Sampo Oyj

Ladies and gentlemen, welcome to this Conference Call on Sampo Group's 2020 Results. I'm Jarmo Salonen, Head of Investor Relations.

And I have with me here our Group CEO, Torbjörn Magnusson; and Ricard Wennerklint, Chief of Strategy for the Group; Group CFO, Knut Arne Alsaker; and Morten Thorsrud, CEO of If; and Toby van der Meer, who's CEO of Hastings. And I hope I did not forget any names.

So we're here to discuss the full year results and you're more than welcome to join us in a couple of weeks' time 24th of February to discuss more strategy and that sort of issues at the Capital Market Day. We'll start as always with the presentation from Torbjörn and after that we'll take your questions.

Let me remind you that you can follow this transmission on sampo.com/results and a recorded version of the call will later be available at that same address. Now I hand over to Torbjörn.

Torbjörn, please.

Thanks Jarmo. I'm very pleased indeed to present a set of extremely strong number to 2020, which was at the same time also a year of intense activity to develop our group.

First and foremost, of course, the operational performance of our biggest division If P&C didn't leave much to wish for I think. The lowest combined ratio ever, very strong indeed compared to peers and even at the lower end of our outlook from Q3.

And this combined with further improvements in efficiency and good growth again, especially in the digital channels. I'm sure that the momentum in If P&C has never been stronger and better and as you know I have a rather long history with that company.

Today some attention is also given to the extraordinary accounting step to reduce the book value of Nordea at Sampo. However, this has nothing to do with Nordea's business.

As you will have seen, Nordea is progressing impressively well towards their targets and our confidence in this is unperturbed. A brief remark on Mandatum Life.

It's encouraging to see that the high-guarantee liabilities have never run off faster than this year. This, of course, reduces risk and releases capital in this solvency-intense segment.

When it comes to our preparations for the future, I think, our actions from the last year are well known. Suffice it to say now that with hindsight the timing for the acquisition of Hastings and the date for the Nordea sell-down seem to have been well chosen or at least done with good timing.

For If P&C, let's begin with a few remarks on the combined ratio. As a large motor insurer, it was certainly helped by COVID effects.

On the other hand, large losses came in quite a bit above normal except for Q4. So the net effect of those two effects is not huge.

The starting point for the coming years is thus very strong and we gave an outlook of below 85% for the year not a range as we usually do as estimating COVID effects is uncertain to say the least. Growth continued to be distinctly higher than the GDP and this is despite a negative premium effect in excess of 1% due to the low new car sales.

As many of you are aware, car dealers is a channel in which we have excelled for many years and continue to do so as several of the largest agreements were renewed last year in all cases for long time periods, long contract time period. All-in-all underwriting profits continue to grow and the Nordic markets seem to be on the way to even more consolidation thanks to Tryg and RSA.

Hastings. For the first time, we have Toby van der Meer, CEO of Hastings Group on the call.

So a special welcome to you Toby. We have now had a chance to work together for a couple of months.

So let me give you some impressions on Hastings, as it is now a new part of our group. It's been exciting to start to work together.

The corporate cultures are definitely so similar, that we should have done this a long time ago. Toby and his team are hands-on thrifty insurance professionals with high long-term ambitions, all characteristics we value at Sampo.

And when we looked at the company last year, we became convinced that we did not share the doubts about the company that the markets seem to have and consequently, we look more positively at valuations. 2020 ended well for Hastings, in line with their previous plans on growth and loss ratio and we're also stable -- and we're also able to strengthen the balance sheet of Hastings at the year-end, so that it holds the same standards we are used to at Sampo and all this combined with a strong 76.5% loss ratio.

We have also designed a structured process for synergy development. That started in January, which I have planned to discuss more in detail with you at our Capital Markets Day in two weeks' time.

Turning finally to the dividend. You could consider Sampo to be in a transition phase, in some respect, as we're moving towards a more focused, more simply structured insurance group.

For this reason, it is natural to look to the insurance operations to supply the means for the dividend and this slide details the numbers. We will work on increasing the insurance dividends as a reflection of the underwriting profits, as a solid basis for our group dividends.

Volatility in underwriting profit is certainly much lower than other lines that are more exposed to the investment markets. The present market situation supports our ambitions better than in many years.

And our insurance operations are better equipped than I can remember to win these increasingly digital markets. And now we look forward to your questions.

Operator?

Thank you, Torbjörn. And operator, we are now ready for the questions, please.

Good afternoon, everyone. I've got two questions, please.

The first one is on dividends. I was wondering if restrictions on bank dividends are lifted later this year, Nordea seems to be further €0.72 per share.

I was wondering whether Sampo will then distribute that dividend income on a special dividend, well, later this year maybe next year. That's my first question.

And then, secondly, in terms of pricing in P&C, can you give us a sense of the price increases you have managed to achieve on the January 1 renewals in your industrial and commercial lines, please? Thank you.

Morten, if you answer the price increase, I'll take the dividend after that.

Yes, sure. Price increases in -- at the 1 -- or 1 renewals, I think, the general statement would be that they are very high seen in a historical perspective in -- particularly, in the large corporate segment so, i.e., our industrial book of business.

Also, fairly substantial in the commercial book of business, in particular, still in Norway, which is a situation that we see now for quite a while. And all-in-all, price increase is well above what is assumed sort of inflation.

So that, kind of, situation continues also in the 1 renewal.

Are they as strong as last year or better?

I would say, on the commerce -- on the industrial side, I would say, it's perhaps slightly stronger. And then, commercial, in line with last year, in general.

All right. Thank you very much.

On the dividend, if the recommendation or ban on dividends was to be lifted in the autumn, we would potentially then get a dividend from Nordea, hopefully, I trust. And that would actually -- the timing of that would not be too different from when we receive normally the dividend from If P&C.

We have a policy that's in excess of 70% of earnings. There is no ceiling to that and we don't have any M&A agenda except possibly if possibilities will occur for bolt-ons in the Nordics.

So that is probably as much as I can give us an answer.

All right. Thank you.

Thank you very much.

Hi. Good morning.

Thanks very much for taking my questions. Firstly on, If.

You flagged a, I think it was a four-point benefit to the combined ratio from COVID. Are you or your competitors passing any of the benefit on to consumers by a lower pricing yet or still no?

And I think you said, less than 85% instead of a range because it was hard to estimate the COVID effects. Just wondering what would that range be before assuming any impact on COVID?

And I guess take the opportunity as Toby's here. And what's driving the acceleration in policy count at Hastings?

What kind of rate changes are you putting through versus the market? And just finally I think you mentioned that you strengthened Hastings' balance sheet at year end.

What kind of benefit do you think COVID has on Hastings' loss ratio in 2020?

So on the range first. We have typically given a range of four percentage points at the beginning of the year which is the uncertainty that we've held -- had in our normal planning.

So that's what history indicates. Morten, If and COVID.

Yes. Yes.

You say we estimate 4% COVID effect in the fourth quarter. I think one should bear in mind that it's of course extremely difficult to really estimate that effect.

It's hard to really understand what's more sort of -- what's weather what more normal frequency development and what's kind of specifically COVID-related so it's a very rough estimate. And similarly we have a very rough estimate of a 3% effect on a full year level.

We are not passing that benefit back to the customers mainly because most customers placed a number of products with us. And again, we see a beneficial development on motor insurance due to low frequencies but then, of course, we have other lines of businesses where we see a more negative development.

So that's I think, the situation on the COVID and maybe pass on to the customers.

And Toby, the last one.

Yes. Hi, Jon.

Thanks for the question. On your first question related to Hastings on policy count growth.

And I guess, there's a couple of moving parts to the 8% policy count growth that we've seen for the full year 2020. The first is that we saw continued strong retention rates throughout the year.

So very pleased with all the team -- the work the teams have done to continue what is now pretty close to market-leading levels of customer retention. And then secondly, we -- throughout the year we've been able to deliver a series of enhancements to our pricing models that have helped our new business volumes i.e.

increases our share of price-comparison website sales during the year. And that was particularly true during the second quarter and in the third quarter where we were able to continue running the business without too much interruption from COVID and at a time when some of our competitors had to retrench.

As they dealt with operation or systems issues we were able to keep forging ahead. On your second question on the impact of COVID on the loss ratio, you'll have seen in the numbers that Torbjörn talked about a six point or so improvement in the loss ratio.

Embedded in that although we haven't quantified the effect of COVID, but embedded in that is of course, the benefit of lower frequencies particularly in the second quarter or some very limited driving then, sort of, driving behavior increase during the third quarter and the beginning of the fourth quarter. And then tail-off again, of course, when the third national lockdown hit in the UK toward the end of the year.

But as Torbjörn has also said, overall, we have delivered a good loss ratio with that six point improvement, but also strengthened our reserving position. And I guess, when you bring all of that together then when we think about 2021 it leaves us in a very confident position to be able to say that the combination of the current accident year performance and the development patterns for prior years will leave us in a position where we can say it should be expected to improve.

Thank you very much. Is it possible just to get the magnitude of reserve strengthening?

We wouldn't normally comment on that as there are so many moving parts in that statement.

Okay. Thanks very much.

Thank you and good afternoon. I have a few questions.

Firstly, just with regards to the Hastings underlying performance in the year, it's very difficult to get much from the six-week period that you've reported. Perhaps not today, but I wonder if that's something you'll talk about more at the Capital Markets Day, so we can have an idea of what to expect from Hastings going forwards.

Secondly, just on the reserve strengthening you're clearly not going to comment on the number, but was that done just internally from Hastings so there's no need to transfer anything from Sampo Group into Hastings? I'm assuming that was just done internally.

Also on Hastings, I wonder if you -- just take the opportunity to ask management what the expected impact of the FCA pricing review and changes will be on the company and its competitive position. And my final question, I'm sorry to ask so many, but they're all quite simple ones.

This dividend from If P&C was only €600 million against I think over €700 million last year. Is that really just a balancing item in terms of what you need to fund the external dividend?

Or is there something else going on there? Thanks very much.

So, on the first two, we will speak more about Hastings' performance in the Capital Markets Day and Toby will be there and have a separate session on Hastings. On the reserving yes it's been done within Hastings resources.

And then -- yes, the next one was for you Toby.

Yes. Great.

So, just to comment briefly on the FCA pricing practices work and its impact on us and we will talk more about this at the Capital Markets Day in a couple of weeks' time as well. But at a headline level for today's purposes, I would just say that the FCA has identified as you will be aware of a large number of players in the industry have been making disproportionate returns and profits from renewing customers through practices such as price walking.

And as you can imagine that has been most prevalent in the businesses that have been around for the longest have the most all surrounding customer bases. And for a company like ourselves that attract customers mainly from price-comparison websites and mainly over the last say four or five years, you can imagine that we don't have the sorts of customers who would let us do price walking.

So, we do charge our customers a little bit more today on renewal than for new businesses, but for us that's a negligible amount. And therefore, I guess as we look ahead and we would expect FCA's changes to have an impact on those sorts of profits that it is largely irrelevant for us, but may have a big impact on some of our competitors.

The second dynamic that is how it will change shopping-around behavior in the longer-term and will it have an impact on price-comparison websites as a distribution channel, I know some of our competitors are hoping that customers will all of a sudden become a lot more loyal love their brands and start shopping around directly a lot more. I guess we're not sure about that.

We suspect that customers across the UK have been told and educated and shop around like using price-comparison websites of sites to do so and will continue to do so in the future. So, I think we're relatively optimistic about the impact of all of the changes that the FCA will bring are supportive of them.

But of course, we'll monitor them very closely as they start to have an effect on the market depending on the timing, the final FCA expectations, but much likely towards the end of the year.

And finally Knut have you emptied the coffers of If P&C?

No, Torbjörn. That’s one other thing, of course, we have not -- the dividends from If P&C was based on the earnings in 2019, but also on a view that it was reasonable to leave If P&C with a little bit extra-strong solvency ratio at the end of the year which they have given the uncertainties that we still have around us.

Okay, great. Thank you.

Thank you, and good afternoon, from my side as well. I guess, the question is on the leverage in Sampo Group after the write-down, which was announced this morning of roughly €900 million.

Could you just talk us through what would be the impact on the financial leverage in Sampo Group, and what that might have of consequences or might not have of consequences? That was my first question.

And secondly, a bit more broader question, and I don't know, if you can or will answer it but I see there is a change to the Board composition where your main owner is as far as I can read no longer going to be represented in the Board of Sampo. Can I read anything into this?

Then lastly, why exactly did you choose to write-down the Nordea value now? Anything specifically happened that made you do the change now?

Thank you.

Knut, will you talk about leverage and Nordea's timing?

Sure. Good afternoon, Jakob.

Leverage in Sampo at the end of the year based on our booked equity, was just below 29%. If you would calculate it based on the market value of Nordea we would be just above 29%.

The impairment as such which had an impact on our equity of €900 million as you know impacted the leverage ratio based on booked equity by around 1.5 percentage points. Obviously, no change on the ratio based on Nordea's market value.

This is an adequate level for us. It has no impact on any considerations for us in terms of ratings and obviously not solvency.

When it comes to the timing, we have of course have had a market value of Nordea that is -- has been below our book value for some time. And we have done impairment testing on a regular basis every quarter according to accounting regulation.

What has changed during 2020 and also in the fourth quarter? So, of course, that Nordea has made good profit and we have consolidated our part of it, which is increasing the book value.

But different than in historical years there's been very little or no dividend payments, and that has not adjusted the book value downwards. The book value is a mechanical exercise of the acquisition price plus all the accumulated profit less dividend.

That brought the book value, up to a level which we're about to exceed what we had as the value in use in our model. And it was needed to do an impairment.

And that basically happened now, when Nordea announced their fourth quarter and also announced their plans to postpone the dividend further to the fourth quarter of this year. So it's a -- it's basically -- the timing is basically due to the fact that Nordea is doing very well and not a changed view from our side on Nordea, and not because the Nordea profitability is not in line with what we expect.

And then on Board representation Antti Mäkinen is not available for another season. But remember that Jannica Fagerholm my -- our Deputy Chairman is actually also on the Board of Solidium.

So I don't know -- you shouldn't read anything into this as far as I am aware.

Okay. Thank you very much.

Very clear.

Yes. Thank you.

Per Grønborg from SEB. A couple of questions from my side as well.

First of all, why 7.5% and not down to 7% as the current market value roughly is on the Nordea impairment?

I couldn't hear the question Per. Can you repeat it?

I try once again. You are impairing Nordea down to 7.5%.

You -- why don't you -- why not impairing it down to the market value? What's the rationale behind that?

This -- the impair -- this is -- we make an accounting consideration according to accounting rules. We use a model which is based on requirements under accounting regulations.

We use assumptions which are based -- market-based, particularly based on what we observed were cost of equities at the time when we sold Nordea stakes -- the 4% in Nordea in November. So it's not based on the actual market value.

If we were to pay a rate down to the exact market value, which there are no reasons to do, based on our view of Nordea, that would more be an indication of a change in accounting principle going mark-to-market on Nordea. And that's not what we do.

We still count it as an associate company and not hope that's an available-for-sale asset.

How far should your owner's stake in Nordea drop before you couldn't account for it as an associate any longer?

There is no such exact limit. It used to be more clear before, but there is no such an exact limit.

That consideration is based of course on the size of the ownership on the size of the ownership versus other shareholders, our Board representation, the fact Torbjörn is Chairman, et cetera. So there -- I can't give you an exact limit but it's lower than where we are today obviously.

Not everything in the world is exact at least that tells us where we are. My second question back to what is important the P&C underwriting.

If I should make a very rough width from your 2020 results until and after COVID situation, you have three percentage point in COVID impact that will reverse. If I look at Q2 report weather-related say for -- if I look at a peer like Tryg they are guiding for weather-related being a positive one percentage point better in 2020 than in a normal year.

I doubt your numbers are that different. Then you have the large claims that are a couple of percentage points above your normal run rate.

Does this imply that after COVID, we should look for a combined ratio or claims ratio that is approximately two percentage points worse than it was last year plus/minus of course the improvements you will do to the business in between?

I think yes, we have probably discussed this before you and I. And let me give you an indication of what I think and then Morten will correct me.

But we of course do planning. And the factors that you mentioned are two of the more important ones but also going into this these calculations are of course, the price increases, the rate increases that we've done during the year and the exact timing of those as well as the weather influence on our results.

So it is a little bit more comprehensive than what you have described. Morten, what do you think?

Yes. I think when we do our calculation we do read to quite a fair underlying improvement if it may.

Large gains 1.9% higher this year than last year. Runovers felt more or less in line with last year.

And COVID is a very rough estimate rounding up to 3% on the full year. And net of those being about 1% on the full year.

Weather and events for us it's quite a similar 2020 as 2019. When we look at weather and also event of course in that bearing in mind, the tragic landslide claim in Norway at the very end of the year.

So all in all sort of this leaves us with the improvement in the combined ratio of 2020 versus 2019 of somewhere between 1% and 2%. So I think it's a -- the way we see it is a good underlying improvement as a result of general underwriting improvements but also pricing being above inflation now for a time period.

Okay. Thank you.

Hi. Good afternoon.

Thanks, thanks for taking my questions. The first of the questions I have relates to, If P&C.

So firstly in terms of the large losses, which I think for the first three quarters and even for the fourth quarter, exceeded budget or expectations. Are there any specific trends that you've observed?

Were there specific lines of businesses or regions where the large losses have occurred?

Morten?

Yes. No particular play trend.

Of course, the large claims in the industrial segment will be a bit volatile. And you need to go really far back in time to find a deviation and I think it's a negative deviation on the level that we had, in 2020.

So it's, typically sort of normal property claims. No specific geography clients that's been with us for a long, long time period typically.

So we look upon this as being the normal volatility that you will have in the industrial market, so, yes.

Yes. Thanks.

And my next question is just on your run-off trends. So it's roughly stable year-on-year.

Can you maybe talk about the sources of the runoffs? And maybe the outlook for them given that some peers have been commenting on, a more moderated level going forward?

Morten?

Yes. It will be of course repeating a little bit, what we said before.

But the main source of the run-off profit still is from the motor business in Sweden, which is one of the most long-tailed businesses in all of Europe actually. And again, the drivers that we've seen over the last 10 years and more benign development on bodily injury claims, than what was assumed in the reserving model.

We typically of course do not try to predict too much about the future. And then, of course, sort of -- at a certain point in time, so if this development is leveling out, but of course, we continue to have strong reserves.

So I guess, -- and again, the development has been positive and constant over the last 10 years in -- when it comes to motor, bodily injury claims payments.

Yes. Thanks, thanks.

And just one more on If P&C please, just looking at the underlying trends between the four segments, it's quite hard to assess from the outside, but could you maybe give some comments on the 2020 performance relative to 2019? So which were the main segments of improvements?

And what were the main drivers if you like?

Yes. I think, the private business area being the largest one, continue to perform really well.

It had a great performance in 2019. And continue to have very strong performance in 2020.

The larger positive, COVID-19 effect of course, will be visible in the business area private result, as a result of the motor business that they have in there. Commercial show an improvement in combined ratio, compared to 2019.

Large claims smaller than planned, good pricing momentum throughout 2020. So I think, again, that represents an improvement in the underlying performance for commercial.

And industrial very high combined ratio that can be fully attributed to the large claims outcome. So when you adjust for that, we do have a good profitability also in the industrial business area.

One could also bear in mind that, we reduced the discount rate for Finnish workers comp or Finnish annuities, impacting commercial and industrial to a fair extent in 2020. And that's what we talk about on the third quarter.

And then finally, Baltic continue to have a stellar performance, 36.6% combined ratio for 2020 on the same level as they had in 2019. So, I think all-in-all good profitability throughout all business segments and all geographies.

Thanks so much, Morten. Just one last question on debt leverage please.

So what is the main metric that you look at? And is it dictated by the rating agency?

So whether -- is it IFRS equity is it tangible equity? Is it Solvency II?

And what might be the ideal level that you want to operate at please? Thank you.

Could you repeat that? I didn't get the first part of the question.

Sorry.

Yes. So talking about debt leverage…

Yes. We'll talk -- we'll elaborate a bit more on that at our Capital Markets Day.

But, obviously, rating agencies is one such consideration to have leverage levels, which is in line with rating -- the rating that we have from S&P and Moody's and obviously also to have a leverage, which is in line with our balance sheet and our balance sheet as P&C insurance group. And I'll talk more about this in two weeks' time.

I appreciate it. Thank you all.

Yes, hi. Thank you and good afternoon, everyone.

Just a simple couple of questions. I'm pretty sure this must have been asked in past as well.

How do we think about leverage in case you were to exit Nordea completely? I mean, what would be the end leverage profile that you would want the company, the insurance company to have?

So that would be my first question. The second question is on Hastings basically.

Now clearly as you suggested that there are participants in the market who are suggesting that loyalty will improve post the FCA move. Basically loyalty is going to improve or not, I mean that's not the way you are thinking about.

According to you there will be more volumes that will come on your way. Now given that you're -- Hastings is making profit in the current pricing model, how do we think about the volume versus profitability focus of Hastings if FCA review goes through?

And lastly is Hastings never have strong result basically like not much buffers are typically there in Hastings backwards. So, how would you think about creating buffers in Hastings back book at the moment?

Thank you.

First one and leverage, we will discuss capital management more in detail in at the Capital Markets Day so welcome to that. And then I had a little bit of trouble hearing exactly what you said.

I don't know if you heard more, Toby.

Yes. I think I got the gist.

Thank you for the question. So in terms of the FCA's work, I guess our base case expectation is that other firms are no longer able to make money from renewal pricing.

And at the moment they are often discounting new business prices assuming that they'll get the money back in the second year then they will no longer be able to afford to do so. And because of that, you could imagine that new business prices might go up in the future.

We'll see whether that happens, but that would be our base case expectation as we sit here today. I guess, Hastings then because we don't rely on that price walking and we're already -- are in that position where we can price customers effectively in their first year and make profit from that.

We would like to get then to be in a position where we can choose to take as the market prices go up whether we also increase our prices, and therefore increase our margin for new business customers or whether we take it as additional volume. And that is a series of trade-offs that we have models in place for at an aggregate level, but more importantly at an individual customer level.

In other words, we would ask the underwriting team in our business to continue to be very disciplined in hitting our target loss ratio and improving that over time. And then our retail trading team will maintain the algorithms that look at the trade-off between volume and long-term value at an individual customer and segment level and if there are parts of the market where we think it's more effective in terms of long-term value creation to put our prices up rather than take it as volume then we'll do that.

If there are other parts of the market where we think there are higher-value customers that we should be writing more of then we may choose to take it as volume. But we'll trade in it through the models in the way that we always do rather than taking an ivory tower decision by the executive team.

We prefer to let the models do the talking. And in terms of the buffer, I guess first thing to say is, we're not explicitly trying to create a buffer.

We've just have a very strong reserving position at the end of 2020 and we're happy with that reserving position. No particular objective to increase it further as we sit here today in order to create any other sort of buffers.

So I guess that means that as we improve the loss ratio, as we build more customers, generate more profits and more free cash then we should be in a position to release that to shareholders and make it available for dividends.

That’s very good. Thank you.

And first one my question is going to be a repeat. And one -- because I didn't understand the answer.

So combined ratio for the year 2020 is 82%. There was three points of COVID benefits, so adjusting for that 85%.

The large claims were I think 1.9% higher than expected. So I arrive back at 83%.

I'm rounding here. And your new guidance is below 85%.

And I'm just wondering normally you improve your guidance every year, but it doesn't feel like you're improving it. And I'm sure you kind of discussed it and I completely missed it, but I would wonder if you could kind of say if your new guidance is an improvement or you're kind of staying flat this year?

And then the other question is a really stupid one you're going say, my god. But if I look at the banner you have which is a leading financials group in the Nordic region, what are you going to do when you can no longer use that banner?

I mean if you sell Nordea or if Tryg completes its rise this year and does all these things, you won't be here. How are you -- what's the -- what you're going to say to investors when they say was it done by Tryg or Nordea or Sampo?

Whereas now there's -- until now it's been very clear, but it doesn't -- the clarity is no longer there, but maybe I'm lost?

I think the guidance that we've given early in the year, last year, yes, that was 84% to 87%. So the upper end 85% rather than 87% at the beginning of the year signifies an improvement.

And as far as I can tell after 19 years with P&C, we've missed our guidance in one quarter when we had the worst winter in 30 years. Leading Nordic, I'm not sure how often we use that, but whatever we have -- when Tryg -- when and if Tryg has completed its transaction with RSA, we will still be the biggest Nordic insurer if we necessarily want to compete on that.

But we obviously compete on being the best insurer rather than -- not necessarily the biggest one, but we will remain the biggest one in the Nordic even after -- even if they could keep go down which is not obvious to me that they will.

That's very clear. And may I just ask one more, which is really -- just the completion.

On the -- in Mandatum, how -- where do you get -- I mean this is more a really positive question. You added €77 million to reserves, but the results were exactly in line with what I'd expect in line in the 4Q and to reserves.

Where did that money come from?

The money came from a good result in Mandatum during 2020 and also during the fourth quarter. There was a really good fourth quarter on the investment side and it was better than last year at risk and expense result.

So, it basically came from the result, if you would add back that €77 million, you would have the result for 2020 pre that additional reserving. So, it's a fairly straightforward answer.

Maybe I missed your point there.

No, no. There’s nothing funny.

No, I'm just wondering if there's been an underlying improvement. Obviously it's investment income.

That's lovely. Thank you very much.

Thank you very much. I don't know if I'm jumping the gun here, but I believe Hastings tends to give policy targets and loss ratio targets for the year ahead.

Can you provide these? Or would it be coming at the Capital Markets Day?

Can I defer strategy questions to the Capital Markets Day, if I may?

No problem at all. Sorry about that one.

And then, I don't know if this is strategy or if this is M&A-related. But obviously with the upcoming deal that Tryg is doing, do you see potentially some sort of business coming to If P&C or Topdanmark, because of potential dislocations in the market as a consequence of their integration of Codan.

It will be rather busy for a couple of years with all the synergies that they have promised the market. So, out in the line organization, there is a lot of activity to take business from them, but there is no transaction or any interest from us in Codan in Denmark or anything.

Okay. That's clear.

And finally, sorry. Talking about current restrictions in the Nordic markets, can you sort of give us an update to who are not based in the Nordic markets and what the restrictions are in the countries and how long they may be expected to occur?

Knut, do you want to try?

Was it dividend restrictions? Was that the question, Steven?

I think it’s more on lockdown.

Sorry. Yes, lockdown economic restrictions.

I think I could try to comment that a bit. I think there are still quite strong restrictions in all Nordic countries, which means that at least some are mostly working from home, which means that there is very limited traveling in the countries and within -- between the Nordic countries.

Of course, highly uncertain to know how long this is going to last. But the current restrictions they vary -- it varies a bit from country to country but I think most countries talking about that they at least have restrictions into March and then we will see whether those will be prolonged again.

So, I guess it's an uncertain situation for us as it is for most other countries.

Okay. Thank you.

Thank you very much.

Thank you. I have some couple of questions left.

The first one is on the cost ratio, which seems to be ever down every year, of course. But it has jumped a little bit in the Q4 numbers.

It is so that you have been able to take out some cost in Q4? Or also some cash up effect from the Q3, which was very benign?

We can start with that.

Sure. Yes as you say cost ratio is down 30 basis points.

It's is a bit more than we've seen. In an average year I guess typically we've been around 20 basis points year-on-year.

So good underlying cost development. In Q4 it's a bit up compared to Q4 last year.

We're not terribly off. I mean the cost occurs a bit different from year-to-year some of the cost items.

And then this year in particular we have a number of costs and sort of smaller, I want to say kind of investments that were postponed from Q2 into Q3 and Q4. Of course in Q2 then when the kind of pandemic started sort of -- we put some project at the hold and they were started again then in Q3.

So then you see an effect of that in Q4. But I think the important thing is to focus on the full year development of 21.5% compared to 21.8%.

Absolutely agree. But then I understand the development between the quarters because it looked a little bit odd.

But of course COVID-19 has been around the whole year or at least since March. Secondly on the life which one of the other guys has probably touched upon is it only because you had very strong return that you came with respect to the -- on the life side?

Or is it also what you will confirm anyway so to speak?

Could you repeat that? You said that it is...

On the life side Mandatum is there the strengthening in the reserve?

So Knut.

It's not only because we have a strong result it was a strong result for Mandatum. And Mandatum had had strong results also historically so to speak.

So there is nothing special in terms of the way we think around making prudent reserve strengthening of Mandatum. They obviously have a -- interest rate guarantee on a back book which of course is running off in fast dates.

And we want to maintain a buffer to meet those guarantees also going forward from a reported profit perspective. The discount rate reserve of Mandatum with the €77 million we made this year is about unchanged compared to the end of 2019 so to speak.

Then having said that, of course, the important factor what -- maybe even more important factor for Mandatum's dividend-paying capacity going forward is their solvency rate which actually this discount rate reserving has very little to do with nothing really because there -- it's market-based and Solvency II reserves are -- solvency ratio of Mandatum is really strong at the end of the year. And consequently a dividend from Mandatum of €200 million is expected.

But it is to make sure that we see from a -- also from an accounting perspective allocate the investment return we are generating to the discount rate. We have to be going forward from a reported profit basis.

Okay. Perfect.

If you would -- as I see you that you have an adjusted EPS of €0.65 on your report. If you could give us some details on that later tonight or later this week about how we reach that level that will be great because it's hard to get all of the small and nitty-gritty stuff underlying for an analyst looking through your reports.

So that will be great. And I'm looking forward to your CMD.

Thanks a lot.

Thank you.

Yes, thanks very much. Just a couple of follow-ups.

Firstly, I wondered if you could give us some insight on the trajectory of the private equity businesses. Obviously you sold a stake in interim last year.

I think Nets had a merger. What happens post that?

So that's the first question. The second question is a slightly awkward one to phrase, but I guess it's well-known in the market that there's some pressure from investors on you to exit Nordea quickly.

As ever the market wants to know when you're going to sell what you're going to do with the money etcetera. Difficult questions for you to answer.

Just wonder how is it possible for you to square that circle? What level of disclosures can you give around that?

Or will it just be a case of investors being frustrated until such times as the final actions occur? I know you'll probably talk about that more at the Capital Markets Day, but I thought I'd pose a question I guess.

Okay. Thank you, Blair.

The trajectory for P/E there's not a lot to say. They will run their course together with our investors.

And Nets is obviously doing something interesting, but there is no -- that deal isn't even closed yet. Pressure to exit Nordea, what would you do with the money?

Well the one thing that I can comment already is of course that I think I mentioned earlier, we don't have any M&A agenda apart from possibly, if there is a good opportunity for a bolt-on in the Nordics, but we will not be looking for other investments around the world.

And I guess just on the -- the Nordea question's more complicated. It's not a simple investment because you do have the Chair at the company.

So is that a hindrance to your ability to do anything quickly with Nordea?

No. That doesn't have anything to do with that.

And for the long term, of course we are looking to allocate more capital to P&C.

Okay. Great.

Well I look forward to a bit more color around that in a couple of weeks.

Absolutely.

Thank you.

Thank you very much. It was a very simple question.

The Mandatum so the €200 million dividend now. Is that the annual run rate we should expect?

What do you think Knut?

Yes. No Michael.

I would call that higher than an annual run rate. It's a reflection also that we canceled the dividend last year and left Mandatum with an improved balance sheet given the uncertainty we had in March 2020.

Now the profitability in Mandatum as you also alluded to earlier has been really good for the remainder of the year, which left Mandatum with a very strong solvency base at the end of 2020. And we then felt we could take out a little extra, if you like compared to an annual run rate.

I would say an annual run rate from Mandatum is more to the tune of €150 million.

Very clear. Thank you.

Thank you. Just one follow-up on the life side.

As you said, you would like to invest more money into the non-life industry. Is sort of life in business also one of your exit businesses?

No, it's not. But then -- and I wouldn't call any of our businesses exit businesses.

That's not a good phrase. But on strategy, welcome to our Capital Markets Day.

Thank you once again.

And that's probably a good final remark here, Jarmo isn't it?

Indeed, indeed. Thank you all for your attention and have a very good evening.