Sampo Oyj

Good afternoon, everyone and welcome to the Sampo Group 2021 results Conference Call Miami seven Taipalus. And I am Head of Investor Relations at some per group on joined on the call by Group CEO and President Torbjorn Magnusson, Group CFO, Knut - Arne Alsaker.

CEO of If Morten Thorsrud and CEO of Hastings, Toby Vanda. 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/results. With that, I hand over to Torbjörn.

Please go ahead.

Thank you, Sami. Please move on to Page 3, there we are.

Thank you. Good afternoon then everyone.

And I'm very pleased to be able to present yet another set of solid numbers on developments for our group. Maybe the first page here speaks for itself, but let me give you a brief commentary anyway.

Underwriting culture together with customer focus have been our trademarks for decades -- two decades. Few insurance companies have been able to show the consistency that we have also in our own well-structured region.

Thus I think -- this I think has been particularly true for the past few years where our digital advantages have supported the underwriting culture of the group. And a combined ratio of 81.4% for non-life [Indiscernible] more than €7 billion in premiums compares quite favorably to peers.

And as usual, volatility in our numbers is really not low. In addition to our own development, the markets have stayed rational and consolidated.

The 1-1 renewals in the Nordics where more than 40% of the commercial and industrial businesses renewed, was one of the most successes following the past decade for FP&C with good growth and adequate rates, furthermore, renewal rates were very satisfactory and still increasing from already high levels in FP&C. Renewal rates reflect our success in offering customers value for money, best approach to keeping down on mid admin costs for us, and they certainly also reflect rational markets.

We have come to learn that every year is a new year for investment returns, and the uncertainty for the future in those returns is high. And that has been the case for long time.

2021, anyway, supplied high returns. We don't rely on or calculate with higher nominal interest when we price the insurance business going forward.

But nor do we cry wolf about claims inflation in the presence, still very moderate situation. Then further down on this page show on strategic actions and their capital consequences, reducing our Nordea stake has been a rapid process and produce good proceeds in tandem window, the ASM (ph).

strategic strong progress. And secondly, achieving full ownership of Hastings happened already this year, clearly ahead of expectations.

The Board then has today proposed a dividend of €10 cents, including the extraordinary €2 management had already indicated in the autumn, as well as the €170 insurance dividend. Next slide, please, Sami.

So starting from the right-hand side of this slide, 81.4%, already mentioned group combined ratio. Together with a positive trend for FP&C.

1% in the [Indiscernible] combined ratio the last year. That is the combined ratio adjusted role volatile items, like [Indiscernible], COVID, weather, prior-year results.

In other words, slightly came over 1% better rates. Combining this with growth, we had 19% higher underwriting profits than a year before adjusting for Hastings’s ownership and COVID.

Next slide, please. I'll leave the detailed volume comments to more later on in the call probably.

But just say that given the geographical mix we have, we will probably see marginally increased market shares when the statistics come out. We're a bit dependent on car sales.

And in the last two quarters, only Norwegians have had the money or the chance to buy cars apparently. But all-in-all, very satisfactory development on number of customers and market shares.

It is worth mentioning also that we have achieved adequate rate levels also in our commercial book some time ago. And consequently, volume development also there is now good with an increasing number of customers.

Next slide. This we'll save for the call I think, so next slide.

Turning to Hastings, we are of course, in the UK, in the middle of a period of change in the market with Hastings really well prepared for unless affected by the GIPP reform than many others. The market reaction to this is something we monitor day by day, so talking about 2021, feels somewhat late now.

However summarizing then, 2021 Hastings really well, continuing to build on their technological advantages, increase in the customer count, but being cautious to avoid competing with price in the COVID over stimulated market. Excellent operating ratio and continued rapid growth in home insurance completes the picture.

Next slide. In terms of the synergy process, let me now say and then point out that we have started reusing the proportion of say, the business, keeping more of the book on our own account just as planned.

Next slide. Finally, then, let me just show a slide depicting the total capital distribution broken down between buybacks, extra dividend from Nordea proceeds, insurance dividend and the rest.

I am really pleased to be able to report on the rapid progress for the group simplification programs launched a year ago together with the usual Sampo excellence underwriting and all of this wrapped up together in the handsome capital distribution. And with that over to you, Sami.

Thank you. Torbjörn.

That concludes the presentation. Operator, we're now ready for Q&A.

Thank you. And good afternoon.

First question on Hastings, please. Some 80% combined pray to 4, 2021 as a whole and 84 in the second half of the year, relatively limited premium growth or revenue growth for the full year.

Could you maybe give us some more clarity on how should we look at margins compared to growth, going forward. Also, taking into consideration what you have already seen with the new pricing reform in the UK.

Anything to add, maybe, anything would be helpful. Thank you.

Good afternoon, everybody. Toby van der Meer here.

So to give you a bit of color on the dynamics, firstly, just to remind you that across the UK market we've seen a range of premium declines across the second half of 2020. And in particular, the first half of 2021, but also continuing in the second half of 2021.

And a lot of that of course, driven by, particularly in the early period, COVID benefits on claims frequency is being reflected in lower prices by us. And a number of other insurers around the country.

And the effects that's hard is in some ways a tale of two halves for the 2021 financial year. In the earlier parts of the year, the customers we booked with those COVID discounts embedded in them, in the pricing, would have been driven a lot less than normal because of the lockdown and then of course return to more normal driving behavior in the second half of the year.

And so the tale of two halves is really one where we've had the earned through of lower premiums in the second half of the year with driving behavior returning to normal whereas we saw both the frequency benefits and the lower premiums in the first half of the year. Now, those COVID discounts have been unwound by us, so we've been applying rate increases throughout the second half of 2021 and into 2022.

And so that's to cover the unwinding of the COVID frequency benefits as well as general claims inflation. And I suppose, well, that means overall, is that our competitiveness has been stable.

We've been pricing ahead of the market. Normally that would take your policy count backwards.

But because of a range of good initiatives, we've managed to grow the policy count a little bit. And premiums are now going back up, and our pricing throughout all of that.

Whether we're talking about the policies we wrote at the back end of 2020 or the early part of 2021, or the policies we are writing now. We're confident they are in line with our target loss ratio or better.

how by about --

We've seen in,

I'm sorry,

That I was just going to paint a picture, I'm just saying what we've seen across the market in January, post the FCA pricing reforms is some turnaround in market conditions with premium starting to go back up. So we've been doing that throughout 2021 and January.

But we've seen more of the market to do that in January as well, obvious still a mixed picture with a number of players being quite aggressive and a number of other players pressing up quite significantly.

Thank you. And then just to round that up, maybe.

If you're also adding the inflation bit which I read about in the report, that inflation on most repair costs is going up, could you may be -- so what level of combined ratio should we be looking at given the growth you're seeing now? Are we above last year or are we getting closer to the 88% or are we still maturely below?

Yeah. I think it's too early in the year to provide too much guidance on that.

What I can say is, firstly, policy count growth we regard as an output of our pricing, not a target, in its own right. And so we're confident that our pricing is consistent with or better than our target loss ratio and therefore consistent with or better than our combined operating ratio as well.

We've seen muted policy count growth, but some the back end of last year. And you can assume that sort of momentum will continue until we feel like the pricing environment in the market is such that faster growth is warranted.

And obviously there's a long way to play out to this year to see where all of that normalizes post the initial few noisy weeks of the new year post chip. So a stable policy count growth until market conditions improves, pricing consistent or better within our target loss ratio, and as a [Indiscernible] into that, we have seen premium growth come back.

Because of our policy count growth is stable, we've been applying rate increases and unwinding COVID discounts throughout the year, so that top-line growth through something we would expect to see continued.

Great. Thanks a lot.

Then over to a question on them. Well, firstly, buying more of Hastings back in December and the [Indiscernible] also factored, you have bought more shares in Topdanmark during November.

I don't know what's up here. Maybe you can give us some clarity on what is the rationale, especially for the Topdanmark 1.5 million more shares.

And also how to look at the buying more Hastings versus buying your own shares versus buying Topdanmark, etc.

There's not that much to say. There we're blocks available in the market on Topdanmark and at the market price that was not difficult for us.

And Hastings, that was an opportunity that arose out of the other owner's situation in the rest of their business. And as far as we can tell, a strategic review of their own businesses and situation.

So that, we didn't drive, but it arose in the [Indiscernible] and we had a good dialogue with them since before. So there you are.

If I can just follow-up to just -- I guess you can make many adjustments on your own share price for excess capital. It's up Denmark as well and also acquisition price of the last 30% of Hastings.

And I think it's fair to say that the P, if we look at consensus on the three companies, so Sampo, [Indiscernible] and Hastings, the P that you acquired, the last 30% of Hastings set is not that different from what could buy the rest of [Indiscernible]. And also, you could even argue that Sampo adjusted for capital is cheaper on consensus earnings.

So again, what's --

[Indiscernible] analysis, but you -- I don't think we expect me to say much more, do you?

It would be nice, but okay, fair enough. Then just a small last question to Knut, I guess, on Nordea and the last bit of Nordea.

How is it again that we should expect you to account for that? Let's say you sold the last bit of Nordea in Q1, will you then reverse the $464 million difference in the valuation?

Good afternoon [Indiscernible] The profit recognition will obviously depend on which price was alert(ph). But any price above $890 will be recorded as a profit.

Yes, we've done the reversal and an impairment, so that is a profit in our P&L. If we sell at a price about $890.

And at the current share price the number of around 460 million is about right.

Okay. Thanks.

Club.

And if I should just add -- sorry, Jakob, just to add a bit of a detail since you asked about accounting in Nordea, since many are listening and updating [Indiscernible]. In terms of any potential dividend, we received from Nordea, if we still hold share at the ex-dividend date that will be recorded as profit as well.

Yeah. Thank you.

To the highlights. Will hard costs of NEBS.

First of all, thanks for the color on UK pricing, I guess. Question on what level of industry pricing change year-on-year, would we expect to see Hastings back to significant growth in excess of the market?

Then second, is it fair to say that leverage is a binding constraint from here for further capital distributions, if the [Indiscernible] If there's more notice like sell down and how rigid are you with the view of the 25% to 30%? And perhaps an extension of that is just thinking about that potential for the target range to be lowered from 170% to 190%.

Anymore, clarity or so on that since the last update. Thanks.

Toby, that first one and Knut the second just for the listeners we're a little bit more -- it's a bit more difficult to coordinate our answers as we are spread out in several places due to, in my own case, COVID protocol. Toby?

On growth outlook for Hastings, there's not a specific number I can give you in terms of at what point, at what level of market price increases would we start to grow more. The way we build our models is we try and predict, and we have a good track record of accurately predicting the future claims costs, we then try and make sure that we price at a level where we hit our target loss ratio or better.

Those are the prices we put onto the market. To the extent that makes us in any period more competitive will write more business to the extent that others have a different approach, a different view on claims or are prepared to take more risk than they might write more business.

And so it's the balance of that equation. And after two years of COVID frequency benefits, I guess we're faced with a number of other players who are potentially using the reserves built up during COVID to fund more aggressive new business pricing.

And while that dynamic continues, and I wouldn't have thought that they can continue for very long, in the face of those reserves running dry and claims inflation, but to the extent that it does continue, and sometimes it does take longer than you think, then we're quite happy to take our current approach, pricing approach and see less policy count growth. Although as I've already said, we are seeing top-line growth in premiums now because of the pricing actions we've taken coupled with our initiatives?

So just one more follow up on that if possible. Because different competitors are doing different things right now it's probably very tough to decide for exactly what the average industry level is doing.

I guess in that sense, do you think in this current environment is pricing at least capturing inflation at this level from your perspective? And if you're pricing inflation to maintain the margin, are we picking up any market share at these levels?

Yeah, good question. So premiums continue to fall for the market throughout the second half of 2021.

As I've already said, we put our prices up. The data is only a few weeks but I directionally say that new business prices in the market are up mid-single-digits since the start of January.

So falling prices in 2021, mid-single-digit increase during January and early February. I guess so, you can make up your own mind about whether that's consistent with claims inflation but we would say that, that feels tight to us to cover the impact of GIPP and claims inflation and the unwinding of COVID discounts.

So we're comfortable with price for those things but let's say it's tough to say with certainty that the market could have done so given the average dynamics that I've just talked about. Having said that worth recognizing that a few of the players that we would traditionally describe as being more disciplined in their underwriting have done -- have followed a similar pricing strategy to ours.

So there's a number of other players in the market who are still very aggressive.

That's really helpful. Thanks.

Good afternoon. Will, its Knut here, reverting to your two other questions.

Your first was on leverage, whether or not leverage is a constraint to potentially pay out additional dividend or do capital distribution if we generate excess capital above our capital management framework, and it's not a constraint. We are committed to being below 30% target.

There will be need to do further deleveraging if we sell all of Nordea. But as we illustrated, I think it was in the second or third quarter, if I may, we already have liquidity to deal with that leverage, and we would consider that as being dealt with in terms of our target.

If we generate excess capital from selling further Nordea in other words, we would be fine with a certain difference in time between an actual reported leverage and when we actually do something with [Indiscernible] that we have on our books with the liquidity that we have already put aside. Was that clear?

Yes. Very clear.

Thank you.

Perfect. Solvency.

We're also committed to our solvency ratio of between 170 and 190, we haven't changed that target. Rest assured that we will be working on making our capital SPAC and balance sheet efficient also going forward.

And we'll revert to you when we are taking decisions to continue the path to increase our return on the capital, we consumed to run our business.

Hi. [Indiscernible] Thanks for taking my questions.

The first is on January renewals, it's good to hear that they're going very well. Could you just provide a bit of color in terms of net of claims inflation, what sort of rates are you achieving at the renewals?

Second question is coming back to the Topdanmark [Indiscernible]. Given that you've cash were in-house, million Topdanmark share than in policy said that [Indiscernible] financial sense, can we assume from this, that you still feel Topdanmark is undervalued.

Our final question is on Hastings. Toby, can you help us how much of the 2021 performance was down to COVID-related frequency benefits.

And given that the pricing and the market is quite mixed on [Indiscernible], but could you give some color on household in terms of what price increases we're seeing there. Thank you.

Morten, do you want to give us some color on the January renewals first?

Yeah. I can do that.

It's been a very good to January renewal for us in all business segments. Of course, not giving out an exact number on the net effect, but I think I could put it in terms of order of magnitude and say that in the industrial segment, the net effect is, I would say, well above expected inflation.

In the commercial segment, I would say that the net effect is above inflation, and in private, I would say somewhat above. So it's clearly a favorable renewal in all business segments and for if -- as a total, we are pricing somewhat [Indiscernible] expected inflation.

So I think favorable start of the new year.

Great. Thank you.

And Knut do you want to have go at where the Topdanmark is undervalued or not? First of all the price that we bought in November, is a little bit different than today so at least we made more [Indiscernible] on that investment if you like.

I don't think we have an exact number on both the right value of top pays spot, but I wouldn't say that we consider it to be undervalued.

Okay. I mean, I guess as a stand-alone view, though, rather than a -- with synergies, for example.

So standalone feels bare, but in synergy, you could possibly justify higher valuations. Is that a fair thinking about it?

It's absolutely fair to think that in a hypothetical merger between Topdanmark and the remaining part of our Nordic insurance operation there would be synergies.

And the fact that Topdanmark is not -- it doesn't have unusual multiples compared to other Nordic insurers is also obvious to everyone. And then back to Toby on Hastings.

Yeah. I would say in short, no material COVID frequency benefits remaining in the 2021 financials.

And the color on that is, of course, there was a big gauge benefit in 2020 but as the COVID dynamics got reflected in market pricing and in our own pricing, then actual behavior was only slightly better than reflected in our models. We got our pricing models right and a small benefit on top of that.

But COVID has also had a negative impact on some of our retail income streams just from customers not undertaking as much insurance activity as they would normally do, changing their cars, changing their vehicles, changing address, that sort of thing. And so that dampening has largely offset any underwriting benefits.

And so I think the numbers you can largely read is normalized now.

Okay. So if we strip out the acquisition accounting, if the [Indiscernible] results?

Yeah.

[Indiscernible] home insurance pricing, that's okay, if you'd cover that as well.

Home insurance pricing, let's say, not much happened in materiality during 2021 but post - GIPP, we have seen a more significant increase than the mid-single-digit. So I talked about for car insurance increases in prices.

And so, we regard that given that we don't need to apply those increases in home -- we regard home as they continue to address opportunity for us.

Great. Thank you very much.

Hi guys, its Blair here from BofA. Just on the Hastings aspect, on the motor -- sorry, on the home side, I just wondered how the brand name is translating into the home market?

You seem to have some nice early success, obviously from a low base, but just wondering what the strategy was from here in terms of plugging away at that market just using the same distribution channels, etc. And then particularly just how the brand is resonating would be interesting.

Second question, Torbjörn you made an interesting comment about pricing in the Nordics and not crying wolf on inflation, which I thought was quite amusing. I wonder what difference you're seeing in inflation that perhaps others are seeing or not.

And I guess an extension of that as interest rates go up, what impact do you see that having on pricing, if any. And then maybe just a couple -- A couple of comebacks, really, I don't know you I think you said the 170 to 190 reflecting the balance sheet with Nordea, clearly a very different balance sheet without Nordea.

So I'm hoping that you will revisit that 170 to 190. And Toby I might have this wrong but I think the transcripts to the Q3 says that your shareholders and don't see value and top, I guess the difference between buying top in the market and doing something else is that if you do something else, you have to pay a premium.

So I guess that's the missing link rate is that, soon as you start paying a premium, it doesn't make much sense. Thank you.

And Toby.

So the Hastings brand is working well in home insurance. So because of the distribution channel, we favor price comparison websites.

It's mainly about price product features. Those sorts of things.

And the brand is helpful. And so what we're focused on is all the borrowing, but ultimately fascinating for us work to build pricing sophistication, build claim sophistication, build our data assets, build our internal teams.

And in doing so, build a larger and very profitable home book over the next, say, three to five years. So we're very pleased with progress the capability builds going well for good momentum, market conditions look like they might be favorable as a result of [Indiscernible].

So we're feeling good about the long-term opportunity to build that sort of business.

So are you able to leverage any of the expertise from your colleagues at Sampo?

Yes, we've got great capabilities in our UK car insurance business that we can of course leverage, but we haven't done much home in the past. And the [Indiscernible] team in particular, of course, have been doing home insurance at very large-scale, lots of experience with flooding homes, with freezing homes, with pipes, claims management, and pricing.

And so we are working as part of our collaboration efforts to understand which bits of that are transferable in both directions, but I suppose for home insurance, mainly if expertise that we might be able to take advantage of.

And then on claims inflation and then nobody [Indiscernible] Just to put things in perspective, it is, for instance, much lower now than in 2018, 2019 average claims inflation now is three point a low figure. And motorists are bit higher than property because property, despite can property claims inflation in the summer, [Indiscernible] quite quickly.

So, as pointed out many times claims inflation is a very different animal than consumer price inflation. Having said that, it is one of the most important parameters to follow.

So we do just that.

And Blair, on your final, I don't know if it was a question actually or just a wish but I think it's important to return frequently too. It's really important questions and comments.

And regarding our solvency framework, rest assured that we are working and we'll continue to work to make our capital consumption as efficient as possible. Now, when we talk about ratios and ratios in the range capital management framework, that's one thing.

The other thing that is possible to work on is, of course, the nominal SCR requirement as such. And an example of being able to work on that could be that we, over time, could take benefit of some of the internal models, which we already have in the group, which is not the part of our capital management framework currently on a consolidated basis.

Then we will, also I am sure, revisit the stresses we use on a lower SCR consumption and see if the ratio as such, given those stresses and that makes sense at any point in time. Right now, they make sense and the day after we have sold the rest of our Nordea shares, it will always also make sense.

But we will continue to work on the capital efficiency to increase the return on capital, very hard as an [Indiscernible] group going forward.

Super. Thank you.

Good afternoon and thank you for taking my questions. The first one is on solvency.

Could you just remind us about how Nordea is treated into your 185% solvency ratio? Is it -- what level is included and what is not included as of today?

If I understand your question, it's more of the technical treat or is it how much we own in terms of some risk exposure? It's taken a good treatment, it's an equity investment in our solvency framework.

And we own 6.24% on Nordea also it's increasing a bit because of their share buyback, shy of $250 million shares. You basically take whatever market price you have from Nordea from time-to-time, you multiply by, by our number of shares you get to an equity.

Exposure, you multiply that by 39% adjusted for this metric adjustments. And then you posted into our standard multiple and take correlations on that.

Okay. [Indiscernible] in that respect.

When it comes to Top, when would you need to bid for the whole company? Is it when the threshold is above 50% for capital or voting rights or what kind of mandatory offer -- when do you really need to do a mandatory offer and at what price would that be recognized?

Should I take that Torbjörn or?

Go ahead. Yes.

We have. It's a long time, I know, but we actually have made a bid for Topdanmark, a mandatory bid in 2017.

So that's done, meaning that there are no requirements in terms of us placing a bid at any level of ownership in Top going forward.

So it means that you can go on actually buying [Indiscernible] the market every month and then end up only 100% without trying it premium sort to speak?

That's a hypothetical question, but the answer is yes.

Then on the Hastings level, can you give any insights of the call per share, which you have started the year with in Hastings?

In what way insights? They were [Indiscernible]

[Indiscernible] To 5% in the past.

Sorry, I missed that.

We understood it was around 75% in the past, I understand that it's like a [Indiscernible] come off so they call to share agreement with the reinsurance companies?

It's down from 50 to 35 and it's no big changes to the panel, no drama, no gradual change.

Finally, is the [Indiscernible] system in Topdanmark equal to what you have today in FP&C or is it totally different and what is the renewal IT system in property is now being renewed? Is it totally different than what you have in this today?

Yeah. I guess, and the IT system in any insurance company is different as such.

Of course, when it comes to the things that you have to build for the future in particular digital solutions, of course, there you could have similarities but the system a successful, of course, they are different.

Okay. So there will be certain synergies done the thing that Top [Indiscernible] apply your If P&C mobile?

That could be synergies between -- in various IT systems between If P&C and Top, certainly.

Okay. That's also from my side today.

Thank you.

Yes, thank you and good afternoon. A couple of questions from my side.

First on Hastings. Can give us a number of what your net cost was for reinsurance in '21 and help biggest CAF this reinsurance program is insourced in sourced in 22.

I mean, Toby, you can think about what you want to say, but it was a quarter share person. So 50% of premiums 50% of claims for 50% quota share.

And then there is a commission that we wouldn't reveal.

What we basically get it in when Hastings was independent listed from their numbers. This could give us a pretty good in place what the upside is of becoming full owner and potentially good.

I guess there's no reason for Sampo to buy any reinsurance at all for [Indiscernible] diversified multiple.

You're an optimist as always, [Indiscernible]. And the commission varies year-on-year but we'll be as helpful as we can as always.

Okay. My second question --

Sorry, pal to interrupt but to you, but in one of the slides in the Investor Day can also -- one of the slides that we are going to have the initially, we talk about the benefit of reducing that quota share from 50% to 35%. This step, we now are taking, which is a minimum €6.

And the reason why we say a minimum, it depends a bit of course, it can be more depending on profitability. All the book which otherwise would have been seeded than growth in the business going forward.

But the step we took now, first of January already gives us a minimum of €6 in benefit

Okay. Perfect.

That was something I had missed. On Mandatum, you now provision for T plus 5.

Previously you had only provisioned out for T plus 3. What should we expect you to do going forward or would this still be at the [Indiscernible] that you provision when you basically have money for it?

I'm of course, talking about the low interest rates.

Knut, do you have a good answer for this?

No we -- you're correct. We sort of extended the time period if you like.

Not sure I thought about it like that, it's more that I wanted even more discount rate reserves. And the reason for that to be blank is that we have now positioned our team well, in terms of neutralizing on equity effects, translating into IFRS 17.

With the strong increase of €130 million in discount rate reserve during 2021 among the [Indiscernible], well prepared for the new accounting regime next year. Obviously, depending on interest rate development during this year.

But based on how the world looked at the end of '21.

Finally, I will address Topdanmark. Now, let's see whether you want to question -- to answer my implicit question.

If I look at, you’re persisting in Topdanmark 5, 6 years ago, Guy was talking about [Indiscernible] that Topdanmark's share was too expensive, right? When we looked at it from the outside, the market basically paid materially more for your P&C earnings than they did for the P&C of Topdanmark.

Now it's the other way around, and you have started to buy Topdanmark 's shares. What am I missing in this picture, if anything?

It's always more --

I don't think it makes --

myself and buying someone that is more expensive than myself.

First of all, the difference isn't that much and you have to be really careful when you calculate things. And secondly, that was some time ago that we're out there.

Other deliberations at that stage I don't think that's going to be helpful to try to go back without those. Yes.

I don't have any further comments to it. It's a -- we think that Topdanmark is priced in parallel with the rest of the Nordics and P&C market.

We were able to increase our holding a little bit -- a tiny bit at market prices. So that made sense to us.

And when you say, for last, I mean it's actually, it's roughly the same.

And also just to add Torbjörn, if I may. Of course, these [Indiscernible] we bought; they were supply base.

They were offered to [Indiscernible] what we consider was a fair price. We didn't run around looking for them.

Okay. Thank you for the perspective.

That's all from me from my side.

Your next question, Operator.

Afternoon, everybody. Thanks for taking my question.

I've got a very debt specific question for you, please. So just going back to Slide 12 of your deck, you've update it on the progress you've made with capital synergy benefit so far for reinsurance, there's a EUR9 million of gap to go, and very neatly, the cost of the Hastings debt outstanding would fill that EUR 9 million GAAP.

Just trying to understand why you are not looking to harvest that synergy benefit immediately. Unfortunately, the maturity of the bond lies beyond the sort of period that you've set yourself to harvest over those synergies.

When I look at the group, you've got no major debt maturities in 22 that would be a diversion, correct? Quick for liquidity.

It would've pay us as a not some cost to take back account, but then immediately you can start generating synergies through lower interest cost going forward. So could you just help me understand exactly you’re thinking around that and you’re timing about when you might look to, I say, help us though synergy.

Good afternoon, Marcus, we're well aware of some of the numbers you initially mentioned and it is of course meaningful to think about the Hastings. That's a part of our capital management synergies from Hastings, absolutely.

We monitor the cost of debt management activities across the different balance sheets and outstanding bonds we have all the time. And if opportunities should arise where we find it attractive to exercise such opportunities, we will do in line with also the question I answered earlier, where we have set aside the liquidity to do so to make sure we are below 30% leverage when we have no new data on our balance sheet.

And the Hastings debt as a senior debt, is in scope of the bonds we are continuously monitoring and looking at.

Appreciate that. But as I say, it's just I'm trying to find an alternative route to you finding EUR9 million of capital management synergies from Hastings as you so describe on that Slide 12.

And just wondering what would change to make you decide now is the time to take that debt out?

I mean, it's always interesting to see how debts trade some higher interest rates and how interest rate moves. Obviously, when rates go higher, the ability to do liability management exercises could be even more attractive, right?

So it's an assessment of how we see certain factors -- relevant factors develop and going forward.

Understood. I guess it's just some way to a bit of a [Indiscernible] of your success [Indiscernible] investors look at you is a very, very tight place to be for investing with.

And obviously you never say never. Let's see, I guess how markets develop from here.

Are you on the line Jan Erik?

Hello. Can you hear me?

We can hear you now. Yes, we can hear you.

Okay, very good. Sorry, I was probably muted.

On the dividend side. Last autumn you say, you should be patient to see dividends from selling Nordea coming through as an ordinary dividend and the special one, would you consider adding special dividend prior to the AGM in 2023 then or should we await another year before we see a special dividend coming through as your buybacks mandates on not allowing you to distribute capital fast enough, I would say, versus the amount Nodea (ph).

would create. How should we think about the special dividend opportunities once more?

Just greedy, Jan Erik, asking, I guess. We've just announced that we will prolong the buyback program.

We want to have a balance between buybacks -- or our owners have indicated that they want a balance between buybacks and dividends, and we normally have an annual dividend. And that's all normally and that's all-round argument, and then we'll see how the world plays out.

All the time we have first sold down Nordea received the money and then talked about what to do with it.

Absolutely, I agree. Thank you for that [Indiscernible]

Thank you. Just a question on if underlying combined ratio, if we can go back to that.

Morten you mentioned before that you were pricing above inflation in all the segments, I believe, but still the Q4 underlying combined ratio and by underlying, I mean, with what we can adjust for what you give us some large claims. So runoff gains, COVID and whether.

It was still an extremely low level compared to the prior two years Q4. How would you say having all the numbers?

Is this a normalized run rate at where we are currently or is it even more to go down next year given the above in inflation pricing, or is this too good to extrapolate?

Morten, of course.

Yeah. No, of course you're right.

It's a very strong underlying performance in the business and it's a strong performance in all the segments in all countries. Of course, you need to -- as you pointed out yourself, you need to factor in all of the elements that are changing obviously, with call bids instead of being one element that is now -- I guess we're all going to say hopefully disappearing.

And then of course there's quite a bit certainty about what's the new normal that we return to then, sort of our comparison figures now is already quite old. But in the end, there is a strong underlying profitability in the business.

I think that's the only thing to conclude from that.

Okay.

And of course --

Okay. Fair enough.

Thank you.

And of course, Jakob, this is the core of our business, a very big chunk of our business, and we're back to the situation that we are. And the situation that we have benefited from the full year where there's no segment where we're not able to increase rates in tandem with the claims inflation.

And we're actually growing on the back of digitalization in general, and more rational markets. So, yes, this is -- this question is the core of what we're doing at the moment.

What you say, maybe even that all this M&A we have seen in the Nordics has made it even easier to improve profitability. I mean, I guess it's easier to take clients away from the one space with integrating the M&A or has some that happen yet?

That remains to be seen, how our competitors, peers behave. But, in theory, you're absolutely right.

And in theory it is of course, a market now dominated by relatively few rational actuaries rather than a large number of small plays trying to find new distribution channels.

Okay, thanks a lot.

Hi. Can you hear me?

We can hear you [Indiscernible]

Yes.

Hi, I just want to ask, how -- what is the process and how long would it take to get approval for a group partial internal modem, presumably given that IF already has one placed, the process won't be so time-consuming. And I was just wondering if the process is already underway?

Thank you.

Good afternoon. To be clear, we have not applied for a group internal model.

In terms of us considering how to use the internal models, also on the group-wide basis, that is of course something we naturally are thinking about as a part of our considerations around capital management, but no formal processes have been initiated. And if we apply for an internal model or go into any pre -approval process on a group-wide by basis, I would need to revert to a timetable that is difficult to pick from the shelf and say it takes exactly this long.

But it's -- you shouldn't expect it to be a very short process despite the fact that we have internal models within the group. But of course, given the fact that it is very different to apply for an internal module that has been used for 5 years compared to what it was in 2016 when no internal multiple had ever been used.

There could potential so the possibilities to not make this as very long process. But we're a big group.

Our internal multiples consist of enormous amount of documentation which needs to be reviewed and checked for ourselves. So we have to be respectful for the fact that is good then I [Indiscernible] take some time.

Very clear. Thank you.

Thank you. Two questions from me.

So first on the Baltics, obviously, I mean, we are observing strong growth there. So if you can give us an update of what is going on, I mean, what is the outlook, what is driving this growth?

And the second question is, if it's possible to have an update on that portfolio of small investments you have like North ducks, a bank, Saxo Bank, et cetera. Thank you.

Morten, Baltic Rim and digitalization?

Yes, I'll start with the Baltic s. It's a very strong performance for us indeed in the Baltics, both when it comes to profitability, but of course, as you point that indeed when it also comes to growth.

It’s both price-driven, and increase in number of customers. Nothing reflecting an extremely strong operating model that we have, a very modern operating model and modern distribution platform that we have in the Baltics, which means that we have been gaining market shares throughout the Baltics in 2021.

So absolutely good development, and in really in all 3 markets for us in the Baltics.

And then on PE portfolio, we don't normally -- we don't run it ourselves, the individual companies, so we don't normally comment that much. But Knut this time we have both dividends and accounting effects, maybe you would like to touch on those?

Sure. I can do that.

Often in terms of Nordics, I'm sure many of you are aware that Nordics closed the acquisition of Bank Norwegian in Q4, that gave us an accounting profit of €84 million which is included in our holding segment in the fourth quarter. Then there's also what we called an extraordinary item, but it's still, of course, is a positive in terms of the valuation on Nordics.

We didn't participate in Nordics funding. We didn't put in additional capital in Nordics to fund their Bank Norwegian acquisitions.

But they got new co-investors, additional co-investors in Nordics. And they came in to [Indiscernible] at higher valuation than our book value.

And we were diluted but that gave us a positive dilution effect because of this valuation difference also on EUR84 million, but it's not the same number. So in total, we have made in the fourth quarter EUR168 million, which actually is a part of our fourth-quarter reported profit.

Saxo, you wanted me to talk about dividends, Saxo is returning cash to its investors as dividends, it's a smaller part, of course compared to the goods value of [Indiscernible], but it contributed in 2021 to a part of the holding segment's profitability. And we received dividend of about €20 million.

So great progress for all these assets, and yeah, that's it.

Thank you very much.

Thanks. Just two quick ones.

I mean, we didn't quite get to the -- get around to answering one of my questions the last thing just on the potential impact of higher interest rates on underwriting. Do you expect -- expect that to weaken underwriting result in any way.

I know we're still at very low levels, but if rates continue to pick up, and secondly, Toby, let me -- you talked earlier about when Jan Erik was being greedy. You talked about extending the buyback.

Could you -- sorry, basic question. Just remind us where we are with the buyback.

I think you've done about [Indiscernible] without thinking about possible future proceeds, et cetera. Is that buyback going to run to about 750?

Am I right in thinking that or have I got those numbers wrong? Thank you.

The answer to the second question is yes. As to -- and forgive me for missing your first question, you are right.

We didn't -- I didn't get to answering that. Potential impact of increasing interest rates, it's a very hypothetical question.

We're all expecting interest rates to go up one day or another. And if that was significant, I think that most of the large companies in the Nordics have already targets or something similar underpinning their behavior.

Otherwise, I would be saying that, for instance, we would soon be aiming for an ROE of in excess of 40%, and I'm not saying that. We will not price for that.

So significantly increased interest rates may well affect the combined ratios, but that's not where we are at all. And I said -- and that's why I said in my introduction that we're not counting on increased interest rates in our rate-setting at all at the moment.

That doesn't enter into it. Let's see what happens in the world and we've been waiting for this for a long time and speculated about it before.

And just --

Great. Thank you.

-- to add on to that, of course, an increased interest rate would of course, give us a positive accounting effect on the underwriting side when we discount our reserves, just as the reduction in interest rates has given us negative effects over the last few years. So of course that comes automatically.

Yea. Thank you.

Maybe finally, on the investment side we have a shorter duration than most of our peers, which in relative terms, would benefit us.

Thank you very much.

Thank you, Operator. This concludes our call for today.

Thank you for participating and we look forward to speaking more with you in the near future.