Sampo’s future, in my mind, broadly consists of the following components:
-In past years, insurance was rather a poorly performing ‘problem sector’, which has since developed into a highly respected sector in the Nordics, as well as elsewhere in Europe and the Americas. This is increasingly reflected in stock prices too.
-CEO Torbjörn stated in an interview regarding this earnings report that the insurance business has been able to utilize technology to its maximum potential. AI will bring even more efficiencies, with no end in sight.
-In recent years, Sampo has transformed from a financial bazaar into a pure-play insurer. It’s easier to understand, and investors know what they’ve put their money into.
-After a shaky start in Britain, things are now picking up speed there, and among Finland’s largest listed companies, Sampo has the strongest growth prospects, and not just from inflation-driven price increases (Source: early year Verner’s Quarter).
-Of course, there are potential threats, e.g., from competition to the damages caused by climate change, and the ongoing investigation by the Danish competition authorities, as well as those unexpected black swans that no one can predict. But compared to most companies or almost any other investment form, the list of threats is shorter
-And by the way, does the new CEO Morten intend to shake things up?
Autonomous driving is also a risk. Insuring vehicles is a big part of insurance companies’ business. When autonomous driving will arrive is then a more challenging question. Probably not in the coming years, at least not here in the Nordics.
I have no worries regarding Sampo’s outlook, but I’m starting to have concerns about its valuation level The current valuation is already very high (P/E +18x) and in my opinion, this valuation already largely bakes in the future Topdanmark synergies. Furthermore, the current share price assumes everything will continue to go smoothly and gives little weight to the risks outlined by @Verneri_Pulkkinen.
As @740_GLE pointed out, this would be a ‘hold’ recommendation if we had one, and yesterday I thought long and hard about whether this is ‘add’ or ‘reduce’. Ultimately, however, I came to the conclusion that I can no longer recommend buying the stock at its current valuation, as the expected return is simply too thin. At the same time, I don’t really see any downward drivers for the stock.
Regarding If’s growth, I must put a bit of a damper on this discussion by saying that the very strong growth in recent years has been quite exceptional and due to the inflation spike. Fundamentally, the Nordic insurance market grows at roughly the nominal GDP rate or perhaps slightly above, as societal safety nets thin out and are compensated, for example, by health insurance. Gaining market share is, in the big picture, very difficult and expensive. Although If is undeniably the best insurance company in the Nordics, I don’t believe it has competitive advantages that would allow it to systematically gain significantly more market share without affecting its profitability.
Here are OP’s Antti Saari’s quick comments on the Q2 results.
Sampo’s reported Q2 operating profit was higher than both our own forecast and consensus. This is mainly explained by strong financial income. The underwriting result, which is more relevant for the investment story, was also slightly better than anticipated. In the video, Chief Analyst Antti Saari reviews the company’s exceptionally strong quarter.
Sampo is hosting an analyst day today, with topics including digitalization, Topdanmark synergies, and investment operations. The presentation material will be available on the website at 2:00 PM. A recording of the event will be published later.
The presentation materials can be found on Sampo’s website via the link below, and I believe that the recording will eventually appear on Inderes’ service in addition to Sampo’s website.
Sampo held an analyst day yesterday in Helsinki. The day’s content focused on If’s digital capabilities, Topdanmark’s synergies, and the group’s investment portfolio. Particularly regarding Topdanmark’s synergies, the day’s presentations reinforced our view that the current synergy target of EUR 140 million is conservative, and we consider it practically certain that it will be exceeded.
From the recording linked by Mirko (also available on InderesTV), I recommend everyone to watch the part from ~1h55min. It offers a very concise and straightforward market overview of the current situation.
The basic idea of the article is that because the state has a budget deficit, it’s worth selling overpriced Sampo shares. Money taken from pension and housing funds is seen as a worse option than selling Sampo shares, but I don’t understand this idea. Why is withdrawing capital from a pension fund a worse option than selling state-owned assets? “…it would be wiser to sell financial assets that have no strategic importance.” Solidium owns other companies that have no strategic importance, so why specifically Sampo?
According to the author, Sampo is a good target for sale because “Secondly, now is a good time to sell. Sampo’s share price is currently just under ten euros. The price is at its historical highest level, taking into account changes in the company’s structure and the number of shares.” Is Sampo a good target for sale just because the stock is at an ATH? The share price itself doesn’t tell anything. “The average target price set by analysts for the share is 10.10 euros, meaning the share price is now at the level it should be based on Sampo’s earnings performance as defined by analysts. There is little so-called upside potential. Sampo is a well-managed company, but it’s difficult to see it achieving business successes that would multiply the share price. The value of Solidium’s Sampo ownership is approximately 1.6 billion euros. If the ownership were sold, the state could use the money for general expenses or invest it judiciously in growth companies, as well as research and development.”
I understand that Sampo is attractively priced to sell now, but why sell a winner when one could sell so-called losers like Nokian Tyres or Nokia? The author justifies the selling decision only by stating that the stock is expensive in his and analysts’ opinion. Analysts are always right about stock prices, and if analysts say it’s time to sell or buy, then it must be true . I am of the opinion that the state should not own listed companies just for the sake of owning them, but I find it peculiar to single out one company from all non-strategic companies.
I own Sampo, but what annoyed me most about the article was that Kauppalehti issues a sell recommendation based on shaky grounds and essentially commits a very traditional mistake: staring at the share price. “The state could use the money for general expenses or invest it judiciously in growth companies, as well as research and development.” In other words, it doesn’t matter to the article’s author whether the money is wasted or invested, as long as Sampo is sold from Solidium’s portfolio.
Sampo owns a mere 20% of Noba bank. It will be listed on the stock exchange in Stockholm by the end of September. At a price of 35 billion SEK, or just over 3 billion €.
An additional 600 million € for Sampo’s own share buyback programs?
Here are my comments. In short: the price is good and the money will be used for own purchases. Now let’s just keep our fingers crossed that the IPO successfully crosses the finish line
Regarding Sampo, I agree with you, but I cannot accept a casual attitude towards siphoning pension funds into the hands of politicians who understand nothing about money. Well-milking cows are not sold to cover consumption debt unless absolutely necessary.
In my opinion, neither of your alternatives is justified; on the contrary, the state’s revenue side should be supported, expenses should be cut, and pension funding should rather be increased than decreased. The whole question of choosing between giving up two essential things is absurd.
Hi! Time and again, I wonder about that immense enthusiasm for buying back one’s own shares. If Sampo were now also to provide a clear opportunity for a higher dividend, would there possibly be a change in recommendation to a more positive one? Just asking.
Share buybacks are a more tax-efficient way to distribute profits to owners.
This always makes buybacks a better way to distribute profits, UNLESS the stock is overvalued.
Sampo’s dividend is already quite significant, and buybacks reduce the number of shares among which the dividend pool is distributed → in the long run, a growing dividend, a decreasing number of shares, and voilà, dividend/share grows = your received dividend also grows, even if Sampo’s paid dividends don’t grow by more than a certain amount in the short term. Everyone wins, both smarter, tax-optimizing investors and dividend enthusiasts.
It’s probably not relevant to this thread, but seriously, it’s hard to understand why Finns always have such a strong urge to pay taxes at every turn. Dividend fever is one of those factors that inevitably reduces long-term wealth accumulation at both individual and national levels. Sampo certainly wouldn’t have more efficient ways to invest money in its business, but profit distribution can be done much smarter than by pumping dividends from the owner’s back pocket to the front pocket.
The current valuation is already very high (P/E +18x) and in my opinion, this valuation already largely bakes in the future Topdanmark synergies. Furthermore, the current share price assumes everything will continue to go smoothly and gives little weight to the risks outlined by 
. I am of the opinion that the state should not own listed companies just for the sake of owning them, but I find it peculiar to single out one company from all non-strategic companies.