Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sampo Oyj (SAXPF, Financial) reported a solid 8% increase in nine-month underwriting profits, driven by customer growth and favorable rates.
- The integration of Topdanmark is progressing rapidly, with a joint Nordic management team in place, enhancing business opportunities in Denmark.
- The UK business, particularly Hastings, showed strong performance with a 11% increase in total live policies and doubled profits before taxes.
- Sampo Oyj (SAXPF) achieved significant growth in prioritized segments in the Nordics, including 11% in personal risks and 10% in private online sales.
- The company has successfully maintained profitability for electric vehicles, matching that of combustion engines and hybrids.
Negative Points
- Claims inflation remains a concern, with a gradual moderation to 4% on average, but not expected to decrease significantly in the near future.
- New car sales are at a historically low level, impacting growth in the motor segment.
- The Nordic market is experiencing significant price increases, affecting customer satisfaction as reflected in declining Net Promoter Scores (NPS).
- Operating expenses at Hastings have been growing rapidly, outpacing top-line growth, raising concerns about operating leverage.
- The financial result was impacted by market movements, missing some consensus estimates, and showing volatility in net financial results.
Q & A Highlights
Q: You mentioned that the rate increase and claims inflation picture will not change much in the near term. Does this mean the situation will remain unchanged through 2025? Are there differences in required price hikes between retail and commercial SME customers in the Nordics?
A: It's too early to say for the full year 2025, but in the next six months, no changes are expected. In the Nordics, motor insurance requires higher price increases than property, with Norway seeing significant hikes due to currency effects. Denmark will also see high price increases next year due to a special pricing index.
Q: With new car sales affecting premium growth, will this impact your underwriting strategy if the situation doesn't change quickly? Also, could you quantify the benign claims frequency in Hastings for Q3?
A: Low new car sales impact motor growth, but we see good growth in other lines. Motor is important but not critical to our strategy. In Hastings, industry data shows a 5-10% frequency reduction year-on-year, aided by favorable weather and safer cars. Our underwriting actions have also contributed to a safer book.
Q: Could you provide insights on pricing developments at Hastings, given market data suggests prices are declining? Also, why have NPS and retention levels been decreasing in the Nordics?
A: Hastings priced up earlier than others in 2023, allowing a growth-oriented approach in 2024. Prices have slightly decreased, reflecting lower claims inflation. NPS in the Nordics is affected by significant price increases, but retention remains stable, especially in the commercial segment.
Q: Regarding volume versus price and the need for profitability, how will you approach pricing for next year? Also, could you explain the workers' compensation situation in Finland and car frequency in Denmark?
A: Pricing decisions are tactical, focusing on maximizing value. In Finland, workers' comp premiums were adjusted due to lower-than-expected salary levels. In Denmark, significant price increases are expected due to new legislation and high indexation.
Q: Hastings has impressive top-line growth, but operating expenses are rising rapidly. What should we expect regarding operating leverage going forward?
A: Expenses are driven by new business growth and investments in capabilities for long-term success. We expect efficiency improvements from digital investments, particularly in call center costs, to gradually reduce expenses.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
