Sampo Oyj

Good morning, everyone, and welcome to the Sampo Group fourth quarter 2024 conference call. My name is Sami Taipulus, and I am head of Investor Relations at Sampo Group. I'm joined on the call today by Group CEO Torbjörn Magnusson, Group CFO Knut Arne Alsaker, 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 you, Torbjörn. Please go ahead.

Thanks, Sami. In 2023, we had 11% growth as a group with good positive development of the underlying profitability. In 2024, we now show 12% growth and again good positive development in the combined ratio adjusted for volatile items. Underwriting profits are in total over two years up by some 28% and we have become a significantly bigger group. In the Nordics, we grow successfully in the businesses we call operational ambitions, which make up some 40% of IFP&C. We keep up the momentum and actively manage the portfolio also in other lines. In the UK, on the back of the well-timed rate hikes in 2023, this year has been a tremendously positive year. with 12% policy count growth and an increase in the underwriting profit that you almost never see in non-life, especially not combined with growth. The Nordic market has remained rational, with claims inflation easing very, very gradually. There's a little bit of variation between the countries, but our pricing reflects this, and we have roughly the same underlying profitability in all countries. We address the opportunities we see, based on digital capabilities and advanced pricing techniques. For the Nordics also, we have completed the important corporate 1-1 renewals very successfully and been able to keep up the good momentum. Then in the UK, the market has had a really difficult job predicting where claims inflation and frequencies will end up after the unusually volatile period 2022-2024. So far, the market is following frequencies down in a logical and balanced way and very gradually. Also here, we address opportunities we see based on digital capabilities and advanced pricing techniques. Finally, 2024 was a landmark year strategically for us as we completed our structural simplification journey and finally, finally acquired the minority interests in top Denmark. In the summary page, it only remains to mention the dividend proposal of €1.70 per share, which is up 10 cents on last year's regular dividend, and which I expect will be supplemented with buybacks later in the year, as we have no reason to hoard capital. On the next slide, we show the top-line growth, which continued to be excellent in the fourth quarter, on the back of the long-term investments in digital and AR capabilities, and also rational market conditions. Private stands out with 8% currency-adjusted premium growth in the quarter. This growth comes partly from personal insurances and property, which grew by 14% and 7%, respectively. However, supportive conditions in Norway and Denmark also provide a more general tailwind for top Denmark, where growth was 11% in the quarter, and for our Norwegian operations in general. Private retention remains very high and stable at 89%. And to complete the picture on private, I'm very pleased indeed to be able to report that we have recently renewed two of the largest motor insurance distribution arrangements in the Nordic markets. thereby confirming our dominating position in the region for quite a long period. One comment here also on the UK on this slide. Market rates are gradually adjusting to the lower loss frequencies, as already mentioned, and we are of course our usual disciplined selves in the face of this. Despite having said that, though, we've been able to add 84,000 policies in the quarter, mainly with growth in new or relatively new products such as telematics, bike van and home insurance. Since the reason for our success is not aggressive pricing anywhere, Nordics or the UK, we expect to continue to grow and we are for the first time giving a revenue growth outlook. The exact balance between margins and volumes depends, as always, on the opportunities in each segment, in each market. And our target is always to maximize underwriting profits and value creation. Briefly, about the start of the year on this page. As in most parts of the world, this is a big renewal date, and we have basically been able to do exactly what we wanted. Rates are adequate, Norway is very disciplined, and we have continued to de-risk the peak exposures in our property book. As you can see from the bottom right-hand graph, the exposure to our top 50 property exposures is down some 40%. The market has accepted this, and of course it further limits the available capacity in the Nordic region and supports upward rate pressure. Finally, we were able to renew the most important reinsurance covers at good terms, and with pricing to the primary market reflecting this in the 1-1 renewals. In many of our investor meetings for the past two years, we have received questions on rates and other developments, claims inflation in Norway. In the past two reports, we have shown material first on the combined ratio for personal lines, which is for us not deviating negatively from other Nordic markets. And then on the performance for customers with electric vehicles, which again is not deviating from combustion engines for us. I think it only remains this time to show that we obviously have an opportunity at present in Norway where we're gaining customers, shown in the middle graph, that are staying with us, left-hand graph, and where online sales is becoming increasingly important, right-hand graph. We can only conclude that our pricing for claims inflation has been adequate and accurate and that our offering to the clients is well appreciated and the digital investments play out well also here. Top Danmark. 2025 will be something of a work in progress year when it comes to Top Danmark integration, I think. Obviously, it was critical to get a new Nordic leadership team in place, which we have, in a way that gave our combined Danish operations the best support for the customer work in Q4 and now in Q1. I am very happy indeed that this has worked out with even more enthusiasm and better results than we expected. When it comes to synergies, we have incurred the announced integration costs in Q4, split between IF and TOP roughly equally. Since much of the synergies are IT or large process changes, we will see a limited amount realized in 2025. But this is exactly the same way we have worked with cross-border synergies always for decades. Formally, Top Danmark as a legal entity will cease to exist around about mid-year. Then we come to the part of the year when it's time to discuss what to do with the profits. We have no potential acquisition targets in sight that would make sense for what remains of this planned period, and growth capital consumes a very small part of the profits. Thus, we should and we will return the majority of the profits to our owners. We also consider buybacks to be an efficient way of returning capital, and a way that many of our shareholders now view positively. With these statements, capital returns becomes more of a timing question than anything else. We follow our path from the last few years with a stable non-decreasing regular dividend, supplemented with considering a buyback program every 12 months or so after the AGM. So I consequently expect us to launch a buyback programme during the year, perhaps after gaining more clarity also about a disposal of part of our PE investments. So, summarising and looking ahead. Our strategy for the coming period is steady growth in underwriting profits. Nothing has changed in that respect since the CMD last spring. The strategy with a bigger growth effort than in the past is based now on several years of investments in distribution and efficiency. And we have three years of attractive growth in the UK and in the Nordics. Secondly, we have strong 1-1 corporate renewals and solid growth in private and in Hastings in Q4. So we start the year with optimism and energy. And we give an outlook that better reflects the present targets than the old model with only combined ratios. So the outlook now says net insurance revenue of 8.7 to 9 billion euros and an underwriting result of 1.35 to 1.45 billion euros. The upper point of these ranges reflect a strong result of our actions combined with good but not exceptional claims outcome. The lower points, more challenging markets and some adverse claims experience. And of course, we have kept our culture of using conservative targets, especially at the beginning of the year. We enter the year in excellent shape, following strong growth in the fourth quarter and with an attractive pipeline of opportunities and the synergy potential from integrating top Denmark. And with that, Sami, we open up for questions.

That's right. Thank you, Torbjörn. Operator, we're ready for the Q&A.