Tryg A/S Ord New

Good morning, everybody. My name is Gianandrea Roberti. I'm Head of Investor Relations at TREC. We published our full year results earlier this morning, and I have here with me Johan Brammer, Group CEO, Allan Theysen, Group CFO, and Michael Carsten, Group CTO, to present the figures. I would just like to remind everybody to ask one question at a time to allow the highest number of questions from participants. With these words, over to you, Johan.

Thanks a lot, Gian, and I will dive directly into slide three with the financial highlights. TRYG is today reporting an insurance service result for Q4 of 1.654 billion versus 1.472 billion last year, primarily driven by an improved underlying performance and tight cost control. The insurance service result was impacted by higher than normal weather claims and a substantial drop in interest rates in the quarter. Premiums growth was 6.3% for the group, once again driven by a good development in the private and commercial segments. In this context, price increases play a significant role and remain key to continue to fight off inflation. The group underlying claims ratio improved by 50 basis points while private deteriorated modestly in line with previous quarters. The private performance is impacted by an increase in repair costs for auto spare parts in Norway and Sweden, driven by currencies, but also a slight increase in motor frequencies flagged previously and as expected in a post-COVID normalization. This has been taken care of with price increases and tightening conditions, and we'll get back to that later on in the presentation. The investment result ended up at 146 million, with positive developments in the free and match portfolio, somewhat offset by a negative value adjustment in the inflation swap in a quarter characterized by a substantial drop in inflation expectations. The asset mix has remained largely unchanged. The pre-tax result is just below 1.4 billion for the quarter and around 5 billion for the full year, and this drives a return on owned funds, the so-called roof, of just about 30% in the quarter and approximately 25% for the full year. Implicitly, Troik pays a Q4 DPS of 1.85, and by the end of January, we expect to complete the 1 billion buyback launched after the Q3 results. The solvency ratio ended at 197 at the end of 2023, a comfortable level supportive of additional future capital repatriations. We're pleased to note that the ordinary dividend per share for 2023 is around 6% higher than before the acquisition of RSA and subsequent capital raise. And with that, I'm turning to page 4, where we zoom in on the customer satisfaction for the quarter. Customer satisfaction improved from 85 to 86 Q&Q, despite a year with numerous weather-related events and a difficult situation for many of our customers. The improvement in the customer satisfaction in a challenging year reflects Truex's dedication and persistent effort to keep our customers at the center of everything we do. We continue to work with all aspects of the customer journey, And especially our focus on customer touchpoints and processes was the driving elements for the uplift. And with that, I turn to page 5, where we unfold the growth in the ISR for the quarter. The group insurance service result totaled 1.654 in Q4, almost 200 million higher than the corresponding quarter last year. On this slide, we're showing the reported ISR for our three main segments, be it private, commercial, and corporate. And as always, there are a number of moving parts impacting the reported ISAs. In general, the higher insurance service result is driven by an improved underlying performance and tight control on cost. Looking at the main moving parts in the quarter, we highlight on the positive side an improved underlying performance, a good and predominantly price-driven growth, a higher runoff result, and lower large-end weather claims in total, and finally lower costs. And on the negative side, we need to highlight the lower interest rates and the unfavorable currency movements in the quarter. On page 6, we revisit the progress on the synergies as always. And TRYG is for the quarter reporting 84 million of synergies, bringing the accumulated total to 711 million, out of the targeted 6.50 in 2023. It is clear from that that we are well on track towards the targeted 900 million in 2024, despite headwinds from currencies. Approximately 30% of this quarter's synergies stem from expenses, more than 45% stem from claims and procurement, and around 25% from commercial activities. Many of the initiatives in this quarter are actually a continuation and essentially full-run impact of what we've mentioned already in previous quarters. We, as you can see, find the synergy realization for admin and distribution. And in this quarter, we continue to benefit from the previously mentioned termination of marketing spend and contracts primarily in Sweden. Procurement continues to benefit from better contracts and is also positively impacted from sales of items related to large claims through an online auction, which also has a positive ESG angle. This approach stems from Sweden and is now being fully implemented across the TRYK group. In claims, we also continue to further benefit from improved processes for fraud and recourse. And the commercial synergies are positively impacted by price increases in Norway and Sweden, but also by increased cross-setting of Moderna's niche products into the Trocansa customer base. An adverse currency development in both the SEC and NOC has, as mentioned previously, created some headwinds in the last couple of years when it comes to the synergy realization, but our commitment to the communicated targets remains very firm. And with that... I'm turning to the next section on insurance revenue and I'll move to slide 8 in the presentation. TRK is reporting a top line growth of 6.3% or around 6% when adjusted for the customer conversion in Sweden as part of the RSA transaction and a technical adjustment of a partner agreement. The conversion in Norway is now finalized and did not have any impact this quarter. Likewise, we expect that the conversion in Sweden will not have any impact in 2024. Growth was predominantly driven by the private and commercial segments and continued to be driven mostly by price increases to mitigate claims inflation. Profitability continues to be our key priority and we are pricing accordingly. The private segments reported a top-line growth of 7.7%, predominantly driven by price adjustments. And as mentioned, we've been converting the Moderna portfolio in Sweden into Trygghensas and also saw regulation for a big partner agreement. Adjusted for these two factors, the growth was approximately 7% for the private segment. The commercial segment had a good top-line growth of 4.2%, also predominantly driven by price adjustments, and the corporate segment had a modest top-line growth in line with expectations of around 2.5%. The growth in the corporate segment was primarily impacted by the continued rebalancing of the portfolio and further pricing initiatives. With that, I turn to page 9 on average prices. Average insurance prices are continuing to increase across products and countries as a consequence of our focus on rates to mitigate inflation. It is important to stress that the numbers in this slide relate to average prices and not to rate increases, as it does not include any risk-mix changes. For instance, housing content insurance in Sweden increased by 2.6% only, and the low increase comes as a result of a risk mix change to more content insurance, which has a significantly lower average price. Average premium increases are in particular high in Norway to mitigate inflation and drive profitability improvements as needed. It is worth highlighting that these charts display the impact on earned premiums. This means that the full impact of price adjustments in general will take 12 to 24 months before they will be reflected fully in these charts. With that, I turn to page 10, where we see that the retention levels are in line with recent quarters. We generally see a slight drop in retention for selected areas compared to the same period last year. This follows our focus on mitigating inflation through firm price adjustments. The development is in line with our expectation and in line with our experience from the past periods in time where there's been similar needs for price adjustments. We do see the highest impact on retention within the segments of customers with short duration. And in that context, it's important to remember that customers with short durations in general are the least profitable customers. And with that, I turn it over to you, Mikke.

Thank you, Johan. And we now turn to slide 12 and the underlying claims development. The group underlying claims ratio improved 50 basis points broadly in line with previous experience. Commercial and corporate segment improvements offset a modest deterioration in the private segment. The private underlying claims ratio deteriorated 30 basis points, which is primarily driven by selected claims trends, which I will come back to in the next slide. We continue to expect an improved underlying claims ratio moving into 2024, which will support the profitability targets of 7.2 to 7.6 billion insurance service results and a combined ratio at or below 82. Turning to slide 13 and the inflation development. Starting on the left-hand side, there are no big changes in our view of inflation and no changes in our commitment to increase prices to offset the inflation development. It's important to stress that although inflation pressure has slowed down, in particular in Denmark, and trends are going in the right direction, inflation remains a major focus area for us. On the right hand side, we add some more nuance to the situation in motor. First of all, it's important to note that motor inflation comes from three different sources. First, normal inflation, which gives us higher average claims. Second, currency effects in Sweden and Norway, as mentioned previously, has an effect on average cost of spare parts from weak currencies. And third, claims frequency increases. Year-on-year, claims frequencies have increased between 5 and 9 percent depending on country, somewhat tilted to low-cost claims. We expect claims frequencies to increase in short-tailed motor comprehensive as an effect of higher traffic density and vehicle risk mix changes, for instance higher share of electrical cars. In the latter parts of 2023 we can see that claims frequency increase is in the high end of our expected range, not least for glass claims. The total claims inflation is dealt with through price increases and changes in deductibles, and our overall commitment to handle inflation remains firmly unchanged. Turning to slide 14, and here we show the development of large claims, weather claims, runoffs and interest rates used to discount the claims reserves. Weather claims were higher than normal in Q4, while large claims were below normal. The full year 2023 has been challenging in volatile items where both large and weather claims ended up above our long-term normal levels. We maintain our guidance of 800 million net annual expectations for reasons I will come back to in the next slide. The runoff result was 3% both for Q4 and the full year. which is at the low end of our 3% to 5% range, guided for in the 2024 strategy. As usual, the runoff result is impacted by many things, including the inflation spike in 2022. In Q4, we saw a drop in interest rates following the reduced forward-looking inflation expectations, and this drives a lower discount rate of 2.6%, nearly a percentage point lower than at the level in Q3. Turning to slide 15 and the long-term development in volatile items of large and weather claims, which are illustrated on a net basis. As it is evident from the slide, 2022 and 2023 has been unusual in terms of large claims, and this has been driven by specific claims that make up a high share of the total. and we continue to believe in our guided 800 million net level. Weather claims has been a major focus area for us, in particular during the second half of 2023. We expect most years to be below the guided level and specific years to be above. In 2023, we were affected by several events and we can also note that the pattern of events gave little reinsurance relief. And we continue to believe that a level of 800 million Danish is to be expected. It's important to stress that we will always monitor development in large and weather claims, scrutinized trends and patterns. It should be remembered that we run a relatively short tail business and therefore if we need to adjust something, we will push it through our pricing and can therefore adjust things relatively quickly. Turning to reinsurance on slide 16. The reinsurance renewal can be divided into two stories, one for property and one for other programs. For the CAT program and all other smaller programs, renewal was done at largely unchanged conditions and unchanged premiums. For property reinsurance, the market continues to be hard with premium increases as a consequence. The hardening was in line with our expectations and the price increases are passed on fully to our commercial customers. We have also chosen to increase our property retention to 200 million Danish, following our larger size from the Treganza acquisition. Finally, our reinsurance panels continue to be at a very high credit quality. And with that, I pass over to you, Gian.

Thanks, Miche. We are showing in the first slide of the investment portfolio total invested asset of 64 billion as per year end, split in a matched portfolio of 46 billion and a free portfolio of 18 billion. As always, the matched portfolio remains structured to match the insurance liabilities, while the free portfolio seeks to optimize risk-adjusted returns. The composition of the free portfolio is largely unchanged from Q3, Equity exposure has remained low. It's slightly down from 2.5 to 2.4 billion and it's 4% of total invested asset. Properties exposure also came down slightly as well. The investment result was 146 million in Q4. Good developments both in the free and the match portfolio have been somewhat offset by higher than normal other financial income and expenses lines. The free portfolio has reported good returns from equities and fixed income asset classes, while the environment for the real estate asset class is somewhat more challenging. The match portfolio result in Q4 was slightly below normalized expectations. These are around 70-75 million per quarter, including the previously called technical interest, which was part of the insurance service result under FRF 4, but also a significant drop in interest rates in Q4. We have added more details in the annual report on this specific point. Other financial income and expenses included a negative charge of 222 million in Q4 from a negative value adjustment of the inflation swap. following sharply lower inflation expectations in the last three months of the year. Adjusting for this, other financial income and expenses would have been closer to normal. In the annual report, we have also published a couple of indexes that should help you modelling the inflation swap going forward. Finally, I would like to remind you that we published an IFRS 17 DAC at the beginning of March, explaining, among other things, the change account in practice regarding inflation swap and our updated approach to inflation expectations. Over to you, Allan.

Thank you, Gian. Please turn to the first slide in the Solvency and Expenses section for details on the solvency position. Trygg reports a solvency ratio of 197 at the end of Q4 versus 194 at the end of Q3. As always, the main drivers of the solvency ratio are the operating earnings and the dividend cost. Owned funds at Q4 versus Q3 are also driven by a positive currency movement increasing the value of the subordinate loans by 86 million Danish kroner while a partial call of a Tier 1 loan back in October helps explain 185 DKK of the residual item other, somewhat offset by some other positive smaller moving parts. The SCR is virtually flat as a drop in the market risk charge, primarily driven by slightly reduced properties and equities exposure, is partly offset by higher insurance capital charges, which is currencies driven. Now please turn to the next slide. This slide shows the long-term development of the solvency ratio for the last five years. A solvency ratio of 197 is a robust level showing the resilience of our business. We remain very focused on our dividend profile and we are not known to sit on unnecessary capital, also because we have very important profitability targets that keep us disciplined, such as the return on own funds, at 25% going into 2024. We will come back as we get closer to the full year with an updated view and message on our solvency position and a closer look at the implications for our extraordinary repatriation. Important for us to stress that we also prefer some degree of stability on the extraordinary components. Please turn to the next slide showing the updated solvency sensitivities. There is not much news here. The biggest sensitivity remains to spread risk as we are big owners of covered bonds which represents more than 80% of our total invested assets. This is nothing new. Solvency ratio shows relatively low sensitivities to movements in all other asset classes. Now, please turn to the next slide for details on the expense ratio. The expense ratio was 13.5% and lower than the same period last year and fully in line with our IFRS 17 updated CMD target of around 13.5%. The expense ratio was supported by RSA synergies of 26 million Danish kroner this quarter related to admin and distribution costs. As mentioned before, a significant amount of these synergies are reinvested in business development, especially in Sweden. And it's worth mentioning that the entire reduction in the number of FTEs from the recent reorganization are not yet fully reflected in these figures, as these numbers are based on FTEs on payroll. I would like to repeat that Trygg has a strong focus on the expense level, as this is a competitive advantage supporting our strong market position. With this, I would like to hand it back to you, Johan.

Thanks for that, Ellen. And I will take you to our financial targets and page 26 in the presentation. Our target for the insurance service result in 2024 remains firmly unchanged at 7.2 to 7.6 billion, as repeated on multiple occasions. We continue to stress that the external environment will impact where we end within the range. Most importantly, interest rate levels and currencies are some of the main unknowns. I would also like to stress that the 2024 insurance service result target is driven by an expense ratio target around 13.5%, as mentioned by Elland, and a combined ratio target at or below 82%. On the next slide, page 27, we repeat our guidance for selected important items when it comes to our 2024 P&L. I'm not going to go through all of this, but I would like to repeat that the synergy level for 2024 remains at 900 million as the most important one. Additionally, we've already disclosed the date of our London Capital Market Day on December 4th. And we, of course, look forward to seeing many of the people here on this call on that day in London. On the next page, on page 28, we conclude this presentation repeating all our financial targets for 2024. We've shown this many times before and I would like to do it again today to underpin that we remain very committed to the delivery of all of these. I'll not spend time adding single comments on each target as these are well known to all of you by now. I could probably say the same for page 29, but I would like to also here repeat our favorite quote by John D. Rockefeller before I turn it back over to you, Jan.

Thanks a lot. We are now open for questions.

Thank you. We will now start the question and answer session. If you do wish to ask a question, please press five star on your telephone keypad. If you wish to withdraw your question again, you may do so by pressing five star. Please respect only one question per participant, and afterwards you can re-enter the queue for another one.

We will have a brief pause while questions are being registered. The first question is from Asbjørn Mark, Danske Bank. Please go ahead. Your line will now be unmuted.

Yes. Hi, good morning. And thanks for taking my question. I'm limited to one question as requested. And basically, Johan, going back to your favorite quote from John D. Rockefeller and capital distribution. If I look at your business model, obviously much more stable than some of your peers, and not only on the weather claims, but also the whole personal accident business in Sweden. If I look at your 197% solvency ratio at Q4, I look at the... you can see potential benefits from the asset mix changes in your free portfolio that you didn't carry out in Q4, but maybe could do in 20, in 23, sorry, but could do in 24. And I look at your tier one and tier two capacity, which is 1.6 billion at this stage. If I then add the, you can see the cash years, EPS from consensus for 24, which is 9.6, and a payout of around 8 kroners in dividend per share, you're going to build quite a lot of capital also during 24, around 13 percentage points, even without the asset mix changes. I guess my question really is, What is it that is sort of holding you back on capital distribution? You have one of your peers out yesterday with a solvency ratio of 166. You have some of your other peers at somewhat lower targets than where you are currently. Is it the higher retention that you're seeing or retention levels on reinsurance? Is there anything else that is holding you back on capital distribution? Or why should we wait until December to get some news on capital distribution?

Thanks a lot for that question, Esbjorn. And I probably will start by saying I don't think anything is holding us back at the moment. I think we are just around now finalizing the buyback that we announced at the back of Q3. We are also today announcing our quarterly dividend of 1.85 for the quarter, which brings us to a total of 7.4 for the year, which is a pretty significant number, around 17% up versus last year. I think some of the components you're describing here around stability, some of it needs to be demonstrated during the year and then we'll come back to you at the full year. We are not known for sitting around on cash. We do not want to start that maneuver either. But we also like to be prudent and stable and predictable. And as always, we'll get back to our dividend position at the back end of this full year.

But I guess you must be quite confident on the 72 to 76 in insurance service results since you reiterated today. So I'm just wondering why you think you should have so much more capital than your peers?

I think if you take a step back, when we started this journey upon the transaction with RSA and Coda Norway, we wanted to stay at a stable level. I think that has proven a sound decision to do. We've been in an instable environment. And I think for now, we are comfortable. We're very comfortable at 197. Do we need to be at 197? Not necessarily. And I think over time, as we approach the full year, Esbjorn, we'll come back to you on this topic.

All right. Thanks. I'll move back in the queue. The next question is from Jakob Brink, Nordea. Please go ahead. Your line will now be unmuted.

Thanks a lot, and good morning. My question would be on premium growth, please. Looking at the tick-up or acceleration in local currency growth from around 4% to around 6% this quarter, even adjusting for this one-off in private lines is still around 150 basis points higher, and I think, Johan, you said still mainly driven by price. So I guess my question is, we have seen also in your own slides that price increases has been carried out throughout last year. So should we see this as sort of, this is the first quarter where these sort of material price increases are starting to hit the P&L and for how long more can we expect this level to be sustained and maybe even accelerate as more price increases are starting to hit the P&L?

Yes, good morning. I mean, you're right, Jakob, in the fact that there is an earned pattern of the premium increases that we're putting through. So we will gradually see that. And you're also right that we are not shying back on our premium increases, rather the opposite on the motor specifically. So all in all, the levels that we're seeing is something that we overall expect going forward as well. And then obviously, there will always be ups and downs in that going forward.

But if I can just one follow up, please. And if I look at your slide nine, with the price increases here, I guess for, as you said, also motor, you're not shying away for more increases. And I think that's also your comment. So So I guess it's, I mean, looking at the graphs here, it looks like price increases sort of really started at the beginning of 2023. And given sort of the 18 months sort of time horizon to earn the premiums, wouldn't it even be fair to assume an acceleration going into 2025? Right.

I think it's fair to assume that our rate increase levels will not be lower. And as we've shown before, and as Johan talked to, we haven't seen any big movements in the retention levels either. Hence, we are comfortable at the levels that we are. Yeah, we think that they will continue, or if anything, sort of potentially be on the upside. But I think that's a little bit sort of too early to say, because there will be a lot of moving parts. But I think overall, your assumptions are correct.

Okay, thanks a lot. The next question is from Judith Chicory, Autonomous Research. Please go ahead. Your line will now be unmuted.

uh good morning everyone uh so just one question so on your guidance for large and weather claims um i mean uh you you've kept the your guidance the same as recent years and this after you've made some changes to your insurance for the past couple of years i mean given the you know the elevated claims level we've seen over the past year can you just talk about the process of how you go about setting this budget and and the degree of confidence you have, you know, that is still like a fair level. Thank you.

Absolutely. Good morning. So on large claims, I think it's important to note that there are a couple of different moving parts. One, correct that we are increasing our net retention in the property programs while all our other programs remain unchanged. So that will sort of add a little bit, but it's actually a little bit of sort of expected levels on the large side. At the same time, we are de-risking our corporate book. which is obviously taking ourselves in the opposite direction. So all in all, those two effects neutralize. And I think when looking at the overall total large level, as I stated before, we should note that there has been a couple of claims which we don't think are typical for being there every year. And hence, we are comfortable with the 800 million that we're guiding for.

And on weather?

On weather, I mean, obviously the start of 2023 was a very special year. I think we can all sort of refer to that. And I mean, overall for weather, I mean, when we look at the long-term trend, which we also show here, we can see that sort of 2023 stands out as being sort of a very much sort of an an outlier when it comes to sort of what we were at before. And when we are setting our targets, I mean, obviously we take in sort of the weather trends that I think we're all seeing, and that's part of our risk mix. And then we can all sort of go into long debates and saying sort of how large are these trends and how big will they be? But we are comfortable with the 800 million level. And as stated before, this is something that we scrutinize on a very frequent basis. And if needs be, we will adjust our pricing accordingly.

And if I could just add one sort of strategic angle into this, Miki, because I absolutely agree. I guess we are also benefiting somewhat from the fact that the new construction of Trygg being a lot more diversified into both Denmark, Sweden and Norway gives us a little bit of hedge into the weather events also. So in this particular year, 2023, We've seen weather hit us quite significantly in Denmark and Norway, where Sweden has been somewhat spared. So I think there's a little bit of implicit diversification effect from our new group structure that also gives us some confidence into the numbers of 800 on weather.

All right. Thank you. Thank you very much. Hello? Now, did you ask the question?

We didn't hear anything.

No, sorry, I was not asked to ask anything. It's Jan-Erik from ABG, sorry. My question is about the underlying and follow-up on Jakob's questions. When would you sort of start to see, do you think, an underlying positive trend on private versus probably a sort of iteration or a weaker situation on the corporate side, as you have done a lot on the corporate side for several years? And now we're doing a lot of things for the private side. So how should they read you when it comes to the underlying improvement? Should they expect that the private is now taking over for the improvement side? and that corporate is a little bit less beneficial. When will that sort of change happen? Will it be during 2024 or will it be firstly into 2025? Thank you.

Thank you for the question, Jan-Erik. First of all, you're correct. We clearly state that we expect an improvement in our underlying going into 2024. And looking back, that improvement has mainly come from commercial, or it has come from commercial and corporate during the last year, while we've seen some deterioration for a little bit of different reasons, which were noted in the last couple of quarters. Rate increases are definitely picking up, and it's also very much so that the earned impact is coming through continuously. So I will just say that there will be improvements in personal over time. So I think there will be a little bit more of a mixed balance between the two improvements and slight deteriorations that we've seen. But we're communicating an overall target, which is an improvement and not disclosing any sort of more details on that. But summing up, we're very firm on our rate commitments and to offset the inflation that we are seeing.

Did you actually say how much improvement you expected into 2024 or did I miss it?

No, I didn't say it. You didn't miss it. We expect improvements in 2024 and not disclosing any specific levels of that, but definitely expecting improvements.

Thank you. The next question is from Alexander Adams from Citi. Please go ahead. Your line will now be unmuted.

Hi, thanks for taking my question. Just on the frequency that you're suggesting was towards the top end of expectations at the end of the year, I just wonder if you can give a little bit more detail on that. Are you saying sort of this is a new underlying frequency or is some of this related to some of the weather impacts that you'll have seen in Denmark and Norway in the quarter? And then just about sort of what you're doing to mitigate it. I think you mentioned something on deductibles and obviously price increases as well.

Yes, so good morning. Yes, I mean, if I try to sort of take us through the motor frequency story sort of step by step, I think first of all, it's important to remember that there is some normalization, just as you said, sort of when looking at this on a year on year basis or sort of quarter by quarter basis. we should both keep in mind that there was some extraordinary weather events, Q1 in Norway in 2023, and also the hailstorms that we had in summer affecting some of the Danish motorbook. So I think that's the first thing to neutralize and normalize for these events. Then second, there is an underlying expected increase from our side, like I said, of the traffic density and also the fact that the vehicle risk mix is changing over time. One effect being the electrical cars. And this is all something that we build into our pricing. But then, just as you said, and as we stated in our commenting as well, But even when taking those things into account, when we look at the claims frequency in the later parts of 2023, it's been at the top end of the range that we're seeing, especially for glass claims. So that's obviously something that we are really, really close to and continuously scrutinizing. And the actions that we're taking towards it is pricing and also deductibles to come. So we're very firm on our guidance and our commitment to offset these impacts.

Just to follow up, you haven't started moving the deductibles yet. That's something that you're going to do?

It's being executed, correct. The next question is from Faisal Lakhani, HSBC. Please go ahead.

Your line will now be unmuted.

Hi there. This is Faisal Lakhani from HSBC. I'll restrict myself to one question. So when I look at your synergies for next year, between claims and procurement, there's another $123 million. That would indicate or suggest maybe a 30 BIP underlying improvement to your claims ratio next year. And then when you factor in that you've still got to earn some of that corporate business mix shift and potentially some rate above inflation, is there any reason why I shouldn't be expecting underlying improvement of 50 bps or more next year? Or is that too aggressive, do you think?

the way to look at it is you're right if you look in isolation on some of the synergy levers you're right you can take that into the underlying but it's a mixed bag where there's also a reinvestment into the business going on so i don't think you can take them in isolation and bring them straight on to the underlying but i mean ballpark figures i don't think you're way off we do expect an improvement in underlying next year but i don't think you can take the math directly from the seniors into the underlying there's a magnitude of things moving in both directions

Thank you very much. The next question is from Ashim Musadi from Morgan Stanley.

Please go ahead. Your line will now be unmuted.

Yeah, thank you, and good morning. Just one question from me is around claims frequency. I mean, clearly you mentioned that there is some increase in claims frequency, 6% to 10%, if I heard it correctly. But you mentioned that there was just on the some smaller businesses, shorter tail line of business. I mean, can you just give a bit more color on what's happening on the broader private business on the claims frequency side, or is it you're just not seeing anything? So that's the only question I'm trying to get some color. Thank you.

Thank you. So going into claims frequencies and what we said for motor specifically, it was 5% to 9%. And just adding a little bit more color to this, I think first of all commenting on the motor part, the claims frequency increase is very much on the motor comprehensive part. So not on the third party liability, the long tailed, but it's on the short tailed. Having said that, within the short tailed, it's a little bit more on the low cost claims, like for instance glass, but we can see it across the board in different parts, which is actually to be expected given that it comes from higher traffic density and a change in the vehicle risk mix. So there is a distribution within that frequency increase. And I think for frequencies overall in Scandinavia, I mean, it's quite unchanged and we don't see any sort of big movements when it comes to, for instance, our personal accident portfolio and so on. So our very, very tight focus and very sort of specific focus is on motor and motor comprehensive specifically.

Thank you. Thanks a lot. The next question is from Vinny from Mediabank. Please go ahead. Your line will now be unmuted.

Yes, thank you very much, Vinny from Mediabank. So my questions on frequency, I think, have been addressed. I was just curious if it's new, but I think the question I would then choose is something a bit out of the box in that sense that, you know, we keep hearing that FX is really the kind of one variable that you can't control, right? Because that's also important to inflation, for your technical result targets, and quite important. Is there any discussions to do something about it, like create some other hedges, or is there any discussion that you think might help? Of course, it might create problems too, but I'm just curious if you are tempted to do something about this FAS risk.

Thank you very much for your question. And just to elaborate a bit about this, you can say when hedging the FX risk, we are focusing on our balance sheet. Our approach is to protect our sovereignty ratio and thereby our capacity for dividends and And you will recall that our reporting on solvency ratio sensitivity shows a very robust position against movements on that part to Swedish krona and Norwegian krona. About the future earnings, and that of course the Swedish krona and Norwegian business will be converted back to Danish krona at the current exchange rates, which of course represents a FX risk to us. You can say Hedging future earnings would add additional exposure to our balance sheet, and that would not be able to maintain the protection of the sovereignty ratio against the FX changes. And you can say it's pretty hard to log in the future cash flows from our earnings. I mean, then we will introduce new risks on our books, and additionally, we would have a... a significant cost on that. So we are not, you can say, doing any speculation on the risk side. We live with the exposure we have. And yeah, well, that was actually what I wanted to elaborate on that part.

Okay, thank you very much.

The next question is from Martin Gregersberg from ECB. Please go ahead. Your line will now be unmuted.

Thank you so much. Just coming back to the 50 basis points improvements in your underlying combined ratio, I guess motorists will be a drag on those 50 basis points. So what is going in the other direction and what making you able to again deliver these face-to-face spots.

Yes. Thanks, Martin, for the question. I mean, I would say two things. I mean, first of all, commercial and corporate overall moving very much in the positive direction. And also the reason why motor has a very limited impact in commercial is that we have less personal cars exposure. So I think that's one thing. And then obviously the second thing, synergies is something which is improving in the underlying claims ratio as well, although we shouldn't take it on a one-to-one basis, as Johan said before.

But if you look into commercial and corporate, are there any insurance lines that are sticking out in a very positive direction?

I would say generally we see good movements in property, which is obviously a big line of business. So property is something which is moving in the positive direction.

Okay, thanks. We have a question now from Jakob Brink from Nordea.

Please go ahead. Your line will now be unmuted.

Thank you. I just have one follow-up. On market risk in the Solvency or SCR bridge, down 131 million, Q&Q. I was just wondering, what is driving this? Because if we look at the equity exposure, up, I guess, plus 10% in the quarter, plus the symmetric adjustment also up quite a bit, around 10%. So what is, I think, if I do the estimate that gives me a roughly 200 million gross increase in the SCR from equities, then you have sold 100 million equities and 200 million properties, but that's only around 90 million saving. So how do you get from, let's say, this gross increase to a rather significant decline?

Jacob, it's a very, very detailed calculation, but the two main points, it's obviously 100 million lower on equities and 200 million lower on properties in the quarter. There are a few other things, also including diversified alternatives in there. If you need a very, very precise number, we can come back to that. But the main points, it's equities and properties, and also the level of the dampener at the quarter and at the end of the quarter also impacts this. So it's not just a straightforward calculation, just to mention that.

Okay, we can take it after. Fine, thanks.

And we have a question now from Jan-Erik Jalan from ABG. Please go ahead. Your line will now be unmuted.

Thank you for taking my follow-up. When it comes to competition in Norway, Sweden and Denmark, where is it hardest? Where is it softest? And which business lines are the hardest and which are the softest, if you can shed some light into the competition in the different countries and different kinds of products? Thank you.

If I start on this question, I think one... One part of the market dynamics from the Swedish part is obviously that we've seen the private insurance companies being a bit tougher on rates, etc., while the mutuals have been a bit less tough on rates. So I think that has added a little bit into the market dynamics. That's not something new. That's something that we have seen and that's the way the market has been for a long time. And then I think overall, my second comment would be that We see overall some relatively weak numbers in the Norwegian market, and we know that we need improvements there as well. So I think those are the two main things standing out.

And I guess if you can take a step back and look across the region, I think there's always been a competitive part of the world to do insurance. That being said, we have in the most recent years seen some consolidation. We have made some acquisitions into Sweden and Norway. We've seen some consolidation in the Norwegian market, which somewhat normally calls for discipline and effectiveness. So I think in that sense, I think it will remain a good place to compete for insurance business in the Nordics. So, I mean, the competition is there, but, you know, it's also a disciplined market.

Thank you for the flavor. And the next question is from Faisan Lakhani, HSBC. Please go ahead.

Your line is now open.

Hi there. I wanted to touch upon Norway. So your combined ratio was 91.7% this year versus 85% last year. If you could help split out how much of that deterioration is down to weather versus sort of underlying deterioration from motor frequency, that would be helpful. And I guess just to touch that question, when I look at the Norway average premium on page nine, the earned premium starts to fall a little bit. Does that mean that you effectively believe you priced in? on a written basis for that claims inflation? Thank you.

Thanks for those two questions. If I start with the first one, we don't really disclose weather impact across geographies. But I mean, I think it's fair to assume that the Norwegian numbers are somewhat impacted by weather. If you have a ballpark figure in your mind around 300 million Danish, you're not way off. Nevertheless, even if you adjust for that, it's still not satisfactory numbers we're delivering out of Norway. And as Mikko said before, we're not the only one struggling somewhat with the combined in Norway. So I think going forward, pricing will need to take care of that. And I think maybe that brings us to the second part of your question around the earned part in Norway.

Yes. And the second part about the price increases in Norway. And as stated before, there is not a one-to-one relation on slide number nine versus the average premiums and rates. First of all, it's important to remember. And second and most important, no, we're not slowing off on rate increases in Norway, actually quite the opposite. So that will be a big focus for us going forward.

Okay, that's very helpful. Thank you. Up next, we have Vinnie from Mediabanker. Please go ahead. Your line is now open.

Yes, thank you very much. Just on the private side, One of the topics that I'm happy not to see written is travel insurance in the slides. I'm just curious whether it's done and dusted or if it's just a minor thing this time, so not mentioned, because that's what we've been talking about last year as well. So just curious about that topic. Thank you.

Yes, thank you. That's a good question. So overall, travel insurance is now improving from a profitability point of view year on year. But having said that, it's still on a level which is not satisfactory from an absolute point of view. So it's something in which we communicated earlier that we have taken actions towards. Those actions are earning through in our portfolio.

And I guess just to add on that, in general, travel is a small part of our total portfolio mix. It's not a topic we would normally address. The reason why we have been addressing it has been the big swings from pre-COVID to COVID to post-COVID. We've seen massive swings year on year due to the normalization. I think in general, travel should be a non-topic for these conversations. But I understand why you ask, because it has been a topic for some quarters. Thanks. Good to know.

And the last question is from Ashton Mark, Danske Bank. Please go ahead.

Your line will now be unmuted.

Yes, hi. If I may, just to follow up on some of the discussions on motor insurance. So if you look at the combined motor insurance, it makes up 23% of your technical profits now. It used to be 35%, or at least it was in 22%. And then you mentioned some of the differences in frequencies. If I look at your notes, I can see the frequencies in TPL is down 6% and in comprehensive it's up 15%. So maybe if you look at the price changes that you're doing in motor, can you sort of give us a little bit more flavor on the discrepancies on price in the two different products on what kind of price hikes you're carrying through in those two. And then if I look at the average claim in Danish kroners, it's up only 2% in 23, obviously benefiting from FX. But I guess if FX stays relatively unchanged from here, you are actually taking some sort of tailwind into 24.

Isn't that how we should look at it?

So I think starting at, I think that was the mid-question, Asbjörn, on sort of where we're seeing claims inflation the most. And you're right, we see a little bit less inflation. in Denmark and a little bit more in Sweden and Norway. And then when looking at the different elements of motor, our overall focus is obviously to get the full customer relationship profitable and the full motor relationship profitable. So I think it's a little bit sort of maybe over scrutinizing to go into the different elements of the product. But I mean, we are carrying through rate increases that are offsetting the impact that we're seeing on the total inflation side. Sort of frequencies, FX and obviously the main part, the normal inflation.

And maybe just to add a few flavors to your question, which is fairly detailed, I think it's fair just to highlight that the trochanter and codon numbers were not fully consolidated into the Q1 numbers for last year. That can give you some discrepancies when you compare year on year, number one. And second of all, as Miki introduced in the beginning when we discussed motor frequency, glass takes up a pretty big component. And just looking into the Danish numbers that you allude to where the average claims cost, we actually seen glass going up with 16% in Denmark versus 2021, 5.5% versus last year. And glass is a significant driver of volume, but it's actually very low cost claims around a thousand kroners. So I think there are some mixed bags here for those numbers.

All right. Very clear. Thanks.

There are no further questions at this moment, so I will hand it back to the speakers.

So thank you very much, all of you, for the good dialogue and the good questions. As always, Investor Relations will be around for any follow-up you may have. And also, we have a few roadshows coming up. So looking forward to see you all. Thanks a lot.