Good morning, everyone, and welcome to this call on the recommended offer to Topdanmark shareholders that we have announced this morning. My name is Sami Taipalus, and I am Head of Investor Relations at Sampo Group. I'm joined on the call by Sampo Group CEO, Torbjörn Magnusson, and Group CFO, Knut Arne Alsaker. 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.
Thank you, Sami, and welcome, everyone. Sampo has been a shareholder in Topdanmark for a considerable time, and over the last few years, our respective strategies have converged to two high-quality non-life insurers. At Sampo, we have sold our Nordea stake and demerged Mandatum, while Topdanmark has sold its life company and acquired Oona Health. All along, both parties have continued to show very, very stable insurance results based on very similar corporate and underwriting cultures. Digitalization and web service has been a common theme in all Nordic countries, even though the tempos have differed a bit, with Finland and Sweden leading the way in this respect. It has become gradually more important to have the size to be able to invest, the ever-increasing amounts in all aspects of IT, technology, digitalization, and AI.
Consequently, the rationale for Sampo to acquire the remaining half of Topdanmark has become gradually stronger. The expected synergies have increased. It is also a fact that affinity agreements of many types are important in non-life. Also, many of these have, over time, become Nordic, as many of our counterparty vehicle organizations, banks, and others are now also Nordic. Sampo's organization in Denmark is small in this context, and acquiring all of Topdanmark would strengthen us jointly in these competitions. The fully share-based offer we announced today gives Topdanmark's shareholders an attractive 27% premium to spot and an opportunity to take part in the future synergies and value creation. The run rate of identified operational synergies is EUR 95 million per annum. For Sampo's shareholders, the synergy creation leads to reasonable acquisition multiples at 13x earnings and the possibility to further simplify the structure of Sampo.
In parallel to this offer, we start a buyback program in two steps of EUR 800 million, including the amount for a potential squeeze-out. We're also able to upgrade the deployable capital target for the planning period of 2024 to 2026, based on the actions of the last two months and the capital generation from Topdanmark. On the next slide, the strategic development is depicted on the left-hand side and the size of our Nordic operations on the right-hand. With almost EUR 7 billion of premiums, Sampo will also be big in a European comparison, and the ownership in Topdanmark would unlock synergies in the Nordic market, which is maybe not quite a one-country market, but in many, many respects, very close to one. For Sampo, we will now have an extremely simple four-divisional structure. I have already mentioned that this is a synergy-based offer several times.
Obviously, after a number of years working alongside each other and after a thorough process leading up to this offer, we have a firm grip on exactly which the synergies are, what investments are needed, and the timings. In the tradition of Sampo, we have aimed not to exaggerate or to speculate. Volume synergies are supported by the fact that we have very different businesses in Denmark, where there's no need to reduce exposures to any line. Sampo has its highest Danish market share in industrial lines, which is a segment Topdanmark doesn't write at all. Another aspect of the fact that we know each other so well is, of course, that there has seldom existed a merger or an acquisition that has been more expected or where the risk levels are much lower than this.
Finally, it's worth pointing out that even if we together have a very substantial Danish market shares, there would still be more to do. We would not, just summing our market shares up, be even the biggest insurer in Denmark. To become and to be an owner as a shareholder in the combined entity would have a number of advantages deriving from the synergies, but also from Sampo's scale in general. Sampo, of course, almost by definition, has a stability stemming from diversification that no one country insurer can achieve in the Nordics. Sampo's share obviously has much higher liquidity than Topdanmark, and in conjunction with closing this transaction, Sampo would aim to obtain a listing also in Copenhagen.
In the operations, Sampo can provide Topdanmark with experiences from the early mover countries when it comes to digitalization, as I already mentioned, and support the developments with a bigger investment budget. I note as an aside that If P&C has been able to avoid capitalizing any IT development on the balance sheet. So finally, in this introduction, a few numbers. We naturally would have to increase our deployable capital target for the planned period as the rest of Topdanmark's earnings will be added now. Further, after the PIM approval and the new solvency range, we are able to announce a buyback program in two steps of EUR 800 million to be adjusted for the potential squeeze-out following from this transaction. Finally, we uphold the operative EPS growth target, but note that the transaction and corresponding capital actions would give an uplift of some 6% with run rate synergies.
I am, of course, very pleased that we have now come to a point where it's natural for us to suggest to all Topdanmark's shareholders to combine our operations in full. We can do this in a way that would be beneficial to Topdanmark's customers and employees and consequently create a lot of value. Our proposal releases a significant portion of that value immediately in the form of Sampo shares, but also promises future joint value growth. With that, back to Sami for questions.
Great. Thank you, Torbjörn. Operator, we're now ready for the Q&A.
Thank you, sir. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star one on your telephone keypad. If you wish to cancel your request, please press star two. Again, it is star one to ask a question. Now, the first question comes from Tryfonas Spyrou from Berenberg. Please go ahead.
Oh, hi there. Hi, Torbjörn. Thank you so much for the opportunity and the presentation. I guess the first question relates to the synergies. In your opening remarks, you mentioned that the expected synergies have increased the last couple of years. Can you maybe share some more of your thoughts on which synergies precisely have increased? And I guess related to that, I think the IT cost and the streamline there is a big part of the cost synergies. I know that obviously. Topdanmark and If in Denmark have different sort of IT systems. Can you maybe elaborate on what you're planning to do there? The second question is on the capital side. I was wondering if you can maybe share some of your thoughts on how much capital relief you're getting under the PIM with the Topdanmark sort of SCR now.
How much of that sort of can be directly away given the relatively low overlap in sort of the national lines, etc? Thank you.
On the synergies, there will be synergies in a number of areas, of course. One is IT in the broadest sense, and that's the biggest part. Then we will have some head office duplication that we can avoid, and also in the general area of procurement and similar. That's on the cost side. On the volume side, I described the situation especially with affinity agreements. When it comes to digitalization, the Danish market has been the slowest to move over to web service and web sales, and we can then offer the experiences from the faster markets in this respect to Topdanmark and maybe speed up the development of the various systems.
You quite rightly point out that If, in general and in Denmark, has different systems than Topdanmark, and we will, of course, make a choice to use the best possible systems for all different lines of business going forward and not duplicate unnecessarily. That is a process that will start as soon as the offer is accepted.
And just to add that, Torbjörn, on the system side, of course, the IT development work that Topdanmark so far has done is supportive of creating synergies, while there will be some cost avoidance in other parts of the business on the commercial side, which, of course, is helpful with what If already have done on a pan-Nordic basis. On the capital side, just to be clear, capital synergies is not included in the EUR 95 million, nor is it netted off the integration costs. That will be an addition. However, given the fairly capital-like nature of Topdanmark as a whole, and also the fact that we already include half of, or technically even a bit more than half of the capital requirement in Topdanmark, the SCR benefits will be small.
We haven't stated a number, and it depends on the internal model, the group internal model, which we will expand to cover Top. But I would say it would be very low single digits of the current group SCR.
That's okay. Thank you.
As a reminder, to ask a question, please signal by pressing star one. The next question comes from Ulrik Zürcher from Nordea. Please go ahead.
Thank you for taking the question. I was just, you don't write about it, and I know it's probably years in the future, but are there any way here that you can get some capital synergies out of this down the line, for example, redeploy the capital to Denmark even, because to get the PIM applied Nordic, or should we just think about this as maybe own funds and SCR neutral-ish?
I think it's fair to say that we're not making this offer because of solvency calculations and capital synergies. So there's no additional plans other than what we currently have announced today. Just adding to that what I just said in terms of the fact that I believe there will be some capital benefits, although small, as I alluded to. And of course, that also reflects the fact that Topdanmark is a profitable business, which again means an internal model requires a limited amount of capital. And our Danish operation in total combined with our Nordic operation is also a very profitable business, which is not consuming a lot of capital in the current group model. But we will expand our group internal model that will include all of the Danish business.
There will be some additional benefits, and we'll come back to the exact number at a little later stage.
Thank you so much. Could you just, the cost of the share buyback program and the acquisition, how much capital will that cost you in terms of solvency percentage points?
You mean the EUR 800 million, not the cost as such. There is a slide in the investor presentation which highlights this. Give me the page number just to reference that, Sami, for everybody's benefit.
It's slide 23. You've got both the solvency and the leverage.
Thank you. Going back to your question, we have here first a benefit from the partial internal model. So when you deduct the reduction in the own funds from the announced capital deployment today, you need to start at a higher level than the pro forma 180%. You need to start at shy of 200%, which illustrated on page 23, as Sami pointed us to in the investor presentation. From that level, there will be a deduction of 26%, which is the full EUR 800 million, not only the EUR 400 million buyback, which we will start tomorrow. That will land you just above 170%.
Okay, great. Thank you.
Our next question comes from Youdish Chicooree from Autonomous Research. Please go ahead.
Good morning, everyone. I just got one question, please. If I could come back on the synergies you've communicated this morning, I believe your EUR 95 million of pre-tax synergies are to be achieved by 2028. I was just wondering, what is the timeline for achieving? How is that spread over the next few years? Let's say by 2025, how much of that can you achieve? Thank you.
Basically, a large proportion of it will be realized by the end of 2027, and Sami already in 2026. But the final, including all IT adjustments, etc., will be 2028, but a large proportion in 2027.
Right. Okay. So some of the acquisition multiple that you've disclosed on 2025, basically, in reality, there won't be much support from cost synergies at that point, right?
I'm sorry, I didn't catch the question. The line is actually terrible.
I think you disclosed an acquisition multiple of 13x 2025 earnings based on, I guess that is based on the full EUR 95 million of run rate synergies, right?
You're asking about the amount of synergies that come true in 2025, if we hear you correctly.
That's correct.
Yeah.
Yes.
In 2025, it's a really small part of the total run rate synergies. There is a slide in the investor presentation on page 15. We haven't put an exact number on that, but it's a small part that will be realized in 2025, building up to full realization in 2028.
As I said in my introduction, we will, of course, spend a lot of energy trying to speed this up and finding further synergies than are in the package. But we avoid to speculate, as usual, as Sampo and 2025, as you realize, this is a lot to do with IT and business relationships that is just not feasible to realize in that short time.
Okay, thank you very much for the clarification.
Thank you. As a final reminder to ask a question, please signal by pressing star one. I will pause for just a moment to allow you to signal. There are currently no further questions in the queue.
All right. Well, in that case, thanks everyone for your attention, and we look forward to hearing from you soon again. Thank you. That closes the call.