Good morning, everyone, and welcome to the Sampo Group Fourth Quarter 2024 conference call. My name is Sami Taipalus, and I am Head of Investor Relations at Sampo Group. I'm joined on the call today by Group CEO, Torbjörn Magnusson, Group CFO, Knut Alsaker, and CEO of If, Morten Thorsrud. 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 you, Torbjörn. Please go ahead.
Thanks, Sami. In 2023, we had 11% growth as a group, with good positive development of the underlying profitability. In 2024, we now show 12% growth and again good positive development in the combined ratio adjusted for volatile items. Underwriting profits are in total over two years up by some 28%, and we have become a significantly bigger group. In the Nordics, we grow successfully in the businesses we call operational ambitions, which make up some 40% of If P&C. We keep up the momentum and actively manage the portfolio also in other lines. In the U.K., on the back of the well-timed rate hikes in 2023, this year has been a tremendously positive year with 12% policy count growth and an increase in the underwriting profit that you almost never see in non-life, especially not combined with growth.
The Nordic market has remained rational, with claims inflation easing very, very gradually. There's a little bit of variation between the countries, but our pricing reflects this, and we have roughly the same underlying profitability in all countries. We address the opportunities we see based on digital capabilities and advanced pricing techniques. For the Nordics, also, we have completed the important corporate one-to-one renewals very successfully and been able to keep up the good momentum. Then in the U.K., the market has had a really difficult job predicting where claims inflation and frequencies will end up after the unusually volatile periods 2022 to 2024. So far, the market is following frequencies down in a logical and balanced way and very gradually. Also here, we address opportunities we see based on digital capabilities and advanced pricing techniques.
Finally, 2024 was a landmark year strategically for us as we completed our structural simplification journey and finally acquired the minority interests in Topdanmark. In the summary page, it only remains to mention the dividend proposal of EUR 1.70 per share, which is up 10% on last year's regular dividend and which I expect will be supplemented with buybacks later in the year as we have no reason to hoard capital. On the next slide, we show the top-line growth, which continued to be excellent in the fourth quarter on the back of the long-term investments in digital and AR capabilities and also rational market conditions. Private stands out with 8% currency-adjusted premium growth in the quarter. This growth comes partly from personal insurances and property, which grew by 14% and 7% respectively.
However, supportive conditions in Norway and Denmark also provide a more general tailwind for Topdanmark, where growth was 11% in the quarter and for our Norwegian operations in general. Private retention remains very high and stable at 89%, and to complete the picture on private, I'm very pleased indeed to be able to report that we have recently renewed two of the largest motor insurance distribution arrangements in the Nordic markets, thereby confirming our dominating position in the region for quite a long period. One comment here also on the U.K. on this slide. Market rates are gradually adjusting to the lower loss frequencies, as already mentioned, and we are, of course, our usual disciplined selves in the face of this.
Despite having said that, though, we've been able to add 84,000 policies in the quarter, mainly with growth in new or relatively new products such as telematics, bike, van, and home insurance. Since the reason for our success is not aggressive pricing anywhere, Nordics or the U.K., we expect to continue to grow, and we are for the first time giving a revenue growth outlook. The exact balance between margins and volumes depends, as always, on the opportunities in each segment, in each market, and our target is always to maximize underwriting profits and value creation. Briefly about the start of the year on this page. As in most parts of the world, this is a big renewal date, and we have basically been able to do exactly what we wanted.
Rates are adequate, Norway is very disciplined, and we have continued to de-risk the peak exposures in our property book. As you can see from the bottom right-hand graph, the exposure to our top 50 property exposures is down some 40%. The market has accepted this, and of course, it further limits the available capacity in the Nordic region and supports upward rate pressure. Finally, we were able to renew the most important reinsurance covers at good terms and with pricing to the primary market reflecting this in the one-to-one renewals. In many of our investor meetings for the past two years, we have received questions on rates and other developments, claims inflation in Norway.
In the past two reports, we have shown material first on the Combined Ratio for personal lines, which is for us not deviating negatively from other Nordic markets, and then on the performance for customers with electric vehicles, which again is not deviating from combustion engines for us. I think it only remains this time to show that we obviously have an opportunity at present in Norway where we're gaining customers, shown in the middle graph, that are staying with us, left-hand graph, and where online sales is becoming increasingly important, right-hand graph. We can only conclude that our pricing for Claims Inflation has been adequate and accurate and that our offering to the clients is well appreciated and the digital investments play out well also here. Topdanmark. 2025 will be something of a work in progress year when it comes to Topdanmark integration, I think.
Obviously, it was critical to get a new Nordic leadership team in place, which we have in a way that gave our combined Danish operations the best support for the customer work in Q4 and now in Q1. I'm very happy indeed that this has worked out with even more enthusiasm and better results than we expected. When it comes to synergies, we have incurred the announced integration costs in Q4, split between If and Topdanmark roughly equally. Since much of the synergies are IT or large process changes, we will see a limited amount realized in 2025, but this is exactly the same way we have worked with cross-border synergies always for decades. Formally, Topdanmark as a legal entity will cease to exist around about mid-year. Then we come to the part of the year when it's time to discuss what to do with the profits.
We have no potential acquisition targets in sight that would make sense for what remains of this planned period, and growth capital consumes a very small part of the profits. Thus, we should and we will return the majority of the profits to our owners. We also consider buybacks to be an efficient way of returning capital and a way that many of our shareholders now view positively. With these statements, capital returns become more of a timing question than anything else. We follow our path from the last few years with a stable, non-decreasing regular dividend supplemented with considering a buyback program every 12 months or so after the AGM. So I consequently expect us to launch a buyback program during the year, perhaps after gaining more clarity also about a disposal of part of our PE investments. So summarizing and looking ahead.
Our strategy for the coming period is steady growth in underwriting profits. Nothing has changed in that respect since the CMD last spring. The strategy with a bigger growth effort than in the past is based now on several years of investments in distribution and efficiency, and we have three years of attractive growth in the U.K. and in the Nordics. Secondly, we have strong one-to-one corporate renewals and solid growth in private and in Hastings in Q4, so we start the year with optimism and energy, and we give an outlook that better reflects the present targets than the old model with only combined ratios, so the outlook now says net insurance revenue of EUR 8.7-9 billion and an underwriting result of EUR 1.35-1.45 billion.
The upper point of these ranges reflects a strong result of our actions combined with good but not exceptional claims outcome. The lower points, more challenging markets and some adverse claims experience, and of course, we have kept our culture of using conservative targets, especially at the beginning of the year. We enter the year in excellent shape, following strong growth in the fourth quarter and with an attractive pipeline of opportunities and the synergy potential from integrating Topdanmark, and with that, Sami, we open up for questions.
That's right. Thank you, Torbjörn. Operator, we're 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 six on your telephone keypad. The next question comes from Ulrik Zürcher from Nordea. Please go ahead.
Thank you. Sorry. Thank you for taking my question too. Just Norwegian repricing versus claims development is clearly a very attractive situation, but are there other products or countries in the Nordics where you see signs of the same dynamics playing out in the future? I mean, just that it's earlier now in the repricing cycle, for example, Motor Denmark, Motor Sweden, or any other flavor on that. And then just a short one. For the PI growth in customers, is that mainly cross-selling or are you going out finding new clients? Thank you.
Yes. Morten, I'll take your questions on these ones. Repricing, yes, it's clearly higher in Norway than in other Nordic countries, but we see also Denmark coming up quite a bit during 2024 and also into 2025. In Denmark, we have the index that sort of more or less the whole insurance industry is using. That index is now above 4%, so that gives quite a lot of support in itself, and then most companies have price actions on top of that, and we do see also price increases coming up a little bit in Sweden, but Norway is definitely sort of leading here in terms of price increases. When it comes to PI, it is typically a cross-sell product, so one really benefits from having a large customer base and good modern distribution, so it's typically a product that we cross-sell to existing customers.
All right. Great. Thank you.
The next question comes from Hans Rettedal Christiansen from Danske Bank Markets. Please go ahead.
Thank you for taking my question. So I was wondering about three questions. The first one was on your guidance for insurance service results for 2025. What are you assuming in terms of the Swedish new car sales market in that guidance? And the second one also linked to that is on Hastings, how we should think about the mix between price and volume growth here going forward?
Yeah, I could just comment on the Swedish new car sales. We expect a small increase in new car sales in Sweden. However, that will not impact the insurance service result immediately and not to any sort of bigger extent sort of first year. So that we do expect a small sort of increase in new car sales in Sweden. Hastings, I think you have a good indication from the past because we have not grown with the same percentage every quarter, every year in Hastings. That varies quite a bit depending on the opportunity that we see. So we have good growth. We have had exceptional growth maybe in the past year, but we have also been able to introduce new products. So if you look at the home insurance development, that's been really, really powerful.
If you look at the development of telematics lately, that is also an area where we have a very strong situation. So I don't expect the growth in Hastings to be the same every quarter, but we're in a good situation at the moment.
Thank you, and then my final question was just on perhaps it's just reading too much into the wording, but in Q3, you said the motor claims inflation remained at somewhat elevated levels, whereas now you're saying that it's continued to be above historical averages. Is there any significance in that change in rhetoric, or is it just sort of mere semantics?
There's no significant change.
Okay. That was all for me. Thank you very much.
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Hi, this is Youdish from Autonomous Research. Good morning, everyone. I've got two questions. The first one is on the growth you're achieving in Norway. I think the GWP was up 11% here on year in Q4. Could you give us a sense how much of that is just pure volume growth versus rate? And presumably, if you could tell us whether this actually is in 2025, that's the first question. And then secondly, I was wondering if you could be a bit more precise on the price increases you're putting through in the various markets and for key lines like motor and property. Thank you.
It was a little bit hard to hear your first question, but I understood it was definitely about growth in Norway and sort of balance between volume and pricing. Most of the growth that we see in Norway is coming from pricing, but then we do see that we have also growth in terms of number of objects in some lines of businesses, but most of the growth is coming from pricing. Price increases, as I already commented a little bit earlier in the call, are clearly higher in Norway than in other Nordic countries, so I hope that answered your question, but it was a little bit hard to hear what you said precisely.
All right. Thank you very much.
The next question comes from Jan Erik Gjerland from ABG. Please go ahead.
Hello, Jan Erik Gjerland from ABG. I have a couple of questions as well. The first one on inflation on the motor side, where you sort of alluded to that the inflation is more sticky. Is it the average claims inflation that is sticky, or is it also frequency that is sticky? You mentioned that Denmark come off a little bit also in the U.K., but how is it in Sweden, Finland, and Norway when it comes to frequency versus claims inflation growth on the motor side?
Yeah. I think frequency development is very much the same story that we talked about earlier. We have seen a gradual normalization of frequencies after COVID. It's taken some time, but we've seen a gradual sort of return to normal frequencies as we see it. And then that goes for all countries. Then, of course, some countries have been more affected by weather, in particular Norway, so that, of course, you have to factor in as well. But we see that the frequency development is very much in line with our expectations in all Nordic markets. When it comes to claims inflation, it is still higher than what would be sort of a normal level in motor.
So yes, it is more sticky, and it's basically the same in all countries, which, of course, is not the problem as long as we are able to price for this and we are able to price for this fully. Then I think we also commented earlier that we have more visibility now really on inflation with sort of long-term agreements and sort of a more stable development. So I would say it's less of a concern than what it would be sort of a couple of years ago.
Okay. That was that. Then one on Hastings or Tob Hastings. Firstly, you probably renegotiated the reinsurance part of the quota share in Hastings. Is that still stable from last year, or is it coming off, meaning it's going to be lower for 2025? And secondly, on Hastings, the product profitability between motor, home, van, bikes, and these telematics, how should we read that growth or premium growth versus the profitability in these sort of four, five, six products?
The reinsurance quota share has been cut by 5% from 30% to 25%. The product profitability for all products has improved greatly during 2024 and, by and large, similar now for all products.
So no particular product that sticks out in that sense?
I mean, the normal motor portfolio is so much bigger than the others that that's more important, but in terms of profitability, nothing stands out.
Okay. Finally, on share buyback, did I hear you correctly that you will announce anything around the AGM or the CMD?
Management expects us to announce a buyback program, and that will definitely be after the AGM.
After the AGM?
Yeah, but I mean, then it'll depend on a number of other factors, including the PE portfolio development.
Of course. So more in line with your sort of first quarter results than on the 7th of May or something?
I think it's more in line with last year's commitment to review this every 12 months.
Okay. Perfect. Thanks a lot.
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Hello, good morning. This is Amelia from Deutsche Bank. Thank you so much for taking my questions. I have three if that's okay. First on If P&C and prior year releases, I was just wondering if there's any sort of anything new on reserving and releases and how we should think about that going forward. Then second on capital generation and deployment, I noticed a line that sort of read something like opportunities to be explored, including broader use of the PIM. Finally, I think you have a senior bond coming to maturity in 2025, and I was just wondering how you're thinking about this and any potential refinancing conditions. Thank you very much.
Okay, Morten here. I'll start with the first one, and then I'll hand over to Knut Alsaker on the last two. On the prior year releases, yes, it's been a little bit elevated in this quarter. Do remember that we have run-off of the risk adjustment included in the run-off gain. Then, in addition to that, we had some positive movement on some older claims and then a bit of gains on some long-tailed business. This is clearly about what we expect to be a normal level going forward, of course, but we saw favorable development in Q4 and also in 2024 in total on the run-off gains.
And just to add on, Knut Alsaker here, and just to add on reserves in general, the group has a comfortable reserve position and balance sheet also at the end of this quarter, naturally, as we always strive to have. In terms of capital, there's a couple of things we can do in terms of broadening the use of our partial internal model. One is to extend it to our larger Danish business, which currently is on a standard model on a group level. That's one. And the second is to extend it to our U.K. business, which also is on a standard model and which was a disproportionate driver of operational capital requirement in 2024, given the strong growth we had in the U.K.
That would have been lower on a partial internal model, and also the total capital requirement would be lower, and additional diversification benefits would be brought into the group partial internal model. So that we will work on over the next couple of years, both of those. In terms of the senior bond, we have the remaining part of a senior bond where we have done some liability management earlier. I think it's about EUR 162 million or so. Whether it's a call end of February, I expect us to sort of call that bond.
And then in terms of refinancing or capital debt capital structures going forward, it would be natural for us if we wanted to change anything compared to what we have today to use Tier 1 RT1 as a part of our overall capital stack, where we basically have very limited use of that asset class that we have some in our subsidiaries, but it's minor. To use that as a part of our capital stack going forward, we are basically full on Tier 2.
Thank you. The next question comes from Anthony Yang from Goldman Sachs. Please go ahead.
Hi, good morning. Thank you for taking my questions. The first question is in If P&C. So we have seen the price increase at 5%-6% versus claims inflation 4% for two consecutive quarters. Could you give some color in terms of the quantum of the combined ratio improvement year on year into 2025, please? That's kind of baked in your guidance. And the second question is on Hastings. Could you give an update on what is your current APR for your premium financing products, and do you have any views on the FCA market study on the premium financing product? Thank you.
I'll just quickly answer the Hastings question. I don't have the actual number, but we are now exactly mid-market, midpoint, middle of the market on the APR. Morten.
Yeah. And on underlying improvement on If, yes, we are continuing to price ahead of inflation. In 2024, we improved the underlying combined ratio by first 30 basis points on the risk ratio side and then 30 basis points on the cost ratio side. So in total, 60 basis points improvement in the underlying combined ratio of If. And I think that is reflecting a little bit sort of, again, the fact that we have been pricing ahead of inflation now for some time.
Thank you. Can I follow up again on the core? Have you increased your net cat budgets in If P&C going forward in 2025?
No, not in a substantial way. This is not changing from one year to another. Over a longer-term period, sort of 10, 20 years, yes, definitely. But from one year to another, it's not a huge change.
Maybe, Morten, if I may, net cash for us in the Nordics is a very small part of the premium. This is not a substantial part of the normal premium here.
Absolutely, which is important to bear in mind.
There's nothing that has changed in terms of our consideration of last year's winter being a much more rare event than a normal winter, which we currently are experiencing.
Thank you.
The next question comes from Jaakko Tyrväinen from SEB. Please go ahead.
Good morning. Jaakko here from SEB. Thanks for having my question. Actually, just one left at this stage, and then follow up on the guidance and your underwriting guidance range. Could you elaborate a bit what kind of weather effects and the run-off effects you are expecting in this guidance? Some kind of a bit of color on the kind of these moving parts that you report.
In terms of weather across all markets, normal weather, which means that there would be normal seasonal variations between the quarters, and in terms of prior year, normal prior year development, which broadly would be the risk adjustment effects in the P&L.
Okay. Thank you. That's all from my side.
Please state your name and company. Please go ahead.
Thanks. Good morning. This is Vinit from Mediobanca. I hope you can hear me. My two questions, please. One is just on the private lines where we see a 10% growth ex-Swedish mobility in the fourth quarter. Could you comment a bit? Is it mainly pricing, or is that a bit of surprise in some way, either through retentions or through any other means of surprise because it's a big number? And the second question is, please, on Hastings, and apologies if I should have known this, but in the 88.5% operating ratio, I think there's a continued mention of a cautious approach. Please comment on that or quantify that approach. Thank you very much.
Okay. I'll start with the development in private lines. Yes, we do see strong growth momentum both throughout the year and in particular also in Q4. Most of this is price-related, but we also see underlying growth in terms of property and also the PI products, and then motor has been more a negative story in terms of policy development, in particular driven by, again, low new car sales in Sweden, then the retention rate has gone down marginally over the last couple of years, but we've seen now a change in that trend, and we see a slight increase in retention rate over the last six months or so, so that is also, of course, supporting growth in business area private. I'll give you the actuaries' answer to Hastings.
The probability of the reserves that we have set up this year meeting the liabilities going forward is extremely high, or in other words, it is very likely that we will see run-off gains going forward at some stage.
Okay. That's very kind. Thank you.
The next question comes from Alex Mackenzie from BNP Paribas Exane. Please go ahead.
Thank you for taking my questions. Mainly focused on the U.K., so I guess on U.K. motor pricing, do you think the market priced in the ordinary increase ahead of time, or have you seen an acceleration and softening since the announcement? And then just interested to hear your thoughts. Some investors think that the U.K. market consolidation we're seeing is bad for Hastings. What do you think? And then lastly, is there an ambition to move into other personal lines such as travel and pet at Hastings as well? Thank you.
So at the moment, no ambition to get into travel and pet. We have enough growth opportunities in the lines that we write in the U.K. The statement that the consolidation would be bad for Hastings is the opposite of what we think. And I think the opposite of the question that I normally get. Of course, we would like the U.K. market to become more consolidated, and we also hope that we would get some opportunities when consolidators are internally focused, but that's speculation on my part.
Ogden and the reinsurance renewals for that sake for parts of the market, they have been adjusted. The rates have been adjusted for that very quickly, as always in the U.K. I think maybe some of the bigger change in the U.K. is the frequency changes this year, the fact that the frequencies are significantly lower than in the past few years. That is what the market mainly has been adjusting to in, as I called, quite a rational way over the past, say, nine months.
Thanks. If I could just follow up on the frequency, do you have any sort of indication of what's been driving that frequency lower?
Lots of debate and speculation in the market. Let's not go into that too much. I mean, the factors that seem to play into this is speed limits in the U.K. have been lowered. The cost of living crisis has led to people using their cars more carefully and driving with less. Such things seem to affect this because it is certainly a market phenomenon that frequencies have come down, not only for us.
Thank you.
The next question comes from Henry Heathfield from Morningstar. Please go ahead.
Great. You can hear me. Thank you for taking my questions. Just a couple, really. One on the dividend. I noticed that you're just paying a regular this year of EUR 1.7 and no extra, and you're talking about doing a buyback later in the year. So I was just curious whether this is a shift away from an extra and just paying a regular or sticking to the kind of historical program. And then secondly, on the solvency range and financial leverage, I just noticed that the solvency has dipped down a bit. The financial leverage is up a bit versus last year. So I was wondering if there are any plans to kind of strengthen the balance sheet and how you're going to balance that with the buyback. Thank you.
On your first question, I think you're right to conclude that an extra dividend, which we have paid when we have done extraordinary things over the last two years, like reducing our stake in Nordea, is not something we're going to have as a standard part of our capital distribution going forward. The regular dividend is important, and we increase that by EUR 0.10, as you know, pay a dividend according to our dividend policy, and then what we tried to say, communicating about the buyback, is that that could be viewed as a more regular part of our total capital distribution going forward. In terms of our solvency ratio, there's absolutely no need to strengthen the balance sheet at 1.77 after accrued for the communicated dividend proposal.
That is well within the range and above the midpoint of our range of 1.50-1.90, which we have in our capital management framework. Neither am I worried about the leverage. It was well within the below 30% target on reported 31st of December figures. It will move close to that target when adjusting for the dividend. But of course, the dividend is paid in May, and before that, things will happen. We talked earlier on this call about a senior debt that has a call date before that. And of course, our outlook indicates that we will generate profit over the next four months.
Thank you.
The next question comes from Anthony Yang from Goldman Sachs. Please go ahead.
Thank you, and thanks for taking my follow-up questions. The first one is actually on the new car sales in Nordic. Thanks for your guidance on the expectation of a modest dip in 2025 in Swedish markets. Can I ask why is that assumption? What has changed there in the market? And then secondly, should we assume that a modest dip trend in new car sales overall in the Nordic markets? Thank you.
I guess we've seen a drop in new car sales in the Nordics from almost 900,000 in 2017 to 645,000 in 2024. In particular, we've seen a big drop in Sweden, which is the most important market for us when it comes to new car sales. I think one fact is just that new car sales have been on very low levels the last two, three years. Of course, eventually also the Swedish population will need to renew their car fleets.
Of course, this is also linked to interest rate development and perhaps more clarity on where interest rate is going. Of course, we are basing our assumptions on close cooperation with the car dealer industry in Sweden and sort of use a lot of the input and sort of estimates that they have for the year. When we now expect a slight increase in Sweden, it's based on dialogue that we have with the car industry in Sweden.
But just to be clear, we're not making a forecast for Swedish new car sales, and our outlook is not dependent on the development there.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
All right. That concludes the call for today. Thank you very much for listening.