August 13, 2014 / 7:26 AM / in 3 years

UPDATE 3-Sampo raises insurance profits outlook due to low claims

* Insurance arm If hits best-ever first half profitability

* If’s combined ratio 2014 seen at 88-91 pct vs previous 89-92 pct

* Sampo group Q2 profit beats on investments income (Adds comments by CEO)

By Jussi Rosendahl

HELSINKI, Aug 13 (Reuters) - Finland’s Sampo Group has raised its forecast for profits this year on its property and casualty insurance business If, after policyholders made no large claims in the Nordic region in the first six months.

If’s chief executive, Torbjorn Magnusson, said conditions for insurers were exceptional in all Nordic countries, resulting in the company’s best ever first half for profitability.

“There were no large claims. There were few fires and a low amount of car accidents,” he said in a statement on Wednesday.

The upbeat results from If, the biggest property and casualty insurer in the Nordics with a market share of 18 percent, followed similar improvements from rivals Tryg and Pohjola.

Sampo consequently cut its target for If’s combined ratio, or claims and costs as a percentage of earned premiums, to 88-91 percent for this year from the 89-92 percent it forecast in May.

However, analysts had already expected the margin increase, having forecast a combined ratio for the full year of 88.6 percent according to a Reuters poll carried out before the second-quarter results.

The second-quarter combined ratio at If also fell short of expectations, 86.5 percent compared with the average forecast of 85.6 percent given in the poll, enough to send Sampo shares down 2.8 percent to 36 euros, although the price is up 56 percent over the last 24 months, compared with a rise of 37 percent in the Helsinki market’s general index.

“This is a stock that has risen quite strongly, the expectations are high for the company. I would expect the stock to recover,” said Nordea analyst Paavo Ahonen, who had a ‘buy’ rating on the shares.


If’s strong position in all Nordic and Baltic countries balances out any hits from a single market, giving it an advantage over more localised rivals.

Sampo’s chief executive Kari Stadigh told a news conference that a recent forest fire in Sweden will show in If’s numbers in the third quarter, but the impact is not expected to be significant.

“It is Sweden’s biggest forest fire in history ... But still it will not affect If’s overall figures and estimates too much as we can withstand hits with our scale,” he said.

Sampo’s overall pretax profit in the second quarter rose 2 percent from a year ago to 465 million euros ($622 million) on the back of increased investment income. The result beat the average forecast of 435 million euros.

In addition to its own insurance businesses, Sampo owns 21 percent of Swedish bank Nordea, the region’s largest lender, and through If, more than 28 percent of Topdanmark , its Danish rival.

If’s stake in Topdanmark has gradually risen due to the Danish company’s share buybacks and Magnusson recently joined Topdanmark’s board of directors, fuelling speculation If could be planning a bid.

Analysts say Sampo would like to merge the two companies at the right price but Stadigh told the news conference Sampo does not have any takeover plans at the moment.

“We first started to invest in Topdanmark because it was managed like If. We are insurance nerds, and they are too... their combined ratio curve looks like a dead man’s brain wave.”

He admitted that Topdanmark’s share buyback plan could in the coming years boost If’s stake to over 33 percent, the limit that normally would trigger an obligation to bid.

But Stadigh said If might not have to according to the Danish Securities Trading Act.

“I have understood that if we are not buying the stock ourselves, the requirement will not be triggered. But we will check this with authorities in such a case.”

Sampo, whose own biggest shareholder is the state investor Solidium, has a strong track record on deals. It sold its banking business to Danske Bank for 4 billion euros just before the financial crisis, then bought Nordea shares when they were down during the financial crisis in 2008 and 2009.

“At current valuation levels in the sector, I don’t believe we will see any big moves (by Sampo), but rather some kind of add-on acquisitions,” Evli analyst Jaakko Tyrvainen said.

Sampo has raised its annual dividend every year since 2008, and analysts have lately increased their forecasts on future payouts.

Analysts in the Reuters poll expect Sampo to pay a dividend of 1.89 euros for this year, 2.11 euros for 2015 and 2.25 euros for 2016. It paid 1.65 euros on last year’s earnings. (1 US dollar = 0.7479 euros) (Editing by Erica Billingham and Greg Mahlich)

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