Good morning, everyone, and welcome to the Sampo Group First Quarter 2025 Conference Call. My name is Sami Taipalus, and I'm Head of IR at Sampo. I'm joined on the call 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 Torbjörn. Please go ahead.
Thanks, Sami, and welcome, everyone. Our business is non-life insurance, which means that some quarters are exceptional, with large losses or a lack thereof, or harsh winters, or the absence of winter conditions. With our focus on mass markets, underwriting, and a strong balance sheet, we have been able to keep volatility also in such quarters low. However, most quarters have quite normal business conditions when we develop our tools, do customer work, and try to exploit whatever market opportunities we find with them. This is such a quarter. The main items for this quarter are thus, firstly, continued strong growth, both in the Nordics and the U.K., capitalizing on the digital tools that we have, and the corresponding increase in the full-year growth outlook by EUR 100 million.
Secondly, good underwriting performance in a slightly easier winter than average, continued improvement of the underlying risk ratio at roughly the same pace as for a long time, and a corresponding increase of the outlook for the underwriting result by EUR 50 million. Finally, a detailed synergy evaluation from the Topdanmark integration, not surprisingly finding more synergies than the quick one from the transaction, and a corresponding increasing of the cost ratio target to cut 40 basis points per year rather than the earlier 20. Turning to private Nordic business, as we have talked quite a lot about our digital capabilities in the past year, it is, of course, encouraging to see growth of 8.5% in private Nordic. Any concerns about market or customer behaviors changing for the negative with more remote distribution are completely allayed by our now increasing retention. Yes, increasing from 89%.
Yes, digital sales increased by some 20% since last year. We also increase this operational ambition for 2026 to EUR 175 million per year rather than the previous EUR 160 million. We clearly benefit from this shift in the market and continue the strong growth momentum we have now had for some three years. Our strongest growth comes from Norway, where the unusual situation with our peers seemingly needing higher rate increases than us persists. The results for our Norwegian business still indicate to us that no such need exists for our business. In the private business in the U.K., at this point in time, I almost indicated in the late autumn that our U.K. growth was likely to moderate.
Rates have indeed continued to decline slowly, but still in a quite rational way, with claims inflation also moderating now to a mid-single-digit percentage number, now close to the Nordics, actually, or to numbers from before the cost of living crisis. However, we are still able to write home insurance as well as bike and van profitably. We were helped by the GP reform to get the growth push in home, but we are careful not to grow into subsegments before we know how to price them properly. We now have some 777,000 home policies after Q1. Hastings has a long tradition as a company that exploits new technology skillfully, and Telematics is a more recent proof of this. You will see from the graph on the right-hand side on this page that an important part of our growth in the past 12 months has come from this product.
Our way of doing telematics is a bit different than many others in the market. We benefit from low-cost technology, but we have also designed a product so that loss-prone drivers are weeded out quickly, normally in less than 90 days from inception. Turning then to the synergies with Topdanmark, let me just first say that the integration work with Topdanmark has progressed very rapidly and smoothly. During the coming summer, the company will cease to exist as a legal entity. The new integrated organization has already now been in place for some time, and the management reports are no longer separate. Turning to synergies, it was pointed out by many that they seem to be on the low side when they were presented last summer. I said then that we present what we know, and when we know more, we present that.
This, I think you will recognize, is what we have always done in the past. Now, as promised, we have gone through a much more detailed exercise with the people that are to deliver these synergies, and we have laid out integration plans for IT for the next few years. We have also found more fast and simple synergies, like reducing broker costs for reinsurance or office integration, as illustrated by the left-hand and middle graphs here. Notable is that all the improvements are cost synergies, or the new synergies are cost synergies, not revenue ones. To get the full picture of our cost targets, I need to mention that we moved Topdanmark to If standards with full costing of IT expenses from now on, rather than capitalizing developments on the balance sheet and with inclusion of all Hulco costs in the cost ratio.
We prefer to have the full downward pressure on costs by including all of them in our various ratios, as we have always done. Synergies, as you will know, sometimes have a tendency to live a life of their own outside the P&L. To avoid that, we also raise our annual cost ratio target corresponding to this increase. Thus, for the next few years, our ambition will be to reduce the Nordic cost ratio not by 20 basis points per year, but rather 40 basis points per year. My final slide is a reminder of the first, but with numbers, as it were. We have produced Topdanmark synergies faster than originally planned. Digital sales have increased rapidly, and the competitive situations both in the Nordics and the U.K. have played out in our favor.
Furthermore, we had an okay winter, and we have had a good large cadence outcome in the first quarter. The impact on the outlook for 2025 is detailed on the slide. We now expect the net insurance revenue to increase to EUR 8.8 billion-EUR 9.1 billion, at the same time as the underwriting result expectation is now EUR 1.4 billion-EUR 1.5 billion, with both lower and upper end increased by EUR 50 million. Reflecting this, we now have a new AGM mandate for buybacks, and we'll return to this question in our Q2 report, hopefully also with some clarity on the future of NOBA. It's been a really strong beginning of the year, and I'm certainly excited about what we will be able to achieve for the rest of the year. With that, Sami, we open up for questions.
Yes, operator, we're now ready for the Q&A.
If you wish to ask a question, please dial number five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial number six on your telephone keypad. The next question comes from David Barma from Bank of America. Please go ahead.
Good morning. Thanks for taking my questions. Firstly, I wanted to ask about the portfolio measures you've been taking in Nordic commercial and industrial lines. How much progress have you achieved on this, and do you expect upline growth to remain a bit more muted for the rest of this year? Staying in the Nordics, the expense ratio was a bit higher in Q1 and up about 80 basis points compared to Q1 2024. Could you explain what drives this? Lastly, on the U.K., impressive results this quarter. Could you give some color on the sort of exit and year combined ratio you're achieving at this point, or at least how it's developed compared to 2024? Thank you.
Good. Morten here. I'll answer the two first ones. When it comes to the portfolio measures or de-risking in our large corporate business, the actions are close to being fully implemented now, as of 1st of May, actually. Some effect also into the second quarter, but more or less fully implemented. We started this mid-last year. It will still have an impact on volumes in industrial throughout this year and also a little bit into next year, as of course, the premiums are earned in sort of the 12-month period ahead. The actions are such more or less implemented as of now. When it comes to the expense ratio in the Nordics, we reported the proforma of 22.7 last year.
As Torbjörn mentioned in the introduction, we have firstly included a number of costs that Topdanmark had outside of the ISR, typically holding company cost that is now being included in the total cost ratio of If, bringing that sort of figure more to a 23. So that is sort of more 23.0. That is more the starting point. We report 22.9 as of first quarter, which means that the underlying development is according to the trajectory of delivering the 40 basis points improvements. We have some volatility from quarter to quarter. Of course, the synergies are not being realized in an equal manner over the quarters, and also some more cost in the first quarter due to high sales activity. That is on the expense ratio in the Nordics.
Finally, in the U.K., prices have followed the moderation of claims inflation down in a rather rational way. It is easier for us to compete on home insurance, where we have a lower market share to start with, or telematics, where we have a unique product rather than grow very quickly in our, let's say, big motor book. We are meeting the targets on the combined ratio as we've had from before.
If I should just add, Torbjörn on that, it's Knut Alsaker here. The margins that we are creating in the first quarter of this year is not driven by prior year gains. The preserved strength in Hastings is broadly unchanged this quarter compared to year-end.
Very helpful. Thank you.
The next question comes from Nadia Claressa from JPMorgan. Please go ahead.
Hi, yes, good morning. I have two questions, please. The first is just on pricing in the Nordics. You gave us some qualitative comments that rate increases are covering claims inflation. Could you just help us quantify this, please? How does this compare to the 4%? I think I'm just trying to understand the implications on the underlying margin development from here. Secondly, a quick one, hopefully. Are there any updates on the work you're doing around the expansion of the internal model? More specifically relating to Topdanmark, is this something we can still expect at the fourth quarter of this year at earliest? Thank you.
Price increases and inflation in the Nordics, perhaps start with inflation. Inflation is continuing to tick slowly down. Inflation now is slightly below 4% on the total Nordic level. We continue to price somewhat above that, so 5%-6% price increase on average. That is pricing and inflation in the Nordics.
When it comes to the internal model, the timetable is unchanged. Technically, we can't make an application before the merger between Topdanmark and our Swedish operating entity has happened 1st of July. The timeline is six months. At the very end of the fourth quarter is still our expectations.
Great. Thank you.
The next question comes from Youdish Chicooree from Autonomous Research. Please go ahead.
Good morning, everyone. Thank you for taking my question. My first question is, if I could go back on your industrial segment, could you, I mean, if we separate the underwriting or de-risking actions you're taking, can you give us a sense of what the underlying pricing and volume dynamics look like as my first question? Secondly, on Hastings, actually on personal motor pricing specifically, there's been suggestion that the pricing has stabilized. That was the end of Q1 and into April. Is that something that you're seeing as well? Thank you.
I'll start with the industrial segment in the Nordics. Price actions are still being implemented in the large corporate book of business. We have still quite a fair amount of rate increases that would push premiums up. Obviously, the reason why we report zero on gross written premium and even negative on the earned is due to the de-risking. Rates continue to increase with still a fair amount in the large corporate business in the Nordics.
Sorry, could you repeat the second question? Because we heard motor pricing in Q1 and then the line broke down.
Sorry. Yeah, I was wondering whether there has been a stabilization in pricing. That was the end of Q1 and into April, please.
Pricing has come down during the first quarter. That is public knowledge and public data. The rate erosion since then, let's comment on that after Q2, because it is two short periods otherwise. Remember, this is after a very volatile period with extremely high prices. I think the market seems to be searching for the right level with the claims inflation that we are seeing now.
All right. Okay. Thank you.
The next question comes from Hans Rettedal Christiansen from Danske Bank Markets. Please go ahead.
Yes, hello, and thanks for taking my question. My first question was on the updated synergy realization in Topdanmark, and thank you for giving sort of the more detailed numbers for year-over-year. I was just wondering, compared to the EUR 95 million that you'd previously guided, how should we think about the updated number? Is that sort of purely driven by the cost side of those synergies, or is there also an updated expectation on the revenue side of the synergies? The second question related to that is, do you think there's more room as you kind of get to know the portfolio better to take out even more synergies, or is this a final estimate? My second question is on the written premium growth in Norway of 17%.
Can you maybe just decouple that into sort of volume and price effects and what you're seeing in the retention side in perhaps Norway specifically and not on the Nordics overall?
To you, Morten.
Yes. Synergies. Yes, the increase is coming from cost, and it's fair to say that we have focused on understanding the cost and the cost base at this point in time. Of course, as we learn more about the company, we find more areas where we can improve, where we can sort of learn from Topdanmark and where Topdanmark can learn from If. I think this is a good estimate of the synergies, but of course, it will never be a final figure. We will always learn more. When it comes to sort of revenue synergies, those are less tangible. That is also the reason why we have chosen to focus on the cost. I think speculating in revenue synergies, yeah, it comes with less certainty for sure.
Let's see in the future sort of how, for instance, when we introduce digitalization more clearly into the operations of Topdanmark, how that will play out in the market. When it comes to volume and price in Norway, a larger part of the volume increase in Norway is, of course, price-driven. Price actions in Norway are clearly higher than in the other Nordic markets. We are at the same time growing in terms of number of objects, number of customers in Norway, and in particular in Norway, actually. There is also an underlying sort of pure volume sort of component to this. Retention in Norway has been ticking up over the last few months. During Q1, it was more stable. Also for the other countries, retention has typically been ticking up over the last few months.
Over a quarter in total, slight increase in retention in the Nordic region as such.
Knut Alsaker here, just to add to Morten's comment on the synergies and manage expectations, we have just released a very healthy increase of the synergies of EUR 45 million from EUR 95 million to EUR 140 million. That is what you should expect us to realize up until 2028. As Morten says, to continuously work on cost efficiency also after 2028 is a part of the DNA. It is EUR 140 million we have announced today and no other number.
Okay. Thank you very much. That's super helpful.
The next question comes from Vash Gosalia from Goldman Sachs. Please go ahead.
Hi. Thank you for taking my questions. I have two of them, please. The first one on Nordic commercial. There you have highlighted some premium adjustments within the workers' comp line. I just wanted to get a sense if you could unpack that a bit further and explain what is your outlook in that particular segment. Also, if any comments that you could provide on Oona Health at this point. The second one, a bit more strategic, on U.K. motor. Given the consolidation that we are seeing in the U.K. motor market, are you expecting any change in competitive dynamics? If so, also, I mean, do you increase your appetite for M&A in the region? Thank you.
Good. I'll take the two first ones. When it comes to Nordic commercial, we are reporting a growth of 5.2, and we comment that we have a little bit of headwind from workers' comp adjustment premiums in Finland. That's kind of a one-off related to final invoicing of premiums for last year. One of the few areas where you have run-off effects on premiums even. That's adjustment premiums on workers' comp Finland. When it comes to Oona Health, good progress, excellent cooperation. We are starting now cross-selling Oona Health products not only on the Topdanmark portfolio, but also on the If portfolio. Oona is also looking into strengthening their expansion in Sweden. Good development and also continued good growth on the premium side of Oona.
Good morning. It's Knut Alsaker here. I'll take the U.K. motor question. We very much welcome the consolidation that is happening in the U.K. motor market and believe that that will extend the period of rational market behavior and our ability to compete in that market in a healthy way also going forward. Given the size of Hastings, which we have grown organically to be one of the top insurers and will remain one of the top insurers also going forward after the consolidation, we have the size to make the investments for the future in terms of technology that we need to have and still create good margins. There is no strategic need for us from that perspective to participate in consolidation. Of course, we always, in all markets, look at the opportunities that exist.
Our focus this period, as you know, is on organic growth and creating value of organic growth, which we are doing quite successfully without being disturbed by participating in consolidations other than the clearly value-creating acquisitions we made in Denmark.
Got it. Thank you.
The next question comes from Vineet Malhotra from Mediobanca. Please go ahead.
Good morning. Just three quick questions from me, please. One is on the retentions. I mean, do you think Sampo is doing something differently in the market because some of your peers are reporting that retentions are falling because of the big price moves? Do you think it's because Sampo has been more stable sort of in pricing? Just keen to hear your comments on that as a difference to the market. Second question is just on the Topdanmark synergies. You mentioned the costs, but also the claims, the EUR 25 million number. Could you just add a bit of color on? Is there a big jump in that? I presume there is. Why or how would you think the claim side would be also benefiting from the analysis you have done now? Lastly, a quick comment, quick question on new car sales.
We're obviously seeing some pretty big numbers around there. Norway, Finland, Norway up 40% +, Finland down about 10%. Just is there anything to note here? I know your main market remains Sweden on that, but just anything you're seeing in the car buying behavior? Also important because when there are more new cars, it affects the claims patterns as well. Thanks.
Some quick comments on these three items. When it comes to retention, retention is driven by, of course, providing good service and accurate pricing. I think if you are better at that, then the others then will have a good development. I think we've been good at both providing good service and having accurate pricing over time. Topdanmark synergies on the claim side, that's mainly procurement of sort of claims handling services. Using the typically in Denmark, sort of Topdanmark have a better purchasing power than If had as a small player. That gives us benefits on the claim side. When it comes to new car sales, it's somewhat up, slightly up on the Nordic level in Q1, but from very low levels. Yes, you do see some quarterly volatility in car sales in the various countries.
That's typically driven more by changes in car taxation sort of from one year to another, which is, for instance, why you see the effect in Norway. I think over a longer term, sort of car sales remain on a fairly low level in the Nordics, even though it's now increased with 8%.
Okay. Thank you very much.
The next question comes from Jaakko Tyrväinen from SEB. Please go ahead.
Good morning. It's Jaakko from SEB. Most of the questions have already been asked and answered, but I could touch on the prior year claims development, which was very muted during the quarter. [crosstalk].
He is now unmuted. Please go ahead.
Can you hear me now?
Yes, we can.
All right. Asking on prior year claims impact, which was very muted. Could you elaborate a bit what was driving this? Did you have some changes in assumptions, for example, and what should we expect going forward?
I'll take that. The prior year gain this quarter is broadly in line with what you should expect in terms of just the technical release of our risk adjustment reserving. Above that, there were not much prior year gains, which again means that we have during the quarter strengthened the reserve base in the group since we have not at all changed our way of reserving or assumptions in terms of the overall picture for the group balance sheet.
All right. Thanks. Another one on this recent Danish antitrust authority report. What is your interpretation on that one? Do you see, for example, risks of the Danish authorities to introduce similar rules that we saw in the U.K. market a few years back?
I think, first of all, competition is good in the Danish market. I mean, if you look at the number of players and how the market is operating, there is a good and sound competition in the Danish market, but also quite a variation in profitability in the Danish market. When it comes to some of the items that are touched upon in that report, our principle is to focus on risk-correct pricing. I think that's the sound fundament for any insurance company. If you do something else than that, you run the risk sort of in the future. We always have believed strongly in risk-correct pricing. There is also a little bit of focus on this special Danish way of having an index. That is a special Danish solution. One could argue that is good for consumers.
One could argue that is good for insurance companies. We do not have this practice in any other Nordic countries. For us, we are happy operating in sort of any environment with or without this type of construction.
Let me also remind you that when the GP reform was introduced in the U.K., we gained from that rather than lost, as we had the same principle of technical pricing, risk-correct pricing in the U.K. since before, in contrast to some of the market.
Okay. That's very good. All from my side. Thank you.
The next question comes from Jan Erik Gjerland from ABG. Please go ahead.
Thank you. Jan Erik Geirlend from ABG. Thank you for taking my questions. The first one is to your brand names in Denmark. Have you decided what to do with the Topdanmark versus the If brand names? If you could shed some light into that.
Yeah. Longer term, we are focusing on the If brand, but we're using the Topdanmark brand still for a while. Branding is a little bit more difficult these days with digital processes. You need not only to change the brand, but you also need to change a lot of the digital processes before you can change a brand. Currently, we are operating with both If and Topdanmark as brands in the Danish markets. Over time, we will move towards the If branding.
Thank you. When it comes to competition in the Nordics, to shed some light into the Norwegian operation, could you shed some more light into Sweden as well as Denmark and Finland, both private as well as corporate or commercial? Thank you.
I think the overall comment to that is that we see quite a benign competitive situation right now. I think clear proof of that, obviously, is the growth that we see in business area private with 8.5% and basically strong growth across the board in all geographies. I think that also goes for the SME part of commercial, also strong competitive situation in all four markets. On upper commercial and industrial, it's always a little bit more difficult because then it's sort of more volatile and more sort of single clients and single events. I think overall, good competitive situation for us, which also sort of results in extremely high new sales figures, both offline and in particular online, where you see sort of 20% increase, for instance, on private.
That concludes the call for today. Thank you, everyone, for dialing in and participating.