Sampo unlikely to participate in bidding war for Esure Group

Automatic translation: Originally published in Finnish on April 1st, 2025 at 15:49 AM EET. Please note that the automatic translation currently only covers the text visible here and may contain errors. You can provide feedback on the translations here.

Bloomberg reported on Tuesday that the British P&C insurer Esure Group is subject to an auction process. Esure Group was taken private in 2018 by the private equity investor Bain Capital. According to the news, the following are considering submitting a bid: Allianz, Geico, Ageas, Allstate and Sampo. The deadline for submitting offers is, according to the news, April 7. Sampo has not commented on the matter, and we emphasize that this is only a market rumor. We consider it very unlikely that Sampo would end up participating in, let alone "winning", the auction for Esure.

Esure has achieved a significant turnaround in earnings

Esure Group is a British insurance company that focuses primarily on car and home insurance. The company has invested heavily in digital services and its business relies strongly on digital channels. The company's gross written premiums in 2024 were approximately EUR 1.3 billion and its earnings before taxes were approximately 150 MEUR. The combined ratio was at an excellent level of under 85% for the UK market. However, the company's historical earnings level is clearly more modest than this, and for example, the earnings in 2023 were still at a loss. In addition, the reported earnings for 2024 have been adjusted for significant one-off items, and the reported net income for 2024 was 57 MEUR. Naturally, the sustainability of the earnings turnaround is also still a question mark at this stage, considering the volatility of the UK market.

Similar company profiles

Hastings' performance has been strong under Sampo, and in our view, it is clear that the Hastings acquisition has created clear value. In this sense, we think it is very logical that Sampo is also actively exploring inorganic growth opportunities in the UK market. At least on paper, Esure Group seems quite similar to Hastings, and in theory, this could be a viable fit for Sampo.

We think it is very unlikely that Sampo would buy Esure

Even if Sampo were potentially interested in Esure, we consider it very unlikely that Sampo would end up buying Esure. The biggest problem we see is the auction situation, where price tags usually rise quite high. Sampo is known for its conservative capital allocation, which does not align well with "winning" an auction. Esure Group is also practically the same size as Hastings, and the deal would be demanding in terms of integration. Although Sampo has an excellent track record in integrations, the similar size categories of the companies inevitably increase the risks associated with integration, especially as the company has a significant integration underway in Denmark with Topdanmark. Thirdly, the deal would be quite large even on Sampo's scale and a really significant financial investment. We would be surprised if the transaction price did not rise above EUR 1.5 billion, and financing this would be difficult for Sampo with its current balance sheet structure. A deal of this size in Great Britain would also be completely inconsistent with the company's previously communicated capital allocation policy. In our view, a total reversal of the previously communicated capital allocation policy would only be justified in a situation where Sampo is offered an exceptional opportunity to buy a high-quality asset at a blatant undervaluation (a so-called "once in a lifetime" opportunity). In the case of Esure, it is difficult to see these conditions being met.