January-June 2024 results – Q&A

The first half of 2024 saw continuity of strong top line growth and solid underlying development, supplemented with robust investment returns. However, this was partly offset by challenging Nordic winter conditions in the beginning of the year and an elevated large claims outcome during the second quarter.

Profit before taxes increased by 26 per cent to EUR 909 million (722) in January-June 2024, as the strong performance in the UK and increase in net financial result offset lower underwriting profit in the Nordics. In the second quarter, profit before taxes increased to EUR 444 million (363).

Earnings per share amounted to EUR 1.30 (1.13). Operating EPS increased by 2 per cent to EUR 1.09 (1.07), driven by investment returns and capital management actions. In the second quarter, EPS amounted to EUR 0.62 (0.60) and operating EPS to EUR 0.59 (0.56).

The Group combined ratio was 85.8 per cent (83.8) in the first half and 84.4 per cent (83.5) in the second quarter. Following the first half result, Sampo has maintained its 2024 outlook for a Group combined ratio of 83–85 per cent.

The Group top line growth amounted to 11 per cent on a currency adjusted basis in Q2. What were the main growth drivers?

The growth was supported by all business areas, but particularly the UK, where we achieved 22 per cent top line growth on a local currency basis.

The Nordics saw 6.7 per cent growth on a currency adjusted basis, driven by positive development in all business areas. In our largest business area, Private, currency adjusted growth remained robust at 6.2 per cent on the back of strong growth in key areas such as personal insurance and property, and continued high retention.

Within our corporate lines, Commercial stood out with 8.4 per cent currency adjusted growth, supported by strong 8 per cent growth in SME and increased digital sales. Industrial grew by 6.0 per cent on a currency adjusted basis, driven mainly by pricing.

In the UK, top line growth was supported by policy growth in both motor and home, while the large price increases taken during the second half of 2023 in response to significant claims inflation continued to earn through the P&L. Motor policies grew by 2 per cent and home policies by 26 per cent year-on-year, driving a total policy growth of 6 per cent.

How did Sampo’s underwriting profitability develop in Q2?

The underlying margin trends remained positive during the second quarter, driven by positive development across the Nordics and in the UK, only partly offset by a weakening in Topdanmark. In total, the Group underlying combined ratio improved by 1.9 percentage points year-on-year, reflecting our constant focus on underwriting discipline.

However, after favourable large claims experience in the beginning of the year, the second quarter saw an elevated large claims outcome affecting our corporate businesses and partly offsetting the positive underlying development. The large claims outcome was driven by several large property claims, of which one was publicly known: the fire in Børsen-building in Copenhagen in April. In total large claims had 2.7 percentage points negative effect on the Group combined ratio. 

As a result, the reported combined ratio softened to 84.4 per cent (83.5). Despite this, the Group underwriting result increased by 5 per cent to EUR 321 million (306), as the effect from lower margins was offset by continued strong top line growth, particularly in the UK.

How did the claims inflation develop in Sampo’s core markets?

The second quarter saw no material changes. In the Nordics, claims inflation stood stable in the lower part of the 4-5% range as property claims inflation remained moderate, while motor claims inflation was at somewhat elevated level.

In the UK, we continued to observe a moderate slow-down in motor claims inflation, albeit from an elevated level.

How did Sampo’s investment portfolio perform in Q2?

Our investment portfolio saw another quarter of robust returns, supported by higher interest rates and solid equity market development. The net investment income increased by 69 per cent to EUR 183 million (108). Of this, EUR 123 million accumulated purely from recurring interest income, representing 11 per cent growth from the prior year comparison period. 

Year to date, our investment return stood at 2.8 per cent, driven by 1.8 per cent return from fixed income and 15.3 per cent return from equities. We continued to gradually reinvest our fixed income portfolios into higher yields. During the second quarter, If invested EUR 398 million at an average deal rate of 5.9 per cent.

What are the next steps of the Topdanmark exchange offer?

Sampo has received all the regulatory approvals for the offer and got green light from the Extraordinary General Meeting held in July. 

The offer period is expected to start on 9 August 2024 and to expire on 9 September 2024. However, Sampo reserves the right to extend the offer period. Settlement and completion of the offer are expected to occur during September.

The pre-tax run-rate synergies from the completion of the Topdanmark offer are expected to be EUR 95 million by the end of 2028. How confident are you with the delivery of these synergies?

We have been shareholders in Topdanmark since 2007, meaning we know the company very well and have a good view on potential synergies, which limits the execution risk. We only set targets that can be delivered.

In the second quarter of 2021, we communicated that we had identified EUR 45 million run-rate pre-tax benefits through the Hastings and If collaboration and capital management, and that these would realise within 3 years. Today we are happy to inform that the original run-rate has been achieved according to schedule and that additional benefits have been identified and expected to realise in 2024-2026.

Mirko Hurmerinta
IR Manager, Sampo plc