Sampo Oyj (OTCPK:SAXPF) Q2 2022 Earnings Conference Call August 3, 2022 9:00 AM ET
Company Participants
Sami Taipalus – Head of Investor Relations
Torbjörn Magnusson – Group Chief Executive Officer & President
Knut Arne Alsaker – Group Chief Financial Officer
Morten Thorsrud – Chief Executive Officer If P&C Insurance Holding Ltd
Conference Call Participants
Jan Erik Gjerland – ABG
Jakob Brink – Nordea
Youdish Chicooree – Autonomous Research
Alexander Evans – Credit Suisse
Faizan Lakhani – HSBC
Jimmy Fan – UBS
Michael Perito – KBW
Tryfonas Spyrou – Berenberg
Operator
Sami Taipalus
Good afternoon, everyone, and welcome to the Sampo Group Second Quarter 2022 Conference Call. My name is Sami Taipalus and I’m Head of Investor Relations at Sampo Group. I’m joined on the call by Group CEO, Torbjörn Magnusson; Group CFO, Knut Arne Alsaker, and CEO of If, Morten Thorsrud. The call will feature a short presentation from Torbjörn followed by Q&A. A recording of the call will later be available on sampo.com/results.
With that, I hand over to Torbjörn. Please go ahead.
Torbjörn Magnusson
Thanks, Sami, and welcome, everyone. We have had more or less flawless quarter, despite the volatile surroundings. Let me first list a few simple factor fact from our largest entity If P&C. Combined ratio of 77% in the quarter, with average rate increases marginally above present claims inflation, say, 5% versus 4%. No reduction in retention rates, so customer satisfaction as a consequence, quite the contrary, in fact. No segment with special issues in the book, and there is no significant segment where we cannot increase rates at least in parallel with claims inflation.
Hastings next shows the results of having the same underwriting focus, as the rest of Sampo. Clearly a challenging market, but the claims inflation is no secret and Hastings immediately reacted. Of course, the company also benefits from a smaller back book than many peers without issues. So a combined ratio close to our target even for the first half year, this challenging year. And furthermore, the GIPP reform provided a home insurance opportunity and growth this year exceeds 20% in this line.
Q2 for us also saw our complete exit from Nordea with excellent results and impeccable timing. This was the big step we had to take to become a pure-play insurance company. And what remains now in terms of structural simplification is very small in comparison.
The world is volatile, and so our investment returns at the moment, but Sampo benefits from this in several ways. We have increased the nominal discount rate for finished liabilities to 1%, and our running yield has quickly come up significantly. As a consequence of all of the above, our solvency ratio is very high at 245% and already in the middle of the quarter, we were able to launch another buyback program of €1 billion. Our next checkpoint for this is the full year results in February, when we will consider any further distribution of capital.
Giving a little bit more color to the P&C operations. The key question at the moment is, of course, claims inflation versus rate increases. And in the Nordics, claims inflation has added upwards gradually during 2022 and now varies, say, between 3% and 6% with a 4% average.
It’s driven by general inflation in spare parts, some building materials, but not to any significant degree by wage inflation, and there are no structural changes into repair shop chains or contracting firms as in other markets.
We expect a modest further increase in claims inflation for the rest of the year and price for that. So far, competition is unchanged and rational. There are no substantial new movements of market shares in the Nordics and our retention levels and customer satisfaction is even slightly higher than a quarter ago.
For large corporate business, the situation is a bit different. Some international competitors have left the market after a number of years of poor results, and we benefit from their absence.
We have a 22% volume increase in the first half year and two thirds of that is rate increases or improved terms. We also enjoyed a somewhat favorable large claims outcome in Q2.
When it comes to the U.K. and Hastings, we now see the effect of Hastings being part of Sampo Group with no group volume pressure in market segments with inadequate rates. Just as for the rest of Sampo. Hastings management team has handled the development really well, first, by not participating in the price pressures late last year, then by taking the opportunities presented to us by GIPP and then finally, reacting immediately and intelligently to the sudden increase in claims inflation.
Maybe just to point out there that if you try to explain the U.K. market results this year – sorry, this quarter, the rate changes in Q4 last year are not least important, and Hastings was very careful not under price then.
With a smaller back book than many peers and very little price walking, we had a very minor need for price adjustments from GIPP on 11 [ph] this year, also in home insurance, as I already mentioned, we saw a substantial opportunity, which is now ongoing. There are also other sub-segments that became attractive in the new market situation.
Claims inflation, particularly in the U.K., also with structural changes with suppliers, developers, and we continue to react carefully and without delay. Rates in the market are clearly on average insufficient and will cause a lot of pain to some participants going forward, the longer this goes on.
The last few months, we have seen some small rate increases but far from enough for the market as a whole. We continue to develop our book, our selection of segments to operate in and to avoid being volume driven. But of course, take the opportunities from this special situation.
This next slide shows some of the effects of higher interest rates for us. As most of you are aware, we have a good starting point, relatively speaking, as we have kept a very short duration in the fixed income portfolio. Now higher interest rates help us in two ways going forward by increasing the running yield and by reducing the liabilities.
One should bear in mind that over the last decade, we have had to reduce the discount rate gradually to extremely low levels with corresponding risk reported losses, and now this is reversed.
So you have some details here. If P&C has gained some €120 million from discount rate changes in the first six months and the running yield came up 50 basis points in the last quarter from purchases of investment-grade peoples.
Also of importance to us in this context is the fact that higher interest rates support an atoms [ph] solvency ratio, the increase rates have offset by a margin, the challenging development of riskier assets to this first half year.
Let me finally also point out that, as usual, we prefer prudent reserving. And when there is a discretionary element, we have in no way maximized the possibilities from higher discount rates.
This my final slide shows our results compared to our financial targets. This quarter, it would seem that we can have an extended holiday, as we are well ahead of our targets, maybe with the except perception of Hastings. However, this is, of course, most certainly not the way we think about it or see our opportunities.
If P&C is in a very promising position looking forward right now with a leading position in the growing digital channel. But also, of course, having achieved the excellent growth this year without what is normally one of our strongest channels, the car industry collaborations, as car sales have been so extremely low.
Furthermore, we have no intention relaxing our relentless work with costs and If and the synergies from Hastings add to our ambitions for over performing on accurate and tactical pricing over the coming period also in the Nordics.
As regards Hastings, we like the development of skills and the broadening of the product portfolio this year. Whatever the near-term behavior on the market, we will continue to push to stay or become the best digital insurer for personal lines, but always with our usual eye on profitability. This is still a growing channel, and we are definitely already ahead of most of our competitors.
With the momentum we have in If P&C, both in the Nordics and in the U.K., there is a lot of value to be created by organic growth rather than acquisitions. So this is clearly our strategy at this point in time. Looking at the totality of all of this, we feel very motivated to continue running at high speed. And as a team of insurance specialists now running a pure insurance company, we look forward to your questions. Sami?
Sami Taipalus
Thank you, Torbjörn. OPERATOR, we are now ready for Q&A.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] And our first question comes from the line of Jan Erik Gjerland of ABG. Please go ahead. Your line is open.
Jan Erik Gjerland
Thank you. And two questions from my side. The first one is then on the distribution side. And it’s regarding your saying that you will wait until the finalization of this full year before you decide anything more on the extra dividend potential.
Would you shed some light to what you sort of could work down on the solvency ratio versus the leverage ratio to see what kind of magnitude we could expect from such a dividend? That is my first question.
Knut Arne Alsaker
No. It’s Knut Arne here. As you know, we have a solvency range between 170 and 190 as a target and I would consequently define a solvency ratio above 190 as excess capital. And then of course, we have the flexibility to work within that 170 to 190. But a solvency ratio above 190 is excess capital.
And we – I don’t see that we have any leverage issues to work our way down there. It will require us to work on our debt stack, which we have said for a while that we will do and you will see us take on some actions to do exactly that and be below the 30% leverage ratio targets as we work our way down towards our – towards our solvency range. And just to add a comment on that, there’s nothing that I see in terms of transitional effects on our equity going into new accounting rules that would change that fact.
Jan Erik Gjerland
Okay. Very good. Secondly, on the insurance operation, both on If [ph] and Hastings delivered very well and Hasting is probably a little bit above expectations. Could you shed some light into what it did over and of course, to reprice and stay away from the most aggressive market?
And then secondly, on the If P&C side, what kind of price increases do you think the market would have to put in into ’23, as well as maybe into ’24 to cope with the sort of higher inflation speed at the moment?
Torbjörn Magnusson
Well, on Hastings stem first, as I pointed out, I think one of the most important things that we did with Hastings was to avoid being too aggressive late at the end of last year when the market was clearly not putting in the price increases that would have been needed with hindsight. So that was one.
And then GIPP, of course, hit us less than the average in the market. And that’s bit difficult to assess exactly what the consequence of that is and then being Sampo Hastings has reacted immediately when we saw claims inflation, there’s no need for us to speculate where that – when such a situation occurs, we should wait and see what happens. We reacted right away.
Morten Thorsrud
And then – h, Erik, Morten here. When it comes to price increases, first, perhaps just repeating what Torbjörn said in the introduction, today, we sort of have seen a little bit more than 4% inflation on the claims side and the pricing sort of on average around 5%, so slightly ahead of what we have observed so far.
And we see that property inflation over the last few months have stabilized. And then we see that motor inflation is still kicking up somewhat. Of course, we make sure that we are ahead of the curve and price for inflation that we expect to see in the future. But of course, I would like to refrain from speculating in sort of what that will be in 2023 and 2024. But of course, we will make sure to stay – continue to stay ahead of the curve.
Jan Erik Gjerland
Very good. Just one follow-up on the wage side. I think Torbjörn mentioned that you haven’t seen anything in particular claims inflation from the wage part yet. Is that something you sort of expect to come during the fall, as we see next year, as we see wage inflation picking up in several countries?
Torbjörn Magnusson
I don’t think I necessarily said it yet. But I think in all the system [Indiscernible] in the Nordics that it’s basically a result of collective agreements. We haven’t seen any really significant movements yet for this year. And I guess the general outlook for the Nordic is that we will have quite disciplined behavior also going forward. But of course, that remains to be seen.
But of course, again, the Nordic markets are far more disciplined due to the collective agreements we have when it comes to wage increases. So it’s much more of a gradual movement here than what you might see in outside of the Nordics.
Jan Erik Gjerland
Okay. Thanks a lot for your answers.
Operator
Thank you. Our next question comes from the line of Jakob Brink of Nordea. Please go ahead. Your line is open.
Jakob Brink
Thanks a lot. And good afternoon. The first question is on the quite significant drop in the SCR quarter-on-quarter of around €1.4 billion as far as I can estimate then roughly half of it comes from the sell down in Nordea than maybe a few hundred million from the work Sampo in equity markets and the symmetric adjustment but then still probably left with around €500 million unexplained reduction in the SCR. Have you done anything to reduce risk exposure? Or is it just me that the calculation on market exposure wrong?
Torbjörn Magnusson
Yes. Hi, Eric. There are clearly some drops in the SCR during the quarter, and of course, the main item Euro on in terms of the Nordea sell-down, which is reducing SCR and there’s, of course, nothing happened when with the SCR when we do the buybacks. So that’s clearly explaining the main delta.
Then there are some other – I would still call it combined smaller changes where the SA is actually the largest of them. And then there are some which I would call more volatile items from quarter-to-quarter in the SCR movements, which almost all moved our way. One of them, for example, being lower FX risk due to FX movements, which impacts a couple of different market risk elements in our market risks. That which it wasn’t significant, but it was 4%, 5% this particular quarter, and that could, of course, also reverse backed, quite quickly.
But it had, I would say, a significant impact this quarter. Then we did a little bit of derisking across the group. During Q2, there was a little bit of derisking in top 10 mark. And then on a marginal basis, closing the duration gap, this is also reducing the SCR by reducing the market risk SCR of If and Sampo.
So those are some of the flavors of things that contributed to the sort of reduction in SCR. And again, some of them I would call volatile items, which can increase the SCR again very quickly. But the majority is, of course, permanent in terms of derisking market risk from Nordea and some of the smaller things we did under the same label.
Jakob Brink
Okay. Very clear. And second question on the interest rate sensitivity and Torbjörn you show the slide. I was just wondering, I think I’ve asked the question once before, but just to make sure. So obviously, there is an upfront impact on the whole reserving part when you change the discounting rate in Sweden, Finland and Denmark. But also, I guess there must be a running impact on new claims, which is not that insignificant, I guess, given the impact you’re having on the reserving part.
So doing the math of the – of the impact of the change you did in Finland this quarter and also the sensitivity in Sweden. Then I see your average duration in this is around 7 years. So I get some running impact on the combined ratio of just above 1% or 1% change in the interest rate level. Does that sound accurate or?
Torbjörn Magnusson
I think the previous time, I answered that it was a relatively minor effect. And you just tried to prove that, I think, it is small. And depends on a number of other things also.
Morten Thorsrud
If I should add to that. Knut Arne [ph] please correct on here. Of course, the main – the main changes on discount rates are coming from long-tail reserves, annuities not on our nominal reserves, which we don’t discount neither on an IBNR basis or a case reserve basis under current accounting regimes.
So the impact of new claims being annuity on an annual basis is clearly minor compared to the impact we have of reducing the discount rates on prior year claims. But there is, of course, a small effect. I would call it clearly minor.
Jakob Brink
Does 1% sound too much because I was wondering where we…
Morten Thorsrud
I think…
Jakob Brink
Percent end up…
Morten Thorsrud
I think 1% sounds too much. And again, as Knut reminds you about a lot of the claims reserves that we have are not discounted. They are nominal. So it’s really on the annuities that you will have an effect, and that’s quite a small part of it sort of in every single year.
Knut Arne Alsaker
And the annuities in Sweden are discounted with real rates for good reasons. So that’s also different. It just sounds a bit much to us, Jakob.
Jakob Brink
Okay. Makes sense. Okay. And last question. On the – I think you wrote in the report that you have raised the assumption for large claims, maybe I missed some ups, but could you just elaborate on how many millions have you increased the large claims assumption on an annual basis?
Morten Thorsrud
Yes. We are, of course, revising the large claims budget every year. And of course, since our industrial book of business has grown a bit both last year and this year and then the large claim budget in nominal terms is reflecting that.
And I think roughly we talk about a little bit more than on total yearly basis, a little bit more than €20 million in increased large claims budget. But it’s again, it’s fully in line with the growth that we have in that book of business. So that’s what drives it.
Jakob Brink
Okay. Thanks a lot. Thanks for the answers.
Operator
Thank you. Our n ext question comes from the line of Youdish Chicooree of Autonomous Research. Please go ahead. Your line is open.
Youdish Chicooree
Good afternoon, everyone. I’ve got three questions, please. The first one is really on underwriting and claims inflation. You still sound quite confident that you will be able to actually at least price in line with claims inflation. So from that perspective, would it be fair to expect what you call your adjusted risk ratio to continue to improve in the coming years? So that’s my first question.
Secondly, I’ve got two, one question on solvency. There was obviously a very strong benefit from markets in the second quarter. And I’m just considering, given that the risk-free rates have pulled back in the last month or so. I was just wondering whether you had a more up-to-date position to give us on solvency? And my second question.
And then finally, just on leverage and the planned debt reduction of €800 million, does this all relate to senior debt? Or are you also planning to reduce some debt, which is currently included in your solvency capital? Thank you.
Torbjörn Magnusson
On the first one, both for the Nordics and Hastings, I said in my introduction that we, of course, expect to aim to continue to improve on the underwriting. And at the moment, that there is no segment where we have an issue with rate increases. So at the very minimum, no deterioration. But of course, much of our work is aimed at improving
Morten Thorsrud
Hello. Youdish, on the solvency side, I haven’t sort of today number to give you, we haven’t published that in our report and disclose that. But obviously, rates which we all know dropped a bit in June, but then returns on other asset classes, what was good, meaning that it’s not a material different position than what we had.
But again, these volatile items I alluded to are volatile on a monthly basis and a quarterly basis. So we should, of course, be careful to think that they necessarily have to be at the same high level as of 30th of June, but that would do only be to these volatile items and not any other negative sustainable impact that has happened since we closed the book
Youdish Chicooree
All right. Thank you.
Torbjörn Magnusson
On the leverage, I’m not going to point to individual loans on our balance sheet. But as we’ve said before and which you also see on our maturity profile, it would be natural for us to include senior debt in our ascending [ph just also for the purpose that the hybrids, the capital we have work well as an insurance, regulated insurance entity in terms of being used as solvency capital. But I’m not going to point to exact which outstanding loan were sort of have thoughts around
Youdish Chicooree
All right. Thank you.
Operator
Thank you. And our next question comes from the line of Alexander Evans at Credit Suisse. Please go ahead. Your line is open.
Alexander Evans
Hi. Yeah, thanks for taking my questions. And I just want to touch on the discounting impact If P&C. If I look at what you said, it’s €120 million across the first half. And I think in your 1Q report, that was €44 million. So it implies sort of about 6% of earned premium in this quarter and reserve releases were sort of behind that. So I just wanted to get your thoughts of is this sort of increased prudence on your behalf? Or are there some sort of degree of concerns around inflation? And then as you pointed out on sort of rates that down since when you closed the book, that would be a little bit of a headwind in Q3 at the moment. And given the action that you’ve taken can we assume that this is probably going to be smooth.
Then secondly, just on Industrial, how much of that growth is rate related? And how much is volume? And what’s the appetite for sort of a little bit of increased volume there? And then sort of thirdly, if I may, just on Hastings, you’re sort of saying that the operating ratio and the loss ratio should come in line with targets for this year. I guess, sort of in the backdrop of the rest of the U.K. players have been struggling quite significantly. What do you think that means for the Hastings outlook in 2023 and 2024 given where you should be positioned relative to the market? Thanks.
Torbjörn Magnusson
Good. I’ll take the – lift two first ones. First, on discounting, yes, it’s correct that a larger part of the runoff gain, both in the first quarter and second quarter comes from discounting effects. In the first quarter, mainly from Sweden and then in the second quarter from Finland.
And then I think it’s fair to point out that we have increased prudency in our reserving during the second quarter to really make sure that we also account for short-term inflation risk in the serving. So there is definitely a bit of prudency on top of that.
And when it comes to interest rate movements, the Swedish part is more a mark-to-market type of development, whilst the Finnish one, as you might recall, is more rate set as a management decision. So whilst the interest rate in Sweden has come down a little bit in July, there is still quite a lot of room to sort of potentially sort of mark-to-market interest rate level in Finland.
So and then when it comes to Industrial, we have the handset of about two third of the volume increase is sort of price increases. Half of that or one third of the total growth in Industrial is what you could call rate increases? And then the other one third is adjustment of insurance values, in sort of a commercial or private market sort of both of these elements would sort of be classified as premium increases, whilst in Industrial, sort of you typically talk about rate increases being then again one third, which is really sort of supposed to improve the underlying profitability whilst the last one third is more updating to new insurance values as a result of inflation on insured objects.
Morten Thorsrud
Then on Hastings, evidence so far from the few companies that have published results and also rate statistics on the price sites seem to indicate that Hastings has a very good position compared to the market at the moment.
And then if the market would not react to the claims inflation that would be extremely painful after a while for the market. So it would seem that Hastings is – could come out of this from a position of strength.
Alexander Evans
Okay. Thanks a lot.
Operator
Thank you. Our next question comes from the line of Faizan Lakhani of HSBC. Please go ahead. Your line is open.
Faizan Lakhani
Hi. Its Faizan Lakhani from HSBC. My first question is sort of coming back to the solvency, so I understand a number of the movements over the quarter come on sort of volatile items, would you classify that as genuine improvement in the capital position? Or would you look through that when redistributing capital?
And the second one, again, comes back to capital returns. You laid out your framework pertaining to sort of solvency in financial leverage. I wanted to understand this from the lens of liquidity. What sort of level are you happy to operate on this front?
And my third question is on Mandatum. Obviously, the positive rate evolution is a real positive in Mandatum in terms of the strain on the guarantee side. Could we see some benefit on unwind reserves from here. And if I remember from – in the past, you’ve guided for upstream of about €150 million. Does that guidance still stand? Thank you.
Knut Arne Alsaker
All right. On the solvency items here, I mean I would look through it in the way that I would expect them actually to change and sort of be plus or minus zero over time. So I would expect some of these volatile items, which I would sort of top lot in to solvency ratio to be sort of high single-digit percentage points thereabout to actually eliminate itself over time.
If I’m wrong on that, we will not look through them. I’m not giving at all a different capital range for our solvency range, its 170 to 190. It’s just making you aware that 245, it does include some benefits with all the different things that impact the solvency ratio that I would expect on a normalized basis would have made it a little bit less than 245. So it’s – that’s the only thing I’m saying.
In terms of liquidity, I mean, we have a number of companies in the group and different sort of liquidity consideration in different of the subsidiaries. But of course, we would always and all companies, which have some kind of operation like to have a margin and a surplus liquidity position. But that does – if your question is regarding Sampo P&C, you should, of course, because of what I just said, think that it’s not the only company where we have liquidity in the group. So you should be a bit careful to do a simple calculation and deduct all the group liquidity buffer from that particular balance sheet.
Faizan Lakhani
Okay. Understood.
Knut Arne Alsaker
On Mandatum, the higher interest rate – higher interest rate as such doesn’t change the runoff profile in terms of when policies expire in Mandatum. We have the same guarantees on the same policy, whatever market interest rates are. But of course, the reserves that we need to hold against those guarantees. As you know, those changes, meaning that if we have higher interest rates, some of the reserves that we currently have on Mandatum’s balance sheet will be equity and own funds.
Morten Thorsrud r
Maybe just one more remark on the solvency ratio. Knut just to make I’m absolutely clear. Of course, it is true that some of these items are volatile and some of them went the same way this quarter. But it’s not like we had a lot of luck and what goes up must come down. If this is not a forecast about the Swedish exchange rate between the Swedish krona or euro or anything that could equally well go further in the same direction. So it is not – it’s not a prediction that things will be worse
Knut Arne Alsaker
Absolutely not. It’s just that I recognize that our solvency was clearly higher than some estimates and I think there are some good reasons for it and some of what I call sustainable and some of the things, it’s difficult to estimate because it is these volatile items, which I’m just alluding to trying to put that to 245 in perspective.
Faizan Lakhani
And I was just worried about plugging in 245 and [indiscernible] mechanically to get to sort of 170, 190 range might lead to some quite high numbers. So I just want to understand that. Thank you very much for answering my questions.
Operator
Thank you. Our next question comes from the line of Jimmy Fan at UBS. Please go ahead. Your line is open.
Jimmy Fan
Thank you for taking my questions. So I have two, please. So my first question is on the excess capital. I mean we can see the growth in [indiscernible] positive to now margins. And kind of [indiscernible] tracking margins despite a current inflation challenge. And also given your last announced that was number actually very well received by the shareholders.
Have you reconsidered recently perhaps other more accretive ways of deploying the capital through organic or inorganic means? And you think the organic growth that you have mentioned, is there such opportunities that you need to retain some of your excess capital for growth for next year?
Knut Arne Alsaker
I’ll try to answer. We had a little bit of difficulty hearing you. But no, we have not changed the time schedule here. The next milestone here is the full year results when we will consider the full year dividend and any additional distribution of capital.
And then what was the second one? Yes, and the need for capital – retaining capital for that. Now that the need for – with the present growth, even though significant, the extra need for capital is very small, driven by the growth.
Jimmy Fan
Thank you. So that was actually my first question. So my second question is on for the P&C cost ratio starting the exports in 2Q and variation how much factor improvement versus your guidance? In absolute terms, it’s pretty flat year-on-year. And could you remind us on some of the actions you have taken in reducing costs on top of the impact of premium growth, reducing the cost ratio?
Knut Arne Alsaker
Yes. First, just to remind you about sort of the target that we have is sort of a 20 to 30 basis points cost ratio improvement year-on-year. So that’s sort of our target. Then of course, cost ratio, as we also talked about in earlier conference calls, is fluctuating quite a bit from quarter-to-quarter, someone shouldn’t put too much emphasis on one single quarter.
But of course, the main improvement item when it comes to efficiency for us is digitalization as such. Moving distribution from sort of the old channels more towards online gives us efficiency improvements having more and more claims reported online and doing more and more automated claims handing gives us efficiency improvements.
And of course, also a lot of self-service with customers sort of logging in and using our apps and different self-service solutions is driving efficiency – driving up efficiency. So digitalization is sort of the main explanation for the improvements that we’ve seen and also why we expect to see also good development going forward since the digitalization is still sort of is progressing to a quite high speed.
Jimmy Fan
Thank you, that’s very clear.
Operator
Thank you. And our next question comes from the line of Michael Perito of KBW. Please go ahead. Your line is open.
Michael Perito
Yes, thank you. Two questions from me. So the first question is about the reinvestment rate. So how do you see, of course, I mean this scenario now, the outlook its more positive. So how do you see this developing also in terms of what kind of opportunity on the asset side you’re seeing, so what kind of offset your planning to invest if there is any change there?
And my second question is about the portfolio of companies you have like Saxo Bank Nordax, I mean – or what kind of developments are there? If you can give us an update? Thank you.
Morten Thorsrud
Starting with Saxo, et cetera. We have said that that we are not driving them, we are not the lead investor, and we will, at some stage, not participate in the next step for those company’s development. However, I think that they all – they are all – there is going to be very little action here for the next 6 months, probably given the circumstances.
And reinvestment rates going forward is always difficult to answer. But of course, we were able to with the investment climate in May and June to reinvest at higher rates, increasing the yield, the running yield significantly. Now investment returns or rates are – have come down again.
Knut Arne Alsaker
Morten, just to add to Torbjörn’s commentary, we will obviously continue to use opportunities that we see to do similar things like we did in May and June, taking advantage of opportunities to continue to reinvest at higher rates than we sort of have right now in our book. So it’s that sort of – and that’s going to be in the fixed income space. On the – in the equity side, we have been sort of very stable, no sort of change in our portfolio allocation to equities recently.
Michael Perito
Great. Thank you. If I may, just a follow-up on the – sorry, a third question, if I can, on the next update, should we see also some details on IFRS 17 impact?
Knut Arne Alsaker
We’ll talk to you about IFRS 17 during the fall. We haven’t some set an exact date for that yet, but we will give you an update on impacts for the group. Obviously, I mentioned one point actually earlier on this call talking about the leverage that the impact on group equity is basically zero. It could, of course, also mean slightly positive, meaning that the leverage ratio will not be impacted in any significant way from that transition.
Then I think – I would like to mention one more thing since you brought off the topic, and that is when you look at our so-called mark-to-market results, that is a mark-to-market result, which only includes the fair value reserve changes related to our assets.
If you have used IFRS 17 numbers using IFRS 17 discount rates both on the life side and non-life side, we would have had a very different IFRS 17 result in the second quarter, and we would have had a positive fair value – positive mark-to-market results for the Sampo Group and a positive ROE, clearly positive ROE.
And that is – we’ll talk more about some of those details later this fall, but it is an important point for me to make also when you compare ourselves to solve other companies in other markets, which already use this accounting standards where they are mark-to-market, both on the asset and liability side.
Michael Perito
Thank you.
Operator
Thank you. Our next question comes from the line of Tryfonas Spyrou of Berenberg. Please go ahead. Your line is open.
Tryfonas Spyrou
Hi, there. Good afternoon. I just have one question. I’m interested in some comments you made, Torbjörn, with regards to the dislocation in the U.K. market, potentially Sampo starting to come out of the situation. And given your solvency remains very strong. Do you envisage any scenario where you could potentially look to capitalize on this dislocation and could you outpacing to get more scale, acquiring your books of business or small bolt-on deals and so forth. So maybe you prefer to keep your eyes closer to home for a time being? Thank you.
Torbjörn Magnusson
There are some opportunities, not least in home insurance that we discussed and that we’re taking that opportunity very seriously in developing that portfolio very quickly. At the moment then we’ve always said that if there were opportunities to add to that with a small boat on small in relation to Hastings, we’d, of course, be willing to do that, but that’s business as usual for us in the Nordics or in the U.K. There are no such opportunities as we see it at the moment. So we continue to develop the company organically.
Tryfonas Spyrou
Okay. Thank you.
Operator
Thank you. And we have one further person in the queue that’s [indiscernible] Please go ahead. Your line is open.
Unidentified Analyst
Yes, thank you. And thanks for taking my question. I actually have just one question and it goes basically on the FSA, the Swedish FSAs report from July on the pricing in home insurance and the fact that they are at least the loyal policyholders are paying a premium. So any comments from your side on this? And of course, also in the context of repricing currently to offset the claims inflation?
Morten Thorsrud
Yes. Yes, there was an FSA report, they looked at both motor and property during the spring, concluded that they didn’t see any price increases linked to the duration on motor, but that they could see some signs of it in property. It was a pure fact finding type of exercise. So they didn’t look into what was actually driving this and of course, there are certain reasons why a homeowner or household insurance actually would increase in bid price over time, as kind of customers grow older and accumulate more wealth and get kids and in Sweden also travel insurance is included in this.
But of course, again, this was a pure fact finding exercise so far. And the report is out and it’s closed so far. So let’s see what’s happened with that in the future whether kind of regulatories come back to this.
For us, this is not really having any impact or causing any concerns. We have policy of pricing very kind of according to risk and that’s sort of our pricing philosophy. So we are kind of I think in a situation where kind of – yes, we don’t really use a lot of market-based pricing. And again, not a lot of first year discount or anything like that.
So – but again, let’s see what happens in the future for us, this shouldn’t really have any big impact. And of course, we have a fairly small property book in Sweden that we rather like actually to grow. So…
Unidentified Analyst
Do you see any risk of this from or the FSA spreading to other insurance products?
Morten Thorsrud
No, I don’t look upon this as a risk. Again, we are – we have a strategy of pricing risk according to the risk exposure and kind of risk correct pricing and then that shouldn’t be at least to that…
Knut Arne Alsaker
Because the carbon motor and property, which are clearly the two dominant products for personal lines where this is relevant. They concluded there are no issues with motor, which is our biggest product. And then they just in fact, found that there were price increases for property, but didn’t indicate any actions.
So we’re very happy with this and what turned the biggest effect that this could have probably would be if there were price walking in other companies and that they were regulated. So we would have an opportunity rather than a risk.
Unidentified Analyst
All right. That’s very clear. Thank you.
Operator
Thank you. And as there are no further questions at this time. I’ll hand the floor back to our speakers.
Torbjörn Magnusson
Thank you all for your attention today, and we look forward to see you – seeing you all on the road show. Thank you very much.
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