European Insurers
Activist Investor Urges Finland’s Sampo to Dump Nordea Bank
Sampo said it sold 162 million shares of Nordea Bank to institutional investors last November for gross proceeds of €1.17 billion as part of the Finnish insurer’s strategy to focus on property/casualty insurance.
Capital City: Sampo Oyj, the 18th largest European non-life insurer, is headquartered in Helsinki, Finland.
Activist investor Elliott Advisors (UK) Ltd. said Finnish insurer Sampo Oyj needs to further simplify its portfolio by getting rid of its remaining stake in Nordea Bank and clarify its mission as a pure-play property/casualty company.
To simplify its portfolio, Sampo should announce it plans to become a pure-play insurer by the fourth quarter of 2021, said Elliott in a statement. Sampo's Nordea stake is seen as a significant distraction and a sustained drag on valuation for Sampo, the investor said. The investor said it published a presentation outlining “a clear pathway” to transform Sampo into a pure-play insurer and create more than €8 billion ($9.63 billion) of value.
The Nordic insurance group is made up of the parent company Sampo plc and its subsidiaries If P&C, Mandatum Life, Hastings and Topdanmark. The group of companies have insurance operations in Finland, Sweden, Norway, Denmark, Estonia, Lithuania, Latvia and the U.K.
A survey of investors commissioned by Elliott show a “vast” majority of respondents indicated they would like to see a full exit from the Nordea stake within the next 12 months, Elliott said.
“Sampo is positioned to satisfy investor demands by distributing half of Sampo's Nordea shares directly to shareholders—an act that over two-thirds of investors surveyed are supportive of—in Q2 2021 and selling the remainder to maintain a healthy balance sheet,” Elliott said.
Sampo declined to comment, a spokesperson said in an email.
In November, Sampo said it sold 162 million shares of Nordea Bank to institutional investors for gross proceeds of €1.17 billion as part of the Finnish insurer's strategy to focus on property/casualty insurance. After the transaction, Sampo said at the time it holds 642.9 million Nordea shares, or 15.9% of all shares and voting rights in Nordea.
At that time, Elliott said it believes Sampo's management team “has built the best underwriter in the most attractive P/C insurance market in Europe,” an achievement Elliott said reflects the track record of Sampo's current chief executive officer and chief financial officer. Elliott said both executives led If P&C for the past two decades.
Torbjörn Magnusson is Sampo's president and CEO and Knut Arne Alsaker is CFO.
Elliott said while Sampo's November move was a positive first step toward making the structural simplifications necessary to re-establish the company's reputation with investors, Sampo's shares continued to underperform.
Sampo is the 18th largest non-life insurer ranked by 2019 gross written premium, according to AM Best.
Sampo should also clarify its strategy and commit to being a dividend-focused property/casualty insurer with no material mergers and acquisitions ambitions outside the Nordic region, said Elliott.
In November, Sampo and Rand Merchant Investment Holdings Inc. completed the acquisition of U.K.-based Hastings Group Holdings plc.
Sampo should follow a clarification path until the Hastings deal proves successful, Elliott said.
“We believe that there is widespread confusion amongst investors about the Sampo equity story, including skepticism on the rationale for the Hastings transaction and Sampo's future M&A appetite,” said Elliott.
“What is clear is that investors are seeking greater focus on stable dividends, viewed as the lifeblood of a highly rated insurance company, and a commitment by Sampo to become a focused P/C insurer.”
Sampo should also enhance communications by “clearly and confidently” articulating the strong fundamentals of If P&C, described by Elliott as the insurer's “crown jewel.”
“Shining a spotlight on If P&C will enable Sampo to recover its premium valuation,” said Elliott.
Elliott said it advises funds that collectively hold investments equivalent to more than 3% of the share capital of Sampo.
