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Sampo Oyj
Earnings Call Analysis
Q3-2023 Analysis
Sampo Oyj
The company experienced a 6.3% growth boost in the third quarter, attributed mainly to pricing increases of approximately 5-6% across the Nordic region. When factoring out the impact of the Swedish mobility sector, which faced challenges due to stagnant new car sales, the company's growth in private would stand at an even more robust rate of 7.8% for the third quarter.
The management has set a clear outlook for Hastings, maintaining an operating ratio within the range of 88% to 90% for the year. This targeted range indicates a steady expectation of profitability - a key indicator closely monitored by investors for insurance companies.
The current claims inflation across the Nordic region remains consistent with past performance, suggesting stable management of cost pressures. Moreover, the company's retention levels have not wavered, which implies strong customer loyalty and is an essential factor in ensuring recurring revenue streams within the competitive insurance landscape.
Lessons from natural peril events inform localized pricing adjustments. However, the executives highlighted that the overall impact of natural perils on the company's pricing strategy within the Nordic countries is not extensive, suggesting that such events do not significantly disrupt the broader pricing stability or financial performance.
With a reinsurance program specifically for Property in place, featuring an excess of loss at GBP 7 million, the company prepares for potential property claims while assuming normal weather patterns. Although still a relatively small segment, the Property book's growing significance makes this reinsurance an important aspect of risk mitigation, especially considering the ongoing concerns around Motor claims inflation.
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Good afternoon, everyone, and welcome to the Sampo Group Third Quarter 2023 Conference Call. My name is Sami Taipalus, and I'm Head of Investor Relations at Sampo Group. I'm joined on the call by Group CEO, Torbjorn Magnusson; Group CFO, Knut-Arne Alsaker; and CEO of If, Morten Thorsrud. The call will feature a short presentation from Torbjorn, followed by Q&A. A recording of the call will later be available on sampo.com.With that, I hand over to Torbjorn. Please go ahead.
Thanks, Sami, and welcome, everyone. Our third quarter was very much a continuation of the previous ones. The headline numbers are dominated by very strong momentum in our operations and our strong development in our focus areas on the one hand, but also of a second consecutive quarter with natural perils events in the Nordics. I'll comment on both, of course.I'd like to comment upfront also that the so important underlying margin trends are unchanged in the Nordics. We continue to be able to price slightly ahead of claims inflation and are able to keep an extremely high retention level. Claims inflation is stable or even receding slightly. And in total, the development of our portfolio is a very positive one.Beginning with our momentum in the Nordic operations. We are at the moment growing in business lines that we really like, and I'm particularly pleased to see growth picking up in private lines. Car sales are still low, but we are basically keeping market share despite this and growing in Personal [ risks ] and Home.Our digital channel is performing well, and online sales grew by 9%. I think the growth in Nordic home insurance was impressive since the number of people changing homes at the moment is low for natural reasons. Not forgetting profitability for business area Private, I should mention that the combined ratio is 82.7%, despite the elevated weather claims.Zooming out to the total P&C picture, the Nordic market has remained disciplined and our observed claims inflation fell marginally to the lower end of the 4% to 5% range. We had some EUR 90 million in weather effects in Q3 and operationally our focus was on supporting our customers. The weather claims were mainly related to one very large Norwegian storm, Hans, and also to a smaller cloud burst in Oslo.It's part of the fundamental idea of insurance to be diversified and see the events for what they are. They will happen once in a while and need to be priced for and reinsured. From a financial perspective, one has to remember though that in If P&C's 23-year history, we have had these kind of extreme weather events 3, 4, 5 times with a number of event 3 years in between. So trying to draw conclusions from so few events is difficult.Nevertheless, we are monitoring the layer of smaller events carefully and adjusting pricing accordingly, and locally, of course, where exposures are the highest. It's important to remember that we write 12-month policies in our industry and reprice annually. The diversification we have works in several dimensions. We write business in a number of geographies, certainly, but also multiple lines, and we tend to reserve conservatively.This quarter we have some runoff gains from an inflation reserve we set up last year, as well as some ordinary positive settlements from large Industrial claims, as we have had so often in the past, and I suspect often will have in the future. In the U.K. the uniquely high monthly rate increases continued, and the market is catching up with claims inflation. Monthly price increases were in the mid-single digits, while claims inflation remained high, but stable now.Hastings is, as always, prioritizing profitability, but has still managed to grow customer count even in Motor slightly. With an operating ratio of 90.5% for the first 9 months, we expect a full year combined operating ratio in the outlook range for 2023, while carrying very strong operational momentum into 2024.I have a separate slide on Nordic claims inflation today, which almost feels superfluous. In Property, the claims inflation has now fallen a bit, especially for materials and the corresponding development for Motor is stable. Claims frequency is in line with our expectations and pricing and does not drive any big part of the rate increases. We compare, of course, mainly to the years before the pandemic.And so, we continue to implement rate increases ahead of total claims cost development. This means that the trend in underlying margins remained strong as If P&C improved its 9-month adjusted risk ratio by 0.5 percentage point year-on-year, again, and its cost ratio again marginally.Turning to a more detailed view of the U.K. We are doing relatively well in the challenging environment. Remembering that our business achieves the same ROE as the Nordics, one at a slightly higher combined ratios. And that we have growth opportunities of a different kind there. Premium growth was north of 30%. Policy count in Motor is up. And in Home, we're still growing based on structural changes in the market.We look forward to 2024 with confidence, even though there is still uncertainty around the development of the claims inflation. A few simple words on investments and strategy to finish the summary. Sampo delivered a net investment income of nearly EUR 500 million in the first 9 months, the short duration, again, while fixed income portfolio has allowed us to reinvest rapidly, pushing the running yield of If P&C to over 4% from 1.5% at the end of 2021.We acknowledge the uncertainty in relying on this for future underwriting, but continue to make the most of it. Then on the 2nd of October this year, we completed the spinoff of Mandatum by listing it on NASDAQ in Helsinki. And I am pleased to see that the listing has been well received by the market, and I'm excited to take Sampo forward from here now as a pure P&C insurance group.And with that, Sampo -- Sami, I think that we open up for questions.
Thank you, Torbjorn. Operator, we're now ready for the Q&A.
[Operator Instructions] We'll now take our first question from Jakob Brink at Nordea.
Can I start where you started, Torbjorn, on the premium growth? Could you potentially split up the very high underlying growth in what comes from price hikes and what comes from new clients or new products to existing clients in If P&C, please?
Morten, do you want to talk?
Yes, I can take that one. I think it's [ easier ] than to look at the 6.9% figures of that we have for the first 9 months. I think that's mostly representative. And then we've been saying that we've been pricing up about 5% to 6% for inflation. So that sort of -- would sort of be the larger part of that. And then we have a small growth also in number of customers, in basically all business areas. But predominantly, the growth is coming from price actions. Then sort of on the customer side, we are supported still by what is still a historically high retention level. But again, sort of the main growth driver is price increases.
Which means, Morten, that when we look at public statistics, it seems as if we're growing market share slightly.
Slightly growth in market share on the Nordic level, that's right.
And my second question. Looking at -- there's a lot of talk these days around weather and large losses and especially after 2 pretty soft quarters also for you in the Nordics. To what extent should we worry about this relatively high level of weather and large losses when it comes to the outlook for the reinsurance renewal 1st of January? Is this anything that could potentially cause retained risk levels to go up again on pricing, given the, again, maybe somewhat soft profits in -- or large -- quite high, large losses over the past few years, actually?
First of all, I think you need to take sort of a longer-term perspective when it comes to sort of the development in the nat cat market. As Torbjorn alluded to, sort of we've seen some -- few events over the last 20 years, but we really need to go back. I mean, in 2005 we had Gudrun, 2011 we had Dagmar, now 2023 we have Hans. So it's something that will be here occasionally.Then of course, we have sort of the more normal sort of cloud burst that is typically not hitting our reinsurance cover. When it comes to reinsurance, it is a market that has been hardening, of course, for a while. The cat market is very much a commodity market. It's been a profitable market sort of so far. It's more even of a global market. So, I think sort of -- even though the market is hardening, it will probably not have a big effect.And then on the property risk side, there's been some few large claims in the Nordic region over the last couple of years. But then again, I mean, one need to take a longer perspective. And I think in that perspective, the Nordic region look quite fine. Of course, we have sort of assumptions of this when doing pricing. So of course, we are sort of passing this on sort of in our pricing.
And the total reinsurance cost for our core programs is like EUR 80 million. So that's not a big issue. And we also have the luxury that we have chosen the present net retention of, say, some EUR 30 million. From a more tactical perspective, we could easily live with a higher net retention or bring it down further lower if that was a good tactical decision against -- or together with the reinsurance market. So this is business as usual in every way for us.
My third question, please, on capital. I recognize there's a relatively small buffer from your current pro forma solvency ratio of 195% down to the current upper end of the range of 190%. But also I know you have a CMD later in the year and a model approval early next year. And if we start to play around with the numbers of getting the SCR reduction and potentially taking down the solvency ratio, it could become a -- sort of a meaningful special payout. Is that how we should look at it, that you're willing to potentially use these capital drivers to pay out? Or is it more to basically have more reported solvency going forward?
Knut-Arne here. You're right. Currently -- with the current solvency target range we have, the excess capital is there, but small -- very small. And as you know, we'll update our capital management framework later. In terms of the discipline that we have shown in capital management, I would expect us to continue to be disciplined.And the capital management framework talks about excess capital either being used for buybacks, special dividends. Both we have done a lot of over the last few years, so bolt-on acquisitions, which we'll also do from time-to-time, and I expect those 3 uses of excess capital to remain also going forward.
And my last question is a small one. You're right that you bought a few Topdanmark shares in the quarter. Could you tell us what price you bought it at?
It was bought in the market. It was a tiny amount, and that -- we've got nothing new to say about that.
And we'll now move on to our next question from Youdish Chicooree at Autonomous Research.
The first one is on claims…
Youdish, it's very difficult to hear you. If you're wearing some headphones or something like that, could you try to change the arrangement? Should we take the next question in between and then let Youdish come back in the queue?
Sure. We'll now move on to our next question from Faizan Lakhani at HSBC.
The first is on the cost ratio. I can see the trend on a 9-month basis. [ But ] on Q3, it was a considerably better result year-on-year. Is that simply due to sort of timing of expenses? Or is -- or can we take that and assume that was a genuine improvement [ every ] quarter?
Because [ modern ] [indiscernible] completely ignores managing the costs over quarters and sometimes pay more and sometimes pay less, for instance, of IT investments. The annual number is what you should look at.
So the answer is yes. And we still have a target of the 10 to 20 basis points on the full year, that sort of the targets.
That could be higher. It could be up in Q4 year-on-year, I guess, on that basis.
Second question is more of an IFRS 17 question. Can you just help us guide us on how the If is meant to develop over the course of the next -- over next year directionally and sort of on an absolute basis? That would be useful. And the final one is on the prior year releases. It sounds like most of it is one-off, but it's been 2 quarters where you've had quite strong reserve releases. Is there anything we can assume that was more structural in that beyond the -- sort of the general guidance?
Half of the reserve releases were from the [ caution ] reserve that we set up for inflation last year. And then the large -- the settlement of large loss in Industrial that made up part of the rest. That's now and then. But we seldom have a negative item on that.
So is there any more inflation reserves left?
We are always sort of prudent. Yes, we sort of -- I think that's what we typically say about that. But what Torbjorn was talking about was a special reserve that we put up in second and third quarter. But of course, we have still reserves to handle inflation, of course.
And if I understood your question on IFRS 17, it was about insurance finance income and expense. Is there -- was that correct?
Yes. That's correct.
There's a few elements there without going into sort of significant detail, but unwinding of discounting effects is basically going to be sort of unwinding of last year's discounting in the combined ratio, fairly stable quarter-over-quarter, as you've seen also this year. So no sort of need to give any specific comments that, that will materially change going forward.Same with the indexation of annuities, also a fairly stable element. And then you have the effect of -- from changes in discount rates, which obviously will be stable if there is no change in discount rates. But you saw -- we have sensitivities from that in our IFRS 17 in [ raw ] material, and I think also some in the investor presentation from today. What happened during the third quarter was that loan euro rates where we have the highest sensitivities, increased slightly.So loan euro rates, if they go up, it will mean a more meaningful positive impact on this particular part of the insurance finance income and expense. And obviously, the other way around, if it drops. The second highest currency sensitivity or rate sensitivity here is Swedish loan rates.And we will sort of come back with a little bit more granularity on the sensitivities that we so far have published, where it's basically a 100 basis point up and down on the interest rate curve on average, to give you a bit more granularity on how that sensitivity plays out, particularly in the euro and Swedish curve.
I think we're ready for the next question. Okay. Operator, can we get the next question?
If you just hang on for a second, we're having a small problem with the connection to the operator.
We'll now take our next question from Vinit Malhotra.
The main question I have is on inflation. I'm just curious about the wage inflation topic, given even in properties, as you highlight in your slide, labor is sort of the bigger chunk. And you've said here a statement that visibility on salary and cost inflation gradually improved. I'm just curious to hear some more thoughts on wage inflation generally? Because that seems to be a topic that can have longer-term implications. And obviously, you have reduced some of your inflation reserves while still saying that you're confident. I'm just curious to hear your thoughts on the topic of wage inflation and how this plays out when you see gradually improved visibility?
Yes, it's Morten here. I can comment on that. I think what we have this year that is a little bit special is that we already now know the wage inflation sort of through the Central Union negotiations in Sweden and Finland also for next year. So that is giving us quite a bit of visibility in terms of development of wage inflation next year. Then of course, we also have sort of the usual sort of negotiations with suppliers that always gives us good visibility on future inflation when it comes to [ repair ] cost and so forth.So, I think that's something that is positive and a little bit sort of different than what it'd be in the normal year, that you have sort of 2-year agreements with unions in the Nordics. And then as you seen, inflation for us is [ easening ] a little bit. So it's now more in the lower range of 4% to 5%. Motor is stabilizing, Property going a bit down.
So -- and even Norway and Denmark, similar approach?
Not similar arrangements in Norway and Denmark. But I think we still have good forecasts also there sort of for -- where wage inflation will move. And of course, for us, it's more important than negotiations that we do with the body shops where we sort of constantly are sort of setting prices for also next year. So that gives us already a lot of visibility on pricing into next year.
Remember, claims inflation never exceeded 5% in the Nordics. And for almost all lines, it was 3% to 6% at the most. So, we never had a period when we hit our clients with extremely high rate increases.
[Operator Instructions] We'll now take our question from Freya Kong.
It sounds like you are getting a little more relaxed on the claims inflation outlook in the Nordics. How long do you need to see this trend normalizing before this moves potentially into lower pricing for your customers?
Of course, [ we're ] [ relaxed ], but Morten will give you the right answer.
Yes. I think sort of claims inflation and also sort of claims frequency very much has developed as we have anticipated. I mean, first -- claims frequencies have come back more or less to pre-COVID levels just as expected. Claims inflation has, of course, been high in the historical context. But due to the fact that we're sort of having a lot of future-looking agreements with partners, we've been able to predict it with a quite high degree of accuracy.Then looking forward, I think sort of -- it will be at an elevated level also sort of the coming year or 2 if you just look at sort of the wage increases that we'll have in the Nordics. I mean, that will continue to sort of be above a longer-term sort of average. But again, as Torbjorn said, I mean, we've never seen sort of really the extreme levels that you see in other parts of Europe.So we've been always sort of talking about the peak of 5% to 6% -- yes, peak of sort of 4% to 5%, perhaps a little bit more than 5% inflation. Now it's more towards sort of the lower end of 4% to 5%. So yes, I think that's sort of the outlook that we have.
My next question was on Hastings. I think the guidance would imply still quite a strong Q4 operating ratio, better than what you've done this year, to get to the target for the full year. So how should we think about the trajectory of the earn through into Q4 and 2024 of these higher rates? And I guess once you hit this target range of profitability, how are you thinking about -- what's the competitive landscape like in the U.K. to push for growth from there?
The important development is the rate increases of 3%, 4%, 5% per month now for 5 or 6 months consecutively. Claims inflation has stayed at 12%, in our view. And of course, at some stage, these lines will cross, and we will have earnings from the excess rate increases over a period going forward. So that's the important development. And exactly when that happens depends on the claims inflation going forward. Then the beginning of your question was more purely mathematical. Knut, do you want to expand a bit?
I mean, the outlook for the full year with a combined ratio or operating ratio between [ 88.9% ] obviously means that we will see some of the benefits, which Torbjorn just alluded to, in Q4. That's needless to say, and also, of course, continuing into next year.
And then sorry, just a final question, if I may. I think you alluded to it in your introductory remarks, but how are you thinking about the attractive pickup in yields when it comes to underwriting and pricing? Surely, this at some stage is coming into the overall ROE considerations, which might allow a more aggressive combined ratio?
I think the jury is out on what the interest rates will be at the end of next year, and underwriting decisions are annual decisions. They work for the next 12 months. So, we have to be careful not to be too much influenced by instantaneous changes in the financial markets. At the moment, we haven't changed our stance on rates.
We will now take our next question from Jan Erik of ABG.
I have a couple of ones. And the first one [ versus ] your position. You have a very strong underwriting profitability. And how do you see -- your growth in volumes versus sort of your improved pricing and seeing the claims inflation coming through? So your rate increases, how should we think about them rolling versus prices going forward? And how should they be picked up, so to speak? That was the first one. The second one is on the exit of the PE portfolio, which is sort of a little bit down the road probably and you took some markdown on next year, I can see in your disclosure. So how should we think about those PE investments when it comes to your excess capital, not necessarily next year, but down the road in '25 or '26? Your Industrial gross written premium is to be growing by about 40%. Could you just say some more thoughts about the price versus volume in that business line?And finally, on Hastings, could you update us on how you think about retention -- or your own sort of retention for premiums next year in that line of business?
Everyone wants to answer your first question. I'll give you the first answer. Now our main purpose in Life is, of course, to grow profits, and we do that by growing the underwriting profits mainly, and the rest will follow, which means that -- your question is basically for the Nordics, [ Morten Thorsrud's ] job, isn't it. There will always have to be a balance between increasing rates, improving the combined ratio, reducing costs and on the other hand, increasing volumes. And that's not a theoretical decision. That's a decision that he takes every day for every segment that he is in-charge of. So that's the question -- that's more to add to that.
No, I think sort of little to add on that. So I think I'd rather comment on the Industrial part sort of. And Industrial growth, I think also there -- remember, we are reporting on sort of gross written premium, and that's obviously a little bit sort of volatile from quarter-to-quarter. And in particular, third quarter is a small renewal quarter in Industrial. So I think it's more fair to look at the [ 13.1% ] sort of being sort of the year-to-date figure, where all of that growth is coming from either price increases or value increases. On the total Industrial business area, new versus lost customers is actually marginally negative. Then in the third quarter, in particular, there was also just a little bit tough movement of inception dates. So some technical effects in that respect sort of driving sort of third quarter growth in Industrial, which was a similar effect actually sort of in the negative direction on commercial. So again, it's better to look at the 9 months figures, that's more sort of representing the underlying growth. And again, all coming from rate increases or value increases sort of insured value.
Knut-Arne here. On the PE, there's really nothing new to say in terms of our plans for those 2 remaining financial investments in Sampo P&C. We're not in control of the -- there is neither Nexi, because we don't own Nexi shares. We own a part of companies set up with the private equity firm. That is a special purpose vehicle for basically only Nexi shares.And when that is exited, we will get our money back and obviously, it will add to the excess capital. So there's nothing new on the time line of this. But you are right that there was a smaller negative effect from this investment in the Q3, and you all can see how Nexi have performed in Q4 just following the share price. Since it is an SPV we're owning, that's directly linked to Nexi, but nothing new on the time line.
And finally, your fourth question on Hastings retention. I'm not sure that I heard all of it. But the U.K. -- retention in the U.K. -- first of all, retention is a prioritized number for us. We understand how important it is for costs and actually also on keeping the right customers. Hastings has understood this from the very beginning of its, well, 12, 13-year journey and has very high retention numbers in the U.K. context.The U.K. context is normally such that the retention numbers are significantly lower than in the Nordics. The large companies probably have something like 10% lower retention numbers than in the Nordics. Take that as a very round number.But Hastings has made an effort from the very beginning to keep customers -- to find ways of keeping customers, also not to use first year discounts as has now been prohibited by the pricing reform last year in the U.K. So, we never had any problem with that or had to address an issue arising from that. I hope that's an answer to you.
Just one follow-up. The reinsurance share of the quota share you have in the U.K. is still very high. Do you intend to lower it? Or is this the level you are as comfortable with?
We're too comfortable. For the long term, it's going to be lower. But then it's a tactical decision together with all the other reinsurance programs that we buy. So it doesn't have to happen immediately. But it's not there for the long term.
And we'll now move on to our next question from Tryfonas at Berenberg.
Apologies if this has been addressed during the call, a little bit late, but is on the Private -- just the Private growth, which accelerated. I think you had a slide highlighting that. I guess, what's the key driver there? How should we think about the volume versus price dynamic? And how much of that can mix up late into next year, and is that growth rate sustainable? That was my question. And then on Hastings. Clearly, you expect operating ratio to be below maybe 80%, given this is what you need to get below -- back to your target guidance for this year in Q4. So in that level, then the one to expect into 2024? So that means somewhat below the 88% you had originally guided for?
I'll start with the question on the private growth. So, we report 6.3% growth in the third quarter. And prices, as we say, is about 5% to 6% sort of on a sort of total Nordic level. So clearly, most of the growth is coming from pricing. Then if you adjust for the Swedish mobility business, where we still see a little bit of a headwind due to still fairly low new car sales. The growth in private would be 7.8% in the third quarter. So, we have sort of growth in number of customers, but of course, the largest growth driver is still pricing.
When it comes to Hastings, just to be clear on the outlook for the year, it's 88% to 90%. I'm not sure I heard you right. Just to make clear, it's not below 88%. So it's 88% to 90%. In terms of targets and ambitions for the various segments going forward after the 3-year strategic period we'll obviously revert to when we have a CMD.
And may I please ask if the new targets would be [ annual ] or it would be a 3-year target, if I may? You don't have to answer it just as well.
Let's refer to the new targets when we have a CMD.
And we'll now move on to our next question from Asbjorn at Danske Bank.
If I may ask on your multi-insurance and reported claims inflation, just looking at the Swedish krona being relatively stable for at least a couple of months after being under significant pressure. I know its early days, but I was just wondering the 4% to 5% claims inflation you mentioned, obviously, in the lower end now, how big a driver has reported claims inflation been within Motor, within building materials? How would that have looked if the currencies would be stable?And second question, looking at the Norwegian multi-insurance market, at least the statistics that I have available seems to have been around 7% year-over-year repricing on Motor on your side, quite a big difference between the different players in the market. Obviously, I only have average numbers, and there might be issues with the official data in any case. But do you see anything in terms of some competitors being more aggressive on the Motor side, I guess, lowering their or deteriorating the underwriting to take market share, other players being more rational seems to be so in the statistics?
Yes. I'll try to answer your questions here. First of all, just to repeat, sort of overall inflation, 4% to 5%. And then we've been saying that Motor inflation more on the higher end of that and Property lower than that. And weak Norwegian currency. Unfortunately, it's not a new thing. It's something that we worked on sort of for many, many, many years.So, we are quite used to sort of that. And of course, it has an impact over time in terms of sort of spare part prices. But this is something that we have a very sort of granular view at. It varies from producer to producer sort of. But it's -- this is our sort of core business, sort of monitoring this on a monthly basis and making sure that you price for it.So of course, if the weak Norwegian currency continues, then, of course, that will mean that inflation will continue to be at a bit more elevated levels. But again, this is business as usual for us to sort of work with that and price for that.When it comes to reported claims inflation numbers, and you asked about Norway in specific -- specifically, it's always difficult to comment on what people report in the market.Because sometimes people confuse claims frequency with inflation. You can have mix effects, which we typically have sort of -- if we're in the COVID period or not. So we do not see a significantly different picture in Norway. Obviously, you have the weakening Norwegian krona that we talked about. But there's nothing special about Norway that makes it very different than the other Nordic countries.And claims inflation for us, when we look at real inflation sort of comparable claim types, is comparable sort of now across most of the Nordic region. Then to competitors' action, I don't think sort of we comment that much.
But there is a simple answer, isn't there, Morten? Retention levels have not changed.
We still have sort of a very good retention level, which is still sort of very high in the historical context, [ still ].
If I may follow up, just on the FX side. So if I look at the repricing that you've done, obviously, taking into consideration the FX [ happens ], if we sort of look at the potential stabilization of the Swedish kroner, which seems to be the case, considering how you're repricing, will there be an increased profitability improvement going forward from that? Or would that [ just be ]…?
Let's see. I think sort of -- I mean we're not following the sort of daily movement on FX sort of -- again, for us, we more look at sort of the actual price increases we see with specific OEMs on specific car models. So it's sort of -- for us, it's a much more granular approach, much more sort of long-term view. And of course, FX in the long run has an impact, but we don't need to look at sort of the daily FX trading, so to speak.
And we will now move on to our next question from Alex Evans at Citi.
Just -- I think, Torbjorn, at the start you mentioned something about adjusting prices for smaller events and exposure areas. I just wondered if you could give a little bit more detail on this? Is this an appreciation of a different trend of losses than you've seen historically? Because commentary from some of the competitors suggest that some of these losses are just [ sarcastic ]. And then just following up on the questions on implied Hastings Q4 operating ratio. Obviously, Home's an area that you've grown very strongly in. Are there any specific weather reinsurance programs that you have there? And how should we think about exposure to some of the storms that we've seen in the U.K. recently for 4Q?
Every natural perils event, flood, windstorm, gives you new information about which parts of your geography is sensitive to that, like areas along rivers or next to mountains. And we learned from that -- and price. That's why I used to work locally, I think, in my introduction. The total natural perils element of pricing in the Nordics is not very big.So these are small changes to most policies unless you are -- unless we learn something completely new, just about your specific house that we didn't know before. So this is an ongoing process, and we learn from every new event, but it's -- we're not talking about any large effects.
It was Hastings in Q4. There is a reinsurance program in place for Property, excess of loss reinsurance program. Although, obviously, a number of events would mean a number of net retentions, which would impact the profitability. And just to be clear, as it always is, when we think about the next year or next quarter and try to forecast for that, we do assume a normal weather pattern and not a number of weather events in our outlook. So, they are not included as normal assumptions. Then of course, the Property book is fairly small still, but growing in terms of the relative importance of Motor claims inflation, for example.
Is it possible to give the level of retention on that program?
And -- I think the -- if I remember correctly, it's GBP 7 million.
We have no further questions in queue currently. [Operator Instructions] There are no further questions coming in. So I will hand you back to your host to conclude today's conference.
Okay. Thank you, all, for your attention, and we look forward to seeing you soon.