SAMPO OYJ On 30 September 2020, Sampo plc held 804,922,858 Nordea shares, which corresponds to a holding of 19.87 per cent. The average price paid per share amounted to EUR 6.46 and the book value in the Group accounts was EUR 8.62 per share. The closing price as at 30 September 2020 was EUR 6.49. Sampo's share of Nordea's profit before taxes for January--September 2020 amounted to EUR 299 million (147). Further information on Nordea Bank's Interim Report for January--September 2020 is available at https://www.globenewswire.com/Tracker?data=VtcZaM5XomdKrs_UGU9xP3KqTKi3vAC6mVMfqeHA2NO-Tp-SftPSfYtnOjUfwkgbGXAdQRgf7vuTT9ainQqHSA== www.nordea.com. Mandatum Life Mandatum segment's profit before taxes for January - September 2020 amounted to EUR 100 million (212). The total comprehensive income after tax reflecting the changes in market values of assets amounted to EUR 53 million (224) in January - September of 2020 and EUR 143 million (34) in the third quarter of the year. Return on equity for January - September 2020 was 5.0 per cent (25.9). Mandatum Life Group's premium income amounted to EUR 670 million (824), of which unit-linked premiums were EUR 590 million (720). Net investment income, excluding income on unit-linked contracts, decreased to EUR 81 million (280). In the third quarter of 2020, net investment income, excluding unit-linked contracts, was EUR 52 million. In January - September of 2020 fair value reserve decreased to EUR 410 million (438). Net income from unit-linked contracts decreased to EUR -86 million (680). In the third quarter, net income from unit-linked contracts amounted to EUR 226 million. Mandatum Life Group's total technical reserves amounted to EUR 11.7 billion (12.0). Unit-linked reserves were close to the all-time high of EUR 8.1 billion (8.1) and around EUR 850 million higher than at the end of March. The with-profit reserves with higher guarantees of 4.5 and 3.5 per cent continued to decrease and dropped below EUR 2.0 billion for the first time. In total, with-profit reserves decreased to EUR 3.6 billion (3.9). Mandatum Life has overall supplemented its technical reserves with a total of EUR 160 million (230) due to low level of interest rates. The figure does not take into account the reserves relating to the segregated fund. The discount rate used for the years 2020 and 2021 is 0.25 per cent. The rate used for 2022 is 1.25 per cent. The discount rate for segregated liabilities is 0.0 per cent and the discount rate reserve of segregated liabilities amounted to EUR 245 million (263) at the end of September 2020. The expense result for January - September 2020 amounted to EUR 19 million (17). The risk result was EUR 16 million (15). Mandatum Life's solvency position is described in the section Solvency. Holding Profit before taxes for January -- September 2020 for the Holding segment amounted to EUR 254 million (26). Sampo's share of profits for the associated companies Nordea and Nordax for January -- September 2020 amounted to EUR 308 million (0), of which Nordea's share was EUR 299 million (-8) and Nordax's share was EUR 9 million (8). The Holding segment's profit before taxes, excluding the associates for January -- September 2020, was EUR -53 million (26). Changes in market values of derivative instruments and currency exchange rates can cause volatility in the net investment income and finance cost lines. Sampo plc's holding in Nordea was booked in the consolidated balance sheet at EUR 6.9 billion, i.e. EUR 8.62 per share. The market value of the holding was EUR 5.2 billion, i.e. EUR 6.49 per share, on 30 September 2020. OTHER DEVELOPMENTS Cash offer on Hastings Group Holdings Plc Sampo and Rand Merchant Investment Holdings Limited (RMI) announced a recommended cash offer to acquire all issued and to be issued shares in Hastings Group Holdings Plc not currently owned or controlled by Sampo and RMI on 5 August 2020. The offer price is GBp 250 for each Hastings share, valuing Hastings' entire issued and to be issued share capital at approximately GBP 1.66 billion or approximately EUR 1.84 billion. The offer price represents a premium of approximately 37.5 per cent to the volume-weighted average price of GBp 182 per Hastings Share for the three-month period ended 28 July 2020 (being the last Business Day before Hastings announced it had received an approach that may or may not lead to an offer). Sampo and RMI formed a new jointly-owned company ("Bidco") for the purposes of acquiring Hastings. Following completion of the offer, Sampo and RMI will own and control 70 per cent and 30 per cent respectively of the shares and votes in Bidco. The governance of Bidco reflects the relative shareholdings of Sampo and RMI, recognizing Sampo's controlling position, but protecting RMI's interest with customary minority protections. The shareholders agreement includes customary exit arrangements for joint investments of this type. The size of Sampo's investment, based on its 70 per cent stake, would be GBP 1.16 billion or EUR 1.29 billion valued at the offer price. Sampo will fund the acquisition costs with EUR 1 billion of hybrid Tier 2 capital issued on 3 September 2020 with the residual coming from existing cash resources. Strategic rationale for acquisition Sampo has a strategic ambition to expand further into non-life insurance, a segment where it has extensive experience and expertise. As part of this strategy, and in the context of its leading market positions in the Nordic markets, Sampo has been considering a geographic expansion beyond its current footprint. Sampo believes that the UK, as one of the largest retail P&C markets in Europe, offers an attractive scale opportunity. In this context, the acquisition of Hastings represents an attractive opportunity for Sampo to advance its strategy and accelerate its repositioning towards retail P&C insurance. Hastings is a leading motor insurer in the UK and has recently been diversifying into other non-life insurance products including home insurance. Both motor and home insurance represent large markets in the UK with growth potential for the Hastings business. The acquisition of Hastings provides an attractively positioned platform in one of the most digitally advanced markets globally. The UK is characterized by its high levels of digital distribution and Hastings is one of the leading distributors of motor insurance policies in this market. Sampo believes that, under its ownership together with that of RMI, Hastings will be able to further develop its agile and digital business model to create long-term value. RMI has a similar investment philosophy to Sampo, with a long-term horizon and a focus on building enduring value over many and differing market cycles. Given the significant retail P&C insurance experience and expertise of Sampo, through its subsidiaries If P&C Insurance and Topdanmark, and RMI, through its ownership of OUTsurance and existing shareholding in Hastings, the intention is to combine this knowledge to drive the strategic direction of Hastings. RMI brings institutional knowledge in Hastings and the UK P&C market to the jointly owned company. Sampo and RMI intend for Hastings to continue to be operated on a standalone but unlisted basis. Sampo believes that a private partnership with RMI provides an optimal structure for Hastings to fulfil its potential and build long-term value for its stakeholders. As a private company, Sampo believes Hastings will benefit from a more long-term approach to decision making. Sampo and RMI believe with their experience and under private ownership there are a number of areas of Hastings' operations that can be improved, including claims handling sophistication, expansion into home insurance, customer retention and the reinsurance strategy. Financial impact of an acquisition on Sampo Group The Sampo Board expects the acquisition of Hastings to be accretive to earnings per share and RoE from the first full year following completion. Sampo estimates the transaction will have a positive impact on earnings per share in the mid-single digits (%). Meanwhile, Sampo's pro forma solvency position remained robust at approximately 185 per cent at the end of the third quarter 2020. In connection to announcing the offer, Sampo estimated the Group pro forma solvency position to be approximately 175 per cent at the end of the second quarter 2020. The estimate has, however, risen because of the profit generated by the businesses and favorable capital market developments. Any estimated dividend to be paid by Sampo in 2021 has not been deducted from the solvency estimates. Both S&P and Moody's have maintained Sampo's credit ratings with stable outlook. The Sampo Board do not expect the acquisition to impact Sampo's dividend policy in the short-term but is expected to enhance the dividend potential in the long-term. The transaction structure and timetable The offer has been recommended by Hastings' independent directors. The offer is being implemented by way of a court-sanctioned scheme of arrangement under English law, which was approved by the requisite majorities at the Hastings shareholder meetings on 29 September 2020. All of the conditions relating to regulatory and antitrust approvals have now been satisfied. The Scheme will be effective following completion of the Court Hearing procedure, which is anticipated to be held on 13 November 2020. More information on the offer at https://www.globenewswire.com/Tracker?data=VtcZaM5XomdKrs_UGU9xP-ocnTgmxy-G6r3Lzpos7T2TpL45Hpnzkx1aSjsJ0dh00r_9KLccD8K8-V0Mnytmom0LvWlAl7N70_bkoSAyrFM= www.sampo.com/offer and https://www.globenewswire.com/Tracker?data=VtcZaM5XomdKrs_UGU9xP-SxBZfiDkkW4IFp_yJqnHoRddhL0xGLfJ1DGGiwYc1eHxfdWWyNFdC03aXluHtzW4G2npzJ2kLKQFO9mz8S8_4= www.hastingsplc.com.
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