Sampo Oyj

Welcome to today's presentation where we have the pleasure to present a sample group to help us through and answer questions and give a short introduction and then we will run a Q&A afterwards. I think we will focus on the Q&A as head of Investor Relations Semitambulist. As always. Of course, this event is covering the Q2 half year report out this morning. Do feel free to ask questions in the box down below. We have had a couple of questions in, but do feel free to put in more questions in the box down there. Do feel free to do it in Danish and I will try and translate to the best of my ability. But I think for now I will hand the call over to you, Sami.

Thank you, Michael. I'll start with a few remarks on the quarter and then we'll go to Q&A. I'll try to keep it reasonably brief. Overall, a very solid quarter, a sort of continuation of what we saw in the first quarter with very strong growth, some of benign weather, but also strong underlying development on the margin. If you've followed the numbers in detail today, you'll see I've seen that we beat the consensus by quite a lot. Most of that comes from investment income, which was partly a little bit fortunate. But if you look through the detail of the numbers, you can also see that actually the operational story is coming through very, very strongly. So we'll go more into that detail in that in a second. But strong organic growth, strong underlying margin development, which has allowed us to upgrade our guidance by a smidgen for the underwriting result. To arrange now of 1.425 to 1.525 billion euros for this year. And that was 25 million euro upgrade on both ends. In total, then we have delivered an operating EPS growth of 16% year on year in the second quarter, which is a solid result and compares very well with the more than 7% target that we have for the current strategic period from 24 to 26. And in addition to this result, then, and I should have changed the slide already so you can see a lovely summary of all this. And in addition to the strong results, we've also launched another share buyback program, so 200 million announced today. And we continue to have a very solid balance sheet with a solvency ratio of 174%, which is slightly above the midpoint of our target range of 150 to 109%. So sort of in a very comfortable position. Let's go through a few details then. And I'll just start with this slide here. We're really, and without going through all the numbers here, really the main point is that the breadth of the strength in the results. So we're growing top line in all divisions except one, and I'll tell you why in a second. And more importantly, we're growing underwriting profit by significant amounts in all of our division across the business. So it's not like we're lucky in one area and just have momentum there and you'll fade there, but the whole business is very well positioned. And I'll come back to talk about the private businesses in a second. But if we look at the, our corporate units, so commercial and industrial, we have a little bit of headwind on the revenue in industrial and that comes from a de-risking program that we've undertaken over the last year or so, where we had a little bit more exposure to large corporate risk, large corporate property risks, and then we would ideally like it. What we've done now is we've cut back that exposure. We've had very good pricing quality on that business and that will ensure that we deliver results that are also very stable as well as with strong margins. That's that on corporate. Let's look a little bit more in detail then on the private segments. And let me start with the Nordic business, which had another really excellent quarter. In fact, it was so excellent that it was the third consecutive quarter where we had record gross within premiums of effective gross revenue growth in the quarter. Where's that coming from then? Well, first of all, and very pleasingly, we have a high so-called retention rate. So a very large share of our customers, more than 89%, renew their insurance with us every year, which we're very pleased with because it always reflects our strong competitive position. We're giving good service at a good price to our customers. So they're choosing to stay. Then again, if you drill into the details of the private segments, so the segment where we sell insurance to our retail customers, the growth is very broadly based here as well. Both in terms of countries. So we're above at or above 5% in all the countries in the retail segment, but also in all the products. So we're at or above 5% in all the major products across retail. Norway stands out as being particularly strong. That's because there's been some quite significant claims cost increases in Norway over the last few years for different reasons. Inflation, weak Norwegian Krona, etc. And then by product, it's personal insurance and motor insurance actually that are developing very nicely in the Nordic region right now. That's the Nordics. Let's look at the UK. And a small reminder first, in the UK, we have a very clear focus. We're in the digital channel. The price comparison websites. We have a business that's set up to operate in those and it doesn't compete outside of those channels. So we don't do any corporate business or any business traditional brokers or anything like that in the UK. The story here really is we entered the UK through the acquisition of Hastings in 2020. And since then, we've managed to almost or more than actually double the premium volume in that business to 2024 and continue to grow in 2025. We've added more than a million customers during that period in the UK. And we've done all this whilst delivering very, very solid results. So the UK market has tended to be known for having high cyclicality of margins. But actually our margins have been very stable. And the reason for that is that we've been very disciplined in underwriting. We've been growing when the market has been giving us an opportunity to do so, as it has been doing this half year. So policy count, the number of customers that we have is up 19% year on year. To the end of the first half. And then we've been very much more cautious when the market hasn't allowed us to grow. So this hasn't come true in a straight line. But rather it's been we've been taking the opportunities when we've been able to. And that's what we expect to continue to do in the second half. We will play market conditions in every single quarter. We have really excellent pricing capabilities. That mean that we can select risk really well. And when we see that the market isn't there, we'll hold back on growth when we see that we can hit our target margins will continue to grow. And what about those margins then? Well, we've delivered a return on capital in this quarter of 24%, which is fully in line with the returns on capital that we're achieving in the Nordic region. So we sometimes get questions about whether the UK dilutes our returns or not. And the answer is no, it's just as profitable as the Nordics. Then we did an interesting transaction last year with the acquisition of the minority in Top Danmark. And now we have in earnest started the integration of the Top Danmark business into IF, which is the big brand that we have in the Nordics. And so far, everything is delivering and developing exactly according to plan. The synergies to date have been very much sort of hard cost synergies across central functions primarily. And then we obviously expect these to accelerate as we continue to implement our plans. So really this first half has been the half where we've had the least amount of synergies of any period now over the next couple of years. And then it's going to accelerate in the second quarter, which will help our particularly our cost ratio. And then over time, we'll get more into more complex synergies like the IT transformation, for example, which will deliver even bigger values. Remember, we upgraded our cost ratio target on the back of these synergies last quarter. So instead of improving the cost ratio by 20 bps year on year, we expect to improve it by 40 bps year on year now until 2028, which is when we plan to hit these 140 million pre-tax synergies that we've announced. And then finally, a slightly closer look at the outlook range. I mentioned the numbers already, so I won't go into them too much in detail. But basically, we're looking at 8 to 16 percent underwriting profit growth in 2025 versus 2024. 8 percent, that's more of a, you know, if we have a bit of bad luck in the second half, which is always possible in PNC insurance, whereas 16 percent would represent neutral luck, but good continued execution against our targets. Two more things to add that aren't strictly related to the outlook. First of all, and as I mentioned, we've announced a new 200 million euro buyback program this quarter. That is funded out of profits we made already in 2024. But as I'm sure a lot of you know, we've been waiting for this NOVA IPO to happen this year, and it didn't happen before the summer. We're hoping that it's going to happen in the second half. And if it does indeed happen, then we'll, the board will look to top up the buyback program to return the proceeds from that IPO, because we don't have any need to retain them. And then finally, worth mention, a brief mention as well is that this was the last quarter of our current CEO, Torbjörn Mangelsson, who will be replaced with the current CEO of IF, Morten Torsrud, from the third quarter onwards, or from the first of October onwards to be exact, but he will be presenting the third quarter result. And that is all I had to say.

Let's jump into the question. The first one, your combined ratio is well below your long term ambitions. You also showed here 85, and I guess, and I know it's only the first half year and you are an insurance company. But the question here is 2025, just a good year. And I think it's a wise way to ask, are you actually looking to look at your long term ambitions or is this just a good year with very low large claims and very low 29 weather claims?

The answer is yes and no. We do have some good fortune on both weather and large claims so far in the first half this year. So I wouldn't necessarily assume that this is a run rate number that we're at. Our target, as you mentioned, is below 85. Some of the good luck that we've had in the first half, we've, you know, used to strengthen the conservatism on our balance sheet. So it hasn't necessarily all fully flowed through. But at the same time, if you look at the underlying development, we improved the underlying combined ratio by around 60 bits in the second quarter. So 0.6 percentage points, mostly driven by expenses. So we're managing a significant expense ratio improvement. But also driven by good pricing against claims inflation.

Is that the general inflation coming down a little bit faster? I think we start to see pretty benign inflation numbers in the Nordic region. I know it can go up again, but is that a part of the answer?

Yeah, it is. I mean, in insurance, we are exposed to a slightly different basket of services and goods than what the general economy is. So the mix, it's like taking a cut out of the overall inflation and looking at that. But it is right that also our claims inflation number, as we call it, has been trending down broadly in line, actually, with the overall CPI. So there is a benefit from that. And that's a better development than what we'd assumed when we set the prices that are in force on the policies that we have right now. So some of it is indeed from that. Some of it is actually from things like the claims handling initiatives that we have in top Denmark as well. So it's a mix of a couple of different things. But I guess the important thing here is that now the market, when the market looks at our margins, they don't project forward the luck that we have. Most of our valuation is obviously on future earnings. So the fact that we have a bit of luck this year on whether on large claims is great. But really, this underlying improvement that we're delivering is what drives the value in the stock and what the investors tend to be very focused on.

Then there's a question here. How much of the growth is coming from prices and are they ahead of inflation?

Yeah, so the prices are still a little bit ahead of inflation. We are a very disciplined underwriter and we always want to make sure with inflation we never want to miss on the underside. So we'd rather be a little bit too disciplined than to miss inflation because it's very difficult once you miss inflation. Then you have to catch up. And that really upsets customers. So we'd rather be cautious upfront and then maybe miss a few new customers and be sort of as straight as we can with the ones that we have. So we are a little bit ahead of claims inflation still. Claims inflation is at 4%. And I'm talking Nordics now. Claims inflation is at 4% and we're maybe a percentage point or something like that above that on pricing. The growth is coming from high retention, so high renewal rates for our customers. It is coming from these price increases, but then it is also coming from an increase in volumes. There's a bunch of different areas where we are adding new customers, particularly in Norway now, actually, because a lot of our peers are having to increase prices much more than us because they're having to go through this process of repairing their margins. And that's an opportunity for us to be more competitive, but also in other areas, including Sweden, Finland, some parts of the Danish market as well.

And you mentioned the retention rate. So there's a couple of questions here. How is the retention rate in Top Denmark compared with the whole sample group after the takeover? Sometimes you can experience some hiccups. So a little bit indication on whether that's actually not happening.

It's not happening to any significant degree. There's always some customers who churn almost just for this reason that you write a letter to them and they remember that they have an insurance policy. But there's no material churn related to the transaction. Top Denmark's retention compared to the Nordic business as a whole is quite similar to the IF business. It's similar rates of retention. But this is one of the things that we liked about the company and continue to like about that business. It operates in many ways similarly strategically to IF and retention is one of those focus areas. In Denmark alone, actually, Top Denmark has had higher retention than the IF business had historically.

And then there's the high retention rate. How much is that your own initiatives and how much is about competition? I think a way of asking, have you seen any changes in competition or is it still a little bit of a benign and everybody is still adopting to a higher inflation level? And that is kind of helping maybe the retention rate a little bit.

It's both. It's both. And your own initiatives are also related to how you handle competition. What we tried to do in this inflation cycle, if I talk big picture, was to be very early with reflecting inflation in pricing. And we'd rather do it, you know, preemptively in more reasonable steps so that we never end up with this position where we have to write to our customers and increase and make really high increases. Because that's when people generally get really fed up and look for a new insurance company. So we've tried to do it in in nice, digestible steps for our consumers. And I think we've been quite successful with that. I think that's a big reason for why we're seeing high retention and positive customer flows in quite a few areas now, where some of our competitors have been taking, you know, they fell behind a little bit, maybe in the beginning. And then they've been taking big steps after that to try and catch up. And that tends to irritate customers.

And then I know you had a busy summer last summer. We just spoke about it. And now someone is asking, will you again have a busy? I was seeing any other candidates for M&A in Denmark specifically here, but maybe you can also elaborate a little bit about the Nordic. Or are you pretty much done with the larger one? There's not many possibilities out there. So a little bit of thoughts about that.

Larger one, I think we can exclude. That's there's just nothing as large left anymore. And we would, you know, we have basically 20 percent market share in pretty much every market. So doing a really large deal on top of that, similarly adding another 15 percentage points market share as we did with top Denmark, then the competition authorities would have something to say about that, I think. So that we can exclude. Could, you know, eventually over time, could a smaller deal be possible in the Nordics? Maybe if something interesting turns up, you never know. I wouldn't want to exclude that. But, you know, M&A is always opportunity driven. We don't have our eye on anything right now. Let's see. The future is a long time.

Perfect. And you actually mentioned a little bit about your financial income. And that was part of the beat here. So there's a question here. Is the financial income in H1 a good proxy for the full year? Meaning, can you just double up on this bottom line? Or has there been some large movement on the interest side, share side or something like that that is that is giving you a better than expected financial income? And we shouldn't just times that too for the full year.

Well, that is a very good question. I mean, every every financial period always has large movements because we have a big balance sheet with a lot of assets and a lot of a recently big chunk of liabilities as well. So you have some one offs in every period. I would say net, we've had some luck in the first half. So I wouldn't I wouldn't just double, double it up. And that comes from in the second quarter, it comes from equity markets. We we tend to most of our equities are invested in the Nordics, but we have also some funds in Asia and the US, for example, that did really well in the second quarter. And then we have an interest rate move that because also the liability side is counted into to our net financial results. We had an interest rate move that was particularly favorable for us. So I wouldn't I wouldn't quite quite go as far as doubling it.

Because you don't you don't guide on that on that item, is that correct? You only guide on the operational side.

That's right. That's right. We don't give a guidance. And, you know, for the very specific reason that you can have some quite significant one offs either way there. What I would say, though, is that the market tends to react less to those movements than what they what it does to movements in the underwriting profit. Really, most of our valuation is based on the the underwriting profit and the insurance services result and much less is attributed to the investment result.

How big a part of your private business is digital only? And do you have ambition on how high that can go?

Yeah, really pure digital only. We're talking about a quarter of sales is is, you know, digital only. Then if you include things that work digitally, but isn't digital only, like, you know, where customers have a, you know, maybe price up a policy on the website, but don't quite feel like, you know, they just want to go through and click through and buy it online. But they, you know, they see the price, they see the policy, they call our customer centers and say, hey, I price this up. And I think the really impressive thing here is that we these are all very cojoined. So the person that they speak to can then see that, oh, yes, this policy exists and then can very quickly and easily close that. Same with partnerships. The partnerships are often very directly integrated into our IT system. So it's very easy, even if you buy via partner to deal with us. So the impact of digital is much bigger than this 20, 25 percent. And then one of the reasons is only 25 percent is actually Denmark, because we are relatively low in Denmark, whereas in some of the other markets, we're quite a bit above this 25 percent. So I think that's a number that's going to continue to go up. It's been going up and

I think it's going to continue. And do we have any ambitions? I don't know. I wonder when I get that is some explanation also on the lowering of the higher margins.

Yeah, we do. We do have an ambition on that. It's it's not cast as a percent of total sales. It's cast us. We want to sell one hundred and seventy five million euros per year of new sales. Remember, only about one tenth of our total premiums is new sales, but one hundred seventy five million of new sales in 2026 purely online. That's an increase of 30 plus percent over the three years leading on to that. So it's a fast pace of growth to get to that. And we're seeing that people are really more and more coming online.

And I guess it's not only the digital side, you know, the infrastructure who needs to be there. It's also the product, right? Because if you have complicated products or it's not in, you might say in boxes, then you actually need, you know, a more fine tuning of your insurance. So I also moving ahead there to to kind of screen or to to streamline your products. So they are actually digitally very sellable.

Absolutely. I mean, most of that work for at least for standard retail products has been done a while ago. It may be a little bit less in Denmark than in the other countries, but you're absolutely right. You need to have a product that fits on the digital interface. It needs to be easy for the consumer to understand. So you feel comfortable with buying it and you understand what you're buying. That's super important, of course. And then you need to have the systems in place to be able to to handle that. We're investing, you know, we've invested more than a billion euros over the last decade into improving these types of processes. And we're actually investing more now than we've ever invested in digital development before. So this is a process that will continue into the medium term.

And then there's a question on the shareback program, and I think you answered the second part. But let's just reiterate the current share program. How in what time frame does this run and can there come more this year?

Yeah, so formally the share buyback program runs until the 31st of October. We typically buy back around 100 million euros per month in stock when we do these share buyback programs. That's what we've done in the past. You obviously never know about the future, but that's what we've done in the past. So it should be fairly easily easy to complete. And yes, we will top this up with the potential proceeds from a no buy IPO should it happen now when the IPO window opens again in the autumn. And we're not going to be able to sell our whole no buy stake in the first step in that. With an IPO, you know, you usually have to sell down maybe a third or half of your stake in the initial listing and you have to then be locked up for six, 12 months, something like that, before you can then continue to reduce your stake. The book value for our no buy investment is a little bit over 400 million euros. So we're talking about if the IPO happens, an increase of a similar sort of water or magnitude to the 200 million we've announced today. So let's see if that happens. It's hard to predict. Hard to predict

right now. I fully accept that. And then let's turn on my paper a little bit to the Hastings. I guess these lower prices must make it harder to grow in that country. I think you alluded a little bit on that saying we are because if you use those price portals, it's high prices that I guess drive a lot of growth. You get a higher price on your car insurance and drives us in there. So that might go down. Is there something you can counter that with other is or is that the full strategy that it's fully only on this price platform? And secondly, on Hastings, a new in Q1 that you talked a little bit about that you're also starting to see some movement on house insurances there and whether that has continued here in the second quarter?

Yeah, I mean, to start with the first one, you're right in that the pricing in the UK market has been coming down, but from a very high peak in the last year. So pricing overshot margins became higher than what I think is reasonable in that market for a period of time. And then over this year, we've seen a lot of that get competed away in the market. We're now at the point where we were able to grow quite clearly still in the second quarter. But obviously, the leeway of margins is now less than it has been for a little while. So the trading conditions in the third and fourth quarter, we will have to see what happens with the market pricing and claims trends before we can say very much about where growth is going to go. Then we will be disciplined. It is true that it's a market. We don't have any other channels there. And quite frankly, I don't think it would really help if we did, because the people are clever enough to always look on price comparison websites. That's the reality. You know, like 90% of sales in the market. So you kind of got it covered by being there. You can get periods. We've had periods since we bought Hastings where we didn't grow much at all for a number of quarters in a row. But that's OK, because we were protecting our margins, we were protecting the quality of our book. And still, we've managed to more than double the business in the last five years. So it's better to be cautious when the market is not there and protect your business, because that means that you're then in a very strong position when the market does improve. Can

you remind us how big a market share? I guess that's also a part of it, that if you are a smaller one, it's easier to always be a little bit aggressive in the periods where it's good to be aggressive.

Yeah, well, exactly. So we're at about eight and a half percent market share in motor insurance in the UK. We have a higher market share of the new business on price comparison websites. So if we just keep that market share gradually, the business would grow in any case. But if you think about the capabilities that we have in the UK, they're very much on par with the biggest players there. So our ambition, certainly, is to become one of those biggest players. And they're more like 15, 16 percent market share, even a little bit higher. So we still see a long way to go potentially on that growth.

And then on the house insurance side, I think you mentioned something, Iq1, I couldn't read so much here in the Q3 report. And is that done the same? Is that also the price comparison or is that more like a car way? Because it's actually more comparable than a house insurance. So a little bit thoughts about that and how that has developed.

Yeah, it's not quite as heavily skewed towards price and comparison websites as what motor is. But it is still most of the market, about two thirds of the market uses price comparison websites in home, which is a much higher share than it was even just five years ago. We grew by 35 percent, policy count by 35 percent in home insurance, sorry, year on year. It's an area of actually we've been growing faster in home insurance over the last few years than motor insurance. Partly that's down to us be having a much smaller market share there. So we've started with a much smaller book. Our market share in home is really just a couple of percent. And that's allowed this high growth rate. We also benefited from some regulatory changes a couple of years ago that's allowed us to accelerate that in a different way to what we've been able to do with home. Sorry, motor. So, yeah, we built up what is a pretty good book now, and we still see an opportunity to continue to grow that into the medium term.

And on the claim side, it's still possible and I can see the numbers apparently to run with that low market share on the housing and actually still have a decent claims. I would be a little bit baffled, but I guess that that seems to be possible to have a claims process that still with that low market share still gives you a decent margins. Is that correctly understood?

That's correctly understood. Actually, the main challenge that we have there is that the distribution cost in home because they charge the price comparison websites charge roughly the same commissions to sell home insurance policies as in motor, roughly the same pounds per policy commissions. It despite the fact that the average premium in home insurance is much smaller than in the in the motor insurance business. So you get a much higher percent of the premium that you need to pay as a commission. So that for a smaller book, that is a challenge. But the you know, if you exclude a couple of years ago when we were still learning the pricing, still learning the data and so on. Right now, the profitability of the home book is good. The loss ratio of the claims ratios are good. We're not seeing any any negative surprises there.

I think that was the last question from the audience and from my side. Thank you, Sammy, for taking us through your results and answering our question. And may everybody have a nice day.

Thank you.