"The Group continued to report strong insurance technical results, although the sharp decrease in the market values of investment assets lowered the profit. Impairments of investment assets totaling almost EUR 200 million are included in the profit," the company stated.
The total comprehensive income for the period, taking changes in the market value of assets into account, decreased to EUR -954 million (1Q2019: EUR 561 million).
Asset values have bounced back substantially after the end of the reporting period and have had a strong positive impact on Sampo Group's net asset value and solvency II ratio. Sampo Group's solvency II ratio strengthened further to 187%, which is 8 percentage points higher than on 31 March 2020. Sampo Group's investment return (excluding Topdanmark) for April 2020 was roughly 2.5%.
Sampo's Board of Directors has today decided to cancel its previous dividend proposal due to the high level of uncertainty in the financial markets and a reduction in the level of dividends it receives from its subsidiaries and associates.
Sampo Group's operating profit consists of the investment result and the insurance technical result. The visibility in the capital markets is limited and Sampo Group cannot reliably foresee the development of its investment result. Therefore, in its Outlook statement the Board has decided to guide the insurance technical results only rather than the total operating profit. The insurance technical results are expected to be good for 2020.
Sampo 1Q2020 preliminary figures, y-o-y changes
- Profit before taxes: EUR 162 million (-66%), of which:
- If: EUR 129 million (-35%)
- Topdenmark: EUR -13 million (1Q2019: 92)
- Associates: EUR 86 million (+3%)
- Mandatum: EUR -16 million (1Q2019: 72)
- Profit: EUR 139 million (-65%)
- RoE: -33.2% (1Q2019: 16.5%)
- Group Solvency II ratio: 179% (+12 pp.)
Profit before taxes for January - March 2020 for the If segment was EUR 129 million (198). The total comprehensive income for the period after tax decreased to EUR -518 million (259). Combined ratio was 83.7 per cent (86.5) and risk ratio 63.4 per cent (64.8). The improvement in risk ratio compared to last year was supported by measures taken in all business areas during past two years as well as a benign frequency situation for a winter quarter.
Net releases from the technical reserves relating to the prior year claims were EUR 62 million (51) in the first quarter of 2020 the main part of which relates to Sweden and motor third party liability. The technical result increased to EUR 180 million (147). The insurance margin (the technical result in relation to the net premiums earned) rose to 16.7 per cent (13.9).
Large claims overall ended up EUR 20 million worse than expected in the first quarter of 2020. Large claims were EUR 9 million better than expected in BA Commercial and EUR 29 worse than expected in BA Industrial due to two major large claims in Norway.
The Swedish discount rate used to discount the annuity reserves was -0.83 per cent in January - March 2020 and had a negative effect on the results of EUR 4 million.
Gross written premiums increased to EUR 1,733 million (1,651) in January - March 2020. With fixed currency rates premiums grew 7.0 per cent in the first quarter of 2020. Growth was positive in all business and market areas. The growth was highest in Denmark and accelerated to 13.3 per cent. Gross written premiums grew by 9.5 per cent in Norway, 5.5 per cent in Sweden and 3.1 per cent in Finland. In BA Industrial premium growth amounted to 7.6 per cent, in BA Commercial 7.3 per cent, in BA Baltic 6.6 and in BA Private 6.4.
The cost ratio was 20.4 per cent (21.7) and expense ratio 15.0 per cent (15.7).
On 31 March 2020 the total investment assets of If amounted to EUR 9.9 billion (10.8).
- If has since mid-March prioritized business continuity and continued to serve and support If's customers in the best way in the changed working conditions in all markets. As a result, approximately 83 per cent of all If's employees worked from home offices at the end of the quarter. If has broadly managed to offer a service level close to normal.
- Claims cost is negatively impacted from travel insurance policies primarily following imposed travel restrictions from governments due to Covid-19. At the end of the first quarter, the total number of reported claims amounted to approximately 26,000 claims corresponding to a gross claims cost of EUR 12 million. At the end of April, the number of claims had increased towards 48,000 claims, mostly in BA Private and in Norway. For this event, If has a reinsurance cover with a net retention of approx. EUR 10 million. Claims exposure for other areas is in general considered low and in the case of Business Interruption, a loss from the current Covid-19 situation is not covered by the standard terms.
- At this stage, it is still too early to draw conclusions on the risk ratio impact from the lock down but from mid-March, If has noted a decrease in claims frequencies, especially in motor, that for a shorter period of time will have a positive effect. At the same time claims repair costs might increase due to a lack of material, delays in transportation of material or shortage of personnel following implemented government travel restrictions.
- As a consequence of the COVID-19 situation, If expects a negative effect on premium volume for the rest of 2020 from less business activity, fewer new cars sold, decommissioning of vehicles and lower insurable sums and goods. A decrease in business volume is expected to be largely neutral on the risk ratio.
Mandatum segment's profit before taxes for January - March 2020 amounted to EUR -16 million compared to a profit before taxes of EUR 72 million a year ago. The total comprehensive income for the period after tax reflecting the changes in the market values of assets amounted to EUR -323 million (113). Return on equity amounted to -105.2 per cent (37.6).
Mandatum Life Group's premium income on own account amounted to EUR 287 million (238) in the first quarter of 2020. Premiums increased in January - February but decreased in March due the market turmoil.
Net investment income, excluding income on unit-linked contracts, was significantly affected by the market turmoil and amounted to EUR -23 million (126). Net income from unit-linked contracts was EUR -884 million (427). In the first quarter of 2020 fair value reserve decreased to EUR 128 million (438).
Mandatum Life's total technical reserves amounted to EUR 11.0 billion (12.0). Unit-linked reserves were EUR 7.2 billion (8.1) and with-profit reserves EUR 3.8 billion (3.9) at the end of March 2020.
The decrease in unit-linked reserves was fully explained by the negative investment return. During the first quarter of 2020, with-profit reserves related to the higher guarantees of 4.5 and 3.5 per cent decreased by EUR 65 million to EUR 2.1 billion.
Mandatum Life has overall supplemented its technical reserves with a total of EUR 206 million (230), of which EUR 165 million is allocated to years 2020 - 2022. The figure does not take into account the reserves relating to the segregated fund. The discount rate used for 2020 and 2021 is 0.25 per cent. The rate used for 2022 is 1.25 per cent.
The discount rate for segregated liabilities is 0.0 per cent and the discount rate reserve of segregated liabilities amounted to EUR 256 million (263).
At the end of March 2020, Mandatum Life Group's investment assets, excluding the assets of EUR 7.2 billion (8.1) covering unit-linked liabilities, amounted to EUR 5.1 billion (5.7) at market values.
Mandatum Life's solvency position is described in the section Solvency.
- In accordance with the contingency plans all personnel started to work from home offices as of 13 March. Business activities have functioned normally.
- Outflow of funds from capital redemption and endowment policies was higher than normal during two weeks after the outbreak of the COVID-19 and was mainly due to two large surrenders. Since then outflow seems to have stabilized at the same level as previous years and before the COVID-19 outbreak.
- Liquidity is expected to remain good as with profit liabilities are predictable and coupons and expirations cover the pension payments for the next two years.
- COVID-19 is not expected to have a material impact on the risk result. The expense result is expected to suffer a little due to lower fee income from unit linked policies.
Torbjorn Magnusson, Group CEO and President, said:
"The news flow in the latter part of the Q1/2020 was dominated by COVID-19. Capital market reactions have been very negative, of course - equities down 25 per cent in Europe and bond spreads widening significantly. As a big investor, Sampo Group has also been adversely impacted. (...) Internet reported claims in P&C insurance have increased significantly and we have paid a large number of COVID-19 related claims, all in all some 26,000 claims in If alone, mostly in travel insurance. (...) This crisis has proved the robustness of our business model. More than 60 per cent of our business is P&C insurance.
Sampo Group and its subsidiaries continue to report solid solvency ratios. This is also the background for our Board's decision to propose a dividend of EUR 1.5 per share. It is important for us to pay dividends in accordance with our dividend policy as we have the capital and the liquidity to do so."
More financial information about Sampo can be found at www.sampo.com/investors/financial-information