SAMPO PLC FINANCIAL STATEMENT RELEASE 11 February 2021 at 9:35 am
Sampo Group’s results for 2020
Sampo Group’s largest business area If had an extremely strong year 2020 in all respects. The combined ratio for the full-year 2020 was 82.1 per cent (84.5). This is the strongest combined ratio If has ever reported. Because of the impairment loss of EUR 899 million and the sales loss of EUR 262 million on Nordea shares, Group’s reported profit before taxes for 2020 decreased to EUR 380 million (1,541). Without the extraordinary items relating to the Nordea holding, the profit before taxes would have been EUR 1,541 million for 2020 and EUR 1,696 million for 2019. The total comprehensive income for the period, taking changes in the market value of assets into account, amounted to EUR 434 million (1,565).
- The earnings per share were EUR 0.07 (2.04) and marked-to-market earnings per share were EUR 0.65 (2.63). The earnings per share excluding the Nordea-related extraordinary items were EUR 2.16 per share (2.31). In accordance with the dividend policy, this figure has been used as basis when calculating the dividend proposal. The return on equity for the Group amounted to 3.1 per cent (12.0) for 2020. The net asset value per share on 31 December 2020 was EUR 19.82 (20.71).
- Sampo plc’s Board of Directors has today, after applying management judgement, decided to impair the book value of Nordea to EUR 7.50 per share from EUR 8.90 per share in Sampo Group’s consolidated accounts at the end of December 2020.
- Sampo plc’s Board of Directors has proposed to the Annual General Meeting to be held on 19 May 2021 a dividend of EUR 1.70 per share (1.50). The proposed dividend payment amounts in total to EUR 944 million (833).
- If segment’s profit before taxes rose to EUR 901 million (884) the insurance technical result improved to EUR 811 million (685). The return on equity remained at a high level at 33.3 per cent (34.5). Premiums grew in all business areas in the Nordics amounting to almost 5 per cent with fixed currencies. If paid a dividend of SEK 6.3 billion (approximately EUR 600 million) to Sampo plc in December 2020.
- Topdanmark segment’s profit before taxes for 2020 was EUR 167 million (238). The combined ratio amounted to 85.2 per cent (82.1) in 2020. The expense ratio was 16.2 per cent (16.0).
- The Board of Directors of Topdanmark will recommend to the AGM on 25 March 2021 that in total a dividend of DKK 20 per share will be paid. If approved, Sampo plc’s share of the dividend payment is EUR 113 million.
- Sampo holds 70 per cent of Hastings Group (Consolidated) Limited, which became Sampo plc’s subsidiary and forms a separate segment in the Group’s financial reporting as of 16 November 2020. The consolidated last six weeks of 2020 comprise a number of one-off expense items.
- Sampo’s share of Nordea’s net profit for 2020, excluding the accounting impacts of the sale of Nordea shares in November 2020 and the impairment of the holding in Sampo Group’s consolidated accounts 2020, amounted to EUR 429 million (290). The reported loss after these measures was EUR -734 million (290). Nordea is progressing well towards meeting its 2022 financial targets.
- On 4 February, Nordea’s Board proposed a dividend of EUR 0.39 per share for 2020. In addition, the Board will decide on 18 February to distribute EUR 0.07 per share as the first instalment of the delayed 2019 dividend of EUR 0.40 per share. The Board also proposes that the Annual General Meeting authorize it to pay out the remaining part of the 2019 dividend (EUR 0.33 per share) and the 2020 dividend (EUR 0.39 per share) – a total of EUR 0.72 per share – after September 2021, in line with the European Central Bank recommendation. Sampo plc’s share of the proposed dividend payments is EUR 508 million.
- The profit before taxes for the segment Mandatum was EUR 154 million (280). The with-profit reserves continued to decrease as planned during 2020. The reserves related to the higher guarantees of 4.5 and 3.5 per cent decreased by EUR 268 million to EUR 1.9 billion at the end of 2020. Mandatum Life has supplemented the discount rate reserve and the rate used for 2021 - 2023 is 0.25 per cent. This had a negative impact of EUR 77 million on the result. The return on equity amounted to 14.4 per cent (23.5). Mandatum Life’s Board proposes a dividend of EUR 200 million to Sampo plc in February 2021.
| KEY FIGURES | 2020 | 2019 | Change, % | 10-12/ 2020 | 10-12/ 2019 | Change, % |
| EURm | ||||||
| Profit before taxes *) | 380 | 1,541 | -75 | -675 | 468 | - |
| If | 901 | 884 | 2 | 285 | 228 | 25 |
| Topdanmark | 167 | 238 | -30 | 82 | 58 | 41 |
| Hastings | -16 | - | - | -16 | - | - |
| Associates *) | -722 | 298 | - | -1,030 | 143 | - |
| Mandatum | 154 | 280 | -45 | 54 | 68 | -20 |
| Holding (excl. Associates) | -103 | -4 | - | -50 | -29 | 69 |
| Profit for the period | 112 | 1,237 | -91 | -769 | 389 | - |
| Change | Change | |||||
| Earnings per share, EUR | 0.07 | 2.04 | -1.97 | -1.44 | 0.66 | -2.10 |
| EPS (without eo. items) EUR | 2.16 | 2.31 | -0.15 | - | - | - |
| EPS (based on OCI) EUR | 0.65 | 2.63 | -1.88 | -0.47 | 1.19 | -1.63 |
| NAV per share, EUR | 19.82 | 20.71 | -0.89 | - | - | - |
| Average number of staff (FTE) | 13,227 | 9,813 | 3,414 | - | - | - |
| Group solvency ratio, % | 176 | 174 | 2 | - | - | - |
| RoE, % | 3.1 | 12.0 | -8.9 | - | - | - |
*) the reported loss related to the sale of Nordea shares in November 2020 and the impairment of Nordea holding made in the consolidated Group accounts 2020, together EUR 1,161 million is included in the 2020 figure. The comparison figure includes a valuation loss of EUR 155 million related to Nordea shares.
The figures in this report have not been audited.
Sampo follows the disclosure procedure enabled by the Finnish Financial Supervisory Authority and hereby publishes its Full-Year Financial Report attached as a PDF file to this stock exchange release. The Full-Year Financial Report is also available at www.sampo.com/result.
| Exchange rates used in reporting | 1-12/2020 | 1-9/2020 | 1-6/2020 | 1-3/2020 | 1-12/2019 | 1-9/2019 |
| EURSEK | ||||||
| Income statement (average) | 10.4882 | 10.5622 | 10.6621 | 10.6649 | 10.5853 | 10.5679 |
| Balance sheet (at end of period) | 10.0343 | 10.5713 | 10.4948 | 11.0613 | 10.4468 | 10.6958 |
| DKKSEK | ||||||
| Income statement (average) | 1.4066 | 1.4157 | 1.4280 | 1.4279 | 1.4183 | 1.4158 |
| Balance sheet (at end of period) | 1.3485 | 1.4197 | 1.4813 | 1.4813 | 1.3982 | 1.4326 |
| NOKSEK | ||||||
| Income statement (average) | 0.9778 | 0.9857 | 0.9932 | 1.0195 | 1.0749 | 1.0816 |
| Balance sheet (at end of period) | 0.9584 | 0.9523 | 0.9618 | 0.9610 | 1.0591 | 1.0809 |
| EURDKK | ||||||
| Income statement (average) | 7.4544 | 7.4581 | 7.4648 | 7.4714 | 7.4661 | 7.4644 |
| Balance sheet (at end of period) | 7.4409 | 7.4462 | 7.4526 | 7.4674 | 7.4715 | 7.4662 |
| EURGBP | ||||||
| Income statement (average) | 0.8892 | |||||
| Balance sheet (at end of period) | 0.8990 |
GROUP CEO’S COMMENT
Despite the challenging backdrop, 2020 has been a successful year for Sampo Group. I am particularly pleased with the strong performance delivered by our P&C operations. If P&C has been the standout performer, with a record-low combined ratio of 82.1 per cent and premium growth of 5 pe cent driving a 17 per cent year-on-year increase in the technical result. Operational momentum was also strong, as retention stood at 90 per cent and the number of If Private customers grew for the third consecutive year to over 3 million. This demonstrates the strength of our increasingly digital business, which has benefitted from customers using online channels during the COVID-19 pandemic.
Strategically, Sampo’s focus in 2020 has been on laying the foundation for future growth in underwriting profits. We have continued to invest heavily in the digitalisation of our Nordic P&C operations to ensure that these continue to be the best choice for customers, while the acquisition of Hastings Group provides a new avenue for long term growth. As a lean, digital insurer, I see Hastings not only as a long-term winner in the UK personal lines P&C insurance market but also believe it can add value to our Nordic operations. I expect the acquisition will deliver significant value after a period of focussed operational work, just as If has done.
The sale of Nordea shares in November 2020, which reduced Sampo’s stake by 4 percentage points to 15.87 per cent, represented another important step in Sampo’s strategy to focus more on P&C insurance. Reported losses related to the sale and a Q4 impairment in the book value of the residual stake had a negative impact of EUR 1.2 billion on group net income. As these accounting items do not affect our dividend capacity, we have excluded them from our DPS calculation.
Nonetheless, regulatory and macroeconomic uncertainty have continued to weigh on the market value of Nordea, despite a notable improvement in operational performance. The turnaround in business volumes and increased cost efficiency delivered by Nordea in 2020 illustrated robust operational momentum, while its strong balance sheet supports attractive capital returns once regulatory restrictions are lifted. Sampo continues to see upside in Nordea’s 2022 plans but the group will, over time, explore options to reduce its exposure to banking.
Sampo navigated its investment portfolio well through the volatility experienced in 2020, delivering a return of 3.5 per cent. The recovery in financial markets in the second half of the year supported returns but has left an investment environment in which it is difficult to deploy money at attractive returns, further emphasising the need to invest in our underwriting capabilities.
Looking ahead, the strong positioning and performance of Sampo Group’s P&C operations over 2020 gives me confidence in our strategy and our ability to deliver value for our shareholders. We expect P&C underwriting results to remain robust and continue to work toward a more focussed group structure.
Sampo aims to deliver attractive and sustainable dividends to shareholders. The introduction of a new dividend policy to pay out at least 70 per cent of earnings (excluding extraordinary items) in February 2020 represented an important step in achieving this objective. The Sampo Board has proposed a 2020 DPS of EUR 1.70 (2019: 1.50), representing 79 per cent of the group’s EPS excluding Nordea-related reported losses of EUR 2.16. Aside from a small expected contribution from Nordea, this dividend is funded entirely by our insurance operations.
I look forward to presenting our strategy and financial plans in more detail at the upcoming Capital Markets Day on 24 February 2021.
Torbjörn Magnusson
Group CEO and President
FOURTH QUARTER 2020 IN BRIEF
Sampo Group’s profit before taxes for the fourth quarter of 2020, excluding the reported loss related to Nordea, amounted to EUR 486 million. The reported result for the quarter was EUR -675 million (468). The earnings per share was EUR -1.44 (0.66) and the mark-to-market earnings per share EUR -0.47 (-0.22). The net asset value per share increased EUR 1.19 during the fourth quarter of 2020 and amounted to EUR 19.82.
If’s combined ratio for the fourth quarter of 2020 was 81.3 per cent (85.0). The profit before taxes amounted to EUR 285 million (228). The technical profit was EUR 216 million (165).
Topdanmark’s combined ratio for the fourth quarter was 83.7 per cent (87.1) and the profit before taxes EUR 82 million (58).
Sampo only consolidated Hastings for 6 weeks and reported a loss before taxes of EUR 16 million. The loss consists of one-off items related to the closing of the transaction, e.g. stamp duties of EUR 9 million.
Sampo’s share of Nordea’s fourth quarter 2020 net profit was EUR 128 million. The loss on sale of Nordea shares in November 2020 and the impairment at the end of 2020 resulted in a loss of EUR 1,033 million (143).
The profit before taxes for Mandatum amounted to EUR 54 million (68). The discount rate used for 2021 - 2023 was lowered to 0.25 per cent, which had a negative impact of EUR 77 million on the result.
EFFECTS OF COVID-19 ON SAMPO GROUP
During the COVID-19 pandemic, priority in Sampo Group has been given to maintaining service level and to supporting customers in the best possible way in the changed working conditions. Despite the challenging situation, all the subsidiaries have been able to offer normal service level and customer satisfaction has remained at a high level, in Mandatum Life the customer satisfaction even reached a new record high.
There have been no COVID-19 related lay-offs among Sampo Group personnel and none of the group companies has required any government funding support during the COVID-19 pandemic.
If
Claims cost for 2020 was negatively impacted from travel insurance policies primarily following imposed travel restrictions from governments due to COVID-19. At the end of the reporting period, the total number of reported claims amounted to approximately 50,000 claims corresponding to a gross claims cost of EUR 35 million, mostly in BA Private and Norway. For this event, If had a reinsurance cover with a net retention of approximately EUR 10 million.
Government restrictions and in general low activity level had a positive effect on claims frequency, affecting especially motor insurance. The effect of COVID-19 on If’s risk ratio is approximately 4 percentage points positive in the fourth quarter and approximately 3 percentage points for the full year. Going forward repair costs might increase due to a lack of material, delays in transportation of material or shortage of personnel following implemented government travel restrictions.
During the fourth quarter premium volume was slightly impacted by the COVID-19 situation, primarily by travel insurance in Private business and with continued negative impact related to decommissioning of vehicles and lower sums insured in the Commercial segment, but as a whole the effects were not very significant. There is still some uncertainty with regard to possible lagging effects to premiums through, for example, lower insurable sums and lower turnover in the corporate segments.
Topdanmark
Topdanmark has reported on the impacts of the COVID-19 pandemic in its announcement of 2020 annual results published on 22 January 2021. The report is available at www.topdanmark.com.
Hastings
Overall, motor claims frequencies reduced during the year, reflecting reduced motor vehicle usage following national and local restrictions resulting from COVID-19. Claim severities increased due to interruptions in the repair networks and supply of parts caused by COVID-19 and increased car rental costs, with repairs typically taking longer than anticipated.
Hastings does not provide insurance for any business lines which have been negatively impacted by COVID-19, such as travel or business interruption.
Mandatum Life
The unusual situation caused Mandatum Life to change its focus from new sales to existing customers for several months starting from spring 2020 and this, together with the uncertain capital market situation, was reflected in the premium income in 2020 as premiums did not quite meet the record level of the comparison year.
The volatility of claims costs did not differ from the normal level. All in all, looking at the entire year of 2020, the COVID-19 related impacts on the company’s business remained small.
Investment activities
In the fourth quarter, particularly in November and December, good news about the COVID-19 vaccines and continued central bank stimulus sparked strong increases in equity values. While equity portfolios brought the best investment returns, fixed income investments also generated a solid return in the fourth quarter, which gave Sampo a good opportunity to cautiously repatriate investment profits. Looking at the Group’s total investment result reported for 2020, a significant portion of the very good returns came during the last few months of the year.
Solvency positions
The solvency positions of Sampo Group and its subsidiaries were strong at the end of 2020. More information is available in the section Solvency.
BUSINESS AREAS
If
The profit before taxes for 2020 for the If segment amounted to EUR 901 million (884). The total comprehensive income for the period after tax was EUR 866 million (836).
The combined ratio for 2020 improved to 82.1 percent (84.5) and the risk ratio to 60.7 per cent (62.7). The cost ratio was 21.5 per cent (21.8). The effect of COVID-19 on the combined ratio was approximately 3 percentage points positive in January-December 2020 and 4 percentage points in the fourth quarter.
In 2020 EUR 186 million (190) was released from the technical reserves relating to prior year claims. The return on equity was 33.3 per cent (33.4) and the fair value reserve on 31 December 2020 amounted to EUR 557 million (457).
The technical result amounted to EUR 811 million (685) and the insurance margin (technical result in relation to net premiums earned) was 18.2 per cent (15.9).
Large claims were EUR 88 million worse than expected in 2020. In BA Commercial, they were EUR 3 million worse and in BA Industrial EUR 85 million worse than expected. The claims related to the landslide in Gjerdrum, Norway, at the end of December 2020 amounted to EUR 18 million.
The Swedish discount rate for the annuity reserves was -0.72 per cent (-0.77) at the end of 2020 and had a positive effect of EUR 5 million on the full-year results. The discount rate used in Finland, was lowered to 0.75 per cent in the third quarter and had a negative impact of EUR 51 million.
Gross written premiums amounted to EUR 4,823 million (4,675) in 2020. Excluding the currency effects, premiums grew 4.7 per cent (5.7) in January – December 2020. Premiums grew in all markets and business areas.
Within business areas, the growth was highest in BA Industrial, at 10.4 per cent, followed by BA Commercial at 4.2 per cent. In BA Private, the growth was 3.7 per cent. Geographically, premiums grew 10.6 per cent in Denmark, 5.0 per cent in Norway, 4.4 per cent in Sweden and 2.5 per cent in Finland.
Customer retention continued to be high and stable across all business areas. In BA Private, the customer base increased by 1 per cent.
If’s solvency position is described in the section Solvency.
Topdanmark
At the end of 2020 Sampo plc held 41,997,070 Topdanmark shares, corresponding to 46.7 per cent of all shares and 48.0 per cent of related voting rights in the company. The market value of the holding was EUR 1,491 million on 31 December 2020.
The Board of Directors of Topdanmark will recommend to the AGM on 25 March 2021 that a dividend of DKK 1,035 million will be distributed for 2020, representing DKK 11.5 per share. In addition, the Board of Directors will recommend to the AGM that the remaining dividend of DKK 8.5 per share (DKK 765 million) for 2019 will be distributed as an extraordinary dividend. Given the AGM approval, the total dividend distributed in connection with the AGM will be DKK 1,800 million or DKK 20 per share.
Topdanmark’s profit before taxes for 2020 amounted in Sampo Group’s profit and loss account to EUR 167 million (238). The combined ratio amounted to 85.2 per cent (82.1) in 2020. The expense ratio was 16.2 per cent (16.0). The increase in the expense ratio is impacted by high sales through new distribution partner Nordea, and COVID-19 related expenses.
Further information on Topdanmark A/S and its January-December 2020 result is available at www.topdanmark.com.
Hastings
Sampo plc owns 70 per cent of the shares of Hastings and the Group started to consolidate the UK insurance group as a subsidiary as of 16 November 2020. In Sampo Group’s consolidated accounts Hastings is reported as a separate segment. Hastings profit and loss items are recognized line-by-line in the Group’s consolidated financial statements.
During the next seven and half years the annual amortization of intangibles will amount to approximately EUR 40 million, i.e. EUR 10 million per quarter. The short period consolidated in 2020 also contains items which are not recurring.
Hastings’ agility and digital capability has enabled operations to continue with minimal interruption despite the unprecedented disruption to UK society and the economy as a result of COVID-19. Progress continues on its strategic initiatives, delivering profitable growth, with the total number of customer policies growing 8 per cent to 3.1 million. The growth in customer policies has been supported by continued strong retention rates throughout 2020. Home insurance customer policies also continue to grow, up 28 per cent to 0.3 million.
The full year 2020 loss ratio reduced compared to 2019 due to a reduction of claims frequencies resulting from the lockdown restrictions, partially offset by inflation in the cost of claims. The reserving position as at 31 December 2020 reflects the increased claims uncertainties caused by the pandemic.
Hastings continues to build on its digital capabilities, resulting in more customers choosing to make contact through the Mobile App. This has had over 1.2 million downloads to date and customer engagement and feedback on the App continues to be positive. Hastings’ claims transformation initiatives continue to develop and progress, with initiatives spanning accidental damage, third party property damage and bodily injury.
Nordea
On 31 December 2020 Sampo plc held 642,924,782 Nordea shares corresponding to a holding of 15.87 per cent. Sampo’s holding decreased 4 percentage points after Sampo successfully sold 162 million Nordea shares in an accelerated book-build offering to institutional investors on 10 November 2020.
The average purchase price per share amounted to EUR 6.46. Nordea’s book value in the Group accounts is, after the impairment, EUR 7.50 per share. As disclosed on 11 February 2021, the book value was impaired from EUR 8.90 per share by a decision by Sampo’s Board based on management judgement. Nordea’s closing price as at 31 December 2020 was EUR 6.67.
Sampo’s share of Nordea’s 2020 profit before taxes, excluding the accounting impacts of the sale of Nordea shares in 10 November 2020 and the impairment of the holding in Sampo Group’s consolidated accounts 2020, amounted to EUR 429 million (290).
On 4 February, Nordea’s Board proposed a dividend of EUR 0.39 per share for 2020. In addition, the Board will decide on 18 February to distribute EUR 0.07 per share as the first instalment of the delayed 2019 dividend of EUR 0.40 per share. The Board also proposes that the Annual General Meeting authorise it to pay out the remaining part of the 2019 dividend (EUR 0.33 per share) and the 2020 dividend (EUR 0.39 per share) – a total of EUR 0.72 per share – after September 2021, in line with the European Central Bank recommendation.
Further information on Nordea’s full-year results 2020 is available at www.nordea.com.
Mandatum Life
The profit before taxes for Mandatum Life in 2020 amounted to EUR 154 million (280). The total comprehensive income for the period after tax reflecting the changes in market value of assets, was EUR 213 million (308). The return on equity amounted to 14.4 per cent (23.5).
The expense result increased to EUR 27 million (24). The risk result increased to EUR 38 million (35).
Premium income on own account was EUR 1,051 million (1,596), of which unit-linked premiums were EUR 960 million (1,476). In 2019 both premium income and claims paid included around EUR 400 million one-off items caused by changes in the tax treatment of life insurance products.
The net investment income, excluding income on unit-linked contracts amounted to EUR 189 million (358). The net income from unit-linked contracts was EUR 397 million (908). During 2020 the fair value reserve increased to EUR 534 million (438).
The total technical reserves of Mandatum Life Group increased to EUR 12.3 billion (12.0). The unit-linked reserves increased to highest ever EUR 8.8 billion (8.1) at the end of 2020. The unit-linked reserves corresponded to 72 per cent (67) of total technical reserves.
The with-profit reserves decreased as planned during 2020 and amounted to EUR 3.5 billion (3.9) on 31 December 2020. The with-profit reserves related to the higher guarantees of 4.5 and 3.5 per cent decreased by EUR 268 million to EUR 1.9 billion at the end of 2020.
Mandatum Life has overall supplemented its technical reserves with a total of EUR 218 million (230). The figure does not take into account the reserves relating to the segregated fund. The discount rate used for 2021 - 2023 is 0.25 per cent. The new discount rates for years 2022 and 2023 had a negative impact of EUR 77 million on the result.
The discount rate of segregated liabilities is 0.0 per cent and the discount rate reserve of the segregated liabilities amounted to EUR 232 million (263).
Mandatum Life’s solvency position is described in the section Solvency.
Holding
Holding segment’s profit before taxes for January - December 2020 decreased to EUR -826 million (139), including two Nordea-related one-off items of EUR 1,161 million. The comparison period includes a EUR -155 million valuation loss incurred in connection with distribution of Nordea shares as dividends to Sampo shareholders in the third quarter of 2019.
After the impairment, Sampo plc’s holding in Nordea was booked in the consolidated balance sheet on 31 December 2020 at EUR 4.8 billion, i.e. EUR 7.50 per share. The market value of the holding was EUR 4.3 billion, i.e. EUR 6.67 per share, on 31 December 2020.
Including the impairment loss and the sales loss on Nordea shares, Sampo’s share of profits of associated companies Nordea and Nordax Holding for January – December 2020 amounted to EUR -722 million. The one-off items excluded, the share of the profits of the associates was EUR 439 million (298), of which Nordea’s share was EUR 427 million (290) and Nordax’s share was EUR 12 million (8).
OTHER DEVELOPMENTS
Disposal of Nordea shares
On 10 November 2020, Sampo sold 162 million Nordea shares, 4.0 per cent of the outstanding shares, in an accelerated bookbuild offering to institutional investors. The transaction price was EUR 7.25 per share, resulting in gross proceeds of EUR 1,174 million.
After the transaction, Sampo held 642,924,782 Nordea shares, corresponding to 15.9 per cent of all shares and voting rights in Nordea.
Sampo incurred a reported loss of EUR 262 million from the transaction for the last quarter of 2020. Nordea’s status as an associated company of Sampo remained unchanged.
In connection with the offering, Sampo entered into a lock-up undertaking, under which it has, subject to certain exceptions, agreed not to sell any Nordea shares for a period ending at 9 May 2021.
Hastings acquisition
The offer on Hastings was being implemented by way of a court-sanctioned scheme of arrangement under English law, which was approved by the requisite majorities at the Hastings shareholder meetings on 29 September 2020. All of the conditions relating to regulatory and antitrust approvals were satisfied by 27 October 2020 and the scheme was effective following completion of the Court Hearing procedure held on 13 November 2020.
The jointly-owned company of Sampo and RMI, currently known as Hastings Group (Consolidated) Limited, became Sampo plc’s subsidiary and formed a separate segment in the Group’s financial reporting as of 16 November 2020. Hastings’s profit and loss items were recognized line-by-line in the Group’s consolidated financial statements.
Changes in Group Management
After the end of the reporting year on 20 January 2021 Ivar Martinsen left his position as Head of BA Commercial and the membership of Sampo Group Executive Committee.
Remuneration
In 2020, a total of EUR 50 million (41), including social costs, was paid as short-term incentives. During the same period, a total of EUR 6 million (18), including social costs, was paid from long-term incentive schemes. The results impact of the long-term incentive schemes in force in 2020 was EUR 2 million (12).
Shareholders
During 2020 Sampo plc received altogether 9 notifications of change in holding pursuant to Chapter 9, Section 5 of the Securities Markets Act, according to which the total number of Sampo A shares or related voting rights owned by BlackRock, Inc. (tax ID 32-0174421) and its funds directly or through financial instruments had decreased below 5 per cent or increased above 5 per cent.
After the end of the reporting period Sampo plc had received 4 notifications of change in holding pursuant to Chapter 9, Section 5 of the Securities Markets Act, from BlackRock, Inc.
The details of the notifications are available at www.sampo.com/flaggings.
Internal dividends
Mandatum Life’s Board proposes a dividend of EUR 200 million to Sampo plc in February 2021.
Following the Danish FSA’s recommendation, Topdanmark’s Board of Directors decided on 23 March 2020 to postpone paying out half of the planned dividend for 2019 until the AGM on 25 March 2021. On 22 January 2021 Topdanmark’s Board of Directors recommended to the AGM that a dividend of DKK 1,035 million will be distributed for 2020, representing DKK 11.5 per share. The Board of Directors also recommended to the AGM that the remaining dividend for 2019 of DKK 765 million will be distributed as an extraordinary dividend. Given the AGM approval, the total dividend distributed in connection with the AGM will be DKK 1,800 million or DKK 20 per share. If the AGM approves the proposals, Sampo plc’s share of the dividends amounts to EUR 113 million.
On 4 February, Nordea’s Board proposed a dividend of EUR 0.39 per share for 2020. In addition, the Board will decide on 18 February to distribute EUR 0.07 per share as the first instalment of the delayed 2019 dividend of EUR 0.40 per share. The Board also proposes that the Annual General Meeting authorize it to pay out the remaining part of the 2019 dividend (EUR 0.33 per share) and the 2020 dividend (EUR 0.39 per share) – a total of EUR 0.72 per share – after September 2021, in line with the European Central Bank recommendation. Sampo plc’s share of the proposed dividends is EUR 508 million.
If normally pays its dividend towards the end of the calendar year.
Ratings
Relevant ratings for Sampo Group companies on 31 December 2020 are presented in the table below.
| Rated company | Moody’s | Standard & Poor’s | ||
| Rating | Outlook | Rating | Outlook | |
| Sampo plc – Issuer Credit Rating | A3 | Stable | A | Stable |
| If P&C Insurance Ltd – Insurance Financial Strength Rating | A1 | Stable | A+ | Stable |
| If P&C Insurance Holding Ltd (publ) - Issuer Credit Rating | - | - | A | Stable |
| Mandatum Life Insurance Company Ltd – Issuer Credit Rating | - | - | A+ | Stable |
In addition, Hastings Group (Finance) plc has an outstanding senior bond of GBP 250 million for which Fitch has an Issuer Default Rating (IDR) of A- and a stable outlook.
Solvency
Group solvency
Sampo Group calculates its group solvency under the Solvency II rules. In this calculation Nordea is treated as an equity investment. According to the Solvency II directive, Sampo Group’s solvency ratio amounted to 176 per cent (174) at the end of December 2020.
Solvency position in the subsidiaries
The insurance subsidiaries apply Solvency II rules in their regulatory solvency calculations. If Group companies use either partial internal models or standard model for calculation of their solo solvency position. Mandatum Life reports in accordance with standard formula for Solvency II. Topdanmark uses a partial internal model to report its stand-alone solvency position.
Hastings is fully consolidated into the Sampo Group’s Own funds and SCR. As a stand-alone entity AICL, Hastings underwriting company, calculates its solo solvency position according to Solvency II rules.
If Group has an A+ rating from S&P which will continue to require significantly more capital than the standard formula and therefore the use of standard formula has no practical implications on If Group’s capital position. On 31 December 2020 If Group’s Solvency II capital requirement under standard formula amounted to EUR 1,916 million (1,890) and own funds to EUR 3,623 million (3,592). The solvency ratio amounted to 189 per cent (196).
The S&P A+ rating capital requirement for If Group amounted to EUR 3,083 million (3,083) on 31 December 2020 and the capital base was EUR 3,234 million (3,151).
Topdanmark calculates most of its non-life and health risks and their respective solvency capital requirement by applying a partial internal model approved by the DFSA. Other risks are calculated by the Solvency II SCR standard formula. Topdanmark’s solvency ratio under the partial internal model was 170 per cent (177) at the end of December 2020.
Mandatum Life’s solvency ratio after transitional measures amounted to 188 per cent (194) on 31 December 2020. Own funds were EUR 2,308 million (2,290) and the Solvency Capital Requirement (SCR) was EUR 1,230 million (1,182). Without transitional measures, own funds would have amounted to EUR 1,977 million (1,929) and the solvency capital requirement would have amounted to EUR 1,245 million (1,212), leading to a solvency ratio of 159 per cent (159).
Debt financing
Sampo plc’s debt financing on 31 December 2020 amounted to EUR 3,934 million (3,908) and interest bearing assets to EUR 1,529 million (1,725). Interest bearing assets include bank accounts, fixed income instruments and EUR 324 million (359) of hybrid capital and subordinated debt instruments issued by the subsidiaries and associated companies.
At the end of 2020 the interest bearing net debt of Sampo plc amounted to EUR 2,405 million (2,183). The net debt calculation takes into account interest bearing assets and liabilities. Gross debt to Sampo plc’s equity was 53 per cent (51) and financial leverage 34 per cent (34).
On 28 May 2020 Sampo plc repaid SEK 3,000 million senior notes maturing on that date.
On 3 September 2020 Sampo plc issued 32-nc-12 Tier 2 notes of EUR 1,000 million maturing on 3 September 2032.
On 1 December Sampo plc redeemed EUR 655 million outstanding senior notes maturing on 18 September 2023, 16 September 2021, 23 May 2022 and 30 May 2025 in a cash tender offer.
On 31 December 2020 financial liabilities in Sampo plc’s balance sheet consisted of issued senior bonds and notes of EUR 2,448 million (3,414). In addition, Sampo plc has issued subordinated notes of EUR 1,486 million (494). The amount of subordinated notes increased due to the financing of the acquisition of Hastings. No CPs were outstanding (0). The average interest, net of interest rate swaps, on Sampo plc’s debt as of 31 December 2020 was 1.6 per cent (1.2).
More information on Sampo Group’s outstanding debt issues is available at www.sampo.com/debtfinancing.
OUTLOOK
Outlook for 2021
Sampo Group’s insurance businesses are expected to report good insurance technical results for 2021, although the mark-to-market component of investment returns will be significantly influenced by capital markets’ developments, particularly in life insurance.
If P&C is expected to reach a combined ratio of below 85 per cent in 2021.
With regard to Topdanmark, reference is made to the profit forecast model that the company publishes on a quarterly basis.
Hastings remains well positioned and expects to further improve its loss ratio and overall results, despite some market uncertainty from COVID-19, regulatory reform and Brexit.
Nordea continues to focus on creating great customer experiences, growing income and improving operational efficiency. The results are progressing well towards 2022 targets.
The major risks and uncertainties for the Group in the near-term
In its current day-to-day business activities Sampo Group is exposed to various risks and uncertainties, mainly through its separately managed major business units.
Major risks affecting the Group companies’ profitability and its variation are market, credit, insurance and operational risks that are quantified independently by the major business units. At the group level, sources of risks are the same, although they are not directly additive due to the effects of diversification.
Uncertainties in the form of major unforeseen events may have an immediate impact on the Group’s profitability. The identification of unforeseen events is easier than the estimation of their probabilities, timing, and potential outcomes. Currently, the COVID-19 pandemic and the measures taken to contain the virus are causing significant negative effects on economies and uncertainties on capital market development. There are also a number of widely identified macroeconomic, political and other sources of uncertainty which can, in various ways, affect the financial services industry in a negative manner.
Other sources of uncertainty are unforeseen structural changes in the business environment and already identified trends and potential wide-impact events. These external drivers may have a long-term impact on how Sampo Group’s business will be conducted. Examples of identified trends are technological developments in areas such as artificial intelligence and digitalization, demographic changes, and sustainability issues that may also have profound effects on companies within the financial sector.
DIVIDEND PROPOSAL
The parent company’s distributable capital and reserves totaled EUR 7 250 153 463,79 of which profit for the financial year 2020 was EUR 699 633 592,61.
The Board proposes to the Annual General Meeting a dividend of EUR 1.70 per share to the company’s 555,351,850 shares. The dividends to be paid are EUR 944,098,145.00 in total. The remainder of the funds are left in the equity.
The dividend will be paid to the shareholders registered in the Register of Shareholders held by Euroclear Finland Ltd as the record date of 21 May 2021. The Board proposes that the dividend be paid on 28 May 2021.
No significant changes have taken place in the company's financial position since the end of the financial year. The impairment of Nordea shares had no impact on Sampo plc’s distributable capital and reserves. The company's liquidity position is good and in the view of the Board, the proposed distribution does not jeopardize the company's ability to fulfill its obligations.
SAMPO PLC
Board of Directors
For more information, please contact:
Knut Arne Alsaker, Group CFO, tel. +358 10 516 0010
Jarmo Salonen, Head of Investor Relations and Group Communications, tel. +358 10 516 0030
Maria Silander, Communications Manager, Media Relations, tel. +358 10 516 0031
Conference call
An English-language conference call for investors and analysts will be arranged at 4 pm Finnish time (2 pm UK time). Please call tel. +1 631 913 1422, +44 33 3300 0804, +46 8 5664 2651, or +358 9 8171 0310. The conference code is 89421852#.
The conference call can also be followed live at www.sampo.com/result. A recorded version will later be available at the same address.
In addition, the Supplementary Financial Information Package is available at www.sampo.com/result.
Sampo will publish the Interim Statement for January - March 2021 on 5 May 2021.
Distribution:
Nasdaq Helsinki
London Stock Exchange
The principal media
Financial Supervisory Authority
www.sampo.com
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