Company Reports

On Sept. 16, 2024, Sampo made the preliminary announcement of attaining 92.6% of the outstanding Topdanmark shares excluding treasury shares, as final. As Sampo owns more than 90%, starting Sept. 20, 2024, Sampo will therefore buy the remaining 6.6 million shares of Topdanmark that it does not own at a price of DKK 366.38 per share, 1.25 times Sampo’s June 14, 2024, EUR 39.29 per share closing price. This residual acquisition is expected to cost around EUR 325 million of the EUR 400 million set aside for the squeeze out. The EUR 400 million share buyback announced as part of the EUR 800 million capital deployment will be increased to EUR 425 million, which should end no later than Nov. 30, 2024. We maintain our narrow moat rating and our fair value estimate.

After the expiration on Sept. 9 of the offer to buy the remaining Topdanmark shares that it does not own, Sampo announced on Sept. 10 that based on the preliminary nonbinding acceptances, it would own 92.6% of Topdanmark shares, excluding those held in treasury. As a result of owning over 90%, Sampo has announced that—assuming the preliminary result is announced as final—it will no later than Sept. 16 carry out a squeeze-out of the remaining shares using EUR 400 million of the EUR 800 million set aside in relation to the offer for a buyback and potential squeeze-out. That squeeze-out should be cash settled. The offer is expected to settle on Sept. 19. Sampo has obtained all necessary regulatory approvals. We maintain our fair value estimate and our narrow moat rating.

Sampo has delivered what we believe to be a good set of results for first-half 2024 with net income of EUR 653 million. Our estimate for the full year is EUR 1.018 billion and the result looks better than company-compiled consensus. The earnings equate to EUR 1.09 in EPS versus our EUR 1.79 per-share full-year estimate. We maintain our EUR 42.90 fair value estimate and narrow moat rating.

Sampo is an efficiently run Nordics-based personal lines insurer that tends to focus on improving its underwriting quality year on year—be that through holding on to customers for longer and therefore paying less in acquisition costs; be that through the digitalization of its operations and extraction of expenses; be that through scale and negotiation power with its partners such as BMW, Ford, Mercedes, Nissan, Nordea, Volkswagon, Volvia; or be that through an ability to select lower-cost customers in terms of claims, or customers that are willing to pay that little bit more in price. Sampo has proved this ability year on year and tends to invest around EUR 100 million a year to achieve this. We think the savings the company has generated from these investments have more than covered their cost and more than covered the returns the business was already generating. In other words, we believe these investments have been value-accretive.

On June 17, 2024, Sampo announced it had entered into a combination agreement with Topdanmark. Topdanmark is Denmark's second-largest property and casualty insurer, with around a 15% market share. Combined with Sampo’s If property and casualty business in Denmark, the combined entity will have a market share of a little over 20%, and it is likely to be on par with Tryg, the largest local rival. For a long time, Sampo has been a shareholder in Topdanmark, but its lack of scale in this market has meant it has lagged in terms of underwriting. The acquisition of Topdanmark's outstanding share capital is being undertaken to try to close that gap and step up to the information technology, digitalization, and artificial intelligence investment demands required to compete in this market.

Sampo is an efficiently run Nordics-based personal lines insurer that tends to focus on improving its underwriting quality year on year by holding on to customers for longer and therefore paying less in acquisition costs. The digitalization of its operations and extraction of expenses, scale, and negotiation power with its partners have also helped. Sampo has a long-term track record of increasing its prices ahead of the prevailing rate of inflation. The business tends to invest a little under EUR 100 million a year to achieve these goals. We think the savings the company has generated from these investments have more than covered their costs and more than covered the existing returns the business has generated. In other words, we believe these investments have been value-accretive.

In the first quarter of 2024, Sampo Group continued to price ahead of inflation, with rate rises of 5%-6%, versus claims inflation of 4% to 5%, sticking with a premium of 1%. While in this quarter the company has placed more importance on the top line than is typical of Sampo, with 10% currency-adjusted growth, that hasn’t come at the expense of underwriting, with an improvement in its undiscounted combined ratio from 88.4% to 87.3% quarter on quarter. That is despite the absorption of 6% of severe weather claims over the quarter, an increase of 4 percentage points versus the same period in the prior year. Retention in property and casualty has slipped over the year to 89%, a deterioration of 1%. Nonetheless, we think the strength of the business is a bit better than it was last year.

Sampo is an efficiently run Nordics-based personal lines insurer that tends to focus on improving its underwriting quality year on year by holding on to customers for longer and therefore paying less in acquisition costs. The digitalization of its operations and extraction of expenses, scale, and negotiation power with its partners have also helped. Sampo has a long-term track record of increasing its prices ahead of the prevailing rate of inflation. The business tends to invest a little under EUR 100 million a year to achieve these goals. We think the savings the company has generated from these investments have more than covered their costs and more than covered the existing returns the business has generated. In other words, we believe these investments have been value-accretive.

Sampo is an efficiently run Nordics-based personal lines insurer that tends to focus on improving its underwriting quality year on year by holding on to customers for longer and therefore paying less in acquisition costs. The digitalization of its operations and extraction of expenses, scale, and negotiation power with its partners have also helped. Sampo has a long-term track record of increasing its prices ahead of the prevailing rate of inflation. The business tends to invest a little under EUR 100 million a year to achieve these goals. We think the savings the company has generated from these investments have more than covered their costs and more than covered the existing returns the business has generated. In other words, we believe these investments have been value-accretive.

Sampo Group has reported EUR 1.314 billion net income, or EUR 2.62 EPS, for 2023 under the new IFRS 17 reporting standard. This is slightly below the EUR 1.464 billion, or EUR 2.81 per share that we forecast, but aided by 4.4% insurance revenue growth and assisted by investments in service and digital. The board is proposing a EUR 1.8 per-share dividend to be paid to shareholders for the earnings generated over the last year. This is made up of a EUR 1.6 normal dividend and EUR 0.2 special dividend. The board is also proposing a buyback of 50 million shares that we have incorporated into our forecasts. After rolling our model into the new accounting regime and incorporating these distributions, we are raising our fair value estimate to EUR 43.50 per share. We maintain our Medium Morningstar Uncertainty Rating and narrow moat rating.

Sampo is an efficiently run Nordics-based personal lines insurer that tends to focus on improving its underwriting quality year on year through holding on to customers for longer and therefore paying less in acquisition costs, the digitalization of its operations and extraction of expenses, scale and negotiation power with its partners, and through an ability to select lower-cost customers in terms of claims or customers that are willing to pay that little bit more in price. Sampo has proved this ability year on year and tends to invest a little under EUR 100 million a year to achieve these outcomes. We think the savings the company has generated from these investments have more than covered the cost of capital and more than covered the existing returns the business was generating. In other words, we believe these investments have been value accretive.

Sampo Group has reported a net income of EUR 941 million for the first nine months of 2023. We maintain our EUR 40 per-share fair value estimate and narrow moat rating and reiterate that we believe shares are currently fairly valued.

On Oct. 2, Sampo completed the demerger of its life insurance business, Mandatum, with Mandatum being admitted to the official list and Sampo shares now trading without ownership of Mandatum. Sampo shareholders have received one Mandatum share for every Sampo share that they held as at Sept. 29, 2023. This leaves Sampo as a business that is purely focused on property and casualty insurance and gives Mandatum, as well as Sampo, greater strategic and financial independence to pursue its own strategy. The demerger also reduces market risk exposure and earnings volatility for Sampo.

Sampo has reported profits before tax of EUR 722 million for the first six months of the year, or EUR 1.13 per share. That puts Sampo on track to realise EUR 2.27 in earnings per share for the full year, as per Refinitiv-collected consensus. Our full-year estimate is for a pretax income of EUR 1.6 billion, so perhaps we are a little ahead.

We are initiating coverage of Sampo with exemplary capital allocation, a stable moat trend, a narrow economic moat, and Medium Uncertainty Rating. Our fair value estimate is EUR 40 per share. Sampo generated an average return on equity of 13.5% over the last 10 years. We believe Sampo will earn an average return on equity of 14.5% over the next 10 years. Our stage two forecasts use a 12% average return on equity. We apply a 9% cost of equity in line with what we apply to other personal lines insurance businesses.

Sampo is an efficiently run Nordics-based personal lines insurer that tends to focus on improving its underwriting quality year on year through holding on to customers for longer and therefore paying less in acquisition costs, the digitalization of its operations and extraction of expenses, scale and negotiation power with its partners, and through an ability to select lower-cost customers in terms of claims or customers that are willing to pay that little bit more in price. Sampo has proved this ability year on year and tends to invest a little under EUR 100 million a year to achieve these outcomes. We think the savings the company has generated from these investments have more than covered the cost of capital and more than covered the existing returns the business was generating. In other words, we believe these investments have been value accretive.