Alm Brand A/S

Good morning or good afternoon all and welcome to the AlmBrand Q2 2024 Earnings Call. My name is Adam and I'll be your operator today. If you'd like to ask a question in the Q&A portion of today's call, you may do so by pressing star followed by one on your telephone keypad. I will now hand over to CEO Rasmus Werner-Nielsen to begin. So Rasmus, please go ahead when you are ready.

Good morning and welcome to AlmBrand Group's second quarter of 24 conference call. With me today, I As usual, we have our CFO, Andreas Ruben Madsen, and our head of IR, Mads Tinko. This morning, we published our interim report for the second quarter. I will walk you through the operating highlights as well as our divestment, our energy and marine business announced on July 1st. In the end, Andreas will comment on the financials. Overall, I view our results for Q2 as acceptable, given the headwind we have on large claims and increasing motor claims. in the Danish market in general. And just to be clear, the development on motor claims does call for additional profitability initiatives from our side. On a positive note, I'm very pleased with our continued momentum on premium growth in Q2, as well as increasing synergies kicking in. Let's now look at the highlights. Please turn to slide two and some of the headlines for our business in the second quarter of the year. As mentioned before, I view our results for Q2 as acceptable given the headwind we have on large claims and the increasing motor claims in the Danish market in general. While motor frequency has been increasing for many quarters, we are now seeing higher average repair costs related to motor claims, which leads to a rise in our expenses for motor claims. This calls for even more profitability initiatives. Our growth is standing out again in the quarter, and especially I see a bright spot on our growth in the personal lines of 3.7. 7.3% year-on-year. We do take quite a bit of market share in personal lines with our strong bank partnerships as a driver. Synergies are kicking in as we planned and currently receive good momentum for claim synergies. Overall, synergies reduced our underlying loss ratio by more than one percentage point in the second quarter of 2024 year-on-year, while helping the cost ratio a bit as well. We keep a strong cost focus these days to safeguard the synergies are not eaten by general increases in costs. Based on our satisfactory results for the first half of 24 and a strong capital position, we announced a new share buyback program this morning of 150 million. This should be seen as part of the payout ratio for 24. In general, we have a keen focus on returning capital to our shareholders. And now I'll turn to slide three with our financial highlights. Insurance revenue for our continuing business grew about 2.7 billion in the quarter with a very satisfactory growth driven by personal lines as mentioned before. Insurance service we saw for our continuing business was 312 million compared to 425 in Q2 last year. And remember Q2 23 benefited from a very terrible claims experience. Investment income in Q2 was a profit of 65 million, which mostly relates to income in our free portfolio. I will comment on our divestment of energy and marine shortly. On this slide, you can see that our discontinued business made a loss after tax of 89 million in Q2, which is primarily related to regulations of a few old claims from before we took over Kolen in 22. In particular, the adverse development relates to a single offshore wind project dating many years back. This is highly atypical even for this book. Now, if we turn to slide five, I will focus a bit on the divestment of our energy and marine business to the Norwegian insurer GAR announced on July 1st. I'm very pleased with this transaction as it puts our energy and marine business as well as our people working in the business into the hands of a better long-term owner than us. Today, we have a strong position with the market for ensuring wind turbines globally, but we believe this market is set for a heavy expansion in the coming years, and we do not have the risk appetite for matching this. With the divestment, we are freeing up capital, which together with the cash payment amounts to a planned distribution of 1.6 billion to our shareholders after completion of the deal. At the same time, we are also freeing up management time to focus on our new position as the only large insurance company with a pure focus on Danish customers. We also see that the investment leads to a risk for volatility in large claims ahead. I will just run shortly with slide six that shows the transformation history since I took over as the CEO end of 19. It has certainly been an exciting journey to first refocus our company to a purely non-life insurance company by selling our bank and life company. Then we doubled in size by buying Kodan Denmark, and now we are divesting the globally oriented energy and marine business of Kodan to refocus our business to Denmark. We will now put a keen focus on how we can use our new scale in the Danish market for the non-life insurance to have its efficiency gains for many years ahead while gaining even more ground in the Danish market. And now let's continue on slide nine. The group made a technical result of 312 million in the quarter. Insurance service result from personal lines was 276 million against 161 million last year as premiums grew and the cost ratio was reduced. The runoff gains in this quarter was a part of the improvement in personal lines as well. In commercial lines, we have dropped in the insurance service results to 36 million from 264 million last year, driven by very high last claims and much lower runoff gains. Underlying claims were also a headwind in the quarter driven by motor and workers' compensation. Please turn to slide 10. Insurance revenue grew by 5.3% in the quarter compared to 5.6% last quarter, and we are very pleased to see the high growth level from Q1 continue into Q2. In personal lines, we are clearly taking market share on top of indexation and the price increases we do. We do consider 7.3% growth in personal lines a quite bright spot in our report. In commercial lines, we are seeing an acceptable premium growth of 3.3%. And moving on to slide 11 and the claims ratio. In Q2, the claims ratio were up 600 basis points year-on-year in Q2, with 480 basis points higher large claims than Q2 last year. The underlying claims ratio increased by 210 basis points year-on-year, driven by higher motor claims and general headwind on small claims. Commercial lines were also negatively impacted by workers' compensation. Moving to an undiscounted basis, we see a 170 basis point increase in underlying claims year-on-year. We do see this development calls for further profitability initiatives. And now, turn to slide 12. Combined ratio in personal lines dropped to 80.2 and Q2 from 87.6 last year. The drop was due to a lower cost percentage, but also had relatively higher runoff gains. Underlying claims in personal lines was flat year-on-year, which is more than acceptable given the strong headwind on motor in this quarter. Please turn to slide 13 and the commercial line. Combined ratio of commercial lines was an adverse development in Q2 growing to 97.3, which is clearly unacceptable in the long run. However, Q2 was impacted by very high large claims which will vary over time while runoff gains were quite low compared to last year. We are looking into how to handle the Q2 increase in underlying claims in commercial lines of around 4%, while we cannot entirely rule out a spillover from the above 8% reduction in underlying claims in commercial lines in last quarter. And with these comments, I will now hand over the word to Andreas, who will walk us through the synergies investment and guidance.

Thank you, Asmus. Please turn to slide 15 for an update on synergies. We had an increase in harvested synergies in Q2 2024 to 106 million from 62 million in Q2 2023. This implies 44 million uptake in synergies year-on-year, improving our underlying claims ratio with 1.3 percentage points and reducing our cost ratio by 0.3 percentage points year-on-year. The synergy uptake is currently concentrated, especially on the claim side. We remain confident that the synergies for the full year will add to the 450 million that we've stated. And now I move to slide 16 and the investment result. We made an investment result of 65 million, with the largest part stemming from our free portfolio. Financial markets were volatile in Q2, but leaving us with a decent return, mostly related to our bond portfolio. We maintain a conservative stance regarding our investments, but we are changing our portfolio a bit in order to get a higher expected return. And now finally, please turn to slide 18 for the outlook for 24. First, I will state our guidance for continuing business, which is unchanged relative to our company announcement from July 1st relating to the divestment of energy and marine. We guide for an insurance service result in 24, excluding runoffs for the remaining quarters of 1.15 billion to 1.35 billion. This includes expected synergies of a total of 450 million. The cost ratio is expected to be in the range of 18 to 18.5%, and the combined ratio excluding run-offs for the remainder of the year is expected to be 88 to 90. We guide for an investment result of around 400 million, and for other activities, we guide a deficit of around 125 million. Group profit excluding special costs is expected to be 1.43 billion to 1.63 billion before tax. The guide for special costs in the range of 200 to 250 million for the integration of CODAN and the realization of synergies. Then coming to effects from discontinued business, our guidance for depreciation and intangible assets drops to 350 million in 24 from 360 million, while the result for discontinued business after tax drops to zero from 75 million before. This relates to a few old energy claims of Kodam. And with this, I conclude my presentation and hand over the words to our moderator. Thank you.