Alm Brand A/S

Good morning, all. Good afternoon, all. Welcome to the Elm Brand Q424 earnings 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 4 by 1 on your telephone keypad. I will now hand the floor to Rasmus Bernd Nielsen to begin. So, Rasmus, please go ahead when you're ready.

Yeah, good morning, and thank you for joining us on our conference call. I'm here today with our CFO, Andreas Robben Madsen, and our head of IR, Mads Tinko. This morning, we published our interim report for the fourth quarter, and as usual, I will walk you through the operating highlights, and then Andreas will comment on the financials. Let us move to slide two. Overall, 24 ended better than expected with last claims of just 4.7% and weather-related claims of 2.9%, being in the normal range we expect and somewhat lower than 4.1% in 23. We had strong growth in our personal lines in 24 of 7.7%, while also ending the year with a Q4 growth rate above 7%. Thanks to our strong partnerships with local as well as countrywide banks, we're taking market share in personal lines. We view growth in commercial lines as decent in 2024 with about 3% while ending the year at a high note above 5% growth in Q4. Despite a significant headwind on motor claims, We had an improvement in our undiscounted underlying loss ratio of 120 basis points in 24, while ending the year with 190 basis points improvements in Q4, following profitability initiatives kicking in, along with an uptick in the synergy effects. The synergies continue to take in as planned, with the run rate increasing quarter by quarter. On the cost side, we improved the cost percentage to 18.3% in 2024 as planned, but we did need to make an extra effort to make this happen. Combined with a very satisfactory investment result for 2024, the profit before special cost and tax reached 1.75 billion, somewhat above our latest guidance of 1.58 to 1.68 billion. Our proposed dividend of 0.6 crowns per share and total buybacks of 250 million represent a record high normal distribution of 1.15 billion and the payout ratio of 96%. The coolant transaction is simply paying off on our distributions as well. And now I turn to slide three with our financial highlights for Q4. The insurance service result of Q4 24 of 440 million was a big improvement from 287 million last year, which was driven by much lower weather-related claims, but also with support from strong growth in personal lines of about 7% and underlying improvements on claims. The investment result of 74 million in Q4 was satisfactory, despite being lower than last year, and we ended 24 at a very satisfactory level for the investment result of 439 million. Special cost of 109 million is somewhat lower than last year and contains 52 million for the integration of quota as well as 50 million cost for our FTE reductions announced in October 24. And now I turn to slide four with just a few additional remarks on 24. Here I wanted to highlight the improvement we made with an insurance service result of 1.4 billion despite the headwind we saw on motor in 24 while run-up gains at 1.4% were one percentage point lower in 2024 than in 2023, and a bit below the long-term expected level of 2%. We are repricing on motor, following the uptick in frequency in recent years, as well as average repair cost was up in 2024. We expect the repricing effects to kick in into 2025, while recent additional uptick in motor frequency seems to moderate quite a bit, Thus, we see 24 form a good basis for reaching our targets in 25. And now I turn to slide five and six. Both slides illustrate that we had major claims below our normal level in seven out of the last eight quarters. On a group level, we had major claims of 4.7% on average during the last eight quarters compared to our normal expected level of 7%. Despite some volatility between the quarters, we feel we are in a better overall position or continuing business reflecting the upcoming divestment of energy and marine. However, we will continue to work with a further reduction on the volatility in major claims. On slide seven, you can see the payout ratio for 24 of 96%. The payout ratio is achieved for the actual net profit with some at-backs after tax related to the integration of quota and amortization of intangible assets. We are close to a 100% payout ratio again for 24, as we have been for recent years. This reflects our strong underlying capacity for distributions. We already completed the first buyback of 150 million related to the 24 earnings, while we will soon launch the second tranche of 100 million to run in February. So adding together the remaining ordinary share buyback in February, the 1.6 billion buybacks we expect to do related to the divestment of energy and marine after the expected closing in March, and the DPS of 0.6 crown to be paid in April, we expect a total effect of 2.6 billion energy distributions in 2025. Let's go into the detail with the insurance service result of segments on slide 9. Commercial lines did quite well in the fourth quarter with an insurance service result of 238 million compared to 181 million in fourth quarter last year. The main driver for the improvement was weather related claims dropping to 3.4% in Q4 24 from 10.4 in the quarter the year before, while an 0.8 percentage point drop in the cost ratio health commercial lines as well. Personal lines almost doubled on the insurance service results to 202 million in Q4 compared to the year before. But for personal lines, the improvement was driven by lower weather-related claims as well as a huge improvement in the underlying claims ratio with a drop of about 3% year-on-year. For personal lines, a 1.1% drop in the cost ratio health as well. And now please turn to slide 10. Insurance revenue grew by 6.2% in the quarter with a good growth in both lines. In Q4, growth was 7.2% in personal lines and 5.1% in commercial lines. In personal lines, we are still taking market share due to our strong partnerships, bank partnerships, while repricing related to high motor claims helps as well. Commercial growth is coming back to a level around in the station of 3%. While the 2 percentage points effect from new legislation on workers' compensation comes on top of this in the fourth quarter growth rate of 5.1%. And moving on to slide 11 and the claims ratio. The Q4 claims ratio was down 3.8 percentage points year-on-year driven by much lower weather-related claims. The 6 percentage point drop in weather-related case was countered by a 3% drop in runoff gains. The underlying claims ratio improved by seven cheap basis point year-on-year driven by personal lines, a successful repricing on motor claims, while commercial line was adversely impacted by a lower discounting effect on claims and the remaining headwind on motor, even though we view this headwind as moderating in the quarter. Moving to an undiscounted basis, we reached 190 basis point improvement in underlying claims year-on-year, which is very positive for the improvements we are expecting in 2025. And now please turn to slide 12 and the personal lines. Here you can see the drop in the cost ratio of 1.1 percentage point I mentioned before, following necessary FTE reductions, as well as synergies kicking in. The drop in the claims ratio is a massive 5%, with underlying improvements above 3 percentage point as the main trial, I am quite proud of this and believe we are standing out compared to our peers on the underlying development in personal lines. Please turn to slide 13 and the commercial lines. Again, I have already touched upon the improvements we are seeing in our commercial lines. In Q4-24, we are seeing much lower weather-related claims than Q4 last year, but also much lower runoff gains and an adverse effect from the lower discounting rate on claims. The underlying claims experience is not that different from last year, but still with a moderate headwind promoter. Our expense ratio in commercial line in Q4 is down 0.8 percentage points year-on-year. And with these comments, I will now hand over the word to Andreas, who will walk us through synergies, investment, and the guidance.

Thank you, Rasmus. Please turn to slide 15. We continue to move forward on our various synergy initiatives according to our plans, and this quarter we have realized 138 million, leading to 460 million harvested in synergies for 2024, slightly above our target of 450 million. 138 million harvested synergies in Q4 is a significant uptick from the 75 million in Q4 of 2023, as we are now seeing more support from IT and administration for the year-on-year uptick. I'm proud to point to the fact that we are moving into 2025 with a run rate for synergies of 550 million, which is not that far from the 600 million targeted in P&L synergies for 2025. And now I move to slide 16 and the investment result. The investment result was a profit of 74 million driven by a positive return from our free portfolio amid a drop in interest rates in Q4, while the matched portfolio delivered a return a bit above zero. Overall, I'm quite pleased with the investment result for 24, which ended close to the $450 million that we guided for. Even though we focused much more on the insurance sales result than the investment result, it's clear that a positive investment outcome like we had in 24 is a nice add-on to our distributions of dividends and buybacks for the year. And now, finally, please turn to slide 18 for the outlook for 25, initially stated on January 22nd. Our guidance includes a technical result excluding run-offs of 1.5 billion to 1.7 billion including expected synergy gains of a total of 600 million. The guidance also reflects continued pricing efforts in commercial as well as personal lines. The cost ratio is expected to be at 17% and the combined ratio excluding the runoff result is expected to be at 85.5 to 87.5. We expect an investment result of 200 million in 2025 based on the current return for the free portfolio and the series of the match portfolio. other activities we guide a deficit of around 125 million consequently group profit excluding special costs is expected to be 1.58 to 1.78 billion before tax excluding one of gains for 25. in addition we guide for the restructuring costs of 175 million of which 25 million relates to the separation of our energy and marine business while we expect depreciation on intangible assets to affect the income statement by approximately $335 million in 2025. Lastly, we expect a result after tax in discontinued activities of $250 million. And with this, I conclude our presentation and hand over the word to our moderator. Thank you.