Sampo Oyj

Good afternoon everyone and welcome to the Sampo Group third quarter 2023 conference call. My name is Sami Taipulus and I'm Head of Investor Relations at Sampo Group. I'm joined on the call by Group CEO Torbjörn Magnusson, Group CFO Knut-Arne Ahlsaker 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 welcome, everyone. Our third quarter was very much a continuation of the previous ones. The headline numbers are dominated by very strong momentum in our operations and our strong development in our focus areas on the one hand, but also of a second consecutive quarter with natural perils events in the Nordics. I'll comment on both, of course. I'd like to comment upfront also that the so important underlying margin trends are unchanged in the Nordics. We continue to be able to price slightly ahead of claims inflation and are able to keep an extremely high retention level. Claims inflation is stable or even receding slightly. And in total, the development of our portfolio is a very positive one. Beginning with our momentum in the Nordic operations, we are at the moment growing in business lines that we really like. And I'm particularly pleased to see growth picking up in private lines. Car sales are still low, but we are basically keeping market share despite this and growing in personal risks and home. Our digital channel is performing well and online sales grew by 9%. I think the growth in Nordic home insurance was impressive since the number of people changing homes at the moment is low for natural reasons. Not forgetting profitability for business area private, I should mention that the combined ratio is 82.7% despite the elevated weather claims. Zooming out to the total P&C picture, the Nordic market has remained disciplined, and our observed claims inflation fell marginally to the lower end of the 4% to 5% range. We had some €90 million in weather effects in Q3, and operationally, our focus was on supporting our customers. The weather claims were mainly related to one very large Norwegian storm, Hans, and also to a smaller cloudburst in Oslo. It's part of the fundamental idea of insurance to be diversified and see these events for what they are. They will happen once in a while and need to be priced for and reinsured. From a financial perspective, one has to remember, though, that in IFPNC's 23-year history, we have had these kind of extreme weather events three, four, five times with a number of event-free years in between. So trying to draw conclusions from so few events is difficult. Nevertheless, we are monitoring the layer of smaller events carefully and adjusting pricing accordingly. And locally, of course, where exposures are the highest. It's important to remember that we write 12-month policies in our industry and reprice annually. The diversification we have works in several dimensions. We write business in a number of geographies, certainly, but also in multiple lines. And we tend to reserve conservatively. This quarter, we have some runoff gains from an inflation reserve we set up last year, as well as some ordinary positive settlements from large industrial claims. as we have had so often in the past, and I suspect often will have in the future. In the UK, the uniquely high monthly rate increases continued, and the market is catching up with claims inflation. Monthly price increases were in the mid single digits, while claims inflation remained high but stable now. Hastings is, as always, prioritizing profitability, but has still managed to grow customer account even in motor slightly. With an operating ratio of 90.5% for the first nine months, we expect a full year combined operating ratio in the outlook range for 2023, while carrying very strong operational momentum into 2024. I have a separate slide on Nordic claims inflation today, which almost feels superfluous. In property, the claims inflation has now fallen a bit, especially for materials, and the corresponding development for motor is stable. Claims frequency is in line with our expectations and pricing and does not drive any big part of the rate increases. We compare, of course, mainly to the years before the pandemic. And so we continue to implement rate increases ahead of total claims cost development. This means that the trend in underlying margins remains strong, as if P&C improved its nine-month adjusted risk ratio by half a percentage point year on year again, and its cost ratio again marginally. Turning to a more detailed view of the UK, we are doing relatively well in the challenging environment, remembering that our business achieves the same ROE as the Nordics, one at a slightly higher combined ratios, and that we have growth opportunities of a different kind there. Premium growth was north of 30%, policy count in motor is up, and in home we're still growing based on structural changes in the market. We look forward to 2024 with confidence, even though there is still uncertainty around the development of the claims inflation. A few simple words on investments and strategy to finish the summary. Sampo delivered a net investment income of nearly €500 million in the first nine months. The short duration, again, of our fixed-income portfolio has allowed us to reinvest rapidly, pushing the running yield of IFP&C to over 4%, from 1.5% at the end of 2021. We acknowledge the uncertainty in relying on this for future underwriting, but continue to make the most of it. Then on the 2nd of October this year, we completed the spinoff of a mandatum by listing it on Nasdaq in Helsinki. And I am pleased to see that the listing has been well received by the market. And I am excited to take Sampo forward from here now as a pure P&C insurance group. And with that, Sampo, Sami, I think that we open up for questions.

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