Sampo Oyj

Good morning, everyone, and welcome to the Sampo Group first quarter 2025 conference call. My name is Sami Taipulus, and I'm head of IR at Sampo. 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 business is non-life insurance, which means that some quarters are exceptional with large losses or a lack thereof or harsh winters or the absence of winter conditions. With our focus on mass markets, underwriting, and a strong balance sheet, we have been able to keep volatility also in such quarters low. However, most quarters have quite normal business conditions when we develop our tools, do customer work, and try to exploit whatever market opportunities we find with them. This is such a quarter. So, the main items for this quarter are thus, firstly, continued strong growth, both in the Nordics and the UK, capitalizing on the digital tools that we have, and the corresponding increase in the full-year growth outlook by 100 million euros. Secondly, good underwriting performance in a slightly easier winter than average, continued improvement of the underlying risk ratio at roughly the same pace as for a long time, and a corresponding increase of the outlook for the underwriting result by 50 million euros. And finally, a detailed synergy evaluation from the top Denmark integration. Not surprisingly, finding more synergies than the quick one from the transaction and a corresponding increasing of the cost ratio target to cut 40 basis points per year rather than the earlier 20. Turning to private Nordic business, as we have talked quite a lot about our digital capabilities in the past year, it's, of course, encouraging to see growth of 8.5% in private Nordic. Any concerns about market or customer behaviors changing for the negative with more remote distribution are completely allayed by our now increasing retention. Yes, increasing from 89%. And yes, digital sales increased by some 20% since last year, so we also increase this operational ambition for 2026 to 175 million euros per year rather than the previous 160. We clearly benefit from this shift in the market and continue the strong growth momentum we've now had for some three years. Our strongest growth comes from Norway, where the unusual situation with our peers seemingly needing higher rate increases than us persists. The results for our Norwegian business still indicate to us that no such need exists for our business. In the private business in the UK, at this point in time, I almost indicated in the late autumn that our UK growth was likely to moderate. Rates have indeed continued to decline slowly, but still in a quite rational way, with claims inflation also moderating now to a mid-single-digit percent number, now close to the Nordics, actually, or to numbers from before the cost-of-living crisis. However, we are still able to write home insurance as well as bike and van profitably. We were helped by the JIP reform to get a growth push in home, but we are careful not to grow into sub-segments before we know how to price them properly. We now have some 777,000 home policies after Q1. Hastings has a long tradition as a company that exploits new technology skilfully, and telematics is a more recent proof of this. You will see from the graph on the right-hand side on this page that an important part of our growth in the past 12 months has come from this product. Our way of doing telematics is a bit different than many others in the market. We benefit from low-cost technology, but we have also designed a product so that loss-prone drivers are weeded out quickly, normally in less than 90 days from inception. Turning then to the synergies with Top Danmark, Let me just first say that the integration work with Top Danmark has progressed very rapidly and smoothly. And during the summer, the coming summer, the company will cease to exist as a legal entity. The new integrated organization has already now been in place for some time, and the management reports are no longer separate. Turning to synergies... It was pointed out by many that they seem to be on the low side when they were presented last summer. I said then that we present what we know, and when we know more, we present that. This, I think you will recognize, is what we have always done in the past. Now, as promised, we have gone through a much more detailed exercise with the people that are to deliver these synergies, and we have laid out integration plans for IT for the next few years. We have also found more fast and simple synergies, like reducing broker costs for reinsurance or office integration, as illustrated by the left-hand and middle graphs here. Notable is that all the improvements are cost synergies, so the new synergies are cost synergies, not revenue ones. To get the full picture of our cost targets, I need to mention that we moved Top Denmark to IF standards with full costing of IT expenses from now on, rather than capitalizing developments on the balance sheet and with inclusion of all Holco costs in the cost ratio. We prefer to have the full downward pressure on costs by including all of them in our various ratios, as we have always done. Synergies, as you will know, sometimes have a tendency to live a life of their own outside the P&L. And to avoid that, we also raise our annual cost ratio target corresponding to this increase. Thus, for the next few years, our ambition will be to reduce the Nordic cost ratio not by 20 basis points per year, but rather 40 basis points per year. Then my final slide is a reminder of the first, but with numbers, as it were. We have produced top-down market synergies faster than originally planned. Digital sales have increased rapidly, and the competitive situations both in the Nordics and the UK have played out in our favor. Furthermore, we had an okay winter, and we have had a good large-laden outcome in the first quarter. The impact on the outlook for 2025 is detailed on the slide. We now expect the net insurance revenue to increase to 8.8 to 9.1 billion euros, at the same time as the underwriting result expectation is now 1.4 to 1.5 billion euros, with both lower and upper end increased by 50 millions. Reflecting this, we now have a new AGM mandate for buybacks, and we'll return to this question in our Q2 report, hopefully also with some clarity on the future of NOBA. It's been a really strong beginning of the year, and I'm certainly excited about what we will be able to achieve for the rest of the year. And with that, Sami, we open up for questions.

Yes, operator, we're now ready for the Q&A.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key five. Fix on your telephone keypad. The next question comes from David Barmer from Bank of America. Please go ahead.

Good morning. Thanks for taking my questions. Firstly, I wanted to ask about the portfolio measures you've been taking in Nordic Commercial and Industrial Alliance. How much progress? have you achieved on this? And do you expect upline growth to remain a bit more muted for the rest of this year? And then staying in the Nordics, the expense ratio was a bit higher in Q1 and up about 80 bps compared to Q1 2024. Could you explain what drives this? And then lastly, on the UK, so impressive results this quarter. Could you give some color on the sort of accident year combined ratio you're achieving at this point? That is how it's developed compared to 2024. Thank you.

Good morning here. I'll answer the two first ones. When it comes to the portfolio measures or de-risking in our large corporate business, The actions are close to being fully implemented now as of 1st of May, actually. So some effect also into the second quarter, but more or less fully implemented. We started this mid last year. It will still have an impact on volumes in industrial throughout this year and also a little bit into next year as, of course, the premiums are earned in sort of the 12-month period ahead. But the actions as such more or less implemented as of now. When it comes to the expense ratio in the Nordics, we reported a pro forma of 22.7 last year. Then, as Torbjörn mentioned in the introduction, we have firstly included a number of costs, that Top Denmark had outside of the ISR, typically holding company cost that is now being included in the total cost ratio of ETH. bringing that sort of figure more to 23, so that's sort of more 23.0, so that's more the starting point. And then we report 22.9 as of first quarter, which means that the underlying development is according to the trajectory of delivering the 40 basis point improvements, but we have some volatility from quarter to quarter, Of course, the synergies are not being realized in an equal manner over the quarters, and then also some more cost in the first quarter due to high sales activity. So that's an expense ratio on the Nordics.

And then finally, in the U.K., Prices have followed the moderation of claims inflation down in a rather rational way. We have – it's easier for us to compete on home insurance where we have a lower market share to start with or telematics where we have a unique product rather than grow very quickly in our, let's say, big motor book. But we are meeting the targets on the combined ratio as we've had from before.

And if I should just add, Torbjörn, on that, it's Knut Onne here. The margins that we are creating in the first quarter of this year is not driven by prior year gains. The reserve strength in Hastings is broadly unchanged this quarter compared to year end.

Very helpful. Thank you.

The next question comes from Nadia Claressa from JPMorgan. Please go ahead.

Hi, yes, good morning. I have two questions, please. The first is just on pricing in the Nordics. So you gave us some qualitative comments that rate increases are covering claims inflation, but could you just help us quantify this, please? So how does this compare to the 4%? I think I'm just trying to understand the implications on the underlying margin development from here. And secondly, a quick one, hopefully, are there any updates on the work you're doing around the expansion of the internal model? More specifically relating to top, is this something we can still expect at the fourth quarter of this year at earliest? Thank you.

So price increases and inflation in the Nordics perhaps start with inflation. Inflation is continuing to tick slowly down. So inflation now is slightly below 4% on the total Nordic level. And we continue to price somewhat above that, so 5% to 6% price increase on average. So that's pricing and inflation in the Nordics.

And when it comes to the internal model, the timetable is unchanged. Technically, we can't make an application before the merger between Top Danmark and our Swedish operating entity has happened 1st of July. And then the timeline is six months. At the very end of the fourth quarter is still our expectations.

Great, thank you.

The next question comes from Yudish Chikuri from Autonomous Research. Please go ahead.

Good morning, everyone. Thank you for taking my question. My first question is, if I could go back on your industrial segment. Could you, I mean, if we separate the underwriting or or de-risking actions you're taking, can you give us a sense of what the underlying pricing and volume dynamics look like? That's my first question. And then secondly, on Hastings, actually on personal motor pricing specifically, there's been suggestion that the pricing has stabilized. That was the end of Q1 and into April. Is that something that you're seeing as well? Thank you.

start with the industrial segment in the Nordics. Price actions are still being implemented in the large corporate book of business. So we have still quite a fair amount of rate increases that would push premiums up. And then, obviously, the reason why we report zero on gross written premium and even negative on the earned is due to the de-risking. But rates continue to increase with still a fair amount in the large corporate business in the Nordics.

Sorry, could you repeat the second question? Because we heard motor pricing in Q1 and then the line broke down.

Sorry. Yes, I was wondering whether there has been a stabilization in pricing towards the end of Q1 and into April, please.

Pricing has come down during the first quarter. That's public knowledge and public data. And the... Rate erosion since then, let's comment on that after Q2 because it's too short periods otherwise. But remember, this is after a very volatile period with extremely high prices. So I think the market seems to be searching for the right level with the claims inflation that we're seeing now.

All right. Okay. Thank you. Thank you.

The next question comes from Hans Retterdel-Christensen from Danske Bank Markets. Please go ahead.

Yes, hello, and thanks for taking my question. So my first question was on the updated synergy realization in Top Danmark, and thank you for giving sort of the more detailed numbers for year over year. I was just wondering, compared to the 95 million that you'd previously guided. Should we think about the updated number? Is that sort of purely driven by the cost side of those synergies, or is there also an updated expectation on the revenue side of the synergies? And the second question related to that is, Do you think there's more room as you kind of get to know the portfolio better to take out even more synergies or is this a final estimate? My second question is on the written premium growth in Norway of 17%. Can you maybe just decouple that into sort of volume and price effect and what you're seeing in the retention side in perhaps Norway specifically and not on the Nordics overall.

To you, Morten.

Yes. Synergies. Yes, the increase is coming from cost, and it's fair to say that we have focused on understanding the cost and the cost based at this point in time. And of course, as we learn more about the company, we find more areas where we can improve, where we can sort of learn from top Denmark and where top Denmark can learn from it. So I think this is a good estimate of the synergies. But of course, it will never be a final figure. We will always learn more. Then... And when it comes to sort of revenue synergies, those are less tangible. And that's also the reason why we have chosen to focus on the cost. So I think speculating in revenue synergies, it comes with less certainty, sort of for sure. So let's see in the future sort of how, for instance, when we – introduce digitalization more clearly into the operations of top Denmark, how that will play out in the market. When it comes to volume and price in Norway, a larger part of the volume increase in Norway is of course price driven. Price actions in Norway are clearly higher than in the other Nordic markets. then we are at the same time growing in terms of number of objects, number of customers in Norway and in particularly Norway, actually. So there is also an underlying sort of pure volume sort of component to this. Retention in Norway has been ticking up over the last few months. During Q1, it was more stable. And also for the other countries, retention have typically been ticking up over the last few months. And over a quarter in total, a slight increase in retention in the Nordic region as such.

And Hans Knuttonen here, just to add to Morten's. comment on the synergies and manage expectations. We have just released a very healthy increase of the synergies of 45 million euros from 95 to 140. That is what you should expect us to realize up until 2028. Then, as Morten says, to continuously work on cost efficiency also after 2028 is a part of the DNA. But it is 140 we have announced today and no other number.

Okay. Thank you very much. That's super helpful.

The next question comes from Vash Gosalia from Goldman Sachs. Please go ahead.

Hi. Thank you for taking my questions. I have Two of them, please. So the first one on Nordic Commercial. So there you have highlighted some premium adjustments within the workers' comp line. So I just wanted to get a sense if you could just unpack that a bit further and explain what is the outlook in that particular segment. And also if any comments that you could provide on owner health at this point. And the second one, a bit more strategic on UK Motor. So just given the consolidation that we're seeing in the UK motor market, are you expecting any change in competitive dynamics? And if so, also, I mean, do you increase your appetite for M&A in the region? Thank you.

Good, so I'll take the two first ones. When it comes to Nordic Commercial, we are reporting a growth of 5.2, and then we... comment that we have a little bit of headwind from workers' comp adjustment premiums in Finland. And that's kind of a one-off related to finally invoicing of premiums for last year. So one of the few areas where you kind of have runoff effects on premiums even. So that's adjustment premiums on workers' comp Finland. When it comes to ONA Health, good progress, excellent cooperation. We are starting now cross-selling ONA Health products, not only on the Top Denmark portfolio, but also on the IF portfolio. And ONA is also looking into strengthening their expansion in Sweden. So good development and also continued good growth on the premium side of ONA.

And good morning. It's Knutana here. I'll take the UK motor question. We very much welcome the consolidation that is happening in the UK motor market and believe that that will extend the period of rational market behavior. and our ability to compete in that market in a health way also going forward. Given the size of Hastings, which we have grown organically to be one of the top insurers and will remain one of the top insurers also going forward after the consolidation, we have the size to make the investments for the future in terms of technology, that we need to have and still create good margins. There's no strategic need for us from that perspective to participate in consolidation. Then, of course, we always, in all markets, look at the opportunities that exist. But our focus this period, as you know, is on organic growth and creating value of organic growth, which we are doing quite successfully without being disturbed by participating in in consolidations up there than the clearly value-creating acquisitions we made in Denmark.

Got it. Thank you.

The next question comes from Vineet Malhotra from Mediobanker. Please go ahead.

Good morning. So just three quick checks. questions for me, please. One is on the retentions, I mean, do you think Sampo is doing something differently in the market because some of your peers are reporting that retentions have been falling because of the big price moves? Do you think it's because Sampo has been more stable sort of in pricing? Just keen to hear your comments on that and the difference to the markets. um second question is just on the top denmark synergy you mentioned the cost but also the claims the 25 million euro number um you just add a bit of color on uh is there a big jump in that at the view there is and and why or how would you think the claim side would be also benefiting from the analysis you have done now Lastly, a quick question on new car sales. We're obviously seeing some pretty big numbers around there. Norway, Finland, Norway up 40% plus, Finland down about 10%. Is there anything to note here? I know your main market remains Sweden on that, but is there anything you're seeing in the car buying behavior? Also important because when there are more new cars, it affects the claims patterns as well. Thanks.

Some quick comments on these three items. When it comes to retention, retention is driven by, of course, providing good service and accurate pricing. And I think if you are better at that, then the others will have a good development. So I think we've been good at both providing good service and having accurate pricing over time. Top Denmark synergies on the claim side, that's mainly procurement of claims handling services. So typically in Denmark, Top Denmark have a better purchasing power than IF had as a small player. So that gives us benefits on the claim side. Then when it comes to new car sales, it's somewhat up, slightly up on the Nordic level in Q1, but from very low levels. And then, yes, you do see some quarterly volatility in car sales in the various countries. That's typically driven more by changes in car taxation. sort of from one year to another, which is, for instance, why you see the effect in Norway. So I think over a longer term, sort of car sales remain on a fairly low level in the Nordics, even though it's now increased by 8%.

Okay, thank you very much.

The next question comes from Jocko Tervenen from SEB. Please go ahead.

Good morning. It's Jokko from SCB. Most of the questions have already been asked and answered, but I could touch on the prior year claims development, which was very muted during the quarter. What was...

Time is now unmuted. Please go ahead.

Can you hear me now? Yes, we can hear you. All right. I'm asking on prior year claims impact, which was very muted. Could you elaborate a bit what was driving this? Did you have some changes in assumptions, for example, and what should we expect going forward?

that the prior year gain this quarter is broadly in line with what you should expect in terms of just the technical release of our risk adjustment reserving. Above that, there weren't much prior year gains, which again means that we have during the quarter strengthened the reserve base in the group. since we have not at all changed our way of reserving or assumptions in terms of the overall picture for the group balance sheet.

All right, thanks. And then another one on this recent Danish antitrust authority report. What is your interpretation on that one? Do you see, for example, risks of Danish authorities to introduce similar rules that we saw in the UK market a few years back?

I think, first of all, competition is... is good in the Danish market. I mean, if you look at the number of players and how the market is operating, there is a good and sound competition in the Danish market, but also quite a variation in profitability in the Danish market. When it comes to some of the items that is touched upon in that report, our principle is to focus on risk-correct pricing. I think that's the sound fundament for any insurance company. And if you do something else than that, you run the risk sort of in the future. We always have believed strongly in risk-correct pricing. And then there is also a little bit focus on this special Danish way of having an index. And that is a special Danish solution. One could argue that is good for consumers. One could argue that is good for insurance companies. We don't have this practice in any other Nordic countries. So for us, we are happy operating in sort of any environment with or without this type of construction.

And let me also remind you that when the JIP reform was introduced in the UK, we gained from that rather than lost, as we have the same principle of technical pricing, risk-correct pricing in the UK since before, in contrast to some of the market.

Okay, that's very good from my side. Thank you.

The next question comes from Jan-Erik Geerland from ABG. Please go ahead.

Thank you, Jan-Erik Geerland from ABG. Thank you for taking my questions. The first one is to your brand names in Denmark. Have you decided what to do with the top Denmark versus the IF brand names? If you could shed some light into that.

Yeah, longer term, we are focusing on the IF brand, but we're using the top Denmark brand still for a while. Branding is a little bit more difficult these days with digital processes. You need not only to change the brand, but you also need to change a lot of the digital processes before you can change a brand. So currently we're operating with both IF and Top Denmark as brands in the Danish markets and then over time we will move towards the IF branding.

Thank you. When it comes to competition in the Nordics, you shed some light into the Norwegian operation. Could you shed some more light into Sweden, as well as Denmark and Finland, both private as well as corporate or commercial? Thank you. Yeah.

I think the overall comment to that is that we see quite benign competitive situation right now. I think... Clear proof of that, obviously, is the growth that we see in business area private with 8.5% and basically strong growth across the board in all geographies. I think that also goes for the SME part of commercial, also strong competitive situation in all four markets. And then on upper commercial and industrial, it's always a little bit more difficult because then it's more volatile and more single clients and single events. But I think overall, good competitive situation for us, which also sort of result in... Extremely high new sales figures, both offline and in particular online, where you see sort of 20% increase, for instance, on private.

So that concludes the call for today. Thank you everyone for dialing in and participating.