Alm Brand As Adr

call today. If you would like to ask a question during the Q&A session, please press star 1 on your telephone keypad. If you would like to withdraw from the queue, please press star 2. I will now hand the floor to Rasmus Werner Nielsen, CEO, to begin. Please go ahead.

Thank you. Good morning, and thank you for joining us on our conference call. I am Rasmus Werner Nielsen, as usual, I have with me today our CFO, Andreas Ropen Madsen, and the head of our IR team, Matt Tinkle. This morning, we published our interim report for the second quarter, and as usual, I will walk you through the operating highlights, and then Andreas will comment on the financials. Please turn to slide two. I'm pleased with the overall financial performance in the satisfactory Q2, with good cost control leading to a significant drop in the expected ratio year-on-year, while the underlying loss ratio is strongly improving helped by synergies and price adjustments. Our organic growth of about 8% in Q2 is very satisfactory as well. We reach an insurance revenue growth of 11% in the personal lines, which implies we're taking quite a bit of market share with our strong bank partnerships as a driver while price adjustments are kicking in as well. Synergies are materializing just as we planned and currently we see good momentum for claims as well as cost synergies. As justice for significantly lower discounting effect on claims, we reach an improvement in the underlying loss ratio of about five percentage points. And now I'll turn to slide three with our financial highlights. Insurance revenue grew to about 2.9 billion in the quarter with a very satisfactory growth in personal lines, as mentioned before. The technical result was 520 million compared to 312 million last year. We view this as a healthy improvement supported by a strong underlying development and good cost control. We see a clear path towards reaching our strategic target of a technical result in 25 of 1.85 billion. Investment income in Q2 was a very satisfactory profit of 102 million, which were primarily driven by a positive result in the free portfolio. And now I'll turn to slide four and five Both slides illustrate that we have had major claims below our normal level, nine out of the last 10 quarters, with Q2 last year being the one quarter above the normal level. On a group level, we had major claims of just 4.8% on average during the last 10 quarters compared to our normal expected level of 7%. Despite some volatility between the quarters, we feel we're in a better overall position in our continuing business following the divestment of energy and marine. However, we will continue to work with the further reduction of the volatility in major claims. And now, let us continue on slide seven. The group made a technical result of 520 million in the quarter, up from 312 million due to synergies, premium growth, and profitability improvements. Insurance service results from commercial lines was 234 million against 36 million last year, in which commercial lines was impacted by very large major claims, as well as underlying losses above normal. In personal lines, we had a small increase in insurance service results to 286 million from 276 million last year, with good underlying improvements countering much lower runoff gains. So even though the insurance service result was just a bit Higher this year, the quality was much better. Please turn to slide eight. Insurance revenue grew strongly by 8.3% in the quarter compared to 5.2% last quarter. I would say overall premium growth is very satisfactory with an accelerating strong momentum. In personal lines, we are clearly taking market share on top of indexation and the price increases we have implemented. We do consider eight 11% growth in personal lines, a very bright spot in our report. In commercial lines, we see a rebound in the premium growth to 5.3%, despite a drag from the repricing efforts we are undertaking among our largest clients, especially in relation to unprofitable standalone workers' compensation. And moving on to slide nine on the claims ratio. The Q2 claims ratio was down 490 basis points year-on-year, in a quarter with lower major claims, but also a bit higher with the related claims than Q2 last year, as well as lower runoff gains this year. A reinstatement premium paid to our reinsurance related to the Mexico case was a drag as well. The underlying claims ratio was 420 basis points better year-on-year, especially driven by commercial lines. Moving to an undiscounted basis, we see a 520 basis point improvement in the underlying claims year-on-year. Commercial lines stand out with around 750 basis points improvement in the underlying undiscounted claims year-on-year, while personal lines improved by around 300 basis points. And now please turn to slide 10. The combined ratio in personal lines increased to 81.6 from 80.2 last year, due to 160 basis point runoff gains in the quarter compared to runoff gains of 530 basis points last year, as well as higher weather-related claims this year. The cost ratio and underlying losses improved nicely. As I said before, the quality is getting much better as premium adjustments are helping the cost ratio as well as the underlying loss ratio. We're seeing motor frequencies starting to drop and a continuing increase in the average motor repair cost. In total, we see a bit of stabilization in the overall motor claims experience. Please turn to slide 11 and the commercial lines. Commercial lines, we see a significant decrease in the combined ratio to 83.2 this year from 97.3 last year. The massive drop is due to a combination of major claims coming down from a very high level last year while the underlying loss ratio is proving significantly as well. The cost ratio dropped 0.8 percentage points, while synergies and cost initiatives take in. On the other hand, lower discounting effects make a significant headwind for the combined ratio and conversion lines this year. And with these comments, I will now hand over the word to Andreas, who will walk us through the synergies, investments, and the guidance.

Thank you, Rasmus. Now please turn to slide 13 for an update on synergies. We had a nice jump in harvested synergies in Q2 2025 to 151 million from 106 million in Q2 2024. This implies a 45 million uptick in synergies year-on-year, improving our underlying claims ratio of 0.7 percentage points and our cost ratio with 0.8 percentage points year-on-year. The synergy uptake 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 we have stated. And now I move to slide 14 and the investment results. The investment result was very satisfactory, profit of 102 million, primarily driven by a positive return from our free portfolio in combination with a profit from our match portfolio, which was helped by the VA component, a component that we can't hedge. Return on bonds and equity was the key drivers for the strong results. Finally, please turn to slide 16 for the outlook for 2025, which we update today. We upgrade our guidance for the insurance service result in 2025 by 50 million to 1.6 to 1.8 billion. This is due to the realized run-up gains in Q2. The cost ratio is unchanged at 17% for 2025, while the combined ratio excluding the runoff result in the second half of 2025 is expected to be 84.5 to 86.5, an improvement of 50 basis points, again, due to the runoff gains in Q2. The guidance includes synergies of 600 million and the effect of implemented pricing efforts in commercial as well as personal lines. We upgrade the guidance for the investment result in 2025 by 50 million to 250 million, while the guidance for other income and expenses of minus 125 million remains unchanged for now. Consequently, group profit excluding special costs is expected to be 1.73 to 1.93 billion before tax, excluding runoff gains for the second half of 2025. In addition, with regard for unchanged 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 for 2025. And with this, I conclude our presentation and hand over the word to our moderator. Thank you.

Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. If you'd like to withdraw your question, please press star 2. First question here is from Asbjorn Mork from Danske Bank. Please go ahead.

Yes, good morning and congratulations on the strong numbers. Just one question on your 25 guidance. So the 1.7 billion mid-range and I guess the sort of like runoff gain second half of the year, 120 million-ish, brings us to 18.20 million. It's a little bit short of the 1850 official target. Is that the reinstatement premium from Mexico that is sort of the issue here, or is there anything else we should be aware of? I guess the strong development in the first half of the year should have had a sort of a positive impact here, but just a little bit curious on what's cooking there.

Yeah, thank you. I'll try to add some clarity to that. I think the canopy, you're right. I would, however, say that, I mean, we guide for sort of round numbers here, 1.7 being a round number. I think it fully is in line with an overall expectation of the 1850, including a normalized runoff. So I wouldn't be too much into that.

Okay, fair enough. Then on the growth side, first, if you could sort of split the 11% growth in private

into what sort of is is repricing what is a private cycling and what is the underlying growth in your traditional brands is sort of a a sort of rough split there would be nice yeah i can try to do that um well 11 percent uh we're very very satisfied with that but that's a an impressive number we also believe uh we do have uh to do it in rough numbers uh I would put around 3% coming from indexation. And then I would say around 4% this time is from the pricing strategy. And the reason for that being quite high this time is also that for this quarter now, I've seen the effect of repricing of our travel insurance portfolio, where we've had some big changes going into Q2. And that actually accounts for roughly around two percentage points just for that. So that's why we are high on the pricing effect this time around. And then the rest, around 4%, we would consider market shares gained. A lot of that is also from banking partners, but we also have a good momentum in the other brands. But still, I would say it's true that we have a strong momentum, especially coming from the banking partners.

All right, that's very helpful. Then on the corporate, the that was sort of launched a few years ago, and we haven't had that much since. Is that one of the drivers as well for your growth in the corporate space or commercial space? Or is there sort of a potential here that we should maybe factor into our models going forward?

To take commercial lines, we're just about 5%. closer to what we would consider, let's say, a normalized growth rate, also with the price and indexation we have in the numbers. Not a lot of market shares being had there. It's mostly indexation and price. Avail cycling specifically does not really impact the numbers. It is still, I would say, something where we have yet to tap into the potential. It doesn't amount to that much in the total group numbers for now.

And how come about cycling is not really delivering anything or is that maybe some something you'll come back to in on the 18th of November?

Well, I think I could start just with some brief comments around it. I think about checking is also quite new. You could look at private checking that has been, you know, the private personal lines, private checking is a long standing motor being running now for 25 years, where a minibar group has sort of revitalized that and also brought on new partnerships, and that's going extremely well. Adelstiging is still, in a historical context, quite new, and as such, it will take some time for that to build to something that matters for an adminibar group context. So we're starting from basically zero when we took over.

Okay. Then on the actual repricing, so at the Q1 report, we discussed on the call, We discussed that there was quite a lot of premium still to be earned from repricing that you had already initiated or announced that would come through in the rest of the year. Where are we now in terms of how much do we have still on the premiums table and from repricing measures already carried out?

would say i mean we gave some uh you know clarity around how the renewals in overall uh in round numbers are and and for if you look at the total group we would have around uh 50 renewing in q1 we would have 15 renewing in q2 and q3 and then we have 30 percent um sorry 20 percent uh for for the last uh for q4 That means that right now we would be in rough numbers somewhere with around a third of the portfolio still being renewed for the remainder of the year. And then you could say, okay, but we maybe started a bit before year end, which is also true. So that might be putting it a bit high in terms of the effect of our pricing. So max around a third still to be had in the coming renewals from what we've already put through.

All right, that's very helpful. And then final question from my side on the capital side. So your solvency obviously comes out very nicely, 194. With the PIM model approval, I guess you'll be something like 43% higher, which I guess is going to bring your solvency to almost 240% in the next quarter. How should we look at that, and how you want sort of like should should we wait until the full year 25 before you will address the capital position or it's going to be a capital market day topic or or is it going to be already q3 how should we look at this um yeah i mean the pym model for now as we've already guided is around 500 million expected in in scr relief

I think that comes to around 18 percentage points or so on solvency. All else equal. I think our guidance for now would be that there are sort of the moving factors. There's some tier two we can't include after SCR comes down. On the other hand, we also do have some surplus to the SCR. But I think for now, we'd like people to think more or less around a one-on-one factor between the SCR relief and the capital reduction coming out. We also have ratings and other factors to our rating and other factors to factor in. So for now that's what we sort of would guide in numbers and you're right that I think as a part of the CMD later we'll be coming with a sort of a full review also of our overall capital targets and also in terms of tier two, tier one, and how we will be sort of executing on the surplus capital. So that would be a story for later this year.

So just to understand, Andreas, so the 18% solvency, is that because your tier one and tier two capacity will drop, or why is it only 18?

Well, I just took the 500 and divided by 2,800, which is our SCR for now. So that's the mechanical calculation. And what I said before is, I mean, if you look at it all as equal as when you could say we should maybe multiply the 500 by 1.2. So that's 600. That's from 50% of it disappears because of the SCR effect. And then we have the coverage, surplus coverage of 1.7 on the SCR. But what I'm saying is I think you should guide around 500 for now. Think about 500 because we also have rating and other factors at least to analyze before we are able to determine where we will end up exactly.

No, no, I fully agree. It was more that if I take your SCR minus 500 on the same own funds, you're going to have 43% disappoints higher solvency, right?

Yeah, but that's right, Ashton. When you do that calculation, it does go up.

Okay, so the 18 was the drop in the ACR.

I was looking at it from a different perspective.

Okay, got it.

It's a very nice object, and then we will have to decide what we will do with that. But we are still having a target of 170.

All right, but that's very clear. Thanks a lot.

Our next question is from Mathias Nielsen at Nordea. Please go ahead.

Thank you very much and congratulations on the strong numbers this morning. So my first question is a bit around this Mexico case. So the first question being like, is the more that we should expect from this divested business or is that it? And then related to this, like my understanding of the change that we have seen in reinsurance market recently has been that retention like the what you pay on the on the first last page you have this has gone up quite a lot because the reinstatement fees has grown quite a lot meaning that you basically pay almost everything for the first last claims you have but then the second and third one gets cheaper so when i look into the second half of this year if you have a large claim how would the mechanism around reinsurance work would that be just as it is before or would it actually mean that you would you will have a bit more or a bit less retention on the next one, so to say. How should we think about it? Also, the mechanism about how many times can you reinstate in those reinsurance? Is there any limit that we should be worried about or how to think about that?

Yeah, I can try to act on that. To start with just a comment on the Mexico claim. That is, as we also mentioned in the report, it's the only the only dispute and claim from the old energy and marine business, which we still retain in Enminiband, all else is not, so just to restate that, it's not a part of the Enminiband group anymore. Looking at that claim specifically, if we look at the reinsurance for that, we're actually tapping into a program which is dated, I think, all the way back to 2012, So it's a historically determined program we still tap into. That's the way our type of reinsurance works. So the prepayment and other things related to that is in a historic program, which is not relevant for us today in a minibank group. Also, it was within, it's handled, Yeah, so basically you can say there's no direct connection between this program and the programs we have in effect today. But as a general comment, you're right that there has been in recent years with the hardening of the reinsurance market, there has been some push to put some of these prepayments up for the reinstatements. In the old days, in the old good days, a lot of our programs didn't have reinstatements for the first for the first claim event in the program. But just to restate, the actual claim here and the program it's been handling has no connection to the programs we have for our continuing business.

That's very clear. Thanks a lot for that, Clare. I just wanted to check that there was no risk on that, but it sounds like that's a done deal. So that's great to hear. Then secondly, the expense ratio. uh i'm a bit uh i'm a bit curious to see like the it seems like the expenses in in especially in the commercial lines is almost flat uh q and q where last year they dropped quite dramatically and given the beat on the on on the premium group i would actually expected that to be a bit more tailored to the expense ratio is there any front loading of cost when you sell something like how is the variable pay for your for your sellers and and and how is that structured

I mean, overall, I would say that the beat we see here is more or less what you would expect on average, also going forward, corresponding to also roughly the guidance we have. Keep in mind also that some of the growth we have, when you grow a lot, not the growth coming from pricing, but from the market shares, that's actually, that's not, that typically also, there's some headwind in there for the cost ratio because you pay provisions for your tight agents and in some instances you will also going forward pay, not this quarter, but when we renew, we'll pay for the partners. So it's not as such you can say that we should have a lot of necessarily tailwind from the growth we see in the beginning. Actually, that tailwind comes when things maybe even out a bit over time.

Okay, so that's like one, two quarters away still that we would want to see like the tailwind from the growth that you saw this quarter on the expense ratio.

I mean, I think I'm talking in more broader terms, but at least it's something that takes some time to materialize. With insurance, you sell by a tight agent, you actually, the cost of sale is expensed when you sell. So in general, when you grow a lot, you will have a lot also in the quarters you grow, you will have some headwind from that.

Yeah, that's very clear. And then my last one, it's a bit coming back to Aspern's question. So when I look at the guidance on the insurance service, you lifted by 50 million this quarter. It was the same last quarter, broadly on par with the runoff gains you have seen in the first half. But then you also, on the slide, you also show that large claims have been better than normal. If you do the math, it's around 100 million. So why is the guidance not up by more than just the runoff gains in the first half? It seems a bit odd to me, given that the premiums is also quite strong. Is it just you being super cautious, or how should we think about it? Is there anything that we should be worried about for the second half, which we don't know yet, or the start of the second half that we don't know yet?

No, there's nothing to be worried about. I think without reading too much into it, I think, as I said, we've guided for round numbers here. And you should in no way read this in any way that we see something to be worried about in the second half. On the balance, as I said, I think this would correspond fine with our overall target. And I can also do the math. So mechanically, I can see where you're going. But again, I wouldn't read too much into that.

Okay, that's fine. I would assume like the 1850 was based on normalized large scales. I think large scales have been much stronger.

To be clear, you could say that we are just on sort of the verge of you could consider maybe adding 50 if you had a different approach here. We've tried to be prudent and put it here for now, but I wouldn't read more into it than that.

Perfect. Thanks a lot. That was awesome. I'll jump back in the queue.

Thank you. As a reminder, for any final questions, please press star 1 on your telephone keypad. So we have no further questions on the call. So Rasmus, I'll hand back to you for any closing comments.

Yeah, thank you all for participating, and thank you for your questions. Thank you.

This concludes today's conference call. Thank you all for joining. You may now disconnect.