Sampo Oyj (SAMPO) Earnings Call Transcript & Summary

Maybe just a smaller add on. I think if we deliver on the targets that we have now shown for Hastings for the next 3 years, it would rightly deserve a premium valuation compared to average U.K. peers. And within that group, you will have companies that are very close to Nordic valuations, as it should be. It's about delivering on the targets and get some growth in the U.K. market.

I feel that we need to remind ourselves constantly that this company is not working in the U.K. market, in general. It is a specific segment where the valuations are higher than the general U.K. market.

Okay. Thank you, gentlemen. This is for Knut-Arne. Just wanted to clarify the excess dividend from noninsurance segment. It was mentioned that there is EUR 5 to EUR 6 per share that could be released with a further EUR 1.7 billion from capital release. Should we assume that this means that the actual excess capital to be released will be EUR 8 to EUR 9 per share?

No. That reduction in capital requirement, SCR, of EUR 1.7 billion is obviously a driver of the EUR 5 to EUR 6. So the EUR 5 to EUR 6 is a result of a reduction or a lower capital requirement.

Thank you. Two more questions and then we'll break for coffee. Torbjorn, and this is from Jan Erik, ABG. Why would you not merge if P&C with Topdanmark and listed at Copenhagen or Stockholm Exchange?

Firstly, I'll not do that. Well, that's an interesting idea, and we entertain all interesting ideas in our discussions. And as I said, we don't see an opportunity to one way or the other acquire the rest of Topdanmark at the moment.

Thank you. And the last one for Torbjorn from Blair Stewart, Bank of America. What is the logic of partial reduction in Nordea? Either you want banking exposure, you don't? Are you ruling out a complete exit? And if so, why?

I think we ruled out anything today. But I'd just remind, again, ourselves that it is a complicated or complex situation. We have in advance than typically on the past to become the P&C dominated group to reduce materially in Nordea over the coming period. And that is 18 months. And yes, we're keeping all our options open to respond to not least the price development of Nordea, but it has to be possible to do, of course, to execute whatever path we will follow.

Thank you.

And just to add, Jarmo, obviously, we're showing calculations and capital effects of reducing fully our equity exposures in Sampo plc. So it's not ruling out any of it.

Good. Very clear. And we may have a couple of questions. If we did not answer, we'll take them first thing in the second session. Now we'll break for coffee. And let's be back at 11:10 London time, 10 past 1 in Finland sharp. [Break]

Welcome back to the second part of the day, where we'll be focusing on P&C Insurance. We'll start with the Nordic P&C Insurance, and the first speakers are Morten Thorsrud and Ingrid Janbu Holthe. The floor is yours.

Welcome also on my behalf to the Sampo Capital Markets Day and the section of Nordic P&C and more specifically on If P&C Insurance. I'm Morten Thorsrud, CEO of If P&C. And with me here today, I have Ingrid Janbu Holthe, Head of Business Area Private. Together, we will introduce you to the Nordic P&C Insurance landscape, elaborate on its unique position in this highly attractive market and showcase how If and Sampo will continue to lead the way in Nordic P&C Insurance. For more than 2 decades now, we have benefited from a unique strategic position in the Nordic P&C Insurance landscape. We are, by far, the largest and most diversified insurer in a highly attractive market. We are benefiting from leading capabilities and a strong performance culture, and we have a superior track record of operational execution and financial outperformance. Building on this solid fundament, our ambition is naturally to continue to deliver such superior results. Our financial targets for the period 2021 to 2023 have, therefore, been revised and is now defined as: a combined ratio below 85%, which is the lowest ever combined ratio target that we have set out for a 3-year period; further reduction in our cost ratio, we typically have made improvements of about 20 basis points per year; and mid single-digit growth in underwriting profits. We will revert to these targets throughout the presentation. A main fundament in Sampo's equity story in the Nordic P&C operation is that we strongly benefit from a unique strategic position. Scale is of essence in the insurance industry, in particular, in an increasingly digital world. Our unrivaled position as the largest player in the Nordic P&C Insurance industry has already given us significant benefits, but there is still a large potential to be captured. Although the Nordic and Baltic countries represent different local markets, they still operate in a fairly similar way. Thus, our systems, approaches and insights can be leveraged across the region in full. This means that we can leverage such as our Nordic core system platform, Nordic web shop solutions, Nordic My Pages app and self-service solutions, nordic claims registrations and claims handling systems and Nordic contact center platform, only to mention a few. If has a clear leadership in digitalization with a modern proprietary distribution platform. Today, we operate in modern data-driven omnichannel distribution setup, where our digital distribution is the spearhead. In addition to this, we also benefit from a position as a preferred insurance partner with strong cooperation with leading banks and institution. Also here, we benefit from our Nordic reach and scale, as many of our partners also seek benefits from Nordic scale and consolidation. The Nordic P&C Insurance market has, for the last 15 years, been a very attractive marketplace for P&C insurers. In size, the Nordic market is just a bit smaller than Italy, the fourth largest P&C Insurance market in Europe. However, the Nordic market stands out as clearly the most profitable insurance market in Europe, with average combined ratio levels well below 90%. Further, the Nordic market also benefit from good historic growth and excellent future growth prospects. Over a period of more than 15 years, If has delivered shareholder value to an attractive combination of organic growth and underwriting excellence and thereby delivered on the trajectory of increasing underwriting profits. Over time, If's combined ratio has been reduced as a natural response to lowered interest rates and thus reduced investment returns. This in turn has made the underwriting result and more and more dominant value creation lever. However, this also implies that we, as an insurer, have a much higher quality of earnings today since the underwriting result typically is far less volatile than the investment result. As already known by now, 2020 ended with an all-time low combined ratio of 82.1%. And consequently, also best ever underwriting result of EUR 802 million. One of the important value creation levers is the continued efficiency improvements that have been produced for a long time period. Nordic scale in general and digitalization, in particular, is a key driver for these efficiency improvements. The cost ratio improvements have been realized, while at the same time, gradually increasing the spend on IT development. These investments lay a fundament for further efficiency improvements in the years to come. It should be noted that If also has a very conservative approach to activating cost and, thus, our IT development costs are largely accounted for directly on the P&L. Digitalization and big data have already for 10 to 20 years had a fundamental impact on the underwriting side in P&C Insurance. Over the last 5 to 10 years, however, digitalization has, in particular, revolutionized the distribution models within the industry. If is very much leading this development in the Nordics. Digital sales has more than doubled over the last 5 years and CAGR for the last 10 years has been close to 20%. Today, pure online distribution accounts for about EUR 130 million of annual sales in our Business Area Private, corresponding to almost 25% of number of insurances sold. The digital part of the sales funnel represent the core of our omnichannel distribution setup. The change is of large strategic importance as our own in-house distribution platform now accounts for more than 60% of sales, making us far less dependent on external distribution capacity. Only 10 years ago, the corresponding share of own distribution would be around 40%. Our digital leadership is ripple effects through the entire value chain. Digital distribution, e-service solutions and online claims services are mutually reinforcing, making our customers more prone to digital services. The different markets are on different digital maturity levels from Sweden and Finland being in the lead, Norway being a fast follower and Denmark being a bit of a laggard. Consequently, there are still significant room for improvement through further digitalization. The digitalization is also very much benefiting our customers. With increased digitalization and automation, we reduce the operating cost, and thus, we can continue to improve our price position in the market. Further, customer satisfaction and loyalty are clearly increasing as a result of improved services and solutions where customers are more directly in control themselves. Then I'll leave the word to Ingrid to talk a little bit more about some strategic initiatives in If.

Going forward, we are focusing on the following 4 strategic initiatives: first one being customer orientation, continue to further improve the customer experience and positioning If as the most caring insurance company; secondly, it's best in risk. It's about continuing our success and a strong focus on underwriting and pricing excellence to drive profitable growth; thirdly, the preferred partner for automotive industry in change, where we are in a strong position today and continue to invest in order to be well positioned for the future of mobility; and finally, personal risk and health insurance, a growth area in the Nordic insurance market. Starting with the first strategic initiative of customer orientation. We have seen significant improvement on key customer metrics, illustrated here by our continuous improvement in Net Promoter Score in our contact centers. And we also see this in our claims centers and other contact points. We have all won several awards for best customer service, both in the eyes of our customers and in the eyes of our partners. In Norway, we now won the T&F's Compass prize for best customer experience in the fifth year in a row. The continuous focus on customers is also reflected in our strong organic growth in our customer base. Here you see numbers for BA Private and where we now have more than 3.1 million households as customers in If in the Nordics. This is also due to a growing retention rate over the past years, now at 90%, and we managed to retain this at this record high level also in 2020. With the high focus and proven track record so far on customer experience, we are now strengthening the brand position with a redefined customer promise, By your side, the most caring insurance company. With a high share of direct distribution coming from our own channels, it is important for us to have a strong brand that can drive a high number of high-quality traffic to these channels. Strong brand awareness and preference is key in order to drive digital sales. We have a high level of direct traffic to If websites today, about 50%. But this can be further improved by strengthening the consideration and the preference of our brand. The second strategic initiative is the best in risk, which is about underwriting and pricing excellence to drive profitable growth. This is part of our DNA in If today, and it is equally important for us to strengthen going forward. For us, this is mainly about 3 areas: being best in data; using modern tools and methods; and excellent analytical and risk management expertise. When it comes to best in data, this is to a large extent about value creation from access to and best practice utilization of available external and internal Nordic data. To give you some examples. When it comes to excellent claims prediction for car, we now do risk predictions for 140,000 car model versions on up to 7 claims type using over 10 million of cars claims history. Another example is moot purchasing process for homeowner. But the price model use external object data to improve risk prediction. And at the same time, we remove customers' questions from -- to smoothen the purchase process and strengthen the digital channel. When it comes to modern tools and methods, we have market-leading pricing models with high degree of automation and short time to market. Pricing analysts have common ways of working, using modern analytics techniques. And we have Nordic synergies on understanding what drives claims risk with over 100 pricing models per country using over 100 parameters on object and customer level. And the differentiation in use out sales price has increased with 30% during the last 7 years. When it comes to excellent risk management expertise, this is to a large extent about creating the best place to work for analysts that attract and retains top talent. We have a large and active Nordic community of analysts with regular insight sharing sessions. We also invest in -- a lot in scale development. For example, our own developed If analytics academy with several tailor-made courses and a very high course rating by our analysts. The third strategic initiative is related to mobility, which is an important area for If today and certainly going forward. We have today a very strong position underlined by our market shares, our operational excellence and efficiency in aftermarkets processes as well as our sites in purchasing power. Today, we insured every fifth car in the Nordics. And we are particularly strong in the new car markets through all our partnerships with the car industry across the Nordics. Our strategy in the mobility area is based on partnerships and collaboration with the local and international car industry. This list of partnership is ever-expanding and as well as some of the biggest and most well-known players, such as Volvo, BMW and Ford, we also boost a list of new entrants, such as Polestar, [ Chaupin ] and also start-up companies are becoming more and more important in order for us to develop our core capabilities for the future. If is responding to the trends in the automotive industry. The automotive industry is going through massive changes, influenced by many well-known trends. Our partners in the automotive business find themselves having to adapt their business, their strategies and their plans for the future. We also need to adapt to the changes and make sure that we deliver what our partners need today and also for the future. To exemplify how If is adapting to these changes, we would like to mention a few concrete examples. Firstly, we are implementing an increasing amount of digital integrations in the mobility space, seamlessly integrating our offerings, our services and our capabilities into the customer journeys that our partners deliver to their clients. Secondly, we have invested considerable time, resources and development capability into all the new offerings, in ownership, sharing and flexibility that is developing within the car industry. We are now the most commonly used partner across the Nordics for integrated insurance products within car sharing, car leasing and car subscription models. Finally, our increasing offering to cover areas of importance to our existing and new partners in the mobility space. We can here mention our recent acquisition of Viking, our If services and branded insurance and warranty products as examples. The fourth initiative is related to personal risk and health area, which is a growth area in the Nordic insurance market due to prioritization of public sector services and an increasing awareness of these products in the population. We already have a complete product offering within this area, and we are investing in digitalizing our service offering as well as expanding our service offering. This is also highlighted by our acquisition of [ Practical Hesta ] in 2019. And then I'll leave the word back to you, Morten.

Thank you, [ Inge ]. So you have been introduced to our unique strategic position, our track record of excellent operational and financial performance and Inge has given you some insight into some of our strategic initiatives that will improve our business operations further. In sum, this all gave us a solid fundament and thus firmly support our new financial targets for 2021 to 2023, a combined ratio below 85%, further cost ratio reductions and mid single-digit growth in our underwriting results. In the If business model, the underwriting result has always been the dominant profit driver. On top of this comes an investment result from an investment portfolio with limited risk exposure. Looking back at the 3 previous 3 years periods, we can showcase an attractive increase in the underwriting result driven by an attractive mix of combined ratio improvements and top line growth. With our revised targets for 2021 to 2023, we set an ambition of continuing this attractive financial trajectory. Therefore, Sampo and If will continue to be the leading player in the Nordic P&C insurance landscape. We will continue to be a large and diversified insurer in this highly attractive market. We will continue to leverage our leading capabilities and our performance focused corporate culture. And we continue to deliver on our trajectory of both strong operational execution and excellent financial performance. So that summarizes this section on Nordic P&C insurance. Thank you all for your attention.

Thank you, Ingrid, and thank you, Morten. We have received quite a lot of questions already, but please keep those questions coming, and we'll have plenty of time to address them at the end of the day. Now we shift focus to the U.K. Toby van der Meer, CEO for Hastings, will now give us an update on his company. Over to you, Toby.

Hi, everyone. I'm Toby van der Meer, and I have the pleasure of looking after the Hastings Group as CEO. Today, let me give you a bit of background as to us and the U.K. market before turning to our plans for the future, including with Sampo as our new shareholders. Let me first remind you a bit about who we are. We're a fast-growing UK P&C insurance provider with a very different approach to most of the traditional players in the market. Firstly, we're very focused. We're product focused, with 90% of our business being car insurance, and we're also digitally focused for example, with around 90% of new customers joining us from comparison websites, and we have one of the most highly used and highly rated mobile apps for insurance in the country. We also have a differentiated set of capabilities. I'll talk more about these in a bit of detail later on, but they include our approach to pricing, a modern, scalable tech platform, high customer retention rates and a real focus on keeping the organization lean, but with high colleague engagement. In terms of our results for 2020, it's been a good year. We've seen an 8% increase in customers to 3.1 million, while increasing our operating profits to $131 million, supported by a 6-point improvement in our calendar year loss ratio to 76.5%. 3 quick comments on this loss ratio. Firstly, we've seen lower claims frequencies from COVID-19, albeit slightly offset by higher severities. Secondly, it reflects the impact of our actions, including the benefits of our underwriting and claims initiatives delivered over the last couple of years. And thirdly, this result includes a reserving position which we think cautiously reflects the increased uncertainty caused by the pandemic. Our operating ratio was 87.4. This is a measure of our group-wide results, defined as total costs, including operational depreciation and amortization, divided by total revenue, excluding only investment income, and a look at this measure looks across both our retail and our underwriting businesses. These results for 2020 continue a very good track record. Although some years have been easier than others, we have consistently grown our policy count and maintained a very good loss, ratio demonstrating that those of the right capabilities in this market can grow and do so profitably. Beyond our financial results, 2020 was also a year of great progress in a number of other ways. We took extraordinary actions throughout the year to support colleagues and customers during the pandemic, amounting to tens of millions of pounds of investment. It was, therefore, great that despite the operational disruption caused by COVID-19, we achieved our highest ever level of colleague engagement alongside improvements in customer service and also achieved a carbon neutral status and certification following actions to reduce our waste and offsetting our remaining emissions. Let me briefly recap our business model and what makes us different. Firstly, we've embraced digital and price comparison distribution for many years now, while many of our competitors still fear this channel. We love a model where we can see most of the market for free, cherry-pick the customers we want and then only pay an acquisition cost when a sale is made. Secondly, we've built up a brand and a range of products that are specifically designed for this channel. The myth is that customers on comparison websites always buy the cheapest. The Hastings brand is well-known in the market, following many years of TV advertising, but when customers see us on price comparison websites, they actually get a range of offers from us, typically 6 different products, as you can see on the page, and these are designed to appeal to different customer groups. And this approach allows us to attract more customers and at a higher-margin than a traditional player would do just by using 1 product and focusing only on being the cheapest. We have a unique approach to pricing with the separation of retail and underwriting. The underwriting team focused purely on the loss ratio. And our retail team focused on growth and customer value. And this separation means we get a discipline and focus on the loss ratio, but also sophistication in market pricing, which is so critical in this market where you have to be great at both. We have a low-cost, digitally focused model with great digital customer service and high customer retention, again very different to many of our competitors running who are now just beginning to focus on digital, and many still don't have a mobile app life. We've invested tens of millions of pounds over the last few years in systems and have a modern technology stack in place, including Guidewire as our core broking, billing and claims platform and Snowflake as our cloud-based data platform, enabling the interrogation of billions of rows of data. Again, I wouldn't underestimate how different this is to many of our competitors who are still struggling with legacy platforms. And finally, all of this means we have a resilient and highly cash-generative business model with significant retail revenue streams alongside profitable underwriting. And unlike some of our competitors, who -- we don't rely on renewal pricing to generate those profits. The use of reinsurance also keeps us capital-light, therefore generating strong returns on capital and dividend capacity. To make one of these areas come to life a little bit more, let me talk about pricing specifically in a bit more detail. This is a market characterized by huge quote volumes on comparison websites with customers often running multiple quotes and sometimes across multiple comparison websites, advancing to around 140 million quotes in a typical year. And customers often do so with the privacy of their own homes, and so will play around with the quotes, including adding us a tracking cover or checking the impact on their prices by changing things, say, changing different occupations from maybe being a banker to a retail banker. And for each quote, if as an insurance provider you've set yourself up in the right way, you can access hundreds of different data points to gain further information or to verify what the customer is spelling out as they play around with their quotes. It's also a market where the price of failure is high, both with adverse selection, if you get your pricing wrong, and through fraud, with an estimated GBP 1.2 billion of fraud in the industry every year. Products are largely standardized in this market, but customer behavior is certainly not. Over 60% of customers choose more cover than the cheapest option shown to them on the comparison websites, something many of our competitors don't optimize for. And finally, you can't just put prices into the market and leave them there for weeks or months. Small pricing changes made frequently can make a big difference. We see a 5:1 price elasticity in the market, meaning any players new business volumes will change by 5% for every 1% change in price. Or put it another way, making frequent small price changes of, say, up to GBP 4 on a GBP 400 premium, so 1%, can make a material difference to your performance. And that's not a metabolic rate that many traditional players are used to or set up for. Our approach will we gather more data than we believe anyone else and spent more time analyzing it and verifying it. We use quote data but supplemented with internal data, extra data we get from the comparison website, we buy external data, and we can therefore price on more information and more accurately verify data than anyone else. We maintain dozens of different pricing models to predict risk, market prices and customer lifetime value. And models that might historically look at interactions between 1, 2, 3, occasionally 4 or 5 different variables have now moved on and operate at a micro segment level through the use of more sophisticated modeling techniques. Philosophically, we never sit on our laurels. We always believe that our models are less good than they should be, so we test and learn constantly. In January this year, just by way of example, we had 7 different motor insurance pricing models live on top of constant elasticity testing. Elasticity testing, by the way, means we constantly make minor variations to our standard prices and measure the impact on sales and value when we lower or increase prices at a segment level. This learning then becomes an input into the next set of models and allows us to make those small targeted price increases and reductions that I referred to a minute ago. Given the fraud risks, we've developed market-leading controls, which operate real time. So for example, fraud prediction models for every quote that comes in. And post set, where we do further verification of the customer information we've had. And then further checks again at claims stage, again, based on data-driven analytics to look harder at third parties or claims management companies that might be involved in a claiming instance. And then finally, always the most important part, we have people and culture. We look at everything daily, sometimes intraday. We add new insights to our models weekly. We make price changes constantly. And this is all we do every day without disruption. I've been here for nearly 10 years now. Our underwriting director, [ who know all of me ], has been here over 20 years. And that's alongside a senior team that have largely worked together for a good few years now and with a relentless focus on this. Now let me talk a bit more about the market and why these sorts of skills are so important. Firstly, the U.K. motor and home markets are very large and very profitable, with over 50 million policies up for grabs, over GBP 18 billion of premiums and price comparison websites are now very established, with nearly 80% of all new car insurance sales being brought through the price comparison websites and over 60% and growing in home insurance. And the players who have adapted to this environment are doing very well. Now historically, the market had been dominated by fairly traditional players, including brokers and insurers who operate like they do in many other markets. They, for example, might distribute directly or via intermediaries. They're trying to build strong customer relationships and focus on cross-selling. They also focus on hitting their numbers, including their loss ratio by pricing on a very steady, disciplined monthly cycle or longer. In 2012, the sort of players with that approach held 65% of the market roughly for car insurance. But what's been happening is that this traditional approach is no longer enough, and both with legacy business models or technology has struggled to adapt and new world specialists, as we call them, have steadily grown their market share and have done so profitably. The great news from our perspective is that approximately 56% of the market is still held today by those players with more traditional business models. And therefore, we believe this long-term market share shift still has a long way to play out. One helpful dynamic is regulatory changes as these are likely to provide further disruption to the market and probably make it even tougher for traditional insurance companies and brokers to cope. Firstly, on the FCA pricing practices work. The FCA are intending to stop the practice of aggressive new business discounting, followed by significant price increases for loyal and renewing customers. We estimate that this behavior, price walking, as they call it, has impacted 6 million policyholders and that the industry has benefited to the tune of around GBP 1.2 billion. As you can imagine, this practice of overpriced renewal back books is most prevalent in those companies that have been around for a long time and have long-standing loyal customers. With our business model, with new customers mainly acquired in recent years, and with our ability to make money from customers in the first year by having the right risk selection, this is all not really a big issue for Hastings. Therefore, as others are forced to stop aggressive discounting and are put under profitability pressures, we should be net beneficiaries over time. Incidentally, I know that some of our competitors are talking about how in this new world, customers might all of a sudden become a lot more loyal, trust their insurance companies, start buying direct or stop using price comparison websites, but we just don't believe that. On whiplash reform, we welcome the government's efforts to stop exaggerated bodily injury claims and are well prepared for the upcoming changes and will monitor changes in claims management company behavior very carefully, and with our focus on daily MI and updating our pricing models frequently, we should be able to trade through these changes effectively, again, in a way that will be more difficult for those with legacy systems or less frequent and less detailed data on their mind. Let me now turn to the future. With the backdrop of everything that I've described, we have big ambitions. Having taken Hastings from a small to a medium-sized player, we're now setting out to move from medium-size to a market leader. The internal strap line for this is us becoming the best and biggest digital insurance provider in the U.K. This won't happen overnight and will require disciplined execution over a number of years, but the size of the prize is significant, with some of today's market leaders having well over 5 million policyholders and making over GBP 500 million of operating profit, significantly more than the otherwise very decent set of numbers we posted for 2020. We have 6 clearly identified investment areas; pricing, increased customer retention, a transformation in claims where we've been behind and pretty average to date, further investments in digital and the mobile app, growth in home insurance, where we're still very small, and launching and testing new propositions like multi car, where we've also been a bit behind, and testing new telematic products, where we also see some potential new opportunities. These initiatives will be underpinned by continued focus on colleagues, culture and doing the right thing in the wider world through our ESG initiatives. Although we're making good progress on these projects, we're also very pleased with the new investment by Sampo, which should mean we can accelerate some of these initiatives in a way that would be more difficult for us as a stand-alone company. I won't spend too much more time on the detail of these initiatives, but I just want to reinforce 2 points. Firstly, these are real initiatives and projects with investments and teams already underway and delivering real results. This is not just something we pull together for our Capital Markets Day. As you can see on this page, we have 27 different work streams in-flight as we speak. And I can tell you they have great momentum with a number of them already having delivered new capabilities in our technology releases over the last few weeks in January and February. Second point to reinforce is, these are our priority areas. Because if we get them right, it will make a material difference to our performance over the coming years. In terms of pricing and anti-fraud, if we can get even better at risk selection, we can bring in more of the over 10 million people across the country who switch every year. Plus we already make around GBP 1 billion of premium and over GBP 300 million of retail income. So to the extent that our pricing initiatives increase our average premiums, improve our loss ratio, generate more retail income, you can see that the bottom line impact can be very significant. Although our customer retention rates are very good and our competitors lose a lot more than this, we still lose around GBP 300 million of premium every year from customers leaving. So again, anything we can do to reduce this can make a big difference. We pay out around GBP 750 million a year in claims and have nearly GBP 100 million in operational and call center costs. So improving our claims and digital capabilities remains an area of focus. In home, if we get to a similar market share as we have in motor today, we can bring in around 2 million customers and GBP 400 million of premium over time. Plus in multi car, as just 1 example of our propositions work, we have a big target market to go after with 10 million households in the country who have multiple vehicles. So what does all that mean? Firstly, we're confident about our current performance and momentum and therefore, expect to improve our loss ratio and overall results during 2021. Looking slightly further out, we're targeting a loss ratio of below 76% compared to our previous 75% to 79% target range and compared to our 76.5% results for 2020. I also mentioned our operating ratio earlier, which measures our overall efficiency across the retail and underwriting businesses. And we intend to have this at below 88% consistently. This takes into account market premium dynamics, retail income dynamics and the balance of reducing unnecessary costs, but also investing in the areas required to make us a market leader. We don't set policy growth targets for any particular year. We prefer to regard growth as an output of what we do every day in terms of pricing. And we never chase growth for the sake of it. But we do expect to gain further market share in both car and home insurance over the coming years. Before I wrap up, let me touch briefly on synergies for Sampo. We have our 6 general areas of investment. And as the Sampo team have already mentioned, we've now established a framework of collaboration that will identify specific opportunities for us to leverage joint learnings and accelerate our delivery. We have a good track record of this sort of work. RMI, our other shareholders, joined Hastings in 2017. And since then, we've been able to benefit from their insurance expertise from other markets. This is less a specific joint work, including a large call center operation we've now jointly invested in and shared operational learnings. We've also refined our approach to renewal pricing based on their experience, which is one of the things that has helped improve our customer retention rates over the last few years. With Sampo, we're now already exploring similar opportunities. As just 1 example, Sampo have a very significant motor manufacturer relationships, including an understanding of vehicle technology and its implications for claims frequencies and severities. As you can imagine, this is also an important area for our pricing and claims models as we look into a future of more sophisticated cars and will therefore be exploring how we can use this Sampo insight in the U.K. Let me wrap up. As you've hopefully heard from me, we believe we're well positioned in a market that is so evolving rapidly and where those with legacy business models and technology are under pressure. We have big ambitions and good momentum based on investments over the last few years that are continuing today. And although we missed some dimensions of being a public company and talking to many of you more regularly, we're also very pleased with our new shareholding structure and looking forward to continuing to focus on relentless execution in partnership with them. As always, I'll close off by saying a big thank you to the whole Hastings team for everything they've done during 2020 and continue to do every day. Thank you for your time, and I look forward to taking your questions shortly.

Thank you, Toby. Next, we have Sampo's Chairman, Björn Wahlroos, ending the presentation part of the day by wrapping up today's -- today in his closing remarks. Björn?

Thank you, Jarmo. And welcome to the fairground in Southern France, where it would appear I'm standing. If you look a bit beyond the Ferris wheel, you'll see that there's an airport, so there is some sort of business link here as well. But jokes aside, it's been almost to the day 2 years since we announced the succession plan at Sampo in February 2019. In those 2 years, a lot of things have happened. Immediately after the announcement, Torbjorn took over at Nordea and Morten took over at If. We continued to plan for the succession under Torbjorn's leadership. And over that preparation period, we put in what is essentially a wholly new management team that started working with Torbjorn as he took over at the start of 2020. Since then, quite a few things have happened already. There is the clear orientation towards our area of strength, the P&C industry. And we've actually even made an acquisition in that area, which you've heard a lot about. You just heard a very detailed presentation on that, and you will be supplied with more views on it. The most important point here, however, is that with this succession, this new team, we've also now put together a strategy, not that we wouldn't have had it together, but we're presenting it to you in what I hope is a comprehensive and easily understandable form. It's based on a very simple idea, the way we see it from the group's board perspective, and that is to bet on your strengths. We have a, I would -- I shy away from or I shouldn't shy away from calling it an unrivaled track record in P&C insurance, particularly in If, and we want to lever that human capital. That's essentially what all this is about. So as Torbjorn presented his ideas of where he wants to take the group about a little more than a year ago, it was very easy for the board to join in and say that's where we're going to go. It carried with it a reallocation of some resources. As I already said, it also eventually produced an acquisition. And it will now produce some divestments over the upcoming year or 2. We have 3 first class assets in P&C insurance covering Northern Europe, by far, the largest that you've heard a lot about continues its excellent track record. We have Topdanmark where we own half of it, recuperating from a slightly weaker 2020 or 2019, actually, end of 2019, and producing or getting back to its tradition of excellence. And most recently, of course, we have the addition of Hastings to the group. This is the area where we're going to focus. And for those of you who have asked us, what are you going to do next? Are you going to sort of acquire a Dutch company? Are you going to do something else? I think Torbjorn's message has been very clear. We're only going to do minor bolt-on acquisitions, if there's -- if anything, over the upcoming 2 years or so. We have quite a lot on our hands. We like to further develop our concept. We want to provide the support from If to the 2 other groups that you heard about during this day's proceedings, and we really want to lever our expertise in P&C insurance. So that is where we're going, and that is where we are. The other part of the operation, which in Torbjorn's slide belongs to the develop, maintain and ultimately divest, is made up of a number of businesses. If I start with the smaller ones, we have invested in a number of smaller operations in the financial service area. There are those who have essentially thought of this as a sort of -- well, loss of focus or at least spending, putting management time into an environment where the leverage is not sufficient to really produce value. I don't really think that is the case. That's partly why we've moved all of these investments into our normal investment portfolio, and we're running them as part of our overall portfolio. I can also report that they're doing very well. We're extremely happy with development in Nets and Saxo. And we're actually pretty happy with everything that's going on in that part, we have already exited one of them into [ Asiakastieto ] with a pretty good profit. And of course, there's more good news to come, not just from these private equity type investments, but from the overall investment portfolio. We have already de facto exited Tikkurila, which was a very good investment for us and many other things that will follow. The point here is essentially to say, look, we're in this to create value. We will create value, but we will not add to those portfolios. We will eventually exit those investments and we will do so at a very nice profit, it would appear today. By far the biggest question, if I view it by the amount of communication I received from our shareholders and from analysts of course, is Nordea. And Nordea, as I pointed out publicly, has not been an unqualified success as an investment for the very simple reason that nothing in banking has. Nordea was hit earlier than any of its Scandinavian peers with some of the challenges that now have essentially hit everyone. That's the ordinary KYC money laundering systems development, these challenges, which earlier on in the cycle hit Nordea harder than its competitors. Nordea took very decisive action on this, and I'm very happy to report that we're -- we're really now happy with the work Frank is doing. We're really happy where Nordea is going. However, that doesn't change the fact that we have changed our view of the banking market relative to what it was, say, 5 years ago. We could not foresee the over regulation, the regulatory tsunami that we've been hit by, and we couldn't see interest rates remain as low as they've had for such a long time. In a sense, this is a good moment, I think, to start to exit Nordea. Interest rates now seem to be increasing. We're seeing some of that, a small part of it so far, projected into the valuations of banks. We expect to see more of that. I think Torbjorn has already communicated that in a way, it's sad to say, yes, we're going to exit Nordea because a lot of value will be created in Nordea. But somehow, I think the banking market in Europe, in general, will never -- or one should never say never, well not for quite some time, become what it was, say, 15 years ago. For it to get to that kind of a situation, we would need such a dramatic regulatory or deregulatory overhaul that it's not likely to come within the scope of just a couple of years. It will take more time. And therefore, it makes perfect sense to exit Nordea and to sort of start to work on that. We've set that time frame for this 18 months. I think there's a good chance that we might do it quicker, but we will see how this goes. It's basically a question of 2 things. One, of course, the more obvious one is the market. Of course, we will listen very carefully and monitor the market. We will exit Nordea in a value-creative way. We're not going to create a fire sale situation. The other aspect of this is that it is a sizable chunk of shares. It's 16% almost of Nordea, and the value is almost, depending on share price, about $4 billion. So indeed, it's something one needs to think of. There is an additional interesting aspect to this, and that is that we have a peculiar situation, accounting and tax wise, with the Nordea shares, which require us to really create a plan for how we do it because if we start doing it piecemeal or otherwise sort of by some sort of rule of thumb, it is not unlikely that we will experience some negative reaction either in the market or indeed in the form of taxes or some similar liability that may arise from it. This is why we've committed actually to set up a plan, and that is what we are essentially referring to by saying we're going to materially reduce this position in 18 months. We have a very peculiar setup here because those shares on our books are worth very different amounts depending on whether they belong to the shares of which we still have some left that we bought prior to the financial crisis or there's a larger part of our present holding, which was bought after the financial crisis. Prior to the financial crisis, we bought shares in Nordea at valuations as high as EUR 10 a share or something like that, whereas after the financial crisis, our average acquisition price was about half book. I think the lowest we ever got was about $1.91 a share when we picked up some shares from Nordea's share issue in 2009. And what this means essentially that under a first in, first out of taxation, we need to be very careful with what we do with each backshop shares. If we just start sort of throwing them out in an unplanned manner, we are not only likely to create havoc in the markets, we're also likely to end up with hefty tax bill. So again, what I say should not be taken as any qualification on the 18 months. What I'm saying is we're likely actually to act a whole lot sooner than that, but that action has to be based on a thorough plan for how to do this because otherwise, we're going to destroy shareholder value. This is very important for shareholders to understand. I get a lot of correspondence. There are those shareholders who are saying, look, get out of this quick. Actually, I get almost as many -- actually, I think I've got more letters from shareholders say, careful, don't do stupid things, don't throw them out too fast. I think we can all agree that the strategic orientation of the Sampo Group towards P&C insurance is the key to all of this. And automatic implication of that strategy is that we're going to divest ourselves, particularly from the largest single asset lying outside of that strategy, namely our Nordea hold. And we will do so over a relatively short period of time. But more importantly, in a very orderly and thought-through fashion, and that really is the key to that. Summing it all up. We have a new team in place. It's been in place for just a little more than a year. From a Board perspective, I think I can say we're very happy with the performance. We've seen very decisive action, both in terms of adding to executive management on the group level. And we've seen very determined action, both operationally and in some limited cases in terms of acquisition activity. We now have quite a lot on our plate, and we will stick to that plate. We will create value. And as always, I think I should end by saying, particularly for those who have been a bit worried about whether there are nationalistic or other some trends underlying sample strategy, that simply is not the case. I'm not presently in Finland. I am still a very large shareholder of this group. And I'm primarily interested in creating value, actually adding to my own shareholding by doing the right thing and by following a strategy which, based on our past track record and with the -- based on the people I know who are executing that strategy, will create the most value. So you're welcome to join me on that trip. Thank you.

Thank you, Björn. Now ladies and gentlemen, we are ready to move to the second Q&A session. Let me remind you that we have Björn, Torbjorn, Knut-Arne, Morten, Toby, and in addition, Peter Hermann, CEO of Topdanmark to answer your questions. And I'll think I'll jump into the next -- or the first question of this session, which is both for Björn and Torbjorn. Maybe Björn, you can start and then Torbjorn may fill in. What could be the possible disruptors to the P&C and life businesses?

That was the question?

Yes, indeed.

Okay. This, I think, is more of a question to Torbjorn, but let me very briefly say, we have an unrivaled track record. There have been basically no disruptions to the If business for the more than 15 years that we have owned the company. It's been incredible, really, particularly for a banker like myself, who started out being very worried about P&C insurance. I thought it was a horrible idea, business-wise, to be responsible for things that you can't control, such as natural disasters and stuff. Over the 15 years, I've learned that is not the case. And the most important aspect of that learning has been the track record, i.e., my experience of how these guys are running the group. I've spent a long time trying to sort of explain that. I don't think there are very obvious technologies that are challenging us. We've seen market changes, such as price comparison sites, that people were very worried about. They have barely moved the needle. A lot of people are talking about new technologies in road traffic. So far at least, we have seen no significant impact. Yes, frequencies tend to come down. But on the other hand, cars become more and more expensive. And as a consequence, the total amount of risk that we are insuring remains more or less the same. So all in all, we can start speculating, and I'll turn this over to Torbjorn, on what those risks might be. But on my own, on my behalf, I would essentially say, I'm not particularly worried about disruption. If, indeed, If can pull it through such a huge disruption as the pandemic without barely being touched by it, I think that says quite a lot.

I can only agree. Of course, we are very hands-on management team, and we're also very risk-averse. We have invested long -- in the future over a long time. And there's no insurance technology anywhere in the world -- of course, we look outside the Nordics and follow developments everywhere -- that seems to be disruptive for our market at the moment. We have the best momentum that I can remember in If P&C, and we have actually a better market structure even than what we're used to in the Nordics. So I have a positive view of the world as we speak.

Thank you, both. And the next few questions go to Morten. This one is from [ Prasso ]. How do you see the future competitive landscape in the Nordic P&C insurance space? What is the likelihood that new aggressive competitors, like the ones we saw in Norway some years ago, will emerge in other parts of the Nordic P&C market?

Yes. I think, first of all, the competitive landscape currently is, I would say, rather benign. As I mentioned in my presentation a little bit earlier, the Nordic markets are rather consolidated. And right now, we see more of a trend towards further consolidation, of course, in particular bearing in mind Tryg acquisition of RSA's assets in Scandinavia. So I think sort of the competitive landscape is good. And again, I see that we will have somewhat more consolidation to come, which is, I think, really positive. Yes, we still see some new players being established in the Nordics, and particularly in Norway, if you go some 10 years back. I think history now shows that they have been struggling as [indiscernible], as I also mentioned in my presentation, important and even more so in a digital world, which is why I think it's quite challenging for the newcomers to really get the foothold in this market. We truly benefit from our Nordic scale, we are able to lead the digitalization very much due to our Nordic scale. So I think the outlook is pretty good, as I see it from a competitive situation.

And the next one is for you too. It's from Stephen Haywood, HSBC. To achieve the mid single-digit growth per annum in underwriting profits, to see this being achieved via volume growth or margin improvements, can you be specific on what could drive the volume growth or margin improvements? Also, can you clarify whether the $900 million underwriting result for 2020? Is Sampo's share of Topdanmark and Hastings underwriting profits? Or do we have some -- do we have to remove minorities from this $900 million?

Yes. I think the mid single-digit growth on underwriting profits will always be a combination of top line growth and further good underwriting performance. Over the last few years, we've seen good growth figures at If, [ Corporate 7 ] being the figure for 2020. An important driver of that, in addition to price increases, is record high retention rate throughout our businesses. And that's, of course, something that we will benefit from also going forward. So I think, again, we will -- it will be a mix between volumes and further improvement of our underwriting result. In terms of drivers, I think, again, in my presentation, I pointed out that efficiency improvements continue to be a target for us. We have historically improved our cost ratio with some 20 basis points, and we expect to have a positive development on that also going forward. Digitalization, of course, being the main driver behind this, where we have achieved a lot over the last 10 years, but there is still ample of room for further digitalization and thus further cost ratio improvements also going forward. Then it will always be a balance between sort of top line growth on one hand and then underwriting performance on the other hand. And basically, what we do is that we set an underwriting sort of target for the group and then sort of the growth will very much be dependent on what type of underwriting profit we would like to have in any given year. Then there was a question about EUR 900 million in underwriting profit, if I understood it correctly, Jarmo, at least the figure coming directly from If on that side is EUR 802 million being for 2020, the underwriting profit from the If Group.

I think that was more for me, Morten. And of course, in that EUR 900 million, just a reminder, before talking about minorities, we have adjusted for the COVID impact to make it normal comparing to the year like 2020, which Morten referred to. That's 100%. There's a slide in my part of the presentation, Page 32 of the total pack, just to refer to a specific page, where you see how that sort of compares to the net profit, where there are minorities deducted from that EUR 900 million and tax as well. So that very technically, specifically, the EUR 900 million is the 100% of total Hastings, excluding COVID-19.

Thank you. That was Knut-Arne. And our next question is actually for Knut-Arne. It's from [ Artu El ]. How will the rising inflation rate affect Sampo's financial performance, if at all?

Inflation in itself is always a bit difficult to be specific around when it comes to non-life insurance because inflation that impacts claims is not necessarily the same as CPI inflation. But I might understand the question, so in terms of or more rising interest rates as well. Advising interest rates is positive, for example. It will generate own funds in Mandatum, significantly their own funds where interest rate risk is the single biggest risk in Mandatum. And rising interest rates will improve that position significantly. It will also create a run-off profit in If P&C if rates are sustainably higher than they currently are, as the some -- or all depending on how much we should speculate the interest rate rise of the reduced discount rate impact will be reversed. And that has been significant, for example, over the last decade or so. And that will absolutely outweigh even the short-term mark-to-market loss in our investment portfolio. And long term, of course, it's also beneficial for our investment portfolio as the investment yields will increase.

Thank you, Knut-Arne. Next question is from Jan Erik Gjerland, ABG. It's for Morten. Why will not underwriting results be reduced when motor premiums are shifted towards leasing costs, where the buyer is more professional than a household or private customer?

Yes. I think we're not really seeing that much of a rapid change. I think it's the first thing to comment. This is a shift that takes many, many years. When that is said, we are very much used to working directly with car importers, car dealers, larger leasing companies. So we're already sort of, in our current business mix, very much used to operating with large groups and large negotiators. And we have been able to maintain profitability and good profitability also in these segments. Of course, an important aspect of this is that we managed to run our operation extremely efficiently. So that, of course, gives us possibility of having good products, where we have good coverages to the end consumers, a very efficient operation, and then at the same time, of course, being able to take out the margins that we would like to have in also this type of business. So again, it's just a normal part of our business mix. It's already sort of a substantial part of the business we do. So I don't see any negative impact from that sort of trend.

Very clear. Thank you. And next 4 questions are for Toby from Faizan Lakhani at HSBC. I'll take them one by one. One, you are targeting a calendar year loss ratio of 76%. Given that there has been a significant tailwind from COVID, once that unwinds, what gives you the confidence that you can achieve this, especially given the pressure you have seen on the claims severity?

Yes. Thank you. So we are confident about the medium-term outlook for the loss ratio, and hence, the target of below 76%. That's despite the 76.5% loss ratio that we posted for 2020 and the previous range of 75% to 79%. And the reason for that confidence, if I step aside from COVID, of course, in the short term, we are still seeing lower claims frequencies in the here and now and the start of 2021. But beyond that, we are also seeing very good progress on our pricing initiatives. And so our confidence about risk selection is higher than ever. We're seeing good progress on our claims initiatives. Having changed a number of our repair partners, having introduced new claims processes and controls, we are seeing the benefits of that in our operational day to day-to-day. Thirdly, I guess, because the company is now bigger because we have more customers, we are getting the stability and performance from bigger scale and a bigger book of renewing customers. And then finally, we do think we've taken a cautious approach to reserving. And therefore, the balance of current year performance and prior year performance coming together should mean that we can continue to post good loss ratios as we look ahead.

The second question from Faizan is, once again, in relation to your calendar year loss ratio. It appears that you are taking a more prudent approach to booking reserves. Will higher loss picks not dampen your current year accident loss ratio?

I guess I can only reiterate that we're confident that the combination of the prior year performance and the current year will lead to loss ratios below 76%. And in that, that does include a cautious approach to reserving that we have taken during COVID and a cautious approach that we would intend to maintain as we look ahead.

Thank you. Question number three. It was mentioned that you are not overly worried about customers staying more loyal. But according to the FCA's report, it has suggested that switching will reduce by 9 million to 10 million over the next 10 years. Do you disagree with their analysis?

We think it's a bit early to judge what impact the FCA's changes will have on the market. I guess, to remind everybody, the consultation has only just closed. A policy statement is expected at some point in the second quarter where they will confirm their rules. We will analyze that very carefully and I guess start to think more about what the future impact might be on the market as all of that plays out. More importantly, we will continue to read the data and respond as the market actually changes rather than too much quantification about how it might change in the future. Certainly, one scenario is that customer behavior will change and that customers will become a bit more loyal. I think some of that is likely to happen. So I think there probably will be some increases in retention rates that we will benefit from as well others in the sector. But I don't expect that to be so material that it will have a significant impact on the volume of customers that switch every year and what goes through price comparison websites. It will be on the margins and, therefore, leave us with plenty of opportunity to go after, recognizing that we're still relatively small in a very big marketplace.

And the last one from Faizan. In terms of the upstream of dividend to sample, the payout ratio appears to be quite low. Could you provide color on this?

Yes, I guess it will be guided by the Board and the shareholders in terms of the best capital management approach. For now, we are generating plenty of cash, can comfortably support the 6p dividend that the shareholders have committed to for the near term. And that will give us options to consider with the Board about the best balance of paying future dividends, reducing debt or investing in the business, and we'll take those decisions as we go.

Thank you. And I think that already answered Hadley Cohen's next question. How should we think about your remittance capabilities up to Sampo, particularly given your strong growth ambitions? And we'll -- unless you want to add something, Toby, we'll move on.

Nothing to add for me, I think.

And this is for Torbjorn. Steven Haywood from HSBC. Would distributing Nordea shares to Sampo shareholders be considered value-creative? And is this an option for the management to do?

That's one of the options that we will consider over the coming 18 months. And it would be natural to think about that if it was decided by the Board in conjunction with some of measure so that we can keep some of the process in the company.

Thank you. And back to Morten. Hadley Cohen's question. Should we expect that the annual technology expenses will continue to increase at EUR 10 million per annum? Or will it remain flat at EUR 70 million? That's the first one.

Yes, hard to say anything exact on that. I think -- I do not see that we will continue the same trend over the next 3, 4, 5 years at least. So I think the level that we have now, I assume, is some kind of new normal. But again, investing in digital development is really key. And of course, we do it because we believe that this will give us better products, better solutions to the end customers and a more efficient operation. So it's also very much investment into further efficiency improvements going forward.

Same theme for Morten. How much lower do you think the cost ratio can go? You are talking about 20 basis points per annum. But is it reasonable to assume that this can get sustainably below 20% over time?

Let's see. I mean, then we're speculating a lot sort of into the future. But again, the main driver behind the efficiency improvement so far has really been digitalization of our business. And if you look at that, then at least that process will continue for quite some years. We have still a big potential in further digitalizing our distribution, both within private, perhaps even more in commercial. We have a further potential in automating all of the service errands that we have, again, in all business areas. And then we have clearly also potential for increasing online reporting of claims and automatic claims handling. So at least for the next few years, our expectation is that we will continue to see efficiency improvements. And again, if you look back, it's been in the tune of 20 basis points per year. So let's see how long we can continue with that. But at least now, I think we have a good outlook in terms of further improvements.

And one more. How long-dated are the partnership agreements in motor?

Well, that's varying a lot from partnership to partnership. Some of them are sort of rolling 1 year agreements. Some of them are 3 years; some of them are 5 years. A larger part of them are more long term, and -- i.e., sort of being more of them being more towards sort of the 5-ish time period. If you look at this historically, we've had a very stable situation with most of these partners in the automotive industry. So we kind of are leveraging sort of on strong relationships, deep integrations with different partners. And of course, that's kind of good when it comes to also believing that we'll have great partnerships with these companies in the automotive industry as such going forward.

And the next one is for Torbjorn from Ashik Musaddi, JPMorgan. If is clearly the star performer in Sampo Group with growing volumes and improving combined ratio. Other than that, where are the levers for earnings growth in coming years as Hastings earnings growth guidance isn't clear as there are no volume growth guidance?

I think that, in Sampo for a long time, we have avoided giving very firm growth targets as that risk leading to lack of discipline. And we will probably continue to talk about it that way, both internally and externally. But of course, I see growth and opportunities in P&C. As we point out, we were going into 2021 with excellent momentum and a good market structure. Hastings Group, well, they participate -- we participate there in a growing market. So just keeping market shares that would lead to growth. And the Topdanmark is investing heavily in digitalization as done so for a period. And of course, the purpose of that is to improve service, lead the Danish market towards utilization and ultimately grow. So I see a lot of opportunities for all our P&C businesses.

Thank you. And this next one is for Knut-Arne from Per Grønborg, SEB. And it's on Nordea. Can you be more specific on the taxation from selling/dividending out the stake?

I think In terms of -- for us, in terms of selling or paying a dividend [indiscernible], as such, there is no difference. Then, of course, it could be differences for our shareholders when receiving a dividend in [indiscernible] versus the cash dividend potentially. What [indiscernible] was referring to is that we currently create Nordea as a fixed asset according to Finnish tax legislation, and we'll continue to do so as long as we own more than 10%. When we go below 10%, Nordea will become an investment asset if we keep our share in Nordea for a period of time going forward for more than a year. So that will -- if we remain a shareholder below 10% for a period of time and we dispose our shares later, would lead to a tax position where the acquisition value -- tax acquisition value of those shares are very low. Because as [indiscernible] referred to, it's the first in, first out principles, and we bought some of those shares very cheaply back in 2008. So that's the tax position. On top of that, just in detail, if we remain a shareholder when it's not a fixed asset, we also will be in a tax position on dividends that we receive from Nordea.

And a question for Toby from Jakob Brink, Nordea. In connection with Sampo's acquisition of 70% of Hastings, 3 drivers of higher profitability in Hastings were mentioned. One of it was reduced reinsurance coverage in Hastings. Could you discuss this more? That is -- has this change happened? And going forward, what level of net premiums earned should we be expecting for Hastings?

So we've made no material changes to our reinsurance structures to date. In fact, we placed our quota share and XOL program successfully with strong demand from reinsurers at the year-end with no material changes in prices, a small increase in our XOL program and no change at all in our quota share prices. And as we look ahead, we've made no decisions yet about the optimal reinsurance structure for Hastings. That's something we'll review over the coming months, including engaging with the reinsurers and the shareholders and the Board and then come to a decision at some point towards the end of the year as part of the annual review of our reinsurance programs. So no decisions made, but it's something we are going to look at carefully, again, given the new shareholding structure, the financial stability we have, the improved profitability we have. And that, I think, gives us a lot more flexibility than we would have had as a stand-alone company and as a smaller company in the past.

Next one is for both Morten and Peter. It's from Per Grønborg, SEB. Car leasing, what are your views on profitability level on leased cars versus normally owned cars? Should you differ in view? Why? Maybe Morten can -- yes.

Yes. My short answer to that would be again, no. And as I already commented, car leasing is absolutely not a new thing. It's an operating model that we worked with for many, many, many years, have long relationships with sort of large companies within this sphere. So I do not see any sort of material difference when it comes to earnings potential sort of. Of course, the business risk-wise is slightly different than direct ownership, but yes, it doesn't impact our profitability. Peter?

Yes. So Topdanmark hasn't been very much, you can say, involved with the leasing business until now. The recent years has actually had a little more exposure into the leasing within the commercial segment. And there, we've actually shown pretty good progress as well in terms of profitability. So yes, maybe you have dealing with [indiscernible], I guess, a professional buyer sometimes. But at the moment, we can still see good profitability also within that area. But Topdanmark hasn't been frontrunner within the leasing companies until now.

Thank you, both. The next one, I think, is best suited for both Björn and Torbjorn. It's from Torbjorn [indiscernible], Wade Asset Management. Regarding If and Hastings balance sheet, what is your view on enhancing expected financial return by pursuing a strategy of KCO/Berkshire Hathaway holding a larger portion in equities? Please elaborate why you have this view.

Why don't Torbjorn start with this? Yes.

Okay. I think on the strategy, the path towards the non-life insurer with stable results and insurance dividend, as we speak about it, that doesn't go really well with an increased risk in equities as they're on the balance sheet. So that's not a natural development for this strategy.

If I continue by saying that we have a long-running tradition in Sampo to basically view balance sheet leverage or risk taking for the group as a whole. Of course, this is now, to some extent, affected by the fact that we have more minority stakes in subsidiaries than perhaps traditionally. Still, we prefer to take our risks closer to home to the extent that we want to hold more equities, to the extent that we want to go deeper into alternatives. We have ample capacity to do that in the wholly owned units of the group, primarily Mandatum, secondarily If, but to some extent, even the parent company if need be. So I doubt that, that will largely affect the balance sheets of Topdanmark or Hastings.

Thank you. Next one comes from Michael Huttner, Berenberg Bank, and it is for Björn. The current outperformance of banks versus insurers suggests that the market believes it is insurers which will see more regulation and lower earnings growth. How would this view influence the decision to exit Nordea?

I'm not quite sure that I agree -- I'm not quite sure I agree with the conclusion or inference, the explanation to why we've seen a fairly short period of outperformance of the part of banks. In my closing remarks to this day's formal presentation, so I made the point that as we are now seeing the ultra expansionary monetary policy finally produce the effect that central banks have been looking for, i.e., some inflation expectations, we are starting to see interest rates, particularly at the longer end of the yield curve to go up. And of course, this is very good news for banks. So largely, I would argue that the cost for the performance, which you are referring to is primarily the changed view on interest rates, not a changed view on regulation. I see no material change in insurance regulation of the kind of magnitude that it would have valuation implications on the radar. However, of course, your question is still valid. And we have taken the fact that banks may go up in valuation into account in devising our plan for an exit from Nordea, both in terms of the techniques that we will use to create that exit, and on the other hand, for the timetable. I just reiterate once more what I said in my closing remarks, and that is that we're here to create value, and we certainly want to take every new piece of information that comes to us with regard to these asset valuations into account when we set up the plan for exiting Nordea.

Thank you. Next one is also for Björn and Torbjorn. Comes from Jon Denham, Morgan Stanley. Do your comments on mergers and acquisitions being just within the Nordics par potentially small books for Hastings hold post-2023?

We're here today to discuss is 3-year period and the strategy and the targets, ambitions for that, not what happens afterwards. But Björn, you have a longer perspective than I have.

Let me just say that with the kind of experience that I unfortunately have of the financial services industry, I think the key here is to say we are not looking at any major acquisitions. We may do something small. We may add to some stakes here and there, but it will be really small compared to what you've now learned to sort of treat as major strategic initiatives on our part. Of course, typically, historically, what can come up in our industry is that one competitor sells off a portfolio of policies. That would be a very typical thing in Scandinavia. We've seen that happen in Finland because of changes in the industry structure. We've seen that happen in Norway with faltering start-up companies or new entrants into industry and so on and so forth. What we're saying is, look, we have our hands full. We have quite a lot on the table, and we're not going to do anything big.

Thank you. Let's have one more on the acquisitions. This is for Torbjorn. Is the Baltic P&C market part of the Nordic bolt-on acquisition targets? Or is that small part of your book of minor interest?

That book is so small that it shouldn't really enter discussions today. No. We are -- we are doing nicely. We have excellent results. We have good growth, and we have leading digital capabilities in that area. Now the total premium income there is tiny compared to -- even if we compare to the initiatives of Topdanmark and Hastings.

And we'll change tax totally. And this is Morten. How are you prepared to compete with, for example, Tesla entering the car insurance market by only changing based -- only charging based on driven kilometers or driving style or similar things measured by cars own systems?

Well, I think when people ask this type of question, they quite often forget about the core element in insurance, which is the claims handling. If you're insured sort of through a Tesla solution or a BMW solution or whatever, you still need the claims handling. You still need to be rescued sort of if your car breaks down in the Northern part of Sweden or Finland, you still need the car repair network. And that's, of course, what we operate, and that's the core of our offering to our end customers but also towards the automotive partners. So I think regardless of what distribution models we will have in the automotive industry going forward, they still need an insurance partner in order to operate, and in particular, sort of the claims handling in the Nordics. And again, that's the core of our company, that's the core of our capabilities that we offer superior claim handling, which is quite often a very physical thing. You want to have your car repaired. You want to have your car rescued. And again, we have an efficient network and efficient operating model for that throughout the Nordics. And again, I think that's why we are such a good partner to the Nordic automotive industry.

Thank you. The next one is for Björn. During your long and successful career, you have no doubt seen market trends and changes. How do you view recent events in the U.S.A., meaning social investing in online forums, cryptocurrencies and rapid expansion of retail investors? Do you see any possible opportunities in this trend in Sampo's long-term strategy?

Well, that, of course, is a vast question. There are so many other trends, at least for someone who's been around for as long as I am. Cryptocurrencies is definitely a very weird thing on which I have a very specific opinion. I very much -- and I've said this over and over again, I very much doubt that as long as the cryptocurrencies -- or let's put it this way, there's a trade-off between perfect anonymity and regulatory forbearance. As long as cryptocurrencies support the perfect anonymity approach, i.e., that you can use their payment systems for criminal and similar purposes, I doubt that the regulators in the long run will allow the normal banking system to link up with them. And therefore, I've been skeptical. And in terms of valuation of Bitcoin, at least, I've been wrong all along. Still, there are a lot of trends. And actually, I would say there are trends that are closer to us that do affect our business, perhaps more on the banking side and more in terms of valuation of Nordea. A lot of things are happening in the banking landscape. There are those who are more skeptical to them. And I might belong as a lifelong -- almost lifelong conservative to that group in saying that these things change very slowly, and the banks control a hell of a lot of infrastructure in the financial services arena, which is indispensable for most of the new entrants there, primarily the account system and the KYC that goes with it. So there are -- this you can come up with a lot of different scenarios. On the optimistic end, you might say that we are now entering another era of financial restructuring, deregulation and new innovation of -- that might be similar to the one we experienced in the 1980s and early '90s. That would be the extremely optimistic version of it. Then, of course, the extremely pessimistic would be to say that, look, there are so many bubbles around the financial services area. Today, there are so many crazy valuations that this is a minefield that one shouldn't enter. I've learned partly through our own family office to understand that the way to differ between these 2 views is essentially to do a hell of a lot of analysis. And I think that is essentially what we do. Sampo is a very careful and conservative investor. So the short answer to your question is I doubt that we will be dabbling a lot in these markets. We will be monitoring them because some of these trends may constitute marginal threats to our businesses, and we want to control and understand those threats. But as investor, at least in the short to medium term, I don't think we will be big in these areas.

Thank you. Then let's move to Nordea. Next question is for Torbjorn. It's from [ Bertha Lion ], Degroof Petercam Asset Management. What is management's view on when Nordea will be in a position to act without restrictions on its capital management, paying dividends and potentially returning excess capital, as this is likely to be a driver of a recovery in value of the stake?

I mean, it is clearly one of the really strongly capitalized banks in Europe. And so whenever the regulator does not prolong its recommendation or does not come out with new regulations, Nordea would be financially in a position to be able to distribute capital.

Okay. Next one is still on Nordea for Knut-Arne. If and when you see value in Nordea that will accumulate over time as the business continues to perform, I, at least at first -- at the first glance, see the current book value of the Nordea shares rather conservative. Could you elaborate further what drivers there are that drove you to value the remainder of Nordea shares at EUR 7.50 per share in your balance sheet? This comes from [indiscernible].

Yes. The impairment we did for Nordea was based on accounting rules, where we basically have too high book value -- or not only, basically, we had a too high book value compared to the multiple we have used for impairment purposes for a number of years. And that was again driven by the fact that Nordea had not paid dividend, and not because we have a changed view on Nordea, as such. But the book value for accounting purposes over the years has been built up by adding accumulated profit and deducting dividend. And there's no dividend that is being paid to deduct, the book value increased rapidly and exceeded the value we have had in our internal model. So we changed our assumptions in our model. And we changed those assumptions to be similar to the market assumptions we observed when we sold shares in November. And that would be a reference point which, according to accounting rules and for these purposes, would be natural to use, given the transaction we made in November. It doesn't necessarily reflect us as investors in Nordea. We obviously still own close to 16%, in terms of the future outlook or share price path that we believe Nordea can still enjoy. So it was -- very concretely on the question. It was using market-based assumptions, similar to what we observed at the time we sold shares in Nordea in November.

And one last one on Nordea. And this is for Torbjorn. Is your decision to not give complete clarity on full exit on Nordea driven by your expectation that Nordea shares go up? Or is it more operational issues driven?

To optimize the value of the shareholders, we should not give perfect information, and we could not -- we could not even decide in advance, of course, what the perfect way forward would be without all the information that we will have on the occasion when that is decided.

And the next one is for Knut-Arne from Lionel Trigalou. How will the deleverage happen? Over which period of time?

Just a reminder on where we are on leverage ratio compared to our targets we had, which the Board has set today, which is to be below 30%. And we were, at year-end, at around 29%. So we are within the target, meaning that we have no rush to do further deleveraging. When we reduce market risk by reducing our stake in Nordea, and if that capital is returned to shareholders, it's obviously reducing our IFRS equity base, which again, means that we need to reduce debt accordingly to remain within our target range of being below 30%. But there's no rush today to reduce leverage with the current balance sheet below the 29% that we currently have. Then just to be clear, like I said in the -- my presentation today, since we will reduce our exposure in Nordea over the next 18 months, we have a few natural sort of point in time to reduce also the gross debt by the fact that we have issues maturing over the next 3 years of about EUR 1.5 billion, of which half is related to senior notes, which, of course, would be natural cost to consider not to refinance if we have reduced our IFRS equity base during that period.

Thank you. Next one is for Toby from Blair Stewart at Bank of America. What should we regard as the underlying operating result at Hastings in 2020? Clearly moving parts with COVID-19 boost and some reserving offsets.

I think hard to provide too much more color on that other than to reiterate that we've delivered good profitability growth to the GBP 131 million, that we are confident about future top line and bottom line growth, including the further improvements in the loss ratio that we've already indicated. I guess 2020 did include substantial COVID dynamics in the way that we've talked about with lower frequencies, slightly elevated severities and a prudent reserving position. It also included tens of millions of pounds of investment in total in supporting colleagues homeworking are just one example of that and customers through premium refunds and fee waivers and various other things. And so I suppose, there were some one-offs in 2020 that we wouldn't necessarily expect to repeat themselves in 2021. And we will see the benefit of those, therefore, in our bottom line momentum. even -- that is true even some of the benefits in terms of lower claims frequencies from COVID fall away.

Next one is for Morten from Derald Goh, Citigroup. What level of large losses and reserve releases is assumed in the below 85% target?

The below 85% target is assuming a normal sort of outcome when it comes to large losses. And I would say, sort of -- it's a total combined ratio. So it also includes, of course, any run off profits in that. But it is a target that we're fairly confident about setting out. We do have rate increases that support sort of further improvement of our performance. So I think we're pretty confident about the dealing with sort of any normal volatility, at least.

Thank you. And this is for you, Morten, as well, from Jan Erik Gjerland, ABG. Could the If P&C partnerships be extended to Hastings and Top?

No, I think not directly. If you think about sort of the automotive partnerships, quite many of them we have on the Nordic basis. Then the automotive industry works in a quite different manner in the U.K. The car dealers are not a large distribution channel in the U.K. So it's not sort of easy to transfer sort of those relationships towards the U.K. Then of course, outside of the automotive sphere, we do have some similar partnerships. Topdanmark has a partnership with Nordea in Denmark, and If has a partnership with Nordea in Sweden and Finland. So I think specifically, the automotive partners is mainly sort of Nordic agreements already.

Thank you. And coming back to the acquisition questions, Jakob Brink from Nordea. And this is for Ricard, Torbjorn and Peter. I think maybe, Torbjorn, you could start. How does Sampo look up on Topdanmark potentially participating in the consolidation of the P&C market in Denmark -- referenced to Codan Denmark. That is if Topdanmark were to do M&A, I guess, it would impair Sampo's potential to acquire the rest of Topdanmark due to antitrust, that is, Sampo's market share in Denmark would become too big.

Well, I'll be interested to hear Peter's comment as well. But of course, I don't expect Topdanmark to act on anything in the RSA. Codan Denmark is a very different company than Topdanmark, when it comes to culture and business mix, et cetera. So apart from any regulatory issues, it would make an sense to me. Peter?

Yes. You could say that Topdanmark's growth strategy is based on probably order priority. It's organic growth. It's growth through partners, and it's growth through acquisitions. And we would only make acquisitions if the return on investments on the acquisition case is higher than the required return on the top share, meaning that we could contribute to future value creation. I don't think I would comment specifically on Codan. I just point out that, as also mentioned, the authorities have to access mergers and acquisitions activities. When Topdanmark's included, they will look at Topdanmark's and its total market share in the Danish market. And as Torbjorn is saying, we are focusing on the private and SME segment and agriculture. And if you look at the Codan Denmark business, they have a lot of other business. So a total buy of Codan will not be an interesting thing.

So a final simplified remark. We have 2 operations in Denmark. That's enough.

Clear. This is for Knut-Arne. Michael Huttner, Berenberg Bank. Just to recap, if you reduce solvency target, can you return more than EUR 5 to EUR 6 per share to shareholders?

Let's refer today -- we have just released today sort of optimal range of 170 to 190. To speculate and then to change all that rate to an exact new number, I won't do today. But it is fair to say that if we have significantly lower market risk, which we will have, when we, first and foremost, have reduced our exposure to Nordea, we will, of course, also look whether or not it makes sense to reduce that optimal range somewhat as well. So that would be my answer to that without sort of trying to set a new target starting after the sort of '18 months from now at this point in time.

We have 5 questions left. This is to Morten. Per Grønborg from SEB. Swedish child insurance. You are underexposed to this segment, which seems to be a key driver of Tryg's business case for Trygg-Hansa to deliver sustainable low 70s combined ratios. What is the historical reason? And what are the potential for changing the market position in Sweden?

Yes. It's correct that we have, I would say, a growth opportunity in becoming even larger in child insurance area in Sweden. Something that we work on, it obviously takes a bit of time. But it's a normal -- it's a natural product that we sell very much as an add-on product to our customers. Of course, this portfolio that Trygg-Hansa has is a portfolio with a long, long history, sort of partly also position they got through acquisitions sort of back in time. So that's kind of partly explaining why they have a high market share in that segment. But again, it's is a segment with decent profitability and that we very much focus on and where we expect further growth going forward.

We are on the subject of market shares. We have a question. If market share has declined in the Nordics steadily but slowly over the last 10 years, why has this occurred? Again, Morten.

Yes. It's always a balancing act between profitability and growth, and we've been always trying to optimize that balance. So it's true that over a longer time period, we've seen some loss of market shares. And over the last 2 to 3 years, the market share development has been more stable for us. So last year, growing 4.7% is roughly in line with the total Nordic market. And then of course, you have a bit of variations from country to country. But again, it's always a balancing act between growth and profitability that will then lead to whether we will increase in market share or decrease or be stable.

Thank you. And this is for Torbjorn, Per Grønborg on Hastings. You paid 37% premium to the pre-deal value of Hastings. Where is your 88% operating ratio target versus consensus pre-deal? I had hoped for some tangible on why you are -- or why you can make this entity worth even more than the 40% premium you paid for getting control.

The 88% is an operating ratio that has not been calculated by the consensus. So I can't comment on that, unfortunately. But the loss ratio of 76% is then -- more below 76% is an improvement on the previous guidance. That is one improvement. But remember also that the consensus numbers, when we acquired the company, were a long way above the market price.

Thank you. And the last question for today is for Torbjorn and Knut-Arne. And it's on Nordea. Jan Erik Gjerland, ABG. Is the lockup period the reason for why it would take so long time for you to exit 15.9% stake in Nordea? 5%, then 6 months, then 5%, then 6 months, then 5%. And 18 months has passed on. Is there any methods not to get a lockup period?

I think that Björn's concluding remarks were important in this respect. This is a complicated operation that has to be done with our first care and designed to optimize the value for shareholders. And we don't want to lock us into a specific procedure for this without all the information that we could have, for instance, on capital distribution for the autumn, where we will clearly have more information later this year. So no, the lockup periods are not really the reason for the 18 months -- the choice of the 18 months. This is a complex operation, and we will design it with the best of the shareholders' view in front of us.

Thank you. And it appears that we have no further questions. It remains for me to say thank you on behalf of us all for your participation, and particularly, your activity on the Q&A front. Thank you, and stay safe.