Alm Brand A/S

Good morning, all. Good afternoon, all, and welcome to the Arm Brand Q3 2024 results call. My name is Adam, and I'll be your operator today. If you'd like to ask a question during 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 the floor to CEO Rasmus Werner-Nielsen to begin. So, Rasmus, please go ahead when you're ready.

Yeah, good morning, and welcome to Arm Brand Group's third quarter of 24 conference call. As usual, today I have with me our CFO, Andreas Ruben Madsen, and our head of IR, Mads Tinker. This morning, we published our interim report for the third quarter. I will walk you through the operating highlights, and in the end, Andreas will comment on the financials. Overall, our view of results for Q3 are satisfactory, especially seen in the light of headwind. We see promoter changes in the Danish market in general. especially pleased with the strong growth in personal lines in Q3, while commercial lines growth has muted this quarter. Synergies are kicking in, and we do reach small undiscounted underlying improvements this quarter, despite the headwind on motor. Let's now look at the highlights. Please turn to slide two and some of the headlines for our business in this quarter. As mentioned before, I view our results at Q3 as satisfactory, especially given the headwind we have for motor claims in the Danish market in general. While motor frequency has been increasing for many quarters, we are now also seeing higher average repair costs related to motor claims, which leads to a significant rise in our expenses for motor claims. This calls for even more profitability initiatives, which we are now executing. Major claims in Q3 were significantly down from the high level in Q2 and below what we consider a normal level. Our growth in personal lines is standing out again in the quarter with a year-on-year growth of 7.7%. We do take quite a bit of market share in personal lines with our strong bank partnership as a driver. Commercial premiums were flat year-on-year from last year But this is acceptable to me, given the normal volatility-related profitability initiatives among our larger customers. Synergies are kicking in just as we planned. And while we have seen good momentum for claim synergies for a period, I note higher contributions for admin and IT this quarter. We had a smaller year-on-year reduction in our cost ratio this quarter compared to recent quarters, In order to secure a lower run rate for costs going into 2025, we executed a new FGE reduction last week, where 110 positions were eliminated. A satisfactory Q3 and a strong investment result led to an upgrade in our guidance for 2024 for the 2024 profit before taxing an extraordinary cost of 100 million to the range 1.58 to 1.68 billion. Now I turn to slide three with our financial highlights. Insurance revenue for our continuing business grew to $2.8 billion in the quarter, with a good growth in the quarter driven by personal lines, as mentioned before. Insurance service results for our continuing business was $400 million compared to $366 million in Q3 last year. Many elements were quite stable from last year, while lower weather-related claims drove the increasing insurance service results. premium growth helped as well investment income in q3 was a profit of 133 million which mostly mostly related to income no fee portfolio related to bonds this quarter we had a fairly strong result on discontinue activities after tax of 48 million as well now let's turn shortly to slide four Just to illustrate my point from the start of the presentation regarding moderate major claims in Q3. Looking at our continuing business back from Q1 23, it's clear to me that our last quarter with major claims of 8.8% was stochastically high and not a new normal. Our view is that a normal level for major claims for our continuing business is around 7%. In reality, the average the last seven quarters has been just 4.9%, so I'm quite comfortable with the current level. Slide five shows the same story. This is just to highlight we see normal major claims in our commercial lines of 12% with an average in the last seven quarters of just 8.9%. And now let's continue on slide seven. The group made a technical result of 400 million in the quarter. In assurance service result, was balanced between personal lines and commercial lines, contributing around 200 million each, a large improvement in personal lines and a moderate decrease for commercial lines. Both segments were helped by less weather-related claims than last year, although still above normal level. Personal lines were helped by strong growth, synergies, and a drop in the cost ratio of 0.7 percentage points year-on-year, and relatively strong underlying improvements linked to earlier profitability-enhancing initiatives. In commercial lines, we had a drop in the insurance service results to 197 million from 228 million last year, driven by underlying headwinds from motor claims and workers' compensation. Payments, as well as the cost ratio, was flat year-on-year, providing no improvement to the insurance service results, while the drop in the interest rate had negative discounting effects, especially so in the commercial lines. Please turn to slide eight. Insurance revenue grew by 3.9% year-on-year in the quarter compared to 5.3% last quarter. We are very pleased to see the strong growth in personal lines continue in Q3 while the muted growth in commercial lines is acceptable for now as the drop in growth is mostly linked to profitability initiatives targeted at larger customers. In personal lines, we are clearly taking market share on top of indexation and the price increases we do. We do consider 7.7% growth in personal lines a quite bright spot in our report, and the net winning of business volumes comes with a thanks to our many banking partners, and our strong corporations. And moving on to slide nine in the claims ratio. The Q3 claims ratio was down 50 basis points year-on-year in Q3, with 150 basis points lower with the related claims than in Q3 last year. The underlying claims ratio increased by 50 basis points year-on-year, driven by higher motor claims, while commercial lines were also negatively impacted by workers' comp. The latter partly related to lower discounting effect. Moving to an undiscounted basis, we see a 40% decrease in underlying claims year-on-year. Small improvements is driven by the profitability initiatives and synergies being larger than the additional headwind promoter in 24. But we still see a strong need for further profitability initiatives going into which we are executing on now. Now let's turn to slide 10. Combined ratio in the personal lines dropped to 86.0 in Q3 from 89.7 last year. The drop was due to a lower cost percentage, but also supported by lower weather-related cases, while underlying cases in personal lines was down 2.2 percentage points year-on-year as well. I view the underlying improvement as very satisfactory, given the headwind on motor again in Q3-24. Please turn to slide 11 and the commercial lines. Combined ratio of commercial line was in an adverse development in Q3 growing to 85.5, which was driven by an increase in underlying claims of 3.2%. This was partly caused by lower discounting effects. On top of this, headwinds from the underlying KMC motor continue in Q3, where premiums as well as the cost ratio were just flat year-on-year in the commercial segment. We now execute a new profitability initiative to support the underlying development into 2025, and last week we executed on the FTE reduction to bring down admin costs in general. And with these comments, I'll now hand over the word to Andreas, who will walk us through synergies investment and the guidance.

Thank you, Asmus. Please turn to slide 13 for an update on synergies. We had an increase in housing synergies in Q3 to 118 million from 68 million in Q3 23. This implies a 50 million uptick in synergies year-on-year, improving our underlying claims ratio of 1.4 percentage points and our cost ratio by 0.4 percentage points year-on-year. The synergy uptake is still somewhat concentrated on the claim side while administration and IT synergies are starting to pick up this quarter. We remain confident that the synergies for the full year will add to the 450 million that we have traded previously. And now I move to slide 14 and the investment results. We made a net investment result of 133 million stemming from our free portfolio while we had a small loss on the match portfolio. Our return in Q3 was driven by bond prices moving up due to the decrease in interest rates. We maintain a conservative stance regarding our investments, but we are changing our portfolio a bit in order to get a higher expected return while drop in interest rates put some pressure on our structural investment return after 2024. And now finally, please turn to slide 16 for the outlook for 2024. We upgrade our guidance for the insurance service result in 24, excluding runoffs for the remaining quarters, to 1.25 to 1.35 billion from previously 1.15 to 1.35 billion. We thus upgrade the midpoint by 50 million following a good Q3 and narrow the range with 100 million due to less than two months remaining of the year. The guidance includes expected synergies of a total of 450 million. The cost ratio is still expected to be in the range of 18 to 18 and a half, while the combined ratio excluding the runoff for the remainder of the year is expected to be 88 to 89, which is an improvement from 88 to 90 before. On the back of a strong investment result in Q3, we upgrade our guidance for the investment result in 24 by 50 million to around 450 million, and for other activities, we still guide a deficit of around 125 million. Group profit excluding special costs is thus expected to be 1.58 billion to 1.68 billion before tax from previously 1.43 to 1.63 billion. We now guide for special costs in 2024 around 250 million compared to previously 200 to 250 million, as this item now includes 50 million related to the FTE reductions in October, not recognized as integration costs related to CODA. We expect a depreciation on intangible assets of 350 in 24, while the results of discontinued business after tax in 24 is still guided to zero. And with this, I conclude my presentation and hand over the word to our moderator. Thank you.