Torbjörn Magnusson's (Group CEO and President, Member of the Group Executive Committee, Sampo Group) presentation at FIN-FSA Conference on EU financial markets today and in the future

1. EU financial markets today and in the future
A practitioner's view of the future of the insurance business
2.11.2021 1
November 2, 2021

2. • Changing environments mean changing risk pools – relevance of insurance in a changing world even more pronounced;
through risk mitigation, insurers protect existing values and enable new investments
• Changing environments do not necessarily mean changing focus points; core insurance capabilities will continue to matter
• Investments in select areas are continuously needed to ensure competitiveness in core capabilities
• Insurers can increasingly contribute and drive positive effects in society beyond already beneficial customer proposition
2.11.2021 2
A practitioner's view of the future of the insurance business
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2
3
4

3. 2.11.2021 3
Relevance of insurance in a changing world even more pronounced
Increasing importance Changing landscape Recent history as guideline
• As economies develop, the role of
insurance becomes ever more
important
• Changing environment implies shifting
risk pools – insurance remains relevant
• Example: autonomous driving
technology may shift the shape of the
risk pool
• Pivotal changes have happened also in
recent history, and the evidence points
at insurance continuing to be an integral
part of the economy despite changing
landscapes
1

4. 2.11.2021 4
Insurance penetration tends to rise as economies develop

5. 2.11.2021 5
Need of insurance likely to increase as risk pools grow & change shape
0
50
100
150
200
250
0
50
100
150
200
250
300
350
400
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Global weather-related losses & natural catastrophe events
Total losses (LHS) Number of events (RHS)
Note: 1) Weather-related total losses (Incl. insured & non-insured losses); 2) Natural catastrophe events; 3) Swiss Re Institute Sigma (More risk: the changing nature of P&C insurance opportunities to 2040.
Source: Swiss Re Institute (Sigma explorer)
Climate risks could increase weather-related property catastrophe losses in advanced markets by 30-63%3
2
1
USDbn Number of events
Selected relevant news articles
1

6. 2.11.2021 6
Risks continue to develop along with social advancements
0,9
1,0
1,1
1,2
2014 2015 2016 2017 2018 2019 Future
0,9
1,0
1,1
1,2
2014 2015 2016 2017 2018 2019 Future
As car becomes more autonomous, minor claims frequencies are
expected to decrease; however, distractions and new sources of
claims might increase frequencies
Frequency increasing, partly due to new distractions… …with expected increase of average claim size
If P&C Sweden labelled motor insurance: Indexed claims frequency If P&C Sweden labelled motor insurance: Indexed average claims size
More complex sensors and systems are expected to drive up average
claims cost
?
?
Note: Example from If labeled motor insurances in Sweden
Source: If P&C data
1

7. 2.11.2021 7
Insurance continues to be an integral part of the economy
2,6 %
4,6 %
0,0 %
1,0 %
2,0 %
3,0 %
4,0 %
5,0 %
1983 1987 1991 1995 1999 2003 2007 2011 2015 2019
Penetration development, OECD countries
Direct gross premiums (Non-Life insurance), % of GDP
Recent history, during which important technological developments have happened, points to insurance continuing
to be an integral part of the economy despite changing landscapes
Source: OECD
1

8. 2.11.2021 8
Social advancements do not necessarily mean changing focus points
Safety Convenience Value
• Reliable counterparties that keep their
promises, with solid financial positions
and good governance, continue to have
the preference of customers
• Simple to buy, simple to claim, simple to
interact – convenience, in ever
developing forms, to continue to be
appreciated by customers
• Successful insurers need to deliver fair
pricing for both customers and the
company – understanding and pricing of
risks continues to be the core of
insurance
2

9. 2.11.2021 9
Safety: Solid financial position matters, big institutions remain relevant
0%
20%
40%
60%
80%
100%
2015 2016 2017 2018 2019 2020
If RSA Tryg Lf Gjensidige OP Topdanmark Folksam Alm Brand Tapiola Others
Customers tend to trust stable insurance providers with financial means to keep their promises
If P&C solvency ratio1, (2016-2020) Market shares for Nordic P&C companies (2015-2020)2
100%
120%
140%
160%
180%
200%
2016 2017 2018 2019 2020
Note: 1) Solvency ratio for If P&C, as at year ends; 2) Market shares do not take into account recent large transactions (Tryg / RSA, Alm.Brand / Codan).
Source: If P&C data; Locally published market share data (Sweden, Norway, Denmark, Finland)
2

10. 2.11.2021 10
Convenience: Ease of interaction with insurers appreciated by clientele
Customer
centre
38%
Customer
centre
37%
Digital 6%
Digital
24%
External
distribution
56%
External
distribution
39%
2010 2020
~40%
~60%
Shift to digital channels makes
insurance interaction easy… …increasing customer satisfaction…
…, which yields high and stable
customer retention
Distribution mix development: 2010 vs 2020
57
59
60
61
62
2018 2019 2020 H1
2021
Q2
2021
Customer satisfaction (If P&C1) Retention rate2 ,private customers
85%
86%
87%
88%
89%
90%
91%
2017 2018 2019 2020
90%
of customers
renew
their insurance
Note: 1) NPS, business Area Private; 2) yearly average
Source: If P&C data
2

11. 2.11.2021 11
Value: Scale and cost focus enable fair pricing, attracting customers
23,5%
23,0%
22,8%
22,5%
22,3%
22,1%
22,0%
21,9%
21,8%
21,5%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
If P&C cost ratio (2011-’20)1 If P&C Private avg. customers (millions)
Note: 1) Cost ratio 2015 excl. one-offs
Source: If P&C data
2017 2018 2019 2020
3,1million
households are If
customers
Efficiency investments have allowed If P&C to price risk with minimal operating costs to provide value for the customers.
Understanding and pricing of risk will remain the core of insurance
2

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Upkeep and development of core capabilities requires investments
Technology Skills Culture
• Importance of developing and updating
relevant technical skills and innovating
together with industry collaborators
likely growing
• Digital advancements will continue to
drive convenience and safety, enabling
competitive pricing – investments
needed to ensure continued
competitiveness
• Underwriting profitable business
remains at the core of insurance; profit-
focused culture motivates continuous
investments in the right areas to secure
future relevance
3

13. 2.11.2021 13
Technology: Continued investments in IT enable competitive advantage
48%
Online claims share of total claims, R12
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2018 2019 2020
If P&C IT development costs have…
40
50
60
70
2014 2016 2018 2020
…enabled launching digital solutions… …that are mutually reinforcing…
Customer
centre
38%
Customer
centre
37%
Digital 6%
Digital
24%
External
distribution
56%
External
distribution
39%
2010 2020
~40%
~60%
Distribution mix development: 2010 vs 2020
Source: If P&C data
…creating a virtuous cycle of increased expectations from customers; continuous investments needed
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Skills: Right investments ensure competitiveness in core capabilities
Investing in underwriting capabilities & understanding risks supports results If’s “best in risk” practices
68,4%
65,9%
65,4%
65,1%
66,6%
62,3%
63,3%
63,3%
62,7%
60,7%
59,9%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 6M-21
If P&C risk ratio (%)
“Best in data”
• Value creation from access to and
best practice utilization of
available external and internal
Nordic databases
Modern tools and methods
• Pricing sophistication by utilizing
advanced analytics
Excellent risk management
expertise
• Best work place for analysts
attracts and retains top talent
• Models cannot replace experience
and risk aversion in top
management
Source: If P&C data
3

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Skills: Learnings increasingly via innovating with industry collaborators
• Continuous collaboration with
electric vehicle manufacturers to
develop an understanding of how
the industry and ecosystem will be
affected by the EV shift
• Jointly analyzing and
understanding potential risk factors
and claims costs can continuously
improve the product offering
• Collaboration with car
manufacturers to jointly develop
deep insights in Advanced Driver
Assistance Systems and emerging
autonomous drive functionalities to
maximize these systems’ effect on
total cost of ownership
Shift to Electric Vehicles Autonomous Vehicle revolution New forms of ownership
• Developing capabilities into new
offerings in ownership, sharing and
flexibility
• Integrating insurance products
within car sharing, leasing and
subscription models
• Consumers seek for new
environmentally friendly motor
solutions
• Car industry innovation push
insurers to re-think the insurance
solutions as the liabilities shift from
passengers to manufacturers
• Climate change and circular
economy increase awareness to
re-thing ownership
Example trends
description
Responses on
trends within
mobility
Source: If P&C data
3

16. 2.11.2021 16
Culture: Investing in the workforce is recouped by satisfied customers
57
59
60
61
2018 2019 2020 H1 2021
47
54 54
2019 Apr 2020 Apr 2021 Apr
If P&C: Employee NPS (proxy for satisfaction) If P&C BA Private: Customer NPS (proxy for satisfaction)
In order to satisfy customers, an insurer needs an engaged workforce; making the right investments in
culture & people will continue to be a major source of competitive advantage for insurers in the future
Maintaining & increasing employee satisfaction requires investments …which will continue to enable employees keep customers happy
Source: If P&C data
3

17. 2.11.2021 17
Insurers can increasingly contribute and drive positive effects in society
Insurance directly positive for the society ESG increasingly integrated towards stakeholders
• Insurance as a product is positive for society as it reduces risk
• Additionally, insurers should do their part in ensuring own
operations and direct impact of operations is done in a
sustainable way
• Insurance increasingly built around sustainable principles;
insurers can help promote sustainable solutions indirectly to our
stakeholders in addition to direct impacts
4

18. 2.11.2021 18
Insurers should strive for increasingly sustainable own operations
0
5 000
10 000
15 000
20 000
25 000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
If P&C has reduced CO2e emissions from own operations by 79% since 2008
If P&C CO2e emissions (tonnes)1
Note: 1) Scope 1-3 emissions (CO2e tonnes) from operations in the Nordic countries
Source: If P&C data
4

19. 2.11.2021 19
Insurance industry has the power to promote sustainable choices
4

20. 2.11.2021 20
Recap: A practitioner's view of the future of the insurance business
• Changing environments mean changing risk pools – relevance of insurance in a changing world even more pronounced;
through risk mitigation, insurers protect existing values and enable new investment
• Changing environments do not necessarily mean changing focus points; core insurance capabilities will continue to matter
• Investments in select areas are continuously needed to ensure competitiveness in core capabilities
• Insurers can increasingly contribute and drive positive effects in society beyond already beneficial customer proposition
1
2
3
4
Insurance fundamentally is a social construct, which will walk hand in hand with developments of
society going forward, as it has it the past – successful insurers will keep strengthening the core

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Phone: +358 10 516 0100
Business ID: 0142213-3
www.sampo.com
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Thank you
2.11.2021 21