SAMPO PLC FINANCIAL STATEMENT RELEASE 9 February 2023 at 9:35 am
Sampo Group’s results for 2023
- Profit before taxes increased to EUR 3,171 million (380), or EUR 2,189 million (1,541) excluding extraordinary items*.
- Excellent underwriting profit of EUR 1,282 million (967), representing an increase of 32 per cent year-on-year.
- Sampo Group P&C combined ratio improved by 2.0 percentage points to 81.4 per cent (83.4), materially ahead of the below 86 per cent target.
- Earnings per share rose to EUR 4.63 (0.07), or EUR 2.86 (2.16) excluding extraordinary items*.
- Sampo plc’s Board of Directors proposes an EUR 4.10 per share dividend, including an insurance dividend of EUR 1.70 per share, to the Annual General Meeting on 18 May 2023.
- Group Solvency II coverage stood at 185 per cent (176), within the target range of 170 – 190 per cent, and financial leverage at 23.8 per cent (28.6), inside the target of below 30 per cent.
KEY FIGURES
| EURm | 2021 | 2020 | Change, % | 10–12/ 2021 |
10–12/ 2020 |
Change, % |
| Profit before taxes *) | 3,171 | 380 | 735 | 1,197 | -675 | — |
| If | 1,077 | 901 | 20 | 260 | 285 | -9 |
| Topdanmark | 346 | 167 | 107 | 89 | 82 | 9 |
| Hastings | 127 | -16 | — | 11 | -16 | — |
| Associates *) | 1,311 | -722 | — | 679 | -1,030 | — |
| Mandatum | 291 | 154 | 89 | 91 | 54 | 67 |
| Holding (excl. Associates) | 20 | -103 | — | 68 | -50 | — |
| Profit for the period | 2,748 | 112 | 2,345 | 1,086 | -769 | — |
| Underwriting profit | 1,282 | 967 | 32 | 297 | 248 | 20 |
| Change | Change | |||||
| Earnings per share, EUR | 4.63 | 0.07 | 4.56 | 1.89 | -1.44 | 3.33 |
| EPS (without eo. items) EUR *) | 2.86 | 2.16 | 0.70 | 0.55 | 0.65 | -0.10 |
| EPS (based on OCI) EUR | 5.90 | 0.65 | 5.25 | 2.22 | -0.47 | -1.63 |
| RoE, % | 26.8 | 3.1 | 23.7 | — | — | — |
*) Nordea- and Nordax-related accounting effects of EUR 982 million in January-December 2023 and EUR 746 million in October-December 2023, have been defined as extraordinary items in accordance with Sampo Group’s dividend policy. The comparison figures included extraordinary items of EUR -1,161 million.
The figures in this report have not been audited.
SAMPO GROUP FINANCIAL TARGETS FOR 2023-2023
| Target | 1-12/2021 | |
| Group | Mid-single digit UW profit growth annually on average (excluding COVID-19 effects) | 32% (19% adjusting for the Hastings acquisition and reported COVID-19 effects) |
| Group combined ratio: below 86% | 81.4% (83.1% excluding reported COVID-19 effects) | |
| Solvency ratio: 170-190% | 185% | |
| Financial leverage: below 30% | 23.8% (27.9% including dividend and buybacks) | |
| If | Combined ratio: below 85% | 81.3% (83.6% excluding COVID-19 effects) |
| Hastings | Operating ratio: below 88% | 80.3% |
| Loss ratio: below 76% | 62.2% |
Financial targets for 2023-2023 announced at the Capital Markets Day on 24 February 2023
FINANCIAL HIGHLIGHTS FOR 2023
Sampo Group’s core business, P&C insurance, achieved an underwriting result of EUR 1,282 million (967) in 2023, representing year-on-year growth of 32 per cent. Adjusting for the Hastings acquisition and reported COVID-19 effects, underwriting profit growth was 19 per cent. The Group combined ratio improved by 2.0 percentage points year-on-year to 81.4 per cent (83.4). Excluding reported COVID-19 effects, the combined ratio improved by 2.7 percentage points to 83.1 per cent (85.7). Organic premium growth of 6 per cent combined with the acquisition of Hastings drove a rise in premiums to EUR 7,644 million. The result is well ahead of Sampo Group’s 2023–2023 annual financial targets of mid-single digit per cent growth on average in underwriting profits and a combined ratio below 86 per cent.
If P&C reported an underwriting profit of EUR 891 million (802) and a combined ratio of 81.3 per cent (82.1) for 2023. The result was supported by a solid 4.3 per cent currency adjusted premium growth and strong underlying performance. Premium growth over the year has been broadly based across If’s business areas, but particularly strong in Commercial and Industrial, which continued to see significant rate increases. Currency adjusted premium growth in Private was also robust at 3.7 per cent for the year, despite a sharp decline in Swedish new car sales during the second half, as retention remained excellent at around 90 per cent. Excluding the impact of large losses and severe weather, run-off gains and COVID-19 effects, If’s risk ratio improved by 1.2 percentage points year-on-year, on the back of rate increases and enhanced risk selection, among other factors. Profit before taxes increased to EUR 1,077 million (901).
Topdanmark’s profit before taxes for 2023 amounted in Sampo Group’s profit and loss account to EUR 346 million (167). The combined ratio improved to 82.3 per cent (85.2).
Hastings remained disciplined in the face of high price competition in the UK motor insurance market. Live customer policies grew by 2 per cent over the year to just over 3.1 million, supported by strong retention rates. Hastings’ 2023 operating ratio of 80.3 per cent was materially ahead of the annual target of 88 per cent. Profit before taxes amounted to EUR 127 million, or EUR 168 million excluding non-operational depreciation and amortisation of EUR 41 million. On 8 December 2023, Sampo increased its holding in Hastings to 100 per cent.
Mandatum’s profit before taxes for 2023 increased to EUR 291 million (154). The result was driven by a strong investment return of 10.2 per cent and robust growth in client assets. Mandatum Life’s Solvency II ratio was 190 per cent (188). Unit-linked and other client assets under management grew by 21 per cent to EUR 11.1 billion (9.2), driven by positive net flows and market movements.
Sampo plc’s Board of Directors proposes a dividend of EUR 4.10 per share for the 2023 financial year to the Annual General Meeting to be held on 18 May 2023. This includes an insurance dividend of EUR 1.70 per share (1.60), representing growth of 6 per cent, and the dividend of at least EUR 2.00 per share that management indicated it would propose in connection with the sale of Nordea shares on 26 October 2023. In addition to the dividend, Sampo launched on 1 October 2023 a EUR 750 million share buyback programme of which EUR 380 million had been executed at year-end 2023.
Sampo Group’s year-end 2023 Solvency II ratio stood at 185 per cent, which represents a decline relative to the third quarter figure of 211 per cent but an increase compared to the 176 per cent reported at the end of 2020. The decline over the third quarter primarily reflects the inclusion of the dividend proposal made by the Board in the solvency calculation. Sampo targets a solvency ratio of 170–190 per cent.
Sampo Group’s financial leverage declined to 23.8 per cent from 28.6 per cent from the year-end 2020 and from 25.0 per cent at the end of the third quarter. The decline from the third quarter was driven by growth in equity and approximately EUR 200 million of maturities in If P&C hybrid debt. Adjusted for the proposed dividend and the ongoing buyback programme, the 2023 year-end financial leverage ratio stood at 27.9 per cent. Sampo Group targets financial leverage below 30 per cent.
The profit before taxes included EUR 982 million of accounting effects defined as extraordinary in accordance with Sampo Group’s dividend policy, of which EUR 899 million related to the reduction of Sampo’s holding in Nordea from 15.9 per cent to 6.2 per cent over the year and EUR 84 million to a change in Sampo’s ownership in Nordax.
FOURTH QUARTER 2023 IN BRIEF
During October – December 2023, Sampo Group achieved profit before taxes of EUR 1,197 million (-675) and earnings per share of EUR 1.89 (-1.44). Excluding items defined as extraordinary in accordance with Sampo Group’s dividend policy, profit before taxes amounted to EUR 452 million and EPS to EUR 0.55 per share (0.65). The year-on-year decline in fourth quarter adjusted EPS was largely driven by the classification of Nordea under IFRS 5 Non-current assets held for sale and discontinued operations at the end of October 2023 and the negative impact of recycling of OCI items.
Fourth quarter group underwriting profit grew by 20 per cent year-on-year to EUR 297 million (248). Adjusting for the Hastings acquisition and reported COVID-19 effects, underwriting profit increased by 18 per cent.
If P&C reported profit before taxes of EUR 260 million (285) and underwriting profit of EUR 210 million (213). If’s combined ratio was strong at 82.9 per cent (81.3) and gross written premiums grew by 5.0 per cent on a currency adjusted basis. COVID-19 had a positive effect of 2 percentage points on If’s risk ratio compared to a positive effect of 4 percentage points in the prior year. Excluding the impact of large losses and severe weather, prior year development and COVID-19 effects, If’s risk ratio improved by 1.2 percentage points year-on-year.
Topdanmark’s profit before taxes increased to EUR 89 million (82) and the combined ratio improved to 80.6 per cent (83.7).
Hastings’ live customer policies grew by 1 per cent to just above 3.1 million in the fourth quarter, while profit before taxes amounted to EUR 11 million.
Mandatum reported a strong profit before taxes of EUR 91 million (54) in the fourth quarter. The profit included a revaluation gain on real estate of EUR 44 million, as well as negative effects of EUR 83 million from lowering the liability discount rate and EUR 15 million from the group contribution to Sampo plc.
Fourth quarter profit before taxes included EUR 746 million of accounting effects defined as extraordinary items in accordance with Sampo Group’s dividend policy, of which EUR 662 million related to the reduction of Sampo’s holding in Nordea from 10.1 per cent to 6.2 per cent over the quarter and EUR 84 million to a change in Sampo’s ownership in Nordax.
GROUP CEO’S COMMENT
I am delighted to report another strong quarter for Sampo Group, with excellent financial results ahead of our targets and further progress on our strategic agenda, which aims to focus the group on its unique P&C operations.
Sampo achieved 18 per cent growth in group underwriting profits in the fourth quarter of 2023, excluding COVID-19 effects and the Hastings acquisition, taking full-year growth to 19 per cent – substantially ahead of the mid-single digit target. The result was supported by excellent profitability in our largest subsidiary, If P&C, which achieved a combined ratio of 81.3 per cent and underwriting profit of EUR 891 million in 2023, representing growth of 15 per cent year-on-year excluding COVID-19 effects.
If P&C’s excellent financial results are underpinned by strong business trends, both in terms of successful implementation of key operational initiatives and attractive profitability on new business and renewals. This strength is broadly anchored across the business, but this quarter I would like to highlight If’s Commercial and Industrial operations, where we have taken resolute pricing action over recent years to address rate adequacy. In Commercial, the increase in pricing is enabling a greater focus on growth. To facilitate this, we are strengthening our distribution capabilities, particularly in regard to smaller companies, where digital insurance services are increasingly relevant to our customer proposition. Meanwhile, the Industrial business area has enjoyed another strong 1 January renewal in 2023 with rate increases ahead of claims inflation. We aim to further enhance profitability in the Industrial book over 2023 to ensure attractive returns on capital.
The group’s digital UK operation, Hastings, has performed well over 2023 with an operating ratio of 80.3 per cent, materially ahead of the 88 per cent target, and a small increase in customer numbers, despite challenging market conditions. We remain on track to deliver EUR 45 million of pre-tax earnings benefits from integrating Hastings into the group, with the most significant action taken so far being a reduction in the use of quota share reinsurance that allows us to retain profits previously ceded to reinsurers. Given the strong progress to date, I am delighted that Sampo was able to increase its ownership in Hastings to 100 per cent on 8 December 2023, as this will simplify governance and knowledge sharing, and entitle shareholders to a greater share of future profits.
During the fourth quarter of 2023, Sampo Group sold another 162 million Nordea shares, driving our holding down to 6 per cent. The EUR 1.7 billion of proceeds generated have been deployed into the above-mentioned Hastings transaction, in line with our stated appetite for bolt-on P&C transactions, and to complement the 2023 dividend.
In total, Sampo’s Board of Directors is proposing a dividend of EUR 4.10 per shares for 2023. Of this, EUR 1.70 per share represents the insurance dividend, which we have increased by 6 per cent year-on-year to reflect strong underwriting profit growth. In addition to an attractive dividend, we continue to execute on the EUR 750 million buyback programme, which, combined with the dividend, takes total capital returns for 2023 to nearly EUR 3 billion. Adjusting for planned capital returns, our balance sheet will be within our defined target ranges, calibrated to ensure both resilience and efficiency.
To conclude, Sampo’s fourth quarter has, in many ways, mirrored 2023 as a whole, with excellent financial results and determined execution of our P&C-focused strategic agenda. Although I am pleased with the progress made to date, I am equally determined for the group to carry this strong momentum into 2023 to ensure that we can continue to deliver attractive shareholder value creation.
Torbjörn Magnusson
Group CEO and President
OUTLOOK
Outlook for 2023
Sampo Group’s P&C insurance operations are expected to achieve underwriting margins that meet the annual targets set for 2023-2023. At group level, Sampo targets a combined ratio of below 86 per cent, while the target for its largest subsidiary, If P&C, is below 85 per cent. Hastings targets an operating ratio of below 88 per cent.
The combined and operating ratios of Sampo Group’s P&C insurance operations are subject to quarterly volatility driven by, among other factors, seasonal weather patterns, large claims, prior year development and fluctuations in claims frequency related to the COVID-19 pandemic. These effects are particularly relevant for individual segments and business areas, such as Hastings.
The mark-to-market component of investment returns will be significantly influenced by capital markets’ developments, particularly in life insurance.
With regard to Topdanmark, reference is made to the profit forecast model that the company publishes on a quarterly basis.
The major risks and uncertainties for the Group in the near-term
In its current day-to-day business activities Sampo Group is exposed to various risks and uncertainties, mainly through its major business units.
Major risks affecting the Group companies’ profitability and its variation are market, credit, insurance, and operational risks. At the group level, sources of risks are the same, although they are not directly additive due to the effects of diversification.
Uncertainties in the form of major unforeseen events may have an immediate impact on the Group’s profitability. The identification of unforeseen events is easier than the estimation of their probabilities, timing, and potential outcomes. The COVID-19 pandemic has recently led to supply chain problems, which combined with rapidly increasing demand for consumer goods has been visible as supply disruptions together with rising energy and product prices. The pandemic and the measures taken to contain the virus are consequently currently causing significant uncertainties on economic and capital market development. There are also a number of widely identified macroeconomic, political, and other sources of uncertainty which can, in various ways, affect the financial services industry in a negative manner.
Other sources of uncertainty are unforeseen structural changes in the business environment and already identified trends and potential wide-impact events. These external drivers may have a long-term impact on how Sampo Group’s business will be conducted. Examples of identified trends are demographic changes, sustainability issues, and technological developments in areas such as artificial intelligence and digitalization including threats posed by cybercrime.
DIVIDEND PROPOSAL
Dividend
Sampo Group disclosed on 24 February 2023 a capital management framework designed to ensure high and reliable capital returns supported by a strong but efficient balance sheet. Under the framework, Sampo will return ongoing surplus capital generation from its insurance operations through an insurance dividend. Other forms of surplus capital generation, including possible proceeds from disposals of financial investments, are returned through additional dividends and/or buybacks, to the extent that the funds are not utilised to support business development. Sampo targets a Solvency II ratio of 170 per cent – 190 per cent and financial leverage below 30 per cent.
According to Sampo plc’s Dividend Policy published on 6 February 2020, the total annual dividends paid will be at least 70 per cent of Sampo Group’s net profit for the year (excluding extraordinary items). For this purpose, “extraordinary items” are defined as accounting items related to the sale of Nordea shares during 2023 and the change in Sampo Group’s ownership in Nordax Bank AB.
The parent company’s distributable capital and reserves totalled EUR 8,565,347,307.19 of which profit for the financial year 2023 was EUR 2,639,015,210.13. Based on the policies outlined above, the Board proposes to the Annual General Meeting that a total dividend of EUR 4.10 per share be paid to all shares except for the shares held by Sampo plc on the dividend record date of 20 May 2023. The total dividend includes an insurance dividend of EUR 1.70 per share as well as the dividend of at least EUR 2.00 per share that management indicated it will propose in connection with the sale of Nordea shares on 26 October 2023.
As earnings per share excluding extraordinary items amounted to EUR 2.86 per share, the payout ratio for the total dividend equates to 143 per cent. The remainder of the distributable funds are left in the equity capital. After adjusting for the proposed dividend, Sampo Group’s 2023 year-end distributable funds amounted to EUR 6,323 million, Group Solvency II coverage to 185 per cent and financial leverage to 27 per cent.
Dividend payment
The dividend is proposed to be paid to the shareholders registered in the Register of Shareholders held by Euroclear Finland Oy as at the record date of 20 May 2023. The Board proposes that the dividends be paid on 31 May 2023.
Financial position
No significant changes have taken place in the company’s financial position since the end of the financial year. The company’s liquidity position is good and in the view of the Board, the proposed distributions do not jeopardise the company’s ability to fulfil its obligations.
SAMPO PLC
Board of Directors
Sampo Group’s Financial Statement Release for January–December 2023 is attached to this release. The unabridged Financial Statement Release is also available at www.sampo.com/result.
For more information, please contact
Knut Arne Alsaker, Group CFO, tel. +358 10 516 0010
Sami Taipalus, Head of Investor Relations, tel. +358 10 516 0030
Mirko Hurmerinta, Investor Relations and Communications Specialist, tel. +358 10 516 0032
Maria Silander, Communications Manager, Media Relations, tel. +358 10 516 0031
Conference call
An English-language conference call for investors and analysts will be arranged at 4 pm Finnish time (2 pm UK time). Please call tel. +1 631 913 1422, +44 33 3300 0804, +46 8 5664 2651, or +358 9 8171 0310.
The conference code is 78754047#.
The conference call can also be followed live at www.sampo.com/result. A recorded version will later be available at the same address.
In addition, the Investor Presentation is available at www.sampo.com/result.
Sampo will publish the Interim Statement for January – March 2023 on 4 May 2023.
Distribution:
Nasdaq Helsinki
London Stock Exchange
The principal media
Financial Supervisory Authority
www.sampo.com
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