in particular. Premium growth in the third quarter stood at 3.3 per cent.

If P&C’s Private business delivered GWP growth of 4.2 per cent in the first nine months, with the third quarter at 2.7 per cent. Geographically, growth in Private was strongest in Sweden and Norway year to date. During the third quarter, Private GWP was affected by a 11 per cent decline in Nordic new car sales, driven by all countries except Norway, which had a particularly material effect on CDW (Car Damage Warranty) business volumes. In Sweden new car sales was negatively affected by taxation changes that had boosted sales earlier during the year. Nonetheless, If P&C’s Private customer base continued to grow steadily in all countries and now stands at more than 3.2 million households, many of whom have multiple products with If. The development was supported by a small improvement in retention (to 90 per cent) and continued good development in online services and digital engagement, with increase in MyPages logins, e-policy/payment and online claims.

Nine months constant FX GWP growth in Commercial stood at 2.9 per cent, driven primarily by Sweden. The third quarter growth was 3.7 per cent. In Finland, COVID-19 related negative premium adjustments seen in workers’ compensation at the beginning of the year had a minor effect on the third quarter. The number of commercial customers increased in the third quarter, and customer retention improved from an already high level in all countries. Growth was supported by strong momentum in online sales and continued expansion of the company’s digital offering.

In Industrial, GWP grew by 5.0 per cent in the first nine months and 3.2 per cent in the third quarter, on an FX-adjusted basis. During the first nine months the business area enjoyed strong renewals activity, with significant rate increases. Industrial premium growth was driven by Norway and Sweden, while the shrinking workers’ compensation market in Finland had a negative impact on growth at the beginning of the year. The large amount of multi-year project business written in 2020 had a negative impact on year-on-year premium growth. Business trends remained stable but saw a relatively limited volume of renewals in the third quarter.

Growth in If P&C’s Baltic business was stronger than market average, GWP increased by 9.7 per cent in nine months and 13.7 per cent in the third quarter. Growth was supported by improved pricing mechanism, growing customer base and high retention.

The first nine months combined ratio of 80.8 per cent was 1.6 percentage points better than the year before (82.4), while the third quarter combined ratio of 80.2 per cent improved by 2.7 percentage points compared to last year (82.9).

First nine months large claims measured as a per cent of net earned premiums were 0.1 percentage points worse than expected, an improvement of 2.4 percentage points compared to prior year, while third quarter large claims of 2.4 percentage points were better than expected and 5.7 percentage points better than the period last year.

First nine months saw 1.1 percentage points of severe weather claims, which is 1.4 percentage points above the prior year, while the effect in the third quarter was 2.2 percentage points, compared to very minor severe weather claims in the third quarter of 2020. Third quarter severe weather losses were driven mainly by claims related to the floods in Germany in July - August, which impacted property exposures in the Industrial business. The Industrial operation insures a number of Nordic companies with facilities abroad, such as factories and warehouses. The flood event in Gävle, Sweden, in August also contributed to severe weather losses.

Effects related to the pandemic declined during the third quarter of 2021 as COVID-19 related restrictions were lifted across the Nordic region. Motor claims frequency continued to normalise with traffic returning back to normal levels. Third quarter COVID-19 effects supported the combined ratio by approximately 1 percentage point (3). COVID-19 effects in the first nine months were approximately 2 percentage points.

Development on prior year reserves supported the combined ratio by 3.8 percentage points in the first nine months, representing a small reduction from 4.1 percentage points in the first nine months of 2020. Prior year development increased slightly year-on-year in the third quarter to 3.2 percentage points (2.9). The Swedish MTPL portfolio remained the largest driver of prior year profits.

The risk ratio improved by 1.9 percentage points to 59.8 per cent (61.7) in the first nine months and by 2.8 percentage points to 59.6 per cent (62.4) in the third quarter. Excluding the impact of large losses and severe weather, prior year development and COVID-19 effects, the risk ratio improved by approximately 1.2 percentage points year-on-year. The equivalent figure for the third quarter improved by 1.0 percentage points. The positive trend in the risk ratio primarily reflects rate increases and improvements in price sophistication and risk selection, particularly in business areas Commercial and Industrial.

The cost ratio for the first nine months increased by 0.3 percentage points to 21.0 per cent (20.7). For the third quarter, the cost ratio increased by 0.1 percentage points from 20.5 per cent to 20.6 per cent.

If P&C reported a strong investment result of EUR 162 million (54) in the first nine months, driven by supportive equity and credit markets. Mark-to-market return on investments stood at 2.2 per cent for the first nine months (0.7), and at -0.2 for the third quarter (2.2). Increased volatility in the third quarter led to a decline in the quarterly investment result to EUR 24 million (47).

In total, If P&C reported profit before taxes increased by almost 33 per cent and stood at EUR 818 million (616) for the first nine months. Total comprehensive income for the period was EUR 755 million (391).


Topdanmark

At the end of September 2021 Sampo plc held 41,997,070 Topdanmark shares, corresponding to 46.7 per cent of all shares and 47.9 per cent of related voting rights in the company. The market value of the holding was EUR 1,492 million on 30 September 2021.

Topdanmark’s profit before taxes for January–September 2021 amounted in Sampo Group’s profit and loss account to EUR 256 million (85). The combined ratio for January–September 2021 improved to 82.9 per cent (85.7). The expense ratio was 15.7 per cent (16.1).


Hastings

Strong performance continued to be delivered throughout the period January–September 2021, supported by lower claims frequencies as a result of COVID-19 restrictions, particularly in the first quarter, and the ongoing progress on strategic and operational initiatives.

Hastings achieved total revenue of EUR 642 million in January–September 2021. Gross written premium amounted to EUR 871 million, with lower average premiums reflecting a change in mix of customers to lower risk segments and lower claims costs from COVID-19 and UK whiplash (small bodily injury) reforms. Underlying rates increased slightly compared to 2020.

Rate reductions have been observed across the UK motor market during much of 2021. Hastings has remained disciplined in its pricing approach, including by unwinding COVID-19 related pricing discounts. Nonetheless, it was able to grow live customer policies by 1 per cent in the third quarter to just over 3.1 million, while year-on-year growth was 3 per cent. Customer retention rates continue to be high and above market averages.

The operating ratio for January–September 2021 was 78.1 per cent, materially lower than the 88 per cent target. The ratio includes a 3.6 percentage point benefit from acquisition accounting across revenue and operating expenses for deferred acquisition costs and other fair value adjustments that will continue until the fourth quarter of 2021.

The calendar year loss ratio for January–September 2021 was 63.5 per cent, significantly lower than the target of 76 per cent and stable on the first half of 2021. Hastings continues to take a cautious approach to reserving.

Home insurance customer policies were up 21 per cent year-on-year to over 300,000, supported by new data and pricing capabilities, with new home claims capabilities launched in October 2021.

Hastings has continued to make good progress on strategic initiatives, including development of new pricing models, enhancements of claims and antifraud processes, digital growth (mobile app log ins up over 70 per cent), the rollout of new products, the brand relaunch, and the continued collaboration work with the Sampo and If P&C teams, including the planned changes to reinsurance arrangements.

Profit before taxes for January – September 2021 amounted to EUR 115 million. This includes a EUR 30 million charge for amortisation of non-operational intangibles, which will continue for seven years from the completion of the transaction in November 2020.

Full implementation of the FCA’s general insurance pricing practices market study is required by the end of December 2021, with Hastings having implemented the requirements necessary for the FCA’s 1 October 2021 milestone. Whiplash reforms, designed to reduce the cost of small bodily injury claims, came into effect across the UK market at the end of May. As the relevant bodily injury claims can take a long time to settle, it remains too soon to fully assess the effectiveness of the reforms on ultimate claims costs.

Hastings remains supportive of both reforms and its agile pricing, superior risk selection and business model means that it is well positioned to adapt and become a net beneficiary versus competitors over time.


Mandatum

Mandatum’s profit before taxes for January – September 2021 increased to EUR 201 million (100). Total comprehensive income for the period after tax reflecting the changes in market value of assets was EUR 266 million (53).

Strong investment performance supported Mandatum’s IFRS results and capital generation in the first nine months. The investment result taken through the P&L increased to EUR 157 million (66), driven by gains in equities and other risk assets. The investment return stood at 7.3 per cent yielding a rise in fair value investment result to EUR 287 million (29). Combined with rise in risk free rates, this drove Solvency II own funds generation of EUR 401 million, leading to an increase in the coverage ratio to 214 per cent from 188 per cent at year-end 2020.

Positive development in investment markets also helped Mandatum’s third-party assets under management, as unit-linked and other client assets grew by 16 per cent to EUR 10.6 billion (9.2) at the end of September. Investment returns accounted for roughly two thirds of the growth in assets under management, while the remaining approximately EUR 500 million was driven by net flows. The increase in volume, combined with cost leverage, drove a rise in Mandatum’s operational result (expense result and result from Asset Management) to EUR 29 million (19). The risk result also increased to EUR 20 million (16).

The run-off of Mandatum’s capital-intensive traditional life insurance liabilities progressed well, as with-profit reserves related to the higher guarantees of 4.5 and 3.5 per cent decreased by EUR 160 million to EUR 1.7 billion (1.9). In total, with-profit reserves amounted to EUR 3.2 billion (3.5) at the end of September.

Discount rate changes had a negative impact of EUR 46 million in January – September 2021, of which EUR 8 million related to the third quarter. The discount rate is now 0.25 per cent for 2021-2023 and 0.5 per cent for 2024. Mandatum has overall supplemented its technical reserves with a total of EUR 207 million (218).


Holding

Holding segment’s profit before taxes for January - September 2021 rose to EUR 584 million (254), including EUR 237 reversal of impairment losses related to the Nordea share sales in May and in September 2021. Excluding the one-off items, Nordea’s profit share was EUR 381 million in January-September 2021. Nordax’s profit share was EUR 14 million (9) in the same period.

On 30 September 2021 Sampo plc held 407,924,782 Nordea shares corresponding to a holding of 10.1 per cent. The average purchase price per share is EUR 6.46. Nordea was valued in the consolidated balance sheet at EUR 3.3 billion (EUR 8.21 per share) on 30 September 2021. On the same date the market value of the holding was EUR 4.6 billion (EUR 11.24 per share).

OTHER DEVELOPMENTS

Disposal of Nordea shares in September 2021

During the autumn of 2021, Sampo continued to reduce its holding in Nordea in line with its strategic focus. On 9 September 2021 Sampo launched an accelerated bookbuild offering to sell 73 million Nordea shares to institutional investors. The transaction generated approximately EUR 745 million in gross proceeds and reduced Sampo’s stake in Nordea by 1.8 percentage points to 10.1 per cent of all outstanding shares in Nordea. On disclosing the result of the transaction, Sampo management proposed to use the proceeds for a buyback programme. On 1 October 2021, the Sampo Board of Directors approved the launch of a EUR 750 million buyback programme running to 18 May 2022, the expected date of the AGM.

The sale had a positive accounting effect of EUR 144 million on Sampo Group’s consolidated IFRS net income and an additional EUR 21 million on other comprehensive income in the third quarter of 2021. The net income impact of the sale will be treated as an extraordinary item in the calculation of Sampo’s dividend payout ratio for the 2021 financial year.


Solvency

Sampo Group calculates its group solvency under the Solvency II rules. In this calculation Nordea is treated as an equity investment. Sampo Group targets a solvency ratio between 170 and 190 per cent according to the Solvency II rules, as published on 24 February 2021.

On 30 September 2021, Sampo Group’s solvency ratio stood at 211 per cent (176). The figure includes the effects of the Nordea share sales on 10 September 2021 and 26 May 2021, the buyback programme of EUR 750 million announced on 1 October 2021 and If P&C’s hydrid bonds that will be called in December 2021.


Financial leverage position

Sampo Group targets financial leverage below 30 per cent, as announced on its 24 February 2021 Capital Markets Day. Financial leverage is calculated as Group’s financial debt divided by the sum of IFRS equity and financial debt. The financial leverage ratio for Sampo Group was 25.0 per cent on 30 September 2021 - a reduction of 3.4 percentage points from 28.4 per cent at the end of the first half. During the third quarter, gross debt reduced by EUR 631 million to EUR 4,427 million, mainly as a result of a senior debt maturity of EUR 360 million and a debt repurchase of EUR 182 million. In addition to senior debt reductions in the third quarter, If P&C plans to call its hydrid bonds in December 2021, which will further decrease the Group’s gross debt by approximately EUR 200 million.

Sampo Group IFRS shareholders equity amounted to EUR 13,316 million at the end of the quarter – up from EUR 12,742 million at end of the first half.


Cash tender offer for Sampo plc senior debt

On 17 June 2021, Sampo Group announced a tender offer and proposals relating to senior debt issued by Sampo plc with maturities in 2023 and 2025. On 26 July 2021 Sampo disclosed it had decided to accept for purchase all notes validly tendered pursuant to the offers. Accordingly, approximately EUR 90 million in aggregate nominal amount of the 2023 notes and approximately EUR 92 million in aggregate nominal amount of the 2025 notes were purchased pursuant to the relevant offer. The debt repurchase had a negative P&L effect of EUR 10 million.


Effects of COVID-19 on Sampo Group

The effects of COVID-19 pandemic on Sampo Group declined during the third quarter of 2021 as COVID-19 related restrictions were lifted across Sampo Group’s markets in Nordic region and in the UK.

In If, motor claims frequency continued to normalise in line with traffic returning to pre-pandemic levels. Third quarter COVID-19 effects supported the combined ratio of If by approximately 1 percentage points (3). COVID-19 effects on If in the first nine months of 2021 were approximately 2 percentage points.

Motor claims frequencies in Hastings have increased, as motor usage has increased as restrictions are lifted. Frequencies remain lower than pre-COVID-19 levels, but Hastings believes they broadly are in line with market expectations and pricing. Hastings does not provide insurance for any business lines which have been negatively impacted by COVID-19, such as travel or business interruption.


Remuneration

A total of EUR 68 million (49), including social costs, was paid as short-term incentives in January - September 2021 in Sampo Group. In the same period, a total of 16 million (1) was paid as long-term incentives. The increase in payouts is partly due to the inclusion of Hastings in Sampo Group and partly due to the fact that exceptionally low payouts were made in the comparison period. The long-term incentive schemes in force in Sampo Group produced a negative result impact of EUR 26 million (0).


Shares and shareholders

The Annual General Meeting held on 19 May 2021 authorised the Board to repurchase a maximum of 50,000,000 Sampo A shares. The price paid for the shares repurchased under the authorisation shall be based on the current market price of Sampo A shares on the securities market. The authorisation will be valid until the close of the next Annual General Meeting, nevertheless not more than 18 months after the AGM's decision.

During January – September 2021 Sampo plc made no repurchases of its own shares. Furthermore, Sampo plc and its subsidiaries did not hold any Sampo shares as at 30 September 2021.

After the end of the reporting period, on 1 October 2021, the Board of Directors of Sampo plc made a decision to launch the buyback programme based on the authorisation granted by Sampo’s AGM. According to the Board decision, the aggregate purchase price of all Sampo A shares to be acquired under the programme is EUR 750 million at maximum.

The share repurchases started on 4 October 2021 and will end by 18 May 2022. At the end of October 2021, Sampo plc owned in total 2,311,433 Sampo A shares representing 0.42 per cent of the total number of shares in Sampo plc.

During January - September 2021 Sampo plc received altogether 35 notifications of change in holding pursuant to Chapter 9, Section 5 of the Securities Markets Act, according to which the total number of Sampo A shares or related voting rights owned by BlackRock, Inc. (tax ID 32-0174421) and its funds directly or through financial instruments had decreased below 5 per cent or increased above 5 per cent. After the end of the reporting period, Sampo plc received further five (5) flagging notifications from BlackRock, Inc.


EVENTS AFTER THE END OF THE REPORTING PERIOD

Disposal of Nordea shares in October 2021

On 25 October, after the end of the reporting period, Sampo announced the launch of an accelerated bookbuild offering for a further 162 million Nordea shares to institutional investors. The gross proceeds of the transaction were approximately EUR 1,725 million. After the sale, Sampo holds 245,924,782 Nordea shares, corresponding to 6.1 per cent of all shares and voting rights in Nordea.

On completion of the transaction, Sampo announced that management intends to propose that the proceeds are used for an extra dividend of at least EUR 2.00 per share and that the buyback programme launched on 1 October 2021, is extended to allow for more excess capital to be returned through share repurchases. The proposals require approval from the Board of Sampo plc and the Annual General Meeting.

The sale of Nordea shares will have a positive accounting effect of EUR 351 million on Sampo Group’s consolidated IFRS net income and an additional EUR 45 million on other comprehensive income. The net income impact of the sale will be treated as an extraordinary item in the calculation of Sampo’s dividend payout ratio for the 2021 financial year.

In connection with the offering, Sampo entered into a lock-up undertaking, under which it has, subject to certain exceptions and waiver by the Joint Global Coordinators, agreed not to sell any Nordea shares for a period ending on 24 January 2022.


Launch of share buyback programme

After the end of the reporting period, on 1 October 2021, the Board of Directors of Sampo plc made a decision to launch a EUR 750 million buyback programme based on the authorisation granted by Sampo’s Annual General Meeting on 19 May 2021.

As announced in the Capital Markets Day on 24 February 2021, Sampo is committed to return excess capital to its shareholders that may emerge as the holdings in Nordea and other financial investments are divested. The repurchased shares will be cancelled leading to a reduction in Sampo plc’s capital. The repurchases will reduce funds available for distribution of profit.

The aggregate purchase price of all Sampo A shares to be acquired under the buyback programme is EUR 750 million at maximum. The maximum amount of Sampo A shares that can be repurchased is 20,000,000 shares corresponding to approximately 3.6 per cent of the total number of shares in Sampo. The share repurchases started on 4 October 2021 and will end by 18 May 2022.


SAMPO PLC
Board of Directors

For more information, please contact:

Knut Arne Alsaker, Group CFO, tel. +358 10 516 0010
Sami Taipalus, Head of Investor Relations, tel. +358 10 516 0030
Mirko Hurmerinta, Investor Relations and Communications Specialist, tel. +358 10 516 0032
Maria Silander, Communications Manager, Media Relations, tel. +358 10 516 0031

Conference call

An English-language conference call for investors and analysts will be arranged at 4 pm Finnish time (2 pm UK time). Please call tel. +1 631 913 1422, +46 8 5664 2651, +44 333 300 0804 or +358 9 8171 0310. The conference code is 12353002#.

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 Financial Statement Release for 2021 on 9 February 2022.

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



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