Sampo Oyj

Good afternoon, everyone, and welcome to the Sampo Group first half 2023 conference call. My name is Sami Taipulus, and I am head of investor relations at Sampo Group. I'm joined on the call by Group CEO Torbjörn Magnusson, Group CFO Knut Arne Aalsaker, and CEO of IF, Morten Torsrud. The call will feature a short presentation from Torbjörn, followed by Q&A. A recording of the call will later be available on sampo.com. With that, I hand over to Torbjörn. Please go ahead.

Thanks, Sami, and good afternoon, everyone. The report in front of us is basically a direct continuation of our development over the past quite a few years in many ways. This is the sample you will recognize with a great deal of stability and excellence in our operational performance. As in the past few years, we show good growth. Much of this, also this time, comes from rate increases, and also this time, the increases are marginally ahead of a rather stable claims inflation for our Nordic business, that is, the majority of what we write. We have continued to polish our underwriting and distribution abilities with the ever-increasing budget for technology, and the result is, again, an underlying improvement of the margin development. The UK insurance market is going through a rather unusual period where we stay true to our principles of prioritizing underwriting, but also addressing all opportunities that arise. We seem to be doing extremely well on a relative basis. There are no big discontinuities in the investment markets either, and with the increase in interest rates and duration from last year, our running yield is now at a significantly higher level than in the past few years, at 3.8% for FPNC. It remains to be seen, though, where the world is heading, and we cannot let the volatile investment markets affect our underwriting operations. Finally, on this slide, the process to list Mandatum is on track, and I strongly believe that Mandatum will benefit from becoming an independent company. Mandatum has really shown through the past couple of years that they can perform strongly in very varying market conditions, and asset under management now grew to about 11.2 billion euros. On the Nordic business, In the P&C operations, there is little further to add for the overall picture. There's no significant change in the behavior in the market. The Nordic P&C market has remained disciplined. Inflation is a little higher now for motor than property, but the average remains 4% to 5%, and wage inflation outlooks support that this should not increase. Great actions in commercial Norway and industrial have been rationally received by the market. There have been a number of large fire claims and an unusual rock slide, NatCat, in the Nordics. We have looked very carefully into the details of these events and all the evidence says that this is noise, expensive noise, but stochastical noise. Then in the U.K., There's now a wealth of public data showing quite dramatic rate hikes over the past quarter and also in July, leading to increased shopping. However, the number of customers actually finding cheaper offers are fewer than the shopping numbers might indicate. In Hastings, we have been able to increase the number of motor customers a bit and home insurance a lot. The fact that UK inflation and claims inflation in particular is behaving differently than most of continental Europe and Scandinavia is also well publicized. And we have adjusted our full year outlook to reflect this. Whatever happens with inflation, we will continue to price rationally. This is part of sample group. And maybe even with slightly more conservatism going forward after this unique period of claims inflation. A technical comment on Hastings is also that Hastings has grown by 37% in a year and IFRS 17 drives up upfront distribution costs, which is another significant reason for the adjusted outlook. Frequencies in our markets are close to expectations in the Nordics and slightly marginally high in the UK, but only an issue because of the compounding in the UK with the inflation in average claims. So with the uniquely rapid hardening of the UK market and with our performance in the market, we are more confident, not less, that we will be able to deliver a strong 2024 in the UK. One particularly pleasing part of our performance that I wanted to point out or bring out is the quality of our growth in the Nordics. Private lines growth is now again above 5%, despite car sales staying at the same low levels as last year, even coming down some 4% in our most important market, Sweden. This is now driven by good performance in home and personal insurance. Online sales is increasing again, one of our strongest channels, at 22% of total private line sales in Q2. Retention, as I already mentioned, has remained extremely high by historical comparisons and supports the growth, of course. The Hastings page here I think I have already covered, but just reiterating that I think we have created a lot of value there by growing in the segments we have focused on, by being very early with rate hikes, and now expecting claims inflation to moderate. As usual, we're not optimists, but we will be conservative and careful in our approach and only grow when our customer offering is superior and when we get the prices we want. On our standard performance to targets page, we have a more modest underwriting growth this quarter at 3% in local currencies, tempered by the large loss and NatCat outcome, and also the claims inflation in the UK. The numbers over the planning period are, of course, still excellent, and we do not expect to see a repeat of the negative stochastic elements of our business every quarter. A small note on the cost ratio is that we do not work extremely hard to smooth this one every quarter. As for instance, we do not capitalize IT investments in ETH PNC and they vary between quarters naturally. I expect to see the usual 20 basis points or so improvement at the end of the year. Over the long run, we have been able to do this for some 15 years. This is very supportive for our position in the market. Assuming the spinoff of Mandaten proceeds according to plan, Q4 will be the first time we report as a pure P&C insurer. Given the momentum we have in our business, given the attractive market conditions in the Nordics, and given the rapidly improving dynamics in the UK, I'm confident that we can continue to drive attractive shareholder value creation. And with that, Sami, I think we open up for questions.

Yes, thank you, Torbjörn. Operator, we're now ready for the Q&A.