Sampo Oyj

Good afternoon, everyone, and welcome to the Sampo Group fourth 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 Arlsaker, 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. As you will have seen from our numbers, we maintained really strong momentum through the fourth quarter. I think we reap benefits from three different aspects of our business model. Firstly, we're big and have been able to invest in digitalization over a long time. This means we sell to and service our customers digitally more than ever, more than others in our markets, and very efficiently. Secondly, even in a year with a high number of large losses and nutcat events, our diversification reduces the effects of volatility. Now and then we will have this kind of year, and we have a strong balance sheet with which to meet this. Finally, our exceptional underwriting culture has produced another year of improvement of the underwriting ratios adjusted for the volatile effects just mentioned. Just to list a few key achievements for the year, I think improving the underlying combined ratio again at a stable pace, as well as improving the cost ratio for the 14th consecutive year, belong up there. Having been able to use our digital proficiency to grow other lines, other lines than the motor business in the Nordics, in the face of low car sales is certainly another achievement. And finally, I think Hastings' agility in the challenging market in the UK combined with its underwriting discipline is also impressive to me. Finally, on this page, I think our investment returns compares well to the market. Given our low risk portfolio, 6.3% returns for the group certainly is a welcome addition to the insurance underwriting. Total profit before taxes for 2023 increased to just shy of 1.5 billion euros. That number summarizes all of this, of course. and the proposed dividend of 1.8 euros per share and the payout ratio of 86% of our operational EPS. On the next page, we outline the key general insurance developments. First of all, it has to be pointed out that the Nordic market has remained disciplined, and one observes the rather high combined ratios in part of the market compared to ourselves and a few of our listed peers. Prices have kept pace with claims inflation, and retention numbers for us are by and large in the same place as a few years ago. We continue to see particularly attractive development in our target Nordic growth areas, such as personal, home and SME insurance. In the UK, switching is much, much higher than a year ago, as we predicted then, and rate increases have been late in the face of the cost of living crisis, but rational. Riding this wave as best we can and capitalizing on the JIP opportunity, we have been able to grow, especially in home insurance. Total gross return premium for growth for Hastings last year was 32%, and we have a very good starting position for 2024. However, the special growth opportunity for home insurance, I think, is now fading for us. Claims cost development has continued to follow the same pattern as earlier in the year. In the Nordics, we have rather good visibility with our purchasing power. And average claims inflation remains just over 4%. In the UK, even though claims inflation has moderated slightly towards the end of the year, it's still surprisingly high. We see no obvious reason for claims inflation to stay this high as consumer price inflation has dampened and the price for used cars is falling. So let's see. Despite the claims inflation, though, we were able to reach 89.8% operating ratio for 2023 and with roughly the same reserving levels as before. Finally, when it comes to weather, we have an early and long winter in the Nordics this year, combined with some wind, which cost us some 3% to 4% on the combined ratio in Q4. This is more than the average of, say, 1%, but not an extreme situation at all. We consider it to be maybe a five- to eight-year return period, and it affected only two of the four countries significantly. Commenting on weather, let me also say that even if the return period for the Norwegian windstorm in January this year was very long in meteorological terms, it mainly hit the northern parts of the country, and it doesn't seem to have incurred a double-digit euro loss for us. Looking then to the asset side of the balance sheet, Sampo enjoyed an excellent investment return in the fourth quarter on the back of broad-based gains across the portfolio. The full-year return was 6.3%. As a group, we're comfortable taking measured investment risk in order to enhance earnings over the medium term. And since 2009, we have earned an average spread of some 290 basis points over the risk-free rate in FPNC, equivalent to roughly 300 million euros per annum. As... Before, we are very reluctant to conclude that interest rates will stay at these levels, that stock markets will keep climbing and that there will be continued sunshine everywhere. So last year's investment returns is not a solid basis for us making insurance rate decisions. And indeed, the stock markets in January have not supported, I think, eternal optimism. I thought I should give you a little bit more insight into our 1.1 renewals than I usually do this time of year, considering we are now in February and considering that more than 40% of our corporate book is renewed at the beginning of the year, both in commercial and industrial. We have been able to renew most of the business with unchanged very high retention or renewal rates. The acceptance for adequate rate increases is still high and especially for industrial the changes include tighter terms also equally important in reducing losses. We have also taken the opportunity to move away a little bit from some of the largest exposures in our constant efforts to reduce volatility in our results. This was done without much drama in the market but of course it supported rate increases in general. To conclude, I am pleased to have closed another good year. Our operational performance remains excellent and our competitive advantages are as strong as ever. I look forward to updating investors and analysts on our plans at our upcoming Capital Markets Day on the 6th of March 2024.

Over to you, Sami. Thank you very much, Torbjörn. Operator, we are now ready for the Q&A.