NORDIC NON-LIFE Weather and financial market chills

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1 EQUITY RESEARCH Research report prepared by DNB Markets, a division of DNB Bank ASA This report was completed and disseminated at 7:01 CET on 0 NORDIC NON-LIFE Weather and financial market chills We expect the Nordic non-life insurers Q1 results to reveal a general negative impact following relatively harsh winter weather in Q1 versus previous years. Examples of 90-year snow depth records being broken indicate increased claims frequency in the quarter, while sluggish equity markets together with rising interest rates are likely to weigh on investment returns, leaving reported EPS below normalised levels. We maintain our HOLD recommendations on the stocks covered; Gjensidige remains our top sector pick, while Topdanmark is our least preferred. Nordic Non-life vs DJ Stoxx 600 TR (12m) Apr Jun Aug Oct Dec Feb Apr Nordic Non-life DJ Stoxx 600 TR Source: Factset Q1 combined ratios set to feel winter chill. We expect somewhat weaker combined ratios than in recent first quarters following heavy snowfall and snow depths, indicating a higher claims frequency, in particular for motor insurance as a result of difficult driving conditions. Densely populated areas in Finland, Sweden and particularly Norway saw significant snowfall and many rainy days, with temperatures remaining around freezing. Central Oslo reported 50-year record snow depths in mid-march, and parts of eastern Norway (Biri) broke 90-year records. In Denmark, January and February were reported to have had little snow and ice, while March had significantly more winter weather. There were no significant effects from any large winter storms in the quarter. Icy market headwinds. We expect relatively weak investment returns at all the insurers in Q1 due to falling equity markets, both in the Nordics and globally. The MSCI World index was down 2% in Q1, and together with rising interest rates (resulting in negative marked-to-market effects for fixed-rate bond portfolios), is likely to have put pressure on investment returns. For Sampo, we also factor in the depreciation of the SEK versus the EUR, as it tends to keep some positions open, and weak consensus expectations for Nordea, in which it maintains a stake. Sector valuation looks demanding, and few potential catalysts. The Nordic P&C space enjoys being relatively low-risk investments with typically little earnings volatility and stable dividend capacity. However, we find the valuation fairly demanding at 14 19x 2019e earnings. Further, given the historical stability of sector earnings and beneficial industry characteristics, we struggle to see any near-term share price catalysts, either positive or negative. Gjensidige (HOLD, NOK150) remains our top sector pick as we believe it is trading at an unwarranted discount to its Danish peers at a 2019e P/E of 14x versus 17 19x. Also, we see upside potential in the company meeting its target in the international segments, a strong capital position, potential for higher run-off gains, and strong downside support from its customer dividend model. However, we do not believe that the Q1 or Q2 results are likely to serve as a positive catalyst for Gjensidige, as we believe the winter weather in Norway is likely to cause a higher claims frequency in Q1 and a risk of flood damage in Q2 Target Share Company Cur Rec Price Price P/B 18e P/B 19e P/B 20e Gjensidige Forsikring NOK HOLD Sampo Oyj EUR HOLD Topdanmark DKK HOLD Tryg DKK HOLD Source: DNB Markets ANALYSTS Niclas Gehin niclas.gehin@dnb.no Håkon Astrup hakon.astrup@dnb.no Please see the last two pages for important information. This research report was not produced in the US. Analysts employed by non-us affiliates are not registered/ qualified research analysts with FINRA in the United States.

2 GJENSIDIGE FORSIKRING Q1 set to feel winter chill We forecast Q1 EPS of NOK1.5 (results due at 07:00 CET on 25 April), reflecting harsh winter weather in the group s Norwegian home markets. Snow depths in parts of eastern Norway broke records going back to the 1920s, which we believe is likely to have a negative impact on the Motor segment in particular. We expect a combined ratio of 90.2%, in line with Q4 and ~3%- points above Q1 last year. We have trimmed our estimates, and reduced our target price to NOK150 (160). Our recommendation remains HOLD. Harsh winter weather set to yield higher claims ratios. We forecast combined ratios ~2 4%-points above those reported for the first quarter of recent years due to many rainy days and freezing temperatures resulting in icy roads and record-high snowfall depths. For instance, in mid-march, the snow depth in central Oslo was at its highest since 1968, and in Biri, eastern Norway, touched a 90-year high. We forecast a sharp increase YOY in the combined ratio to 87% in the Norwegian segments, including run-off gains of ~5%-points. We see this being partly offset by improving operations elsewhere, with Gjensidige guiding for profitability in 2018 in Sweden and the Baltics after the losses in Note that Gjensidige will report Sweden and Denmark as two separate segments for the first time in this quarter. Investment return down with downtick in equity markets. The MSCI World Index fell 2.3% in Q1, which we expect to have a negative impact on the reported ROI. We therefore expect a Q1 ROI of NOK327m, well below recent quarters with appreciating equity markets. We have trimmed our estimates, with the net effect a ~1% reduction in e EPS. Gjensidige remains our top pick among the Nordic P&C insurers, as we believe the stock is trading at an unwarranted discount to its peers (2019e P/E of 14x versus peers on 17 19x). We reiterate our HOLD recommendation, while we have reduced our target price from NOK160 to NOK150. We do not expect that a weak Q1 combined ratio in line with our expectations will serve as a negative trigger for the share, as this is largely one-off in character due to the weather, and the weather situation should be well known by the market by now. HOLD TP: NOK150 GJF versus Stoxx 600 Insurance (12m) Apr Jun Aug Oct Dec Feb Apr Gjensidige Forsikring Stoxx 600 Insurance Source: Factset SUMMARY Recommendation (prev.) HOLD (HOLD) Share price (NOK) 133 Target price (previous) (NOK) 150 (160) Upside/downside potential (%) 13 Tickers GJF NO, GJF.OL CAPITAL STRUCTURE No. of shares (m) Market cap. (NOKm) 66,550 Solvency II ratio (%) Book value per share (NOK) NAV per share (NOK) 37.3 SHARE PRICE PERFORMANCE Abs. 1/3/12m (%) -8/-15/0 Rel. 1/3/12m (%) -8/-11/-8 High/Low 12m (NOK) 162/127 Free float (%) 37 Source: Company, DNB Markets (estimates) NEXT EVENT Q /04/2018 ESTIMATE CHANGES (NOK) Year-end Dec 2018e 2019e 2020e EPS (old) EPS (new) Change (%) Consensus E. premiums (old) 24,288 24,773 25,262 E. premiums (new) 24,276 24,762 25,250 Change (%) Consensus 24,048 24,773 25,262 Source: DNB Markets, DNB Markets Year-end Dec e 2019e 2020e Underwriting (NOKm) 2,862 3,457 3,735 3,410 3,117 3,294 3,351 Net finance inc. (NOKm) 2,426 1,492 2,155 2,003 1,857 2,193 2,381 Life insurance (NOKm) Bank (NOKm) PTP (NOKm) 5,399 5,079 6,141 5,829 5,395 5,954 6,248 Net income (NOKm) 4,189 3,814 4,667 4,520 4,152 4,622 4,863 EPS (NOK) DPS (NOK) P/E (X) P/Book (X) Dividend yield (%) ROE (%) Claims ratio (%) Cost ratio (%) Combined ratio (%) ANALYSTS Niclas Gehin niclas.gehin@dnb.no Håkon Astrup hakon.astrup@dnb.no Please see the last two pages for important information. This research report was not produced in the US. Analysts employed by non-us affiliates are not registered/ qualified research analysts with FINRA in the United States. 2

3 2017 Underwriting result Return on Investment Other 2018e Underwriting result Return on Investment Other 2019e DNB Markets Investment case overview Share price performance, DNB Markets target price, bear- and bull-case scenarios NOK180 (35%) 172 Target price methodology Our target price continues to be based on 16x 2019e P/E and 3.0x P/BV (historical averages of 13x and 1.9x, respectively) NOK133 NOK150 (13%) In our bull-case fair value we assume an unchanged 16x P/E and that EPS is increased by ~15%, to NOK10, for the reasons outlined below. 112 NOK100 (-25%) 92 Apr 2017 Aug 2017 Dec 2017 Apr 2018 Aug 2018 Dec 2018 Apr 2019 Historical Share Price Performance Price Target (Apr 19) Current Share Price In our bear-case fair value we assume an unchanged 16x P/E and that EPS is reduced by ~30%, to NOK6.1, for the reasons outlined below. Source: FactSet, DNB Markets Source: DNB Markets Downside risks to our investment case The combined ratio rises to the upper end of Gjensidige s 86 89% target, due to increased claims frequencies and more weather-related incidents than in previous years. Small P&C insurers grow in size and become increasingly aggressive, and premiums growth flattens out. A stagnating Norwegian economy yields 0% premiums growth. Running yields decline. DNB Markets investment case and how we differ from consensus We expect a combined ratio of c87% for 2018, in line with consensus estimates, with normalised claims frequencies. We expect competitive pressure to dampen premium growth, which is largely offset by greater efficiency and economies of scale for Gjensidige. We expect c2% growth in premiums for 2019, somewhat below nominal GDP growth, and Gjensidige to maintain its market share. Upside risks to our investment case The combined ratio falls below 86%, driven by benign weather and run-off gains above guided levels. Claims and costs continue to decline due to measures initiated by Gjensidige or a general improvement in the claims trend. Increased focus on Gjensidige customer dividends leads to higher premium growth. Running yields pick up. Source: DNB Markets Source: DNB Markets Source: DNB Markets Pre-tax profit bridge e (NOKm) 6,200 6,000 5,800 5,600 5,400 5,200 5,000 4,800 4,600 4,400 4,200 5, , ,954 Source: DNB Markets (forecasts), company (historical data) 3

4 P/E Dividend yield DNB Markets Figure 1: Q1 preview Q1 figures YoY grow th Full-year figures (DNB) Consensus DNB est. NOKm Q117 Q118e Low Median High YoY Pct e 2019e 2020e Net Earned Premiums 5,548 5,951 5,756 5,888 5, % 17,548 17,797 18,737 20,387 21,272 22,442 23,398 24,276 24,762 25,250 Claims costs -3,958-4,464-4,466-4,373-4, n.m. -13,249-12,438-13,860-14,470-14,598-15,516-16,402-17,484-17,715-18,065 Operating expenses n.m. -2,878-2,752-2,858-3,054-3,218-3,192-3,587-3,675-3,753-3,833 Underw riting Result % 1,421 2,608 2,020 2,862 3,457 3,735 3,410 3,117 3,294 3,351 Return on Investment (Net) % 2,331 3,005 2,481 2,426 1,492 2,155 2,003 1,857 2,193 2,381 Amortisation n.m Pre tax Profit (P&C) 1, , % 3,614 5,499 4,354 5,120 4,724 5,617 5,108 4,701 5,214 5,459 Pre tax Profit (Online Retail Bank) % Pre tax Profit (Pensions & Savings) % Pre tax Profit (Group) 1,365 1,013 1,098 1,148 1, % 3,698 5,646 4,593 5,399 5,079 6,141 5,829 5,395 5,954 6,248 Net Profit 1, , % 2,822 4,280 3,670 4,190 3,784 4,666 4,520 4,152 4,622 4,863 EPS reported % Dividend (NOK/share) Payout ratio 83% 80% 174% 118% 111% 116% 79% 136% 100% 93% Claims ratio 71.3 % 75.0 % 77.6 % 74.3 % 72.0 % 3.7% 5.1% 75.5 % 69.9 % 74.0 % 71.0 % 68.6 % 69.1 % 70.1 % 72.0 % 71.5 % 71.5 % Cost ratio 15.5 % 15.2 % 15.7 % 15.1 % 14.5 % -0.3% -2.0% 16.4 % 15.5 % 15.3 % 15.0 % 15.1 % 14.2 % 15.3 % 15.1 % 15.2 % 15.2 % Combined ratio (net) 86.8 % 90.2 % 88.2 % 89.9 % 90.4 % 3.4% 3.9% 91.9 % 85.3 % 89.2 % 86.0 % 83.7 % 83.4 % 85.4 % 87.2 % 86.7 % 86.7 % Run-offs 4.3 % 4.7 % 4.3 % 4.2 % 4.2 % 0.4% 8.8% 2.1 % 1.9 % 1.1 % 2.4 % 3.4 % 4.6 % 4.4 % 4.2 % 4.1 % 4.0 % Combined ratio excl. Run-offs 91.1 % 94.9 % 92.5 % 94.1 % 94.6 % 3.7% 4.1% 94.0 % 87.3 % 90.4 % 88.4 % 87.2 % 87.9 % 89.8 % 91.4 % 90.8 % 90.8 % Net Earned Premiums Private Norw ay 2,034 2, % 7,466 7,498 7,799 8,124 8,152 8,291 8,516 8,794 8,924 9,044 Commercial Norw ay 1,798 1, % 6,760 6,765 7,022 7,338 7,077 7,258 7,301 7,501 7,621 7,744 Denmark 1,081 1, % 2,904* 2,910* 3,327* 4,272* 5,233* 4,607 4,827 5,115 5,218 5,323 Sw eden ,311 1,736 1,814 1,851 1,888 Baltics % ,036 1,075 1,153 1,248 1,351 Combined ratio Private Norw ay 74.5 % 86.0 % 11.5 % 15% 86.9 % 80.8 % 83.3 % 80.0 % 72.9 % 73.5 % 74.2 % 82.2 % 81.3 % 81.3 % Commercial Norw ay 80.5 % 88.0 % 7.5 % 9% 91.8 % 85.0 % 85.9 % 84.5 % 79.6 % 77.5 % 77.6 % 83.8 % 83.3 % 83.3 % Denmark % 92.3 % -8.7 % -9% 95.1 %* 82.1 %* 89.7 %* 87.6 %* 90.3 %* 94.7 % 94.1 % 91.3 % 91.3 % 91.3 % Sw eden % 96.3 % 99.9 % % 95.3 % 95.3 % 95.3 % Baltics % 96.0 % -8.7 % -8% 99.2 % 95.7 % 93.0 % 99.9 % % % % 96.0 % 96.0 % 96.0 % Underwriting Result Private Norw ay % 979 1,439 1,306 1,624 2,208 2,197 2,200 1,568 1,671 1,693 Commercial Norw ay % 553 1, ,140 1,441 1,631 1,635 1,213 1,273 1,293 Denmark n.m. 142* 520* 343* 529* 509* Sw eden Baltics n.m # of shares (End of period) * includes Denmark and Sweden, Inquiry Financial (consensus from 20 March) Valuation Gjensidige remains our top pick among the Nordic P&C insurers, as we believe the stock is trading at an unwarranted discount to its peers at a 2019e P/E of 14x versus peers on ~17-19x. Figure 2: P/E Nordic non-life (x) Figure 3: Dividend yield Nordic non-life (%) Gjensidige Sampo Tryg Topdanmark 2019e Average Gjensidige Sampo Tryg Topdanmark 2019e 5.6 Average 5.0 Source: DNB Markets Source: DNB Markets 4

5 Figure 4: Gjensidige P/E 12-month forward 20x Figure 5: Gjensidige P/BV 12-month forward 4.0x 18x 3.5x 16x 3.0x 14x 2.5x 12x 2.0x 10x 1.5x 8x Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 GJF P/E 12mth fwd Mean +1std.dev. -1std.dev. Source: Factset 1.0x Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 GJF P/B 12mth fwd Mean +1std.dev. -1std.dev. Source: Factset Figure 6: European insurance P/BV versus ROE 6.0x 5.0x Tryg P/B 2018e 4.0x 3.0x 2.0x Sampo Gjensidige Topdanmark 1.0x Source: Bloomberg 0% 5% 10% 15% 20% 25% ROE 2018e 5

6 Forecast changes P&L New Old Change (NOKm) 2018e 2019e 2020e 2018e 2019e 2020e 2018e 2019e 2020e Earned Premiums 24,276 24,762 25,250 24,288 24,773 25, Claims costs -17,484-17,715-18,065-17,375-17,724-18, Operating expenses -3,675-3,753-3,833-3,673-3,752-3, Underwriting results 3,117 3,294 3,351 3,239 3,298 3, Return on Investments 1,857 2,193 2,381 2,032 2,209 2, Pre-tax profit P&C 4,701 5,214 5,459 4,998 5,233 5, Life insurance PBT Bank PBT 5,395 5,954 6,248 5,692 5,973 6, Taxes -1,243-1,332-1,386-1,281-1,333-1, Net profit 4,152 4,622 4,863 4,412 4,640 4, Adjustments to net profit Net profit adj 4,152 4,622 4,863 4,412 4,640 4, Per share data (NOK) EPS EPS adj DPS ordinary DPS extraordinary DPS BVPS NAVPS Other key metrics Claims ratio (%) Cost ratio (%) Combined ratio (%) Insurance margin (%) Earned premiums growth (%) Cost inflation (%) Avg. number of shares (m) Source: DNB Markets Forecast changes By segment and assumptions New Old Change (NOKm) 2018e 2019e 2020e 2018e 2019e 2020e 2018e 2019e 2020e Earned premiums Private Norway 8,794 8,924 9,044 8,794 8,924 9, Commercial Norway 7,501 7,621 7,744 7,501 7,621 7, Nordic 6,929 7,069 7,211 6,940 7,080 7, Baltics 1,153 1,248 1,351 1,153 1,248 1, Technical result Private Norway 1,568 1,671 1,693 1,646 1,671 1, Commercial Norway 1,213 1,273 1,293 1,253 1,273 1, Nordic Baltics Combined ratio Private Norway Commercial Norway Nordic Baltics Source: DNB Markets 6

7 Quarterly numbers (NOKm) Q Q Q Q Q Q Q1 2018e Q2 2018e Q3 2018e Q4 2018e Q1 2019e Earned Premiums 5,706 5,686 5,548 5,825 6,056 5,970 5,951 6,063 6,165 6,097 6,079 Claims costs -4,004-4,014-3,958-3,962-4,014-4,468-4,464-4,146-4,364-4,510-4,440 Operating expenses Underwriting results , , Return on Investments PTP P&C 1,459 1,262 1,239 1,442 1, ,499 1,379 1,184 1,249 Life insurance PTP Bank PTP 1,516 1,306 1,365 1,503 1,719 1,244 1,013 1,603 1,486 1,293 1,361 Taxes Net profit 1,172 1,091 1,110 1,095 1,313 1, ,237 1,150 1,006 1,058 Adjustments to net profit Net profit adj 1,172 1,091 1,110 1,095 1,313 1, ,237 1,150 1,006 1,058 Per share data (NOK) EPS EPS adj DPS ordinary DPS extraordinary DPS BVPS NAVPS Other key metrics Claims ratio (%) Cost ratio (%) Combined ratio (%) Insurance margin (%) Earned premiums growth (%) Cost inflation (%) Avg. number of shares (m) Adjustments to quarterly numbers (NOKm) Q Q Q Q Q Q Q1 2018e Q2 2018e Q3 2018e Q4 2018e Q1 2019e Earned premiums 5,706 5,686 5,548 5,825 6,056 5,970 5,951 6,063 6,165 6,097 6,079 Adj Earned premiums 5,706 5,686 5,548 5,825 6,056 5,970 5,951 6,063 6,165 6,097 6,079 Claims costs -4,004-4,014-3,958-3,962-4,014-4,468-4,464-4,146-4,364-4,510-4,440 Run-offs Underlying Claims costs -4,238-4,328-4,198-4,208-4,260-4,769-4,744-4,392-4,615-4,758-4,686 Net profit 1,172 1,091 1,110 1,095 1,313 1, ,237 1,150 1,006 1,058 Special items Net profit adj 1,172 1,091 1,110 1,095 1,313 1, ,237 1,150 1,006 1,058 RONAV (%) Adjusted RONAV (%)

8 Quarterly numbers by segment and assumptions (NOKm) Q Q Q Q Q Q Q1 2018e Q2 2018e Q3 2018e Q4 2018e Q1 2019e Earned premiums Private Norway 2,138 2,112 2,034 2,130 2,229 2,123 2,113 2,203 2,283 2,193 2,153 Commercial Norway 1,831 1,808 1,798 1,815 1,860 1,827 1,864 1,871 1,879 1,886 1,894 Nordic 1,565 1,543 1,487 1,659 1,713 1,705 1,719 1,728 1,737 1,745 1,754 Baltics Technical result Private Norway Commercial Norway Nordic Baltics Combined ratio Private Norway Commercial Norway Nordic Baltics

9 Annual P&L (NOKm) e 2019e 2020e Earned Premiums 17,548 17,797 18,737 20,387 21,272 22,442 23,398 24,276 24,762 25,250 Claims costs -13,249-12,438-13,860-14,470-14,598-15,516-16,402-17,484-17,715-18,065 Operating expenses -2,878-2,752-2,858-3,054-3,218-3,192-3,587-3,675-3,753-3,833 Underwriting results 1,421 2,621 2,035 2,862 3,457 3,735 3,410 3,117 3,294 3,351 Return on Investments 2,331 3,005 2,481 2,426 1,492 2,155 2,003 1,857 2,193 2,381 PTP P&C 3,591 5,499 4,354 5,118 4,740 5,633 5,152 4,701 5,214 5,459 Life insurance PTP Bank PTP 3,653 5,646 4,593 5,399 5,079 6,141 5,829 5,395 5,954 6,248 Taxes , ,210-1,265-1,474-1,310-1,243-1,332-1,386 Net profit 2,753 4,292 3,689 4,189 3,814 4,667 4,520 4,152 4,622 4,863 Adjustments to net profit Net profit adj 2,787 4,292 4,300 4,189 3,814 4,667 4,520 4,152 4,622 4,863 Per share data (NOK) EPS EPS adj DPS ordinary DPS extraordinary DPS BVPS NAVPS Other key metrics Claims ratio (%) Cost ratio (%) Combined ratio (%) Insurance margin (%) Earned premiums growth (%) Cost inflation (%) ROE (%) RONAV (%) Avg. number of shares (m)

10 Adjustments to annual P&L (NOKm) e 2019e 2020e Earned premiums 17,548 17,797 18,737 20,387 21,272 22,442 23,398 24,276 24,762 25,250 Adj Earned premiums 17,548 17,797 18,737 20,387 21,272 22,442 23,398 24,276 24,762 25,250 Claims costs -13,249-12,438-13,860-14,470-14,598-15,516-16,402-17,484-17,715-18,065 Run-offs ,023 1,033 1,025 1,003 1,019 Underlying Claims costs -13,611-12,780-14,072-14,966-15,322-16,539-17,434-18,509-18,718-19,084 Net profit 2,753 4,292 3,689 4,189 3,814 4,667 4,520 4,152 4,622 4,863 Special items Net profit adj 2,787 4,292 4,300 4,189 3,814 4,667 4,520 4,152 4,622 4,863 RONAV (%) Adjusted RONAV (%) ROE (%) Adjusted ROE (%) DNB versus consensus DNB Consensus Deviation (abs) Deviation (%) (NOKm) 2018e 2019e 2018e 2019e 2018e 2019e 2018e 2019e Earned Premiums 24,276 24,762 24,048 24, Claims costs -17,484-17,715-17,114-17, Operating expenses -3,675-3,753-3,673-3, Underwriting results 3,117 3,294 3,291 3, Return on investment (net) 1,857 2,193 1,850 1, PBT P&C 4,701 5,214 PBT Life & Pension PBT Bank PBT 5,395 5,954 5,450 5, Net profit 4,152 4,622 4,169 4, Per share data (NOK) EPS DPS Other data (%) Claims ratio Cost ratio Combined ratio Source: DNB Markets, consensus data vendors 10

11 Balance sheet (NOKm) e 2019e 2020e Assets 88,547 94, , , , , , , , ,432 Total PP&E Intangible assets 3,577 3,391 3,700 3,943 4,568 4,501 5,030 4,774 4,522 4,273 Investment property 5,248 4,627 4,644 6, Investments in associates 4,533 5,036 4, ,086 3,022 3,480 3,521 3,571 3,628 Equity Investments 4,022 4,321 6,023 7,500 7,202 6,892 7,328 7,415 7,521 7,641 Bonds 31,441 29,148 27,609 26,704 33,262 32,012 31,870 32,246 32,709 33,230 Deposits in credit Institutions 24,457 32,397 42,692 46,970 55,837 60,031 67,010 67,800 68,775 69,869 Reinsurer's share of claims 1, Cash 3,513 2,331 2,729 2,404 3,152 2,159 2,685 3,035 3,402 3,780 Other assets 4,675 4,835 5,173 6,132 6,083 7,994 7,769 7,861 7,974 8,101 Total assets 88,547 94, , , , , , , , ,432 Equity and liabilities 88,547 94, , , , , , , , ,432 Shareholders Equity 23,283 25,618 26,288 21,657 23,331 22,326 23,703 24,455 25,677 27,140 Liabilities 65,263 68,589 82,659 92, , , , , , ,292 Provisions for unearned premiums 9,531 10,142 11,049 11,945 13,097 13,655 15,746 16,082 16,399 16,724 Provisions for claims 29,962 29,562 31,749 32,927 33,179 32,448 31,323 31,991 32,621 33,268 Provsions for bonuses and rebates Other liabilities 24,517 28,477 39,446 45,001 56,976 64,400 75,107 75,107 75,107 75,107 Total liabilities 65,263 68,589 82,659 92, , , , , , ,292 Total equity and liabilities 88,547 94, , , , , , , , ,432 Key metrics Tangible equity 19,707 22,227 22,587 17,714 18,763 17,825 18,674 19,681 21,155 22,867 BVPS growth (%) Reserves/Equity

12 Valuation ratios (NOKm) e 2019e 2020e Share price (NOK) Number of shares (m) Market capitalisation 34,650 39,700 57,850 61,000 71,050 68,500 77,450 66,550 66,550 66,550 Valuation EPS EPS adj DPS ordinary DPS extraordinary DPS P/E P/E adj P/NAV P/B P/Premiums Average ROE (%) Average RONAV (%) Average ROA (%) Earnings yield adj. (%) Dividend yield (%) BVPS NAVPS Key accounting ratios e 2019e 2020e P&L ratios (%) Claims ratio Cost ratio Combined ratio Earned premium growth Cost inflation Balance sheet ratios (%) Equity/Total Assets Reserves/Total Assets Investment portfolio/premiums Equity/Premiums Reserves/Premiums Investment ratios (%) Bonds Equities Real estate Other ROI

13 SAMPO OYJ Weathering cold Nordic winter We expect Q1 EPS of EUR0.63, reflecting somewhat higher claims frequencies stemming from relatively harsh winter weather in the Nordics and headwinds from equity markets and FX, and relatively soft consensus expectations for Nordea s Q1 results (results due at 08:30 CET on 9 May). We forecast an If combined ratio of 86.8%, ~2%-points above previous quarters. After factoring in the depreciation in the value of the Nordea stake into our SOTP valuation, we have lowered our target price to EUR47 (48) and reiterate HOLD. Combined ratio set to be affected by heavy snowfall in the Nordics. Finland, Sweden and Norway in particular saw heavy snowfall and high snow depths in densely populated areas in Q1 (parts of Norway hit 90-year records in terms of snow depths), which we expect to have a negative effect on claims frequencies and thus also Sampo s Q1 combined ratio; we expect an 86.8% ratio, including 1.9% of run-off gains, ~3%- points above Q4 and ~1% below Q1 last year when the Finnish segment was affected by a negative one-offs from lowering the discount rate. Headwinds from various financial holdings. We expect a somewhat weaker investment result at If, Topdanmark and Mandatum, due to weak equity markets in Q1, with the MSCI World index down 2%. In addition, the 5% depreciation of the SEK versus the EUR is likely to hit the Holding segment, as Sampo tends to keep some open SEK positions in its books. Lastly, we factor in fairly soft consensus expectations for Nordea s Q1 results, having disappointed the market lately, particularly on costs. Small positive estimate changes. We have raised our e EPS by ~1% on the back of increased return expectations in the investment portfolio. This is partly offset by a weakening SEK and NOK, reducing the underwriting result. HOLD recommendation reiterated target price lowered to EUR47 (48). We have updated our SOTP model for our new estimates and Nordea s weaker share price, and assume that If... should be trading in line with the high-end of the Nordic non-life sector at a 2019e P/E of 18x. We regard Sampo as a high-quality company with a stable earnings base, but struggle to see any significant positive or negative short-term share price catalysts. We believe the stock is fairly valued, trading at a 2018e P/E of 15x HOLD TP: EUR47.0 SAMPO versus Stoxx 600 Insurance (12m) Apr Jun Aug Oct Dec Feb Apr Sampo Oyj Stoxx 600 Insurance Source: Factset SUMMARY Recommendation (prev.) HOLD (HOLD) Share price (EUR) 44.6 Target price (previous) (EUR) 47.0 (48.0) Upside/downside potential (%) 5 Tickers SAMPO FH, SAMPO.HE CAPITAL STRUCTURE No. of shares (m) Market cap. (EURm) 24,764 Solvency II ratio (%) 0.00 Book value per share (EUR) NAV per share (EUR) 20.5 SHARE PRICE PERFORMANCE Abs. 1/3/12m (%) -1/-4/0 Rel. 1/3/12m (%) -1/-1/-4 High/Low 12m (EUR) 49/43 Free float (%) 77 Source: Company, DNB Markets (estimates) NEXT EVENT Q /05/2018 ESTIMATE CHANGES (EUR) Year-end Dec 2018e 2019e 2020e EPS (old) EPS (new) Change (%) Consensus E. premiums (old) 4,350 4,442 4,517 E. premiums (new) 4,320 4,410 4,485 Change (%) Consensus 4,374 4,442 4,523 Year-end Dec e 2019e 2020e Technical result (EURm) Net finance inc. (EURm) Life insurance (EURm) Bank (EURm) , PTP (EURm) 1,760 1,889 1,871 2,482 2,097 1,918 1,937 Net income (EURm) 1,540 1,656 1,650 2,240 1,846 1,712 1,727 EPS (EUR) DPS (EUR) P/E (X) P/Book (X) Dividend yield (%) ROE (%) Claims ratio (%) Cost ratio (%) Combined ratio (%) Source: DNB Markets, DNB Markets ANALYSTS Niclas Gehin niclas.gehin@dnb.no Håkon Astrup hakon.astrup@dnb.no Please see the last two pages for important information. This research report was not produced in the US. Analysts employed by non-us affiliates are not registered/ qualified research analysts with FINRA in the United States. 13

14 2017 Technical result Return on Investment Other 2018e Technical result Return on Investment Other 2019e DNB Markets Investment case overview Share price performance, DNB Markets target price, bear- and bull-case scenarios 62.0 EUR60.0 (34%) EUR44.6 EUR47.0 (5%) EUR30.0 (-33%) 27.0 Apr 2017 Aug 2017 Dec 2017 Apr 2018 Aug 2018 Dec 2018 Apr 2019 Historical Share Price Performance Price Target (Apr 19) Current Share Price Source: FactSet, DNB Markets Target price methodology We continue to base our target price on a SOTP, valuing the Nordea stake at its current market value, while If is trading at a 2018e P/E of 18x. Our target price implies a 2018e P/E of 16x and P/B of 2.1x (historical averages 11x and 1.5x, respectively). Our bull-case fair value assumes EPS is raised by c10% to EUR3.2 for the reasons outlined below, coupled with 20% multiples expansion. Our bear-case fair value assumes EPS is reduced by c10% to EUR2.6 for the reasons outlined below, coupled with 20% multiples contraction. Source: DNB Markets Downside risks to our investment case Combined ratio above 86% as claims frequency and competition pick up. Premium growth remains negative for a prolonged period. ROI is consistently weaker than we expect. Small P&C insurers grow in size and become increasingly aggressive, and premium growth flattens out. Value of the Nordea stake declines. DNB Markets investment case and how we differ from consensus Combined ratio of c86% with normalised claims frequency. Competitive pressure dampens premium growth, which is somewhat below nominal GDP growth. Our valuation of the Nordea stake is based on its current share price. Upside risks to our investment case The combined ratio stabilises below 86%, as in 2014 and Running yields pick up. Sampo announces high run-off gains on a par with Tryg and Gjensidige. Competitive pressure eases. Value of the Nordea stake increases. Source: DNB Markets Source: DNB Markets Source: DNB Markets Pre-tax profit bridge e (EURm) 2,720 2, ,320 2,120 1, ,720 1,520 1,320 2,514 2,097 1,918 Source: DNB Markets (forecasts), company (historical data) 14

15 Figure 7: Q1 preview YoY growth Full-year figures (DNB) Consensus DNB est. EURm Q117 Q118e Low Median High YoY Pct e 2019e 2020e If Earned Premiums 1,069 1,071 1,053 1,082 1, % 4,506 4,457 4,343 4,286 4,293 4,320 4,410 4,485 Claims costs % -3,217-3,162-3,143-2,905-2,959-3,003-3,076-3,129 Operating expenses % Technical Interest % Technical Result % Return on Investment (Net) % Operating Profit (If...) % Operating Profit (Mandatum) % Nordea (Associates) n.m Topdanmark n.m Holding (Excl. Nordea) n.a Operating Profit (Group) % 1,680 1,760 1,890 1,870 2,514 2,097 1,918 1,937 Net profit % 1,462 1,540 1,656 1,650 2,240 1,846 1,712 1,727 EPS reported % Dividend Payout ratio 63% 71% 73% 78% 64% 85% 93% 94% Loss ratio 71.1 % 70.2 % -1% -1% 71.4 % 70.9 % 72.4 % 67.8 % 68.9 % 69.5 % 69.8 % 69.8 % Expense ratio 16.3 % 16.6 % 0% 2% 16.8 % 16.7 % 13.0 % 16.7 % 16.4 % 16.2 % 16.2 % 16.2 % Combined ratio (net) 87.4 % 86.8 % 82.2 % 86.8 % 87.5 % -1% -1% 88.1 % 87.7 % 85.4 % 84.4 % 85.3 % 85.7 % 86.0 % 86.0 % Run-offs 1.6 % 1.9 % 0% 17% 1.8 % 0.0 % 1.4 % 3.3 % 2.6 % 1.9 % 1.8 % 1.8 % Combined ratio excl. Run-offs 89.0 % 88.7 % 0% 0% 89.9 % 87.7 % 86.8 % 87.7 % 87.9 % 87.6 % 87.8 % 87.8 % Net Earned Premiums Norw ay % 1,605 1,517 1,408 1,321 1,317 1,300 1,309 1,318 Sw eden % 1,372 1,377 1,404 1,453 1,495 1,522 1,573 1,607 Finland % 991 1,030 1, Denmark % Baltics % Combined ratio Norw ay 77.7 % 85.8 % n.m. 10% 83.3 % 82.0 % 88.0 % 84.8 % 80.8 % 82.9 % 81.7 % 81.7 % Sw eden 82.2 % 83.6 % n.m. 2% 93.5 % 94.6 % 86.8 % 83.0 % 84.6 % 87.4 % 89.3 % 89.3 % Finland % 91.1 % -16% -15% 88.6 % 89.7 % 95.0 % 82.5 % 88.4 % 85.9 % 85.6 % 85.6 % Denmark 96.7 % 90.6 % -6% -6% 91.2 % 83.6 % 90.8 % 95.3 % 98.8 % 88.2 % 88.2 % 88.2 % Baltics 89.8 % 90.1 % 0% 0% 88.5 % 85.0 % 85.7 % 89.9 % 88.9 % 84.9 % 84.9 % 84.9 % Technical Result Norw ay % Sw eden % Finland % Denmark n.m Baltics % # of shares (End of period) Source: Company (historical figures), Vara Research (consensus from 21 February), DNB Markets (estimates) Figure 8: Sampo SOTP (EURm/EUR) Sampo SOTP Market cap Per share Nordea at EUR8.4/share 7, If at 2019 P/E 18x 12, Topdanmark stake 1, Mandatum at 2019 P/E 13x 2, Excess capital 2, SOTP 25, Source: DNB Markets 15

16 Figure 9: Nordic non-life P/E (x) Figure 10: Nordic non-life dividend yield (%) P/E Gjensidige Sampo Tryg Topdanmark 2019e Average Dividend yield Gjensidige Sampo Tryg Topdanmark 2019e Average Source: DNB Markets Source: DNB Markets Figure 11: Sampo P/E 12-month forward Figure 12: Sampo P/BV 12-month forward 19x 2.5x 17x 15x 2.3x 2.1x 1.9x 13x 11x 1.7x 1.5x 1.3x 9x 1.1x 7x 5x Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec x 0.7x 0.5x Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 P/B 2018e Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Sampo P/E 12mth fwd Mean +1std.dev. -1std.dev. Sampo P/B 12mth fwd Mean +1std.dev. -1std.dev. Source: FactSet Source: FactSet Figure 13: European insurance P/B versus ROE 6.0x 5.0x Tryg 4.0x 3.0x Gjensidige Topdanmark 2.0x Sampo 1.0x Source: Bloomberg 0% 5% 10% 15% 20% 25% ROE 2018e 16

17 Forecast changes P&L New Old Change (EURm) 2018e 2019e 2020e 2018e 2019e 2020e 2018e 2019e 2020e Earned Premiums 4,320 4,410 4,485 4,350 4,442 4, Claims costs -3,003-3,076-3,129-3,035-3,099-3, Operating expenses Technical interest Technical result Return on Investments Pre-tax profit P&C Life insurance PBT Bank PBT 2,097 1,918 1,937 1,861 1,880 1, Taxes Net profit 1,846 1,712 1,727 1,663 1,678 1, Adjustments to net profit Net profit adj 1,846 1,712 1,727 1,663 1,678 1, Per share data (EUR) EPS EPS adj MtM EPS DPS ordinary DPS BVPS NAVPS Other key metrics Claims ratio (%) Cost ratio (%) Combined ratio (%) Insurance margin (%) Earned premiums growth (%) Cost inflation (%) Avg. number of shares (m) Source: DNB Markets 17

18 Forecast changes By segment and assumptions New Old Change (EURm) 2018e 2019e 2020e 2018e 2019e 2020e 2018e 2019e 2020e Earned premiums P&C Norway 1,300 1,309 1,318 1,302 1,311 1, P&C Sweden 1,522 1,573 1,607 1,550 1,602 1, P&C Finland P&C Denmark P&C Baltics Technical result P&C Norway P&C Sweden P&C Finland P&C Denmark P&C Baltics Combined ratio P&C Norway P&C Sweden P&C Finland P&C Denmark P&C Baltics Source: DNB Markets 18

19 Quarterly numbers (EURm) Q Q Q Q Q Q Q1 2018e Q2 2018e Q3 2018e Q4 2018e Q1 2019e Earned Premiums 1,080 1,074 1,069 1,067 1,086 1,071 1,071 1,077 1,083 1,089 1,095 Claims costs Operating expenses Technical interest Technical result Return on Investments PTP P&C Life insurance PTP Bank PTP , Taxes Net profit , Adjustments to net profit Net profit adj , Per share data (EUR) EPS EPS adj MtM EPS DPS ordinary DPS BVPS NAVPS Other key metrics Claims ratio (%) Cost ratio (%) Combined ratio (%) Insurance margin (%) Earned premiums growth (%) Cost inflation (%) Avg. number of shares (m) Adjustments to quarterly numbers (EURm) Q Q Q Q Q Q Q1 2018e Q2 2018e Q3 2018e Q4 2018e Q1 2019e Earned premiums 1,080 1,074 1,069 1,067 1,086 1,071 1,071 1,077 1,083 1,089 1,095 Claims costs Run-offs Underlying Claims costs Net profit , Net profit adj , RONAV (%) Adjusted RONAV (%)

20 Quarterly numbers by segment and assumptions (EURm) Q Q Q Q Q Q Q1 2018e Q2 2018e Q3 2018e Q4 2018e Q1 2019e Earned premiums P&C Norway P&C Sweden P&C Finland P&C Denmark P&C Baltics Technical result P&C Norway P&C Sweden P&C Finland P&C Denmark P&C Baltics Combined ratio P&C Norway P&C Sweden P&C Finland P&C Denmark P&C Baltics

21 Annual P&L (EURm) e 2019e 2020e Earned Premiums 4,094 4,362 4,506 4,457 4,343 4,286 4,293 4,320 4,410 4,485 Claims costs -3,059-3,146-3,217-3,162-3,143-2,905-2,959-3,003-3,076-3,129 Operating expenses Technical interest Technical result Return on Investments PTP P&C Life insurance PTP Bank , PTP 1,232 1,616 1,679 1,760 1,889 1,871 2,482 2,097 1,918 1,937 Taxes Net profit 1,042 1,404 1,462 1,540 1,656 1,650 2,240 1,846 1,712 1,727 Adjustments to net profit Net profit adj 1,042 1,404 1,462 1,540 1,656 1,650 2,240 1,846 1,712 1,727 Per share data (EUR) EPS EPS adj MtM EPS DPS ordinary DPS BVPS NAVPS Other key metrics Claims ratio (%) Cost ratio (%) Combined ratio (%) Insurance margin (%) Earned premiums growth (%) Cost inflation (%) ROE (%) RONAV (%) Avg. number of shares (m)

22 Adjustments to annual P&L (EURm) e 2019e 2020e Earned premiums 4,094 4,362 4,506 4,457 4,343 4,286 4,293 4,320 4,410 4,485 Claims costs -3,059-3,146-3,217-3,162-3,143-2,905-2,959-3,003-3,076-3,129 Run-offs Underlying Claims costs -3,194-3,279-3,296-3,164-3,204-3,046-3,070-3,083-3,156-3,209 Net profit 1,042 1,404 1,462 1,540 1,656 1,650 2,240 1,846 1,712 1,727 Special items 150 Net profit adj 1,042 1,404 1,462 1,540 1,656 1,650 2,240 1,846 1,712 1,727 RONAV (%) Adjusted RONAV (%) ROE (%) Adjusted ROE (%) DNB versus consensus DNB Consensus Deviation (abs) Deviation (%) (EURm) 2018e 2019e 2018e 2019e 2018e 2019e 2018e 2019e Earned Premiums 4,320 4,410 4,374 4, Claims costs -3,003-3,076 Operating expenses Technical result Return on investment (net) PBT P&C PBT Life & Pension PBT Bank PBT 2,097 1,918 2,205 1, Net profit 1,846 1,712 1,819 1, Per share data (EUR) EPS DPS Other data (%) Claims ratio Cost ratio Combined ratio Source: DNB Markets, consensus data vendors 22