Sampo Oyj

OMXH:SAMPO

Earnings Call Analysis

Sampo's Strong Q1 Performance Amid Nordic Weather Challenges

Sampo reported a robust first quarter despite severe Nordic winter weather, causing an extra EUR 120 million in costs. The company saw a 10% growth in premiums and a 29% rise in profit before taxes, totaling EUR 465 million. Organic growth in the U.K. led to a 7% increase in premiums across segments, with significant contributions from digital and non-motor products. Sampo's combined ratio outlook for 2024 has been tightened to 23%-25%, reflecting confidence in sustained positive momentum and improved underwriting margins.

Introduction

Knut-Arne Alsaker, the Group CFO of Sampo, began the earnings call by providing a comprehensive overview of the company’s first quarter results for 2024. Despite the severe Nordic winter weather, the company reported strong operational momentum, highlighted by a 10% growth in premiums and a 29% increase in profit before taxes, which reached EUR 465 million.

Weather Impact

The first quarter of 2024 was marked by the harshest Nordic winter since 2010, resulting in freezing temperatures, heavy snow, and windstorms. These adverse weather conditions cost Sampo approximately EUR 120 million. Despite these challenges, the company maintained strong operational performance.

Premium Growth

Sampo witnessed notable growth in premiums during the first quarter. Organic growth is central to Sampo’s ambition to increase operating EPS by over 7% annually from 2024 through 2026. The U.K. market displayed significant momentum, with premiums in private insurance growing by 7% and 22%, respectively. Personal Insurance experienced a 14% increase in premiums, while Property Insurance saw a 7% rise. The growth was largely driven by investments in digital and non-motor products.

Underwriting and Claims

Even with the severe weather, Sampo saw a positive development in underwriting margins. The underlying group combined ratio, which excludes volatile items, improved by 1.1 percentage points year-on-year. Claims inflation decreased marginally, and claims frequency, excluding weather-related claims, continued as expected. This stability bolsters confidence in Sampo’s business trajectory for the remainder of the year.

Financial Projections

Based on the first quarter performance, Sampo has narrowed its group combined ratio outlook for 2024 to a range of 23% to 25%. This refined projection reflects the company’s solid underlying momentum and strategic initiatives aimed at driving organic growth and improving operational efficiency.

Earnings Call Transcript 2024-Q1

[Knut Alsaker, executive]

Good morning, everyone. My name is Knut-Arne Alsaker, and I'm the group CFO of Sampo. It's my pleasure to give you an overview of Sampo's first quarter results for 2024. The first quarter saw the most severe Nordic winter weather since 2010, with freezing cold temperatures, heavy snow and windstorms, costing the group around EUR 120 million in total. Despite this, our operational momentum was strong with premium growth of 10% and an improvement in underlying margins. Profit before taxes increased by 29% to EUR 465 million, helped by our resilient underwriting results and strong investment returns.

Let me now dive into a few key points in our Q1 results. At our March Capital Markets Day, we got organic growth at the heart of our ambition to grow operating EPS by more than 7% per annum in '24 through '26. I'm pleased to see that we have made a good start on this with private in the U.K., growing premiums by 7% and 22%, respectively, in Q1. Private benefited from the investments we have made in digital and non-motor products. Premiums grew by 14% in Personal Insurance and by 7% in Property. In the U.K., we continue to see the effect of the price increases we took during the second half of 2023 and an increase in customer count, both in Motor and Home. Putting the severe weather aside, we had a very positive development in underwriting margins.

The underlying group combined ratio which excludes volatile items, improved by 1.1 percentage points year-on-year on positive momentum in both the Nordics and U.K. Claims inflation reduced marginally compared to the fourth quarter in both the Nordics and U.K., while claims frequency, excluding weather claims, continued in line with expectations. Given the solid underlying momentum that we see in the business, we are confident in the trajectory that we see for the rest of the year. As a result, we have narrowed our group combined ratio outlook for 2024, 23%, 25%.

With that, I thank you for your attention.