Alm Brand A/S

Good morning or good afternoon and welcome to the Arm Brand Q1 2025 results call. My name is Adam and I'll be your operator today. If you'd like to ask a question at the Q&A portion of today's call, you can do so by pressing start or by one on your telephone keypad to enter the queue. I will now hand the floor to Rasmus Werner-Nielsen to begin. So Rasmus, please go ahead when you're ready.

Good morning and thank you for joining us on our conference call. I'm Rasmus Werner-Nielsen as usual. I have with me today our CFO Andreas Ruben Madsen. and the head of our IIR team, Matt Zinkel. This morning, we published our interim report for the first quarter. And as usual, I will walk you through the operating highlights and then Andreas will comment on the financials. Let's now look at the highlights and please turn to slide two for some of the headlines regarding our business for the first month of the year. As mentioned before, I'm pleased with the overall financial performance. In a satisfactory Q1, we sustained strong organic growth and good cost control leading to a significant drop in the expense ratio year-on-year. We reach a premium growth of 8.2% in personal lines despite one day less than in the first quarter of 2024. This implies we are taking quite a bit of market share in personal lines with our strong bank partnership as a driver. Synergies are kicking in just as we planned and currently we see good momentum for claims as well as cost synergies. It justifies significantly lower discounting effect on claims, as well as an underlying one-off gain. In Q1 last year, we reached an improvement in the underlying loss ratio of around two percentage points. In Q1, we streamlined our group executive management from five to four members, with our CFO, Andreas Ruben Madsen, stepping up as a as a DPG CEO or executive board now consists of Andreas and myself. In the beginning of March, the divestment of Energy and Marine was finalized and soon thereafter a buyback program of 1.6 billion was launched. In April, a dividend of 0.6 Danish crowns per share linked to the 24 earnings was adopted by the AGM. Following the AGM or board pointed to the independent member as his new chairman did not stand for re-election. And now I turn to slide three with our financial highlights. Insurance revenue grew to about 2.8 billion in the quarter with a very satisfactory growth in personal lines as mentioned before. The technical result was 337 million compared to 291 million last year. as a good start to the year, also considering relatively low runoff gains and costs still being front-end loaded in Q1 to some extent. Investment income in Q1 was a satisfactory profit of 96 million. This relates to the feed portfolio as well as the interest hedging of our technical provisions. Discontinuing activities after tax made up 181 million which was driven by the gain booked in relation to the divestment of energy and marine in March with disposals of intangible assets countering the gain and a run-up loss in Q1-25 being a negative component in the quarter. Now I'll turn to slide four and five. Both slides illustrate that we have had major claims below our normal level in eight out of the last nine quarters. On a group level, we had major claims of just 4.8% on average during the last nine quarters compared to our normal expected level of 7%. Despite some volatility between the quarters, we feel we are in a better overall position in our continuing business following the divestment of Energy Marine. However, we will continue to work with a further reduction of the volatility in major claims. Now, let us continue on slide seven. The group made a technical result of 337 million in the quarter, up from 291 million primarily due to synergies kicking in and premium growth. The insurance service results from commercial lines was 146 million against 214 million last year, as major claims came from a very low level in Q1 last year, while still being below a normal level. In personal lines, we had an improvement in the insurance service result to 191 million from 77 million last year. This was primarily due to lower weather related claims, high premium growth in the quarter of about 8%, combined with lower nominal cost, but also higher runoff case than last year. Please turn to slide eight. Insurance revenue grew nicely by 5.2% in the quarter compared to 6.2% last quarter, considering a technicality of one day less in the quarter than compared to last quarter. I would say overall premium growth is very satisfactory with a continuing strong momentum. In personal lines, we are clearly taking market share on top of the and the price increases we do. We do consider 8.2% growth in personal lines as a bright quite a bright spot in our report. In commercial lines, we're seeing a lower permanent growth of 2.1%, but we view this as acceptable given the repricing efforts we are undertaking among our largest clients, especially in relation to unprofitable standalone workers' compensation. And moving on to slide nine and the claims ratio. The Q1 claims ratio was up 50 basis points year-on-year, in a quarter with higher major claims, but also lower weather-related claims than in Q1 last year, as well as higher runoff gains this year. The underlying claims ratio was 70 basis points, worse year-on-year, driven by 140 basis points lower discounting effects. This especially had an adverse effect in commercial lines. Moving to an undiscounted basis adjusted for a right back of a sector bankruptcy, helping 120 basis points, in Q124, we see 190 basis points improvement in the underlying claims year-on-year, a broadly symmetrical improvement in both commercial and personal lines. And now please turn to slide 10. The combined ratio in personal lines improved to 87.1 from 94.4 last year due to a steep decline in the cost ratio of 2.2 percentage points. low weather related claims, but also higher runoff gains. We're seeing a stabilization in motor frequency, while price increases are countering a continued increase in the average motor repair cost. And please turn to slide 11 and the commercial lines. In commercial lines, we see an increase in combined ratio to 89.3 from 84.1 last year, primarily due to major CLAIMS MOVING UP FROM A VERY LOW LEVEL OF JUST 3.5% IN Q1 LAST YEAR. MAJOR CLAIMS OF 8.7% IN COMMERCIAL LINES THIS QUARTER IS STILL BELOW THE NORMAL EXPECTED LEVEL OF AROUND 12%. THE COST RATIO DROPS 1.1% WHILE SYNERGIES AND COST IMMEDIATES TAKE IN. ON THE OTHER HAND, LOWER DISCOUNTING EFFECTS MAKE UP A SIGNIFICANT HEADWIND FOR THE COMBINED RATIO IN COMMERCIAL LINES IN THIS QUARTER. And with these comments, I will now hand over the word to Andreas, who will walk us through the synergies investment and the guidance.

Thank you, Asmus. Please turn to slide 13 for an update on synergies. We had a nice jump in harvest of synergies in Q1 25 to 145 million from 98 million in Q1 of 24. This implies a 47 million uptick in synergies year on year, improving our underlying claims ratio with 0.9 percentage points and our cost ratio by 0.8 percentage points year on year. The synergy uptick is currently quite balanced between the cost side and the claim side. We remain confident that the synergies for the full year will add up to the 600 million that we had previously stated. And now I move to slide 14 and the investment result. The investment result was a satisfactory profit of 96 million driven by a positive return from our free portfolio as well as the profit from our match portfolio, which was helped this time by the VA component, a component that we can't hedge. Please turn to slide 16 now for the outlook for 2025, which we update today. Today we upgrade our guidance for the insurance service results in 2025 by 50 million to 1.55 billion to 1.75 billion. This is primarily due to the realized runoff gains in Q1. The cost ratio is expected to be 17% for 2025 and the combined ratio excluding the run-offs for Q2 to Q4 is expected to be 85 to 87, an improvement of 50 basis points. Again, primarily due to the run-off gains we had in Q1. The guidance includes synergies of 600 million and the effect of implemented pricing efforts in commercial as well as personal lines. The guidance for 2025 investment results of 200 million and other income and expenses of minus 125 million remain unchanged following Q1. Consequently, group profit excluding special costs is expected to be 1.63 to 1.83 billion before tax, excluding the runoff gains for Q2 to Q4 of 25. In addition, we guide the restructuring costs of 175 million, of which 25 million relates to the separation of energy and marine, and while we still expect the depreciation on intangible assets to affect income by approximately 335 million in 2025. Lastly, the result after tax in discontinued activities was 181 million, with the divestment of energy and RIN now being finalized in Q1. And now finally, please turn to the slide 17. We're pleased to announce that on Tuesday, 18th of November, we will host the Capital Markets Day at our headquarters here at Mittermolen in Copenhagen. On the CMV, we will launch our strategy as well as our financial targets for the coming strategy period of 26 to 28. And we hope to see as many of you as possible. And with this, I conclude our presentation and hand over the word to our moderator. Thank you.