Sampo delivers a transitional quarter

Sampo’s Q3 22 results were in line with expectations, although the moving parts behind the performance yielded some surprises. In our view, a couple of one-offs drove the performance and Q4 22 could be much stronger. Some details were given on the upcoming capital distributions although the timing of the full deployment of the excess cash remains uncertain.

IF good as always and a strong Solvency to feed extra distributions?

Sampo reported a strong set of H1 result, albeit substantially helped by IF P&C. With the disposal or Nordea and the market effects, Solvency was very high even accounting for the previously-announced buybacks. All the above should be supportive of the share price.

Incredible If P&C, potential additional capital return to support share price

A satisfactory set of Q1 22 results disclosed by Sampo. Our investment case is reiterated. Management has mentioned further a shareholder distribution besides the €750m and €250m following the complete disposal of Nordea shares. We expect this to support the share price while Hastings has been, once again, very disappointing. In contrast, IF P&C remains impressive.

A remarkable year but not perfect

Again, Sampo’s quarter has been of quality. Aligned with the past months’ trend, the group has benefited from its model’s cyclicality with Nordea’s stake strongly contributing to the outperformance. IF has also been remarkable alongside a stronger than expected Mandatum. We reiterate our concerns about Hastings.

Nordea’s exit with momentum

Sampo’s disposal of Nordea is, according to us, the main highlight of this release. If P&C keeps on delivering and benefits from its digitalisation. We remain doubtful regarding Hastings and its prospects.

Admirable If, the rest is enhanced by strong investment income

Sampo released, again, a strong set of results and part of it is due to the studious If. The rest is highly attributable to better investment performance yoy. Some doubts remain after the Nordea exit but, until then, investors should be rewarded with lucrative distributions.

A great quarter, but not material enough

Sampo’s Q1 results has surprised the insurance world, beating expectations. However, although the insurer has reported a great performance, this looks as if it will not last and does not address the company’s main issues: lack of growth opportunities in its market, few ideas to expand further and Nordea’s planned exit progressively decreasing the remittance rate. Hence, although this quarter has been great, it will have a limited impact on the full-year performance as such in that it is expecte

Nordea is still making headlines

The net result of Sampo was hit by its decision to impair the book value of the Nordea shares from €8.90/share to €7.50/share. The negative impact on the bottom line amounted to €899m and the result stood only at €112m. The profit before tax was stood at €380m, with a positive performance from If P&C (up 1.91% to €901m). The Board will propose a distribution of €1.70/share. 2021 should record a better performance with a return to historic levels of profitability.

Sampo and Nordea, together until further notice

Sampo is under pressure by Elliott, the activist investor, to focus on the insurance business and to sell its stake in Nordea. This step could be accomplished in the medium term as it involves two of the most important financial institutions in the Nordic markets. In addition, Sampo needs another source of internal dividend generation, the finding of which is not evident in the region.

Sampo’s new skin

Sampo is rapidly implementing deep changes to its business mix and strategic orientations. The insurer has sold Nordea’s shares for €1,174m, has acquired a Non-Life British company (Hastings Group) and reduced its financial leverage through debt repurchases. 2020 is the perfect year to book losses and to prepare for a more dynamic future. We expect corporate operations outside the Nordic region, focused on the preferred P&C segment.

The investment activities penalised earnings

Sampo posted H1 20 earnings reaching €569m, -42% yoy. The decline came from the investment side, while the insurance business showed high resilience. The group’s solvency ratio stood at 187%. The insurer has also confirmed its intention to acquire 70% of Hastings Group Holdings with the South African RMI through a newly-formed jointly-owned company. The size of the Sampo’s investment should be €1.29bn, of which €1bn funded by newly-issued hybrid Tier 2 capital. Our estimates will be improved.

Sampo is thinking about a larger European presence

The Finnish insurance group Sampo is exploring an entry into the UK market with a potential bid for the Non-Life insurer Hastings Group Holdings. The operation is being prepared with Hastings’s biggest shareholder, Rand Merchant Investment Holdings. Through such an acquisition, Sampo will be able to diversify its earnings, currently coming exclusively from the Nordic countries, and boost its growth. This is also a sign that the impact of the pandemic on its figures is lower than expected.

Dividend is sacrificed to improve Solvency II ratio

Sampo announced a Q1 20 pre-tax profit of €162m, -65.9% yoy. Mandatum Life recorded a loss of €-16m, while If P&C was resilient but its earnings declined by 34.8% to €129m. The impact of COVID-19 was significant on claims but revenues recorded growth. To preserve its capital position, the Board decided to propose a lower dividend for shareholders, at €1.5/share vs. €2.2 initially. This will allow a Solvency II ratio of 187% to be reached by the end of April 2020.

A new business cycle is beginning

A calm end pf the year for Sampo. The insurer posted an annual profit before tax of €1,541m, -26% yoy and broadly in line with estimates. The revised dividend strategy, with higher payout ratio at 70%, does not mean higher cash for shareholders. It is the way to rebalance the decrease in net profit with a lower contribution from Nordea. Now, the dividend distribution capacity depends on If P&C. A situation comparable to the pre-2015 period.

The capacity to support low interest rates has come to an end

Sampo has posted a 9M 17 profit before tax of €1,073m, down 35% yoy (€92m in Q3 19, -81% relative to Q3 18). This decline is caused by the low interest rates that affected the performance of Nordea and Topdanmark. Mandatum Life’s figures should be adjusted by the exceptional €197m contribution from the cooperation agreement with Danske Bank in 2018. The insurer will be less generous with its shareholders in 2019. Our model will be revised down.

Stable 4Q22

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