Sampo Oyj · OMXHEX:SAMPO
Sampo Oyj — Investor Day (February 2021)
76 slides from Sampo Oyj's investor day presentation, Feb 24, 2021
Slide 1: Sampo Capital Markets Day 2021
Sampo Capital Markets Day 2021 24 February 2021 24 February 2021 1
Slide 2: Agenda
Agenda 11.00 Group strategy 13.30 Hastings update Torbjörn Magnusson, Group CEO and Toby van der Meer, CEO, Hastings Group President, Sampo Group 13.50 - Closing remarks 11.30 Finance & capital management Björn Wahlroos, Chair of the Board, Knut Arne Alsaker, Group CFO, Sampo Sampo Group Group Q&A 1
Slide 3: Group strategy
Group strategy Torbjörn Magnusson, Group CEO and President, Sampo Group 24 February 2021 3
Slide 4: Sampo's strategy is focussed on P&C insurance
Sampo’s strategy is focussed on P&C insurance P&C insurance: Invest and develop Life & investments: Manage for value c60% of c40% group GWP: €7bn COR: 83.6% UW profit: €1.1bn group capital earnings Invest to build high quality Nordic and UK private/SME P&C operations Optimise return on capital Priva
Slide 5: Sampo aims to deliver high quality earnings and attractive dividends
Sampo aims to deliver high quality earnings and attractive dividends Invest in P&C operations Grow underwriting profits Enhance digital and other capabilities in Nordics/UK Capture opportunities for growth and margin expansion Manage non-P&C assets for value Reduce complexity and market risk Continu
Slide 6: Sampo has a strong track record in P&C insurance
Sampo has a strong track record in P&C insurance Sampo has delivered strong returns in P&C Sampo’s P&C success is based on underwriting Private/SME P&C earnings are highly valued Return on equity (%, 2011-20) COR (%, x-axis, 2005-20 avg.) vs. COR volatility (ppt, y-axis) P/E multiples per segment (2
Slide 7: Sampo's P&C footprint is attractive
Sampo’s P&C footprint is attractive Market leader in Nordic P&C Scale operator in Private & SME High-quality, digital UK P&C platform €27bn €6.5bn 7mn Total P&C Sampo Private 8.3% 18% premiums customers +70% 15% Proforma RSA 5.8% £17bn Motor & home 10% premiums 9% 9% If Total Topdan. Hastings Peer 1
Slide 8: Governance and execution are key to Sampo's P&C strategy
Governance and execution are key to Sampo’s P&C strategy Clear focus on underwriting Leveraging operational excellence Customer satisfaction is key profitability, efficiency and scale to gain a competitive edge to long-term success A leader in digital P&C insurance All If employees incentivised c€70
Slide 9: Sampo's management has extensive P&C insurance experience
Sampo’s management has extensive P&C insurance experience President and CEO, Sampo Group Chief Financial Officer, Sampo Group Chief of Strategy, Sampo Group Torbjörn Magnusson Knut Arne Alsaker Ricard Wennerklint • 30 years P&C insurance industry experience • 23 years P&C insurance industry experien
Slide 10: Hastings is an attractive platform and a natural fit for Sampo
Hastings is an attractive platform and a natural fit for Sampo A natural fit for Sampo’s P&C strategy Limited execution risk Attractive financials Access to large market Limited complexity/legacy High profitability and returns Pure P&C play in digital channel Highly scalable Cash generative High qua
Slide 11: Comprehensive skills transfer framework established
Comprehensive skills transfer framework established Collaboration model supplementing stand-alone levers 3 Collaboration model Standalone levers Enhancement and delivery Reinsurance/ • Execute on targeted operational projects Pricing Claims handling capital mgt • Further work continuously to identif
Slide 12: Managing non-P&C operations for value
Managing non-P&C operations for value Divest investment assets as these mature Extract value from life cash generation Mandatum Life c25% • High cash and capital generation from declining Sampo plc with-profit book Sampo investments Total assets of €5bn Own Funds c35% • Capital light new business op
Slide 13: Extracting value from the Nordea investment
Extracting value from the Nordea investment Sampo sees upside in Nordea shares at present Nordea in a Sampo Group context Confident in Nordea achieving its 2022 targets Sampo is not a long term investor in banking Operational momentum building Holding adds market risk Strong balance sheet Balance sh
Slide 14: Sampo's future M&A appetite is limited to bolt-ons
Sampo’s future M&A appetite is limited to bolt-ons Sampo applies stringent criteria to M&A transactions Strategic Operational Financial Bolt-ons in P&C Limit execution risk Expected returns support targets Improve capabilities or distribution Enhance operational quality Financial strain manageable S
Slide 15: Sampo has strong and improving ESG credentials
Sampo has strong and improving ESG credentials • Key strategic focus area - ESG integrated with management and operations If has introduced a Supplier Code of Conduct • Fair treatment of customers and employees integral part of business model Approach and culture • Compliance, corporate governance a
Slide 16: Sampo Group key financial targets for 2021-23
Sampo Group key financial targets for 2021-23 Ambition: Grow P&C underwriting profits by a mid-single digit percentage amount per annum on average P&L targets Group combined ratio <86% Combined ratio <85% Operating ratio* <88% Calendar year loss ratio** <76% Capital management Solvency II ratio 170%
Slide 17: Sampo has a track record of UW profit growth and achieving targets
Sampo has a track record of UW profit growth and achieving targets Sampo’s P&C operations have achieved strong underwriting profit growth Sampo has a strong track record of delivering against key P&C targets Underwriting profit (€mn) If P&C combined ratio & outlook (%) 12% pa 90% If initial COR outl
Slide 18: Sampo is committed to delivering attractive capital returns
Sampo is committed to delivering attractive capital returns Sampo will target a progressive insurance dividend Sampo Group 2020 dividend (€ p/s) €1.7 p/s €1.6 p/s DPS growth driven €5-€6 p/s by P&C earnings Capital above needs of insurance operations Sampo 2020 DPS Nordea/investments Insurance divid
Slide 19: Sampo aims to grow underwriting profits and pay attractive dividends
Sampo aims to grow underwriting profits and pay attractive dividends P&C focussed strategy with the aim to deliver mid-single digit annual growth in underwriting profits on average M&A ambition limited to P&C bolt-ons Nordea stake will materially reduce over next 18 months Progressive insurance divi
Slide 20: Finance & capital management
Finance & capital management Knut Arne Alsaker, Group CFO, Sampo Group 24 February 2021 20
Slide 21: Supporting Sampo's P&C strategy with strong financials
Supporting Sampo’s P&C strategy with strong financials Key actions taken in 2019-2020 Next steps Increased P&C focus through Nordea sell down New capital management framework Significant increase in economic solvency Increasing UW profits and earnings quality New dividend policy (≥70% P/O ratio) Res
Slide 22: Sampo is introducing a new capital management framework
Sampo is introducing a new capital management framework 1 Support growth in underwriting profits Capital management targets 2 Attractive and reliable capital returns Payout ratio at least 70% on net profit excl. eo items Progressive insurance dividend Return excess capital Solvency II target range F
Slide 23: Sampo targets a resilient but efficient balance sheet
Sampo targets a resilient but efficient balance sheet Progressive Return of S2 ratio Leverage insurance dividend excess capital A Risk buffer 190% • Ensure Sampo remains above regulatory and rating agency levels in a severe stress event Sampo • Roughly half of the stress relates to equity risk, driv
Slide 24: Sampo's balance sheet is robust
Sampo’s balance sheet is robust Sampo’s Solvency II ratio is comfortably within the target range Sampo’s financial leverage is near the upper part of the target range Sampo Group Solvency II ratio (%) Sampo Group financial leverage (%) 200% 40% Senior Sub/hybrid Limit (35%) 180% 176% Target range 17
Slide 25: Sampo has increased capital efficiency and reduced senior leverage
Sampo has increased capital efficiency and reduced senior leverage Sampo is making greater use of capital instruments Sampo reduced gross debt by €0.7bn in Dec 2020 Sampo has €1.6bn of debt maturities in 2021-23 Sampo Group gross debt (€bn) Sampo Group financial leverage (%) Sampo Group debt maturit
Slide 26: Robust holding company financials and resilient subsidiaries
Robust holding company financials and resilient subsidiaries Sampo plc investments (FY 2020) Sampo plc liquidity is robust (€bn) Cash, 1.4 1.4 €1.1bn 1.3 1.2 Sub 1.1 debt, €0.3bn 0.7 Nordea, €7bn €4.3bn "PE", €1.0bn Sampo plc €5.6bn investments, €1.1bn liquidity 2015 2016 2017 2018 2019 2020 2018 20
Slide 27: The quality of Sampo's earnings is improving
The quality of Sampo’s earnings is improving The share of UW profits in Sampo earnings is rising Nordic P&C UW profits attract high valuation multiples % of Sampo net income attributable to underwriting profit P/E ratio (2021) vs. share of earnings attributable to underwriting profit 70% 24 P/E (202
Slide 28: If P&C's underwriting margins are expected to remain strong
If P&C’s underwriting margins are expected to remain strong If has a strong track record of delivering against its financial targets 90% If initial COR outlook range 91% 91% - - 88% 88% 90% 88% - 87% 89% 90% - - 86% 86% 89% 86% - 85.4% 85.3% 85.2% 85% <85% 84.4% 84.5% 84% COVID-19 3pp impact 82.1% 8
Slide 29: Sampo aims for disciplined growth in P&C underwriting profits
Sampo aims for disciplined growth in P&C underwriting profits Sampo’s ambition is to deliver mid-single-digit growth in underwriting profits (2020, €bn) €1.1bn Mid-single-digit €0.9bn If P&C Topdanmark Hastings P&C UW profit Covid P&C UW profit ex COVID impact Combined ratio <86% Combined ratio <85%
Slide 30: Sampo will deliver an attractive, reliable and transparent dividend
Sampo will deliver an attractive, reliable and transparent dividend Payout ratio at least 70% on net profit excl. eo items Progressive insurance dividend Return excess capital Highly profitable and Nordea and other Sampo Strong balance sheet resilient insurance plc investments to be operations dives
Slide 31: A bottom-up view of Sampo's dividend
A bottom-up view of Sampo’s dividend P&C insurance Life insurance Investments • Earnings closely linked to capital generation • Dividend capacity driven by regulatory solvency • Visibility on banking dividends limited at present • High returns on capital enable high payout ratios • Mandatum Life cap
Slide 32: P&C earnings to drive growth in the insurance dividend
P&C earnings to drive growth in the insurance dividend Sampo Group insurance dividend capacity for FY 2020 (€ per Sampo share) A €0.9bn €1.7 p/s €1.6 p/s c€70mn c€150mn See slide 29 Assumes no contribution from Nordea or other Sampo plc investments P&C UW profit ex Normal investment Tax & minorities
Slide 33: Mandatum Life supports Sampo's dividend
Mandatum Life supports Sampo’s dividend A With-profit liabilities continue to decline Solvency II capital generation covers the dividend Mandatum Life Solvency II with-profit liabilities (€bn) Mandatum Life S2 surplus assuming €150m pa dividend €2.7bn c€0.2bn pa €1.1bn €1.1bn 2020 2021 2022 2023 202
Slide 34: The financial effects of group simplification
The financial effects of group simplification B Reduced market risk Higher earnings quality and returns Sampo’s P&C operations can deliver P/O ratios above 70% 110% If P&C Topdanmark €5.7bn Sampo Sampo ex-Nordea 100% €4bn 48% 72% 90% 80% 70% 60% 50% FY 2020 Lower market risk Ex Nordea & 2015 2016 20
Slide 35: Sampo aims to operate an efficient balance sheet
Sampo aims to operate an efficient balance sheet B €4-€5 p/s allocated to €10 p/s insurance operations €5-€6 p/s Sampo capital above needs of Insurance insurance ops SCR: €4bn Return excess capital Robust financial position Invest in P&C operations • Solvency: 170%-190% • Plans operationally focusse
Slide 36: Sampo will deliver high quality earnings and attractive capital returns
Sampo will deliver high quality earnings and attractive capital returns Sampo aims to operate a resilient but efficient balance sheet The quality of Sampo’s earnings is improving Sampo insurance operations support an attractive dividend Sampo will return excess capital 36
Slide 37: Sampo Capital Markets Day 2021 Q&A
Sampo Capital Markets Day 2021 Q&A 24 February 2021 37
Slide 38: Sampo's Nordic P&C operations
Sampo’s Nordic P&C operations Morten Thorsrud, CEO, If P&C Insurance Ingrid Janbu Holthe, Head of BA Private, If P&C Insurance 24 February 2021 38
Slide 39: Leading the way in Nordic P&C insurance
Leading the way in Nordic P&C insurance Largest and most diversified P&C Leading capabilities and performance Strong track record of operational insurer in attractive Nordic market focused corporate culture execution and financial performance • Market-wide profitability stronger than • Leading digit
Slide 40: Unique strategic position through Nordic scale, proprietary distribution and partnerships
Unique strategic position through a combination of Nordic scale, modern proprietary distribution platform and strong partnerships Scale advantage as the largest Modern proprietary distribution platform Proven credibility as P&C insurer in the Nordics with a digital edge insurance partner Market shar
Slide 41: Nordic P&C – a market with attractive fundamentals
Nordic P&C – a market with attractive fundamentals 110% 110% Nordic P&C Combined ratio Combined ratio 105% 105% Germany 100% 100% France 95% 95% Italy Finland UK 90% 90% Norway Sweden 85% Nordic 85% Bubble size = Premium MEUR Denmark 80% 80% -2% 0% 2% 4% 6% -2% 0% 2% 4% 6% Premium growth Premium gro
Slide 42: Organic growth and underwriting excellence increase underwriting profit
Combination of organic growth and underwriting excellence results in an attractive trajectory of increasing underwriting profit Organic GWP growth Combined ratio Underwriting result, MEUR 802 92.0% 88.9% 88.1% 87.7% 5.7% 681 86.5% 86.1% 85.3% 85.2% 635 84.5% 628 595 82.1% 587 4.7% 550 533 482 2.9% 3
Slide 43: Scale benefits and digitalization as sources for improved cost position
Scale benefits and digitalization as sources for further Leading in digitalization improved cost position Cost ratio IT development cost, MEUR 70 23.5% 23.0% 60 22.8% 22.5% 22.3% 22.1% 22.0% 21.9% 21.8% 21.5% 50 40 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2014 2016 2018 2020 Note: 2015 excl
Slide 44: Modern proprietary distribution platform with an edge in digital capabilities
Modern proprietary distribution platform with an edge in Leading in digitalization digital capabilities Digital sales premium, MEUR Distribution mix development: 2010 vs 2020 150 Digital sales more than doubled last 5 years 130 MEUR annual digital 125 sales External External distribution 100 distrib
Slide 45: Digital leadership through the entire value chain
Digital leadership through the entire value chain Leading in digitalization Digital distribution eService Online claims Online claims share of total claims, R12 Increase in 50% 48% +30% My Pages logins 45% 40% Quote and buy <60 seconds 35% Customers with >80% Digital invoices 30% 25% 20% Customers w
Slide 46: Fit for the future – select strategic initiatives
Fit for the future – select strategic initiatives Customer orientation • Positioning If P&C as the most caring insurance company Best in risk • Underwriting excellence for profitable growth Preferred partner for automotive industry in change • Positioned for the future of mobility Personal risk and
Slide 47: Significant improvement on key customer metrics
Customer orientation Significant improvement on key customer metrics High and increasing customer satisfaction Select recent awards NPS (indexed) Contact center If P&C, BA Private Best Best in Best 126 customer Best internet customer customer 122 service experience & site service loyalty 115 111 201
Slide 48: Strong organic customer growth
Strong organic customer growth – attracting and retaining Customer orientation customers through improved products and services Growing customer base – number of households High and stable retention rate Yearly average, million Yearly average 3,1million 90% households are If 91% of customers renew 3
Slide 49: Strengthened brand position and redefined customer promise
Customer orientation Strengthened brand position and redefined customer promise • Redefined customer promise: “By your side” • Aim to strengthen brand for all parts of the business • Strong brand awareness and preference is key for driving digital sales • High level of direct traffic to If website –
Slide 50: Underwriting and pricing excellence yields profitable growth
Best in risk Underwriting and pricing excellence yields profitable growth Best in data • Value creation from access to and best practice utilization of available external and internal Nordic data Modern tools and methods • Pricing sophistication by utilizing advanced analytics Excellent risk managem
Slide 51: Every fifth car in the Nordics insured by If P&C
Mobility partner Every fifth car in the Nordics insured by If P&C 2400 Partner workshops 980 million EUR Business to partner workshops 51
Slide 52: If P&C is uniquely positioned for automotive industry trends
If P&C is uniquely positioned for the important trends in the Mobility partner automotive industry Digital partner integrations Experimenting with the new Full mobility service offerings Seamless integration of insurance The most commonly used partner Viking, If Services and branded offerings in the
Slide 53: Personal risk and health insurance – an attractive growth area
Personal risk Personal risk and health insurance – If P&C is well positioned and health in an attractive growth area Nordic personal risk and health insurance market, MEUR 5,000 6% Growth by country • Health 4,500 CAGR insurance 4,000 Sweden 9% • Critical illness 3,500 • Accident cover 3,000 Finland
Slide 54: Continued value creation – strategic initiatives enable financial targets
Continued value creation – strategic initiatives enable financial targets Select strategic initiatives Financial targets 2021-2023 Customer orientation Combined ratio • Combined ratio < 85% Cost ratio Best in risk • Cost ratio reduction to support combined ratio target over time through continued ef
Slide 55: Growth in underwriting result – dominant driver of profit generation
Growth in underwriting result – dominant driver of profit generation Underwriting result, MEUR 2021-2023 target 750-825 700 600 520 2012-2014 2015-2017 2018-2020 2021-2023 Combined ratio ~88% ~86% ~84% <85% Cost ratio improvement* ~30bps ~20bps ~20bps ~20bps Premium growth* 2,7% 0,7% 4,4% * 3 year a
Slide 56: If P&C will continue to be the leading player in Nordic P&C insurance
If P&C will continue to be the leading player in Nordic P&C insurance Largest and most diversified P&C insurer in Leading capabilities and performance Strong track record of operational execution attractive Nordic market focused corporate culture and financial performance By your side 56
Slide 57: Hastings update
Hastings update Hastings, Toby van der Meer, CEO, Hastings Group 24 February 2021 57
Slide 58: Who are we?
Who are we? Hastings is a focussed, modern, technology led insurance provider, differentiated from more traditional P&C players Focused Good momentum in 2020 • c.90% car insurance • 8% policy count growth to 3.1m • c.90% PCW distribution • 19% operating profit growth to £131m • 76.5% calendar year l
Slide 59: Long track record of delivery
Long track record of delivery Live customer policy growth… (millions) …whilst delivering a strong calendar year loss ratio* 2.8 3.1 81.6% 2.6 2.7 73.9% 71.5% 72.4% 75.4% 73.7% 73.0% 75.0% 76.5% 2.3 2.0 1.7 1.4 1.1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2012 2013 2014 2015 2016 2017 2018 2019 2
Slide 60: Strong culture
Strong culture Record level colleague engagement… …supporting improvements in NPS 6% 17% improvement improvement 2019 2020 2019 2020 Page 4
Slide 61: Recap of our business model
Recap of our business model Customer Price comparison websites Direct Low cost, low risk, highly scalable distribution model Strong brand and diverse product range (customised for PCWs) Separation of risk and retail pricing Unique approach to pricing Customer service Low cost, digital servicing mode
Slide 62: Pricing: an example of capabilities needed
Pricing: an example of capabilities needed Hastings has unique capabilities in pricing, underwriting and fraud prevention, honed over a decade Market characteristics Our approach • 140 million quotes p.a. • High volume data verification and enrichment (‘big data’) • 200+ data points per quote • Real
Slide 63: UK market overview
UK market overview Hastings has significant growth opportunity in a large profitable market, where traditional players have been disrupted by distribution, technology and regulatory changes Traditional insurers & brokers New world specialists 32m 21m Brokers £13bn £5bn Gross written Gross written pr
Slide 64: Regulatory dynamics
Regulatory dynamics Hastings is well positioned in the face of regulatory change FCA review of pricing practices • Final policy statement expected Q2 • Hastings supportive of draft statement • Likely to stop practices of aggressive new business discounting “6 million policy holders paid high • There
Slide 65: Significant opportunity and ambition
Significant opportunity and ambition Hastings aims to become a market leader, delivering profitable growth… Become the Best and Biggest Digital Insurance Provider Hastings today Market leaders Large scale 3.1m policies 5m+ policies ambition £131m UK profit £500m+ UK profit Pricing Customer Claims Di
Slide 66: Delivering on our vision
Delivering on our vision A significant change and technology programme continues, building on 2019/20 momentum and leveraging our new core platforms Hastings 2021 change programme Pricing Customer Claims Digital Home New and anti-fraud retention transformation (low cost) propositions • Next generati
Slide 67: Initiatives will drive future performance
Initiatives will drive future performance Become the Best and Biggest Digital Insurance Provider Pricing Customer Claims Digital Home New and anti-fraud retention transformation (low cost) propositions 2021 outlook Medium term targets Hastings remains well positioned and expects to • Calendar year l
Slide 68: Potential further benefits from new shareholding
Potential further benefits from new shareholding Framework of collaboration established to realise benefits Pricing Customer Claims Digital Home New and anti-fraud retention transformation (low cost) propositions leveraging financial strength Page 12
Slide 69: Wrap up
Wrap up 1 Well positioned, with customer focussed business model 2 Big ambitions, with clear areas of investment 3 Good 2020/21 momentum and progress on initiatives 4 New shareholder collaboration underway to accelerate strategy Page 13
Slide 70: Appendix
Hastings ©) Appendix
Slide 71: Financials
Financials £'m 2020 2019 2018 2017 Net earned premiums 444.2 439.3 440.7 410.1 Other revenue 327.9 295.7 308.7 298.7 Investment income 8.9 10.4 7.0 6.8 Net revenue 781.1 745.4 756.4 715.6 Net claims incurred (339.6) (358.4) (330.6) (299.5) Operating expenses (310.7) (268.9) (235.2) (232.0) Operating
Slide 72: Disclaimer
Disclaimer This document, which has been issued by Hastings Group (Consolidated) Ltd (“the Company”), has not been independently verified and no representation or warranty, express or implied, is made by or on behalf of the Company or any of its subsidiary undertakings and any of such person’s direc
Slide 73: Closing remarks
Closing remarks Björn Wahlroos, Chair of the Board, Sampo Group 24 February 2021 58
Slide 74: Sampo's strategy is focussed on P&C insurance
Sampo’s strategy is focussed on P&C insurance P&C insurance: Invest and develop Life & investments: Manage for value c60% of c40% group GWP: €7bn COR: 83.6% UW profit: €1.1bn group capital earnings Invest to build high quality Nordic and UK private/SME P&C operations Optimise return on capital Priva
Slide 75: Sampo Capital Markets Day 2021 Q&A
Sampo Capital Markets Day 2021 Q&A 24 February 2021 60
Slide 76: Sampo Capital Markets Day 2021
Sampo Capital Markets Day 2021 24 February 2021 Sampo plc Fabianinkatu 27 00100 Helsinki, Finland Phone: +358 10 516 0100 Business ID: 0142213-3 www.sampo.com @Sampo_plc sampo-plc sampo_oyj 24 February 2021 61