Ladies and gentlemen, welcome to this conference call on Sampo's Q1 2020 results. I'm Jarmo Salonen, Head of Investor Relations at Sampo. With me at this call, I have our Group CEO and President, Torbjörn Magnusson, Group CFO, Knut Arne Alsaker, and CEO of If P&C, Morten Thorsrud. We will start with Torbjörn's introduction into Q1 developments, and Morten will then follow with a more closer look at the If developments. After these presentations, we are happy to take any questions you may have. Before handing over to Torbjörn, let me remind you that you can follow this transmission at sampo.com/result, and a recorded version is later available at that same address. This time we have some slides, so it might actually make sense to follow this at Sampo.com. With these words, I'll hand over to Torbjörn. Torbjörn, please.
Thank you, Jarmo, and good afternoon, everyone. We've had an unusual quarter, as has the rest of the world, and we all now have to live with many uncertainties. We will try to straighten out as many question marks as possible for Sampo in this call and give you as much facts and information as we can about the development of our group. First and foremost, in terms of the technical insurance result, this is the best first quarter ever for our insurance operations in If P&C, the biggest part of the group. The fact that we are a very technologically advanced group with excellent remote capabilities has helped us also in a socially distant situation. We're able to meet our customers' expectations. Sales have been good until the last two weeks of March, and customer satisfaction continued to be high.
Morten will, in a minute, give some more in-depth information about If P&C's development and the COVID-19 effects. Let me already here state that the effects on the insurance side are very marginal so far. Turning to our bank asset, it was gratifying to see Nordea deliver a second quarter with good progress. Obviously, we first looked at the loan loss documentation in these circumstances. There will remain some uncertainties there for all banks. Nordea also reminded us all, I think, that it's a much less risky bank today than 10 years or even five years ago, much more a Nordic retail bank than then. Looking at Nordea's report the other week, I was also satisfied to see a bank with a new self-confidence, both in the language, in its culture, and in the market. NII and C/I developed well.
Costs and manning are coming down according to plan, and capital is very strong indeed. Market shares are no longer way below Nordea's distribution capacity, but naturally reflecting where the company should be. Frank Vang-Jensen and his team are working quite intensely, and I'm pleased to see this. Returning to Sampo itself in this introduction, we report a solid solvency ratio despite rather depressed asset values. In times like these, this is both prudent and a good strategy for potential opportunities. As is well known, both Nordea and Topdanmark have delayed parts or all of their dividends and are reflecting this and the investment market's uncertainties. The board has decided to propose a EUR 1.50 dividend to the AGM. Can I have the next slide, please?
With that, with this beautiful non-life insurance graph, I hand over to Morten Thorsrud to give us some more in-depth understanding of the non-life operations that constitute the largest part of this group. Please, Morten.
Thank you, Torbjörn, and good afternoon to all of you. The first quarter of 2020 was clearly quite an eventful quarter, where the ongoing COVID-19 pandemic, of course, is impacting our business in several areas. Throughout this period, the health of our employees has, of course, been a key priority, and hence we have moved more than 6,000 out of our 7,000 employees to home offices. I think the organization has responded to this challenge in a really impressive manner, as we have been able to run our business close to normal and actually at very high service levels throughout this period. In many areas, we have even seen record high customer satisfaction levels in the midst of this crisis. During the first quarter, some 26,000 COVID-19 related claims were reported with an estimated claims cost of some EUR 12 million.
Until end of April, this has increased to some 48,000 claims, most of these being travel claims, and most of the claims coming from our Norwegian business. If has an reinsurance cover with self-retention of SEK 100 million or approximately EUR 10 million, that cover these travel claims. In today's environment, as Torbjörn also mentioned, we do see that we benefit from our strong digital capabilities. As we do observe high level of online insurance sales, online insurance service cases, and of course, online claims cases. The strength in our digital and remote business model is expected to be a clear advantage for us going forward in a world that you can say got a gentle push towards increased use of digital and remote operations. On the financial side, the ongoing COVID-19 pandemic obviously have had a significant negative impact on the investment return.
However, the financial impact on the insurance operation has been limited in the first quarter. We continue to deliver strong earnings generation, and we are well-positioned for future challenges and opportunities with a very strong balance sheet. The increase in travel claims related to COVID-19 is temporarily offset by a somewhat lower claims frequency in areas such as motor. Going forward, we do of course, expect a negative top-line effect as a consequence of the dampened business activity level in the Nordic and Baltic region. Turning to the next page then. If continues to deliver on its promise of producing consistent, strong underwriting performance. Combined ratio in the first quarter was a record low 83.7%, down from 86.5% in the first quarter of 2019. The underlying underwriting result was supported by clear improvement in frequency claims outcome.
The cost ratio was on a low level in the quarter, and we had somewhat more run -off gain in this quarter than we had in Q1 2019. At the same time, we did experience a large claims outcome that was well above what we expect to be a normal level. The large claims outcome stems in particular from two Norwegian industrial clients, where the single largest claim was a fire in the parking garage at Sola Airport in Stavanger in January, where If insured the building, of course, in addition to our fair share of the cars. If has had a consistent underwriting discipline, and we've been also supported by our Nordic and Baltic scale and diversification between the business areas.
This has enabled us over the last 15 years to manifest a position as a best in risk insurer in our region, with a combination of low combined ratio and low underwriting volatility. The Nordic P&C insurance market remains rational, with generally sound combined ratio levels and low volatility compared to other parts of the world. Turning to the next page, taking a look at growth development in the first quarter. We have, for a period, seen good business momentum and fairly strong top-line development. In Q1 this continues, and we produce a purely organic premium growth of 7%. The growth stemmed from both increased business volume through increased number of customers and insurance products, as well as from price increases in the portfolio. In the first quarter of 2020, the split between these two sources of growth would be roughly 40/60, i.e., somewhat more price driven.
We do see attractive growth in all business areas and all countries. Going forward, we do again expect some negative top-line effects from the COVID-19 situation. The strong growth materializing in Q1 makes us well prepared to handle some headwind in the future as well. With that, I conclude on the If presentation and lead the word back to Jarmo.
Thank you, Torbjörn, and thank you, Morten. Operator, we are now ready for the questions, please.
Our first question comes from the line of Jakob Brink from Nordea. Please go ahead.
Thank you, and good afternoon. I have a few questions, please. The first one is on the dividend of EUR 1.5 and how this plays in with your dividend policy. I know it's within the plus 70%, but still how should we look at this going forward? For example, I'm thinking this is, of course, very exceptional times, but loan losses in Nordea, I guess, could be higher, they could be low, who knows? At the same time, Topdanmark has postponed half of its dividend. We don't know if Nordea will pay in Q4 or not, and so forth. Could this maybe be the opportunity for Sampo to basically stick to around EUR 1.5 in sort of an ordinary dividend, and then put the rest of it into a buyback both this year and also going forward?
I'm somewhat surprised at the question. We have been very clear that we have a new dividend policy. We pay the dividend once a year, and the dividend will reflect earnings and be at least 70% of earnings. That answer has not changed for some time now.
Basically what you're saying is that let's say Nordea would pay a dividend in Q4 this year. We should not expect it to be paid out until in connection with the dividend decision for 2020 to be paid out next year.
I expect our board to take that into consideration when-They look at the dividend proposal for the AGM in 2021.
Sorry, just to finalize on that question, but then next year, it’s still 70%, but would you think that 2.2% would be the underlying base, or would 1.1% reflect a new starting point going forward? Just to help us.
Maybe I was being a little bit flippant at your question. Firstly, I didn't mean that, but we have a new dividend policy, and there's no expectation that there will be an increasing dividend or something like that.
Okay. Thank you. On to, again, actually one more capital question. In If, for the first time, for quite some time, there is a capital deficit versus the rating approach of EUR 241 million. I know rating agencies doesn't downgrade, upgrade just because of EUR 200 million, how do you look at this deficit? Is this something that should be solved right away, or could it have a potential impact on the upstream from If in December this year?
Good afternoon, Jakob. It's Knut Arne here. There's no plans to downstream capital to If to fix that deficit. It is a deficit in the S&P model due to the current circumstances after Q1. If it's still well capitalized from the perspective of solvency capital. The capital is only one of many factors that S&P is taking into consideration when setting the rating. Of course, I'm sure also they will look at the capital position of If and the group after Q1 when making the rating decisions going forward. We consider If still to be well capitalized and dividend upstreaming from If, as from Sampo will be based on the earnings and capital position of If as of year-end.
Okay. Thank you. My final question, on non-life insurance, you mentioned it briefly, Morten, but basically growth has been quite nice across If, and especially Finland is now growing 5%. I don't know if there's any technicalities, but it's the first time it's been growing that much for quite some time. Could you put a few words on that, please?
Yes, Jakob. I think Finland is growing 3.1% with constant exchange rates. Still it is somewhat of an improvement. Earlier, as we've seen quite a negative development on workers' comp, that situation is still not where we would like it to be, but it has improved somewhat over the period. Apart from that, we see good growth again, also in Finland, in all business areas, both in private, in commercial, and industrial. Again, disregarding workers' comp, which has been a bit of the struggle in Finland.
Okay. Thank you.
The next question comes from the line of Youdish Chicooree from Autonomous. Please go ahead.
Good afternoon, everyone. I've got two questions, please. The first one is just on the underwriting performance. The year-on-year improvement in your underlying loss ratio is quite strong. It's probably around 3.5-4 points in the first quarter. I was wondering if you could just give us an idea of what the benefits were from benign weather, to what extent did the loss ratio benefit from lower frequency during the lockdown? That's my first question. The second one is just on business interruption, please. I think you mentioned in your report that from those standard wordings, the claims related to COVID-19 would be excluded. Did you have an estimate of the potential exposure arising from those contracts that do not follow the terms sheet?
Yes, I'll try to answer your questions. When it comes to the underlying improvement on the combined ratio, yes, we do see quite a healthy development on that. It is hard to compare and try to make a true underlying development, trying to factor in all the effects, different weathers in different quarters and so forth. I think generally this quarter has been pretty benign when it comes to weather, that was also actually the case in the first quarter in 2019. I would say that most of the improvement that you see in the underlying combined ratio is a result of the price and profitability actions that we have implemented over the last few years. When it comes to impact of the lockdown, we do temporarily see somewhat less frequency on motor in particular.
It's, again, hard to exactly estimate how large proportion of the reduced frequency is from the lockdown, how much is from, again, a general benign weather and so forth. I think what we've said is that it's probably offsetting quite some of the EUR 12 million that we have reported in travel claims. I think you have a bit the magnitude there. When it comes to business interruption, if I got your question correctly, I think as you all know, business interruption is typically covering the profit followed by a reimbursable property claim. Physical damage of some sort to some named perils, fire, water leakage, storm, et cetera. In addition to that, you could have business interruption loss coming from access to the property being prevented, the so-called denial of access.
This is typically when you have, again, a property claim, a property damage that makes the police or emergency services hindering your access to your own property. In terms of epidemic business interruption covers, there are some covers in Sweden and Finland, but that's covers that cover loss from the authorities orders, then a disease per specific laws, for instance, listeria, has been found at the insured location. Again, this is not relevant in this current corona situation. You could have, of course, some additional exposures, but our assessment so far, having gone through our portfolio and the exposure we have is that it's very limited, the exposures that we have, when you then disregard the travel insurance claims that we already talked about.
Okay. Thank you very much. Just one quick follow-up on business interruption. Are there cases where policyholders are disputing the terms and conditions, essentially saying that losses arising due to the COVID-19 lockdown should be covered?
No.
Okay.
I think there is a broad agreement in the Nordic region on the terms and conditions and how they are to be interpreted.
Great. Thanks very much.
The next question comes from the line of Alexander Evans from Credit Suisse. Please go ahead.
I've just got one left, actually. Morten, it is on Industrial, I think you touched on it slightly in your presentation. If I remember rightly, I think your premium was growing quite a lot last year in Industrial. I think you said that this was volume led as competitors exited the market due to some unprofitability there. Are you seeing the effect or combined ratio in the quarter as a one-off?
Yeah. I hope I got your question in full. It was a bit disturbance on the line. We have seen an attractive combined ratio for our industrial business, if you look back the last, say, five years or even more than that. We did have two individual large claims in this business area in the first quarter. We clearly expect this to be the normal volatility that you would expect to have in this business area. The two claims coming from traditional industrial clients that have been with us for quite a while.
Okay. Thank you.
The next question comes from the line of Matti Ahokas from Danske Bank. Please go ahead.
Yes, good afternoon. Two questions from my side, please. Firstly, on the dividend, could you a bit elaborate on the board's view on paying a dividend at a time when both the EIOPA and also the Finnish FSA recommended insurance companies not to pay dividends. I guess you took this into account in the proposal, but obviously it is quite extraordinary in the current circumstances. That would be the first question.
Sorry, I was on mute. I agree with EIOPA that these are times when you should be careful with your balance sheet. You will have seen that our solvency ratio has developed well and even increased since before the crisis. Of course, we have had a dialogue with the Finnish FSA, and the board has decided to propose this as a balanced view, given the fact that Nordea and Topdanmark have not paid the dividend that we were expecting from them this spring.
Great, thanks. The second question is on the non-life side. One of your competitors was talking about claims frequencies in motor, and also burglaries down by 15%-30% in March. Is this a figure that you would agree with? How does Q2 look like at the moment? Obviously, we've seen the lockdown impact in the Nordic countries with full force, mainly in April. If you could give us some kind of light on how the claims frequency outlook has developed in April, that'd be great. Thanks.
Yeah. I would agree to that general sort of description that claim frequencies in motor in Q1, or the last two weeks of Q1, has been down some 15%, 20%, even a bit more than that in certain weeks. Varying a bit between countries, obviously. Of course, this continues also in April, even though we have seen a certain uptick in traffic on the roads over the last couple of weeks. Yeah.
Thank you.
Next question comes from the line of Derald Goh from Citigroup. Please go ahead.
Afternoon, all. Hope you're keeping well. A few questions. The first one is just on Mandatum. Solvency seems quite strong. I think there was some benefit of the canceled dividend. I'm just curious around your thoughts there, because it seems to me that even taking away the EUR 1.50 dividend, the solvency would still be actually at a level above the end of 2019.
Yes. That's correct. The canceled dividend in Mandatum contributed to an improvement in the solvency ratio of roughly 16%. There were negative effects, obviously, from the equity value drops and also the fact that during the quarter, interest rates fell. There were positive effects offsetting that, and a bit more, as you allude to, from the change in the symmetric adjustment, and also the fact that Mandatum applies differently from If, for example, the volatility adjustment as well. Those two technical factors, according to the Solvency II regulation, contributed to improve the solvency ratio of Mandatum a bit, even when excluding the canceled dividend.
I guess the question is that was there any other reason as to why you guys canceled the dividend?
No other reason than the fact that with the balance sheet of Mandatum, we felt it was prudent to keep a significant solvency capital base on that balance sheet during the volatility that we have and have in the financial markets. Obviously also Mandatum take into considerations the communication that has come in from EIOPA and the Finnish regulator, exactly as Torbjörn says that the Sampo board has done.
Right. Thank you. Second question is just on the interest rate sensitivity. It seems that it's gone up quite a bit from year-end, I think especially in the interest rate down scenario. Any reason for this? Were there some kind of investment portfolio adjustments that you made during the quarter?
No significant adjustments during the quarter which impacts that. It has, of course, also to do with the sheer size. Since we're talking about sensitivities on the solvency ratio, the sheer size of the own funds and the SCR, both which have shrunk during the quarter.
Got it. Understood. One last question from Morten. I think you mentioned the growth has been really strong, which is mainly rate-driven. I think you alluded to the end of March, where growth slowed somewhat. What are you seeing in April in terms of the growth in prices? On the commercial side, what happened at the April renewals and what's the outlook there in terms of maintaining the rate momentum?
Well, we do of course, expect to see, as I said, some headwind on the growth going forward. One could, for instance, point at things like new car sales. If you take the largest country, Sweden, the official forecast that BIL Sweden gives out was reduced from 320,000 down to 270,000 cars. On the Nordic level, already the year started a bit weak. We had -9.4% in number of new cars being sold after February, but that figure increased to -15.2% after March. Of course, we do see an impact in terms of reduced new car sales that will affect premium income within private. In business area commercial, we do see that some customers are making adjustments to their terms and conditions, for instance, as a result of having fewer employees. That will have a certain impact.
Similarly, we expect the same to materialize into industrial, perhaps with a bit some delay into the industrial market. We do expect to see some headwind on the growth. When that is said, of course, the P&C insurance industry is pretty resilient when it comes to how it operates also in the downturn. I think it's good for us to having started at least the year with 7% growth. It gives us then an ability to handle what we might see in terms of a bit more negative growth prospects going forward.
Thanks for that. Just a small additional point. Any comments on what you saw at the April renewals? I think heading into it, there was a lot of talk about the need to push for more rates coming from a prolonged soft market. Did the rate momentum in April continue from January into April, and do you think it will continue going forward?
Yeah. I don't want to talk too much about Q2, I think we haven't seen any significant change with respect to that so far, at least.
All right. Thank you very much.
The next question comes from the line of Blair Stewart from Bank of America. Please go ahead.
Thank you very much. Good afternoon all. I've got a couple of questions left. Most of them have been asked. Just a technical one for Knut Arne first. The fixed income impairments coming through the income statement. Why did those happen? Was that due to assets that you sold and therefore crystallized a loss? Or was there a cash flow type impairments coming through? That's the first one, actually. Just ask that one first, and then I'll come back if I can.
Good afternoon, Blair. We didn't impair assets that we sold, so to speak. It's not a loss because of disposal. It is impairments in assets that we still hold. We haven't sold them after impairment either. The impairments of fixed income includes an element of management judgment, different from equities, which we impair when there's a difference between observable market value and book value of 20%, which is the limit in Sampo Group. There's a element of management judgment. We haven't done much impairments in fixed income, haven't had the need to do that over the years. This quarter, we looked at certain assets within the energy sector. We don't have a large exposure to assets within that sector in the first place.
For the assets we do own, we saw a need to make an impairment because both our view of all those assets and also that the market value of those assets were significantly below our book value. That, it's about EUR 50 million. It represents roughly a quarter of the exposure we have to the sector within the group.
Have those asset values recovered since the end of the quarter?
Some of those assets' value have recovered. Not to the level of where we impaired it from.
Yep. Okay, fine. Thank you. Just one more question, actually, maybe for Torbjörn on just reflecting on the dividend policy. It seems that you've got two streams of cash flows in the business, one of which coming from the insurance businesses, which hopefully is quite stable and dependable, and then arguably a stream from Nordea that might not be as stable and dependable, depending on what happens in the world. Does that form part of the board's thinking when thinking about a dividend? You mentioned earlier that you don't have any ambition to pay a stable and steadily rising dividend, for example, you just allow the dividend to be what it is. I wonder if within that there's a stable element of the dividend that we can rely on, and perhaps just a pass-through approach to whatever you get from Nordea.
I wonder if you could just comment on that. Thank you.
I think you expressed our thinking about the dividend policy a bit curtly. We certainly have an ambition to increase the earnings of our businesses continuously, and that will be reflected in the dividend. I think it's a bit early to start speculating about the dividend for next year. We have just come out with our proposal to this year's AGM, and let's leave it at that.
Okay. Maybe I didn't pick you up properly earlier, Torbjörn, because the line was distort, but I thought I heard you say that there's no expectation that there will be an ever-increasing dividend or words to that effect. Is that right?
Yeah. That is right. No promise that there will be an ever-increasing increase in the dividend. That's right.
Okay.
Which is a promise that no company can give.
The dividend policy is really just based on a payout ratio, depending on where the earnings are. Clearly cash flows into the center matter as well when thinking about dividend affordability.
Mm-hmm. Yep.
Okay, cool. Thank you.
The next question comes from the line of Per Grønborg from SEB. Please go ahead.
Yes, thank you. Good afternoon. Still a couple of questions left from my side. First, a clarification. Travel insurance, your EUR 10 million own risk on your reinsurance program. How long time does this cover? Does that also cover potential massive cancellation over the summer, or do you have to renew it, start from scratch again at some stage?
Yes, Per. I think that depends on whether we will consider this as being one event or whether there will be multiple events going forward. As long as we are in the current status with one lockdown, we do absolutely look upon this being one event. Of course, you might have a scenario where we are opening up again for traveling and then that later we close down again, and then of course it will be a new event. So far, this is considered as one event, and then it covers the claims that will be reported as a result of this event.
Okay, perfect. My second question on the dividend and the payout versus profit. Clearly, we have a problem on all-time high, but close to all-time high difference between net profit and comprehensive profit. How should we look at your payout versus the one or the other?
I think that today what we have done is as just as I responded to Blair, decided on dividend given a number of uncertainties in the market and the crisis situation in the world, and we have decided on what is a prudent and balanced dividend for this year. What will happen next year and going forward is very early to speculate about, we hope that the world will be a simpler world and easier to interpret based on the 70% of earnings policy that we have. That's probably the best answer that I can give you under these circumstances. Knut, would you like to add anything to that?
No. The dividend policy is of course related to reported earnings, the dividend policy currently in force. I would agree with Torbjörn, it is, of course, after Q1, a very big difference between that and the mark-to-market. Let's see how that develops during the year and what consideration we then make. Mind you, it is, of course, at least 70% of reported earnings that we have in the dividend policy, which is AFS earnings.
Okay. Thank you.
The next question comes from the line of Michael Huttner from Berenberg. Please go ahead.
Thank you. Hang on. I've stopped myself. I beg your pardon. Thank you so much for taking my questions. On the dividend. I'm sorry to go back, and it's just that I should really try to understand it better. The 70% applies to profit, you said. I didn't quite understand which profit line. Is it the profit which I consider, which is excluding mark-to-market, or is it the profit after the mark-to-market?
It's net AFS earnings.
It includes the mark-to-market volatility.
No.
The dividend policy-
If you can make it simple, I think you reported about-
Today's AFS earnings.
Sorry.
That would include things like the impairments that we have done, but it would not include the changes in the fair value reserve.
Brilliant. Excellent. Okay. Sorry, I was unclear on that and I hadn't thought it through. Thank you very much. My other question is really about the combined ratio. I'm going to put words in your mouth and you're going to hate it, but it looks to me as if the group over the many years, and I haven't followed it that long, but has actually had a ratchet in terms of combined ratio and combined ratio guidance. Definitely the guidance has either been flat or improved and the actual, combined ratios has tended to improve. I think there was maybe one year where it went up a little bit or a couple of years, but really minimally. I got really excited when I saw you'd improved your guidance further to 84%-87%.
Here my question is, given your comments on pricing and volumes, et cetera, is this something that you see as sustainable beyond this year?
Maybe I'll start, Morten. We have, for more than the past decade, been able to improve the cost ratio for If P&C every year. We have improved the combined ratio gradually over the same time or even longer than that. It's our ambition to do that by improving the underwriting, of course, and being more and more competitive in the market. I see no reason to stop that ambition. We have the market situation, which has improved in general compared to three or four years ago. The market is now dominated by relatively few insurers in the Nordic region. That is also supporting this statement. Morten.
I agree to that. As I said initially, I think the Nordic P&C insurance market, it is a rational market, with sound combined ratio levels, and these are combined ratio levels that we need in an environment where, of course, we are not expecting a very high return on the investment side. We expect to be disciplined also on the underwriting going forward.
Fantastic. If I may just ask a follow-up, it's really more detailed. If I think of the 84%, 87% and the 83.7% you reported in Q1, I can do the math and think, well, you could land in the middle of that and have ratios in the rest of the year which are more volatile, or you could achieve the lower end and have a more sustainable number every quarter. Obviously, you don't give guidance. I've got to be careful in how I phrase it, in your thinking when you set the 84%, 87%, was it more, yes, this is sustainable pricing competition rational, et cetera, or in there did you say and actually Q1 and the beginning of Q2 is looking so good, it gives us a kind of extra boost which we can put in the number?
I think we don't really want to give much more guidance than the guidance that we gave sort of, which is 84%-87% as a full year guidance on the combined ratio. Obviously, as you also state, we now know that the outcome for Q1 was a quite favorable outcome of 83.6%. Of course, we factor that in when making the outlook.
Okay, brilliant. Lovely. Thank you so much. Thanks very much.
The next question comes from the line of Johan Ström from Carnegie. Please go ahead.
Thank you, and two questions from my side as well. First, I'm sorry if I missed any comments or announced activity on this, but I was wondering how you think about, I think it's EUR 3 billion of senior bond maturities coming up in late May. Are you looking for a refinancing of this, and how responsive do you think the market is for that? Secondly, it would be interesting to hear what you think about the solvency position at the group level now. I think the end of April number of 187% certainly gives you a very strong capital position, but what would be, call it minimum level in this uncertain market? Thank you.
Good afternoon, Johan. It's Knut Arne here. The EUR 3 billion of senior, we always think around our funding, taking market conditions into perspective. You know as well as me how markets are now, and we have planned our liquidity. This is a senior bond, so it's not capital. It's pure liquidity. We have planned our liquidity in a way that there's no refinancing need, for example, for that particular bond, those two tranches, which is due now later in May. That's my answer to your first question, and I think you describe our solvency position well. It's as strong. I think it is prudent to have a strong solvency position with the volatility we have, with the low visibility on how financial markets will develop going forward, and also to be able to use the opportunity that might arise in such market volatility when asset value changes.
I would be careful, because of what I just said, to put a minimum number. Right now, I am happy with having a high number as a solvency ratio as we speak.
Thank you very much. Just bridging the end of March number to 187%, what's the difference there? Is that mainly the Nordea share price? Am I missing something else? Thank you very much.
Yeah. That's mainly Nordea share price. We had a bit help on other equity prices as well, but that was canceled out by a little negative effect from change in interest rates. Net-net, it's basically the Nordea share price that contributes to that 8% or so improvement in the solvency ratio during last month.
Much appreciated. Thank you.
The next question comes from the line of Jonny Urwin from UBS. Please go ahead.
Hi, guys. Thanks for taking my questions. Just two, please. Firstly, on the dividend policy, I think we've heard a few snippets. I think I was a bit confused at the start. I think I understand it now, but I'd just like to kind of summarize what you've said, and just ensure I'm on the right page. Basically, you think the EUR 1.5 for this year is prudent, somewhat exceptional given what's going on. You're sticking to the 70% policy. There's no ratchet. It's clearly too early to think about 2020 dividends, but you're not saying that the EUR 1.5 is a new starting point to think about. Just any yes or no commentary there would be great. Secondly, on the underlying loss ratio, it's good development.
You're not flagging any funnies in there. It sounds like it's relatively clean, which given you've been pricing ahead of claims inflation for most of last year, I expect it to be running that way for this year. That was quite a bullish outlook for the margin, I would think. Again, any color there would be great. Thank you.
On the first question, I'm grateful for your summary, and it's a yes on that one.
Yeah. On your second, on the underlying loss ratio, on one hand, yes, we're seeing a clear improvement in the underlying frequency ratio. Going forward is, of course, always a difficult thing to speculate. We do expect, and we do see somewhat high claims inflation also over the last few months. Of course, we look carefully at the claims inflation going forward, where there might be some extraordinary effects also in the middle of this COVID-19 situation. Looking at claims inflation at the body shops, for instance, is important for us. I think I'll not speculate more about the future than that.
Thank you. I guess the broad comment that you're still pricing in line to slightly ahead of claims inflation, does that still hold?
I think slightly above what we have seen as claims inflation over the last couple of years, slightly above that.
Thank you.
The next question comes from the line of Jan Erik Gjerland from ABG. Please go ahead.
Yes. Good afternoon. Jan Erik Gjerland from ABG. Just some couple of questions, less more technical, I will say. The life solvency looks to be slightly lower without the transition rules. I just wonder, how is the group solvency also including any kind of transition periods for any levels? Secondly, on the life side, is there any sort of minimum you would like to have before you're considering the dividend stream from your life company once more? Thirdly, on your impairment, would it be fair to say that you have done and dusted everything you have to do now on an impairment on your fixed income side, or is there more to come in the second quarter as banks warn for when it comes to looks for their impairments?
I still see that you have fixed income below water, at least on the mark-to-market reserves on page 13 in the supplementary. Any light on that would be great. Thank you.
Yeah. Good afternoon, Jan Erik. If I should start with the life solvency, if I understood your question correctly, the life solvency of 205%, there's no pending dividend proposal from the board at that level. Obviously it is a stronger solvency even excluding the EUR 1.50 earlier proposed dividend, which the board canceled that proposal. It's a stronger solvency than what we had in year-end. If the visibility increases, of course, the possibility from Mandatum to pay a dividend at around that level with the current solvency base, I would say should be there. The group doesn't apply any transitional rules of what you see is what you get there on the solvency ratio, so to speak.
Okay.
That was your second question on impairments side. I wish I had a crystal ball on impairments, Jan Erik, and I'm not trying to sort of refine the question, it's a very relevant question. I just can't say if there will be a need for more impairment. I can say that when we made the estimates for April, to give you those three data points of April, there were no need as we consider it, neither on the equity side, which is quite clear, nor on the fixed income side at that point in time to do further impairments. That is not a promise for Q2 for reasons you understand.
No. If it said it's 20% mismatch between the book value and the market, probably is on the equity side, do you have any kind of internal level of guidance when it comes to what it should be between the fixed income market, and what you have booked it for?
No, we don't have a guidance for that. That's not how IAS 39 is written, so to speak. It's management judgment. The impairments we did had a difference which was significantly above 20%. Obviously, there is of course a difference with equity and fixed income investment, where you basically need to have a default of a fixed income investment to not be able to record the AFS result as predicted. Since it's direct investment income, if the fixed income asset is still paying. Because it was a significant difference, it was above 20%, clearly above 20%, we made that impairment. When we close our books Q2, and if there are significant differences also there, we of course need to make that management judgment also at that point in time.
Like I said in April, even though there were fixed income assets, which the difference was above 20%, we didn't see a need to make an impairment in terms of the predictability of the cash flow from that asset.
Okay. Do you have any high yields in the energy sector at all? I couldn't find that in the disclosure today, but you have a better disclosure on the fixed income than previously, so appreciate of that.
We have a little bit of high yields. The total exposure to the energy sector, as of end of March, was around EUR 170 million for the group.
Okay. Thank you. That's all from my side.
The next question comes from the line of Steven Haywood from HSBC. Please go ahead.
Good afternoon. Thank you. Just a couple of questions. I wonder, I don't know if you've explained this before, but could you just go through it again on the symmetric adjustment in your solvency ratio and how the movement in equity prices going down to -30% is a significant drop in your solvency, and how the symmetric adjustment plays a role here, and how there's doesn't seem to be any movement in the equity dampener coming through as well. Then can you tell me how comfortable Sampo is at running its business in the 140% solvency? Thank you.
Um-
Maybe, as you're thinking about the more technical question, Knut, I'll just say that 125% is of course a floor to where you can comfortably run anything. What 140% means, that depends entirely on the situation. We have previously said that below 140% -1 45%, you get limited room for maneuvering the company if there were opportunities.
I totally agree. Just one addition on that from my side as well. It's not a target for the solvency ratio for the group. That's never what we have described it as. The symmetric adjustment, Steven, if I understood your question correctly, it works like this, that when there are market movements up and down, there's adjustments to the risk factor that's applied to equities. Given the significant market drops, the risk factor, the symmetric adjustment reduced the risk charge on equities from around 39% as of year-end, when the symmetric adjustment was very close to 0%- 29% as of end of the first quarter, when the symmetric adjustment was -10%. The formula for the symmetric adjustment basically makes it stop there. When you have further drops, I think you mentioned 30%, you have no further help.
Companies have no further help, neither Sampo, of course, from the symmetric adjustment. Consequently, the sensitivities to equity in such a scenario increases. That's also why the sensitivities for equities that we have published is different from the ones we had in our disclosures in Q4. Similarly, of course, if equity markets increases and the symmetric adjustment comes into play again, it will have a negative impact on the solvency ratio as the charge for equities increases with the symmetric adjustment. This is applied to the whole equity portfolio, and it is also applied for solvency purposes on our exposures towards Nordea.
Okay. Thank you. That's very helpful.
The next question comes from the line of Jon Denham from Morgan Stanley. Please go ahead.
Thanks. Hi. Thanks for taking my question. I don't want to drag the call on for too long, just one from me. If you do end up making super normal profits in your underwriting business this year, would you expect to return any of that to policy holders via rebate? I think I know the answer, given what's going on the asset portfolio, but maybe if you're under any pressure from either policy holders or regulators in any of your geographies to do so. Thanks.
There's no such pressure and what is super normal, we haven't seen that in the past, and there is no such discussion in our markets.
Very clear. Thank you.
I think I could also add on one comment on that. I think internationally there has been a lot of speculation on this on motor insurance in particular. The Nordics is a bit special in the way that motor insurance in the Nordics is generally priced based on expected yearly mileage. If people expect to drive significantly more or significantly less than what is assumed in the pricing, they have always been able to adjust that. It's quite a different situation in the Nordics than what you have in quite many other geographies.
Of course, the final remark is that it is somewhat surprising that this discussion turns up once that almost every company has lost a lot of money in the investment markets.
Thank you.
We have a follow-up question from the line of Blair Stewart from Bank of America.
Yeah, just a quick one. I'm just intrigued. If everything was as it is at the moment with markets, et cetera, but Nordea had paid its dividend, would the board have revised the dividend, at Sampo?
That, as I think you expected, I cannot answer. I don't know what the board would have done.
Okay. It was worth a try, though, wasn't it? Thank you.
One more follow-up question from the line of Michael Huttner from Berenberg. Please go ahead.
Thank you so much. It was one on pricing and one on symmetry. On pricing, what was the number in Q1 which was included in this lovely increase of premiums of 7%? On symmetry, say this is just a hypothetical, markets return to the level of the start of the year, equity markets, would it mean that solvency would go down from the current level, the 187% as of April? Thank you.
Could answer your first question. The growth of 7%, as I stated initially in this conference, we say that roughly it's a 40/60 split, where then the larger part, i.e. 60%, is price increases and the 40% is then increase in business volume, number of customers, number of insured objects and so forth.
Good afternoon again, Michael, it's Knut Arne here. Yes, it would. It depends, of course, on how our portfolio would look and what we would do in terms of transactions if we have a increased visibility and gradual more comfort in the equity markets, et cetera. Everything else equal, a 20%, no, it's a little bit less, but just let me take that number since we after all are talking about Q1 results and where we were a month ago. A 20% increase in equity markets would roughly have about a couple of percentage point negative effect on our solvency ratio.
Brilliant. Thank you so much. Thank you.
As there are no further questions, I'll hand it back to the speakers.
Thank you, operator. Thank you all for your attention. I wish you all a very nice evening. Thank you.