Sampo plc

OTC:SAXPF

Earnings Call Analysis

Sampo's Strong Q1 Despite Harsh Winter

In Q1 2024, Sampo faced severe Nordic winter weather costing EUR 120 million, yet achieved a 29% increase in profit before taxes to EUR 465 million. Operational momentum remained strong, with premiums growing by 10% and improved margins. The private sector in the U.K. saw significant premium growth, driven by investments in digital and non-motor products. Underlying group combined ratio improved by 1.1 percentage points. For 2024, Sampo has narrowed its combined ratio outlook to 23-25%, reflecting solid underlying business momentum.

Strong Q1 Performance Amid Adversity

Sampo, under the stewardship of CFO Knut-Arne Alsaker, delivered a resilient performance in the first quarter of 2024 despite challenging weather conditions. The Nordic region experienced its harshest winter since 2010, with extreme cold, heavy snow, and windstorms costing the group approximately EUR 120 million. Even so, Sampo recorded a 10% increase in premiums and a notable 29% rise in profit before taxes, reaching EUR 465 million.

Focus on Organic Growth

At the March Capital Markets Day, Sampo emphasized its goal of achieving more than 7% annual growth in operating EPS from 2024 through 2026. In Q1, the company has already shown progress, with premiums in the U.K. growing by 7% and 22%, respectively. The digital and non-motor product investments paid off handsomely, leading to a 14% increase in Personal Insurance and a 7% rise in Property Insurance premiums.

Improved Underwriting Margins

Excluding the impact of volatile items, Sampo's group combined ratio improved by 1.1 percentage points year-on-year. This improvement was driven by positive developments in both the Nordic and U.K. markets. Even as claims inflation slightly decreased compared to the fourth quarter, underlying margins witnessed positive trends. The company has now provided a narrowed group combined ratio outlook for 2024, estimating a range between 23% and 25%.

Positive Outlook

Given the strong underlying momentum, Sampo remains confident in its trajectory for the rest of the year. The decision to narrow the combined ratio outlook reflects positive business expectations despite the severe weather-related challenges faced in Q1.

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.