Earnings call transcript: Tryg Q1 2025 shows steady growth and innovation

Tryg A/S reported strong financial results for Q1 2025, with revenue growth of 3.7% driven by price adjustments. The company's stock price increased by 0.94%, reflecting investor confidence in its strategic initiatives and market performance. Tryg's Insurance Service Result (ISR) was significantly higher than the previous year, demonstrating effective operational management. The company also announced a dividend of DKK 2.05 per share, maintaining its track record of dividend payments for 20 consecutive years. According to InvestingPro data, Tryg currently offers an attractive dividend yield of 5.24%, significantly above industry averages.

Key Takeaways

• Q1 revenue grew by 3.7%, driven by strategic price adjustments.
• Insurance Service Result (ISR) reached DKK 1,540 million, a substantial increase.
• Stock price rose by 0.94% following the earnings announcement.
• Dividend per share was declared at DKK 2.05.
• Strategic focus on cyber insurance and IT organization expansion.

Company Performance

Tryg's performance in Q1 2025 highlights its robust operational strategies and market adaptability. The company's revenue growth of 3.7% was primarily due to price adjustments, reflecting its ability to navigate inflationary pressures. The Insurance Service Result (ISR) was notably high at DKK 1,540 million, indicating improved profitability. Tryg's combined ratio stood at 84.2%, showcasing efficient cost management.

Financial Highlights

• Revenue: 3.7% growth, driven by price adjustments
• Insurance Service Result: DKK 1,540 million, above last year's performance
• Combined Ratio: 84.2%
• Pre-tax Result: DKK 1,491 million
• Dividend per Share: DKK 2.05
• Solvency Ratio: 1.95

Market Reaction

Following the earnings release, Tryg's stock price increased by 0.94%, reaching a new level of investor confidence. Trading at a P/E ratio of 19.69, InvestingPro analysis suggests the stock is currently undervalued, with additional upside potential. The stock's performance is within its 52-week range of $20.61-$25.23, showing resilience amid market volatility. The positive market reaction underscores the company's strategic focus on innovation and operational efficiency, supported by its strong financial health score of GOOD from InvestingPro's comprehensive analysis.

Outlook & Guidance

Looking ahead, Tryg aims to achieve a combined ratio of around 81% by 2027 and an Insurance Service Result between DKK 8,000-8,400 million. The company plans to distribute DKK 17-18 billion to shareholders, reflecting its strong financial position and commitment to shareholder returns. InvestingPro reveals that Tryg has maintained impressive financial metrics, including a healthy current ratio of 1.31 and a strong Altman Z-Score of 6.12, indicating solid financial stability. Tryg's strategic initiatives include expanding its product offerings, particularly in cyber insurance, and enhancing its IT capabilities. For detailed analysis and additional insights, investors can access the comprehensive Pro Research Report available on InvestingPro, covering over 1,400 top stocks including Tryg.

Executive Commentary

"We do not believe this report will in any way hamper our ability to run an efficient business with strong customer satisfaction and healthy returns to shareholders," stated Johan Brahmer, Group CEO. Mikael Schersten, Group CTO, added, "We expect a broadly stable to slightly improving underlying claims ratio going forward."

Risks and Challenges

• Inflationary pressures could impact cost management.
• Regulatory scrutiny from the Danish Consumer and Competition Authority.
• Potential customer churn in a competitive market.
• Challenges in maintaining low expense ratios amidst expansion.
• Market volatility affecting investment income.

Q&A

During the earnings call, analysts inquired about the potential impacts of regulatory investigations and the company's customer retention strategies. Tryg's executives addressed concerns regarding motor insurance claims and emphasized their focus on adapting to market changes.

Full transcript - Tryg A/S (TRYG) Q1 2025:

Giannandrea Roberti, Head of Financial Reporting, Tryg: Good morning, everybody. My name is Giannandrea Roberti. I'm Head of Financial Reporting at Truck. We published our Q1 figure earlier this morning, and I have here with me Johan Brahmer, our Group CEO Alan Tyssen, our Group CFO and Mikael Schersten, our Group CTO, to present the figures. I would like to remind all participants that when we open up for a Q and A, it will be one question at a time to allow everybody ask questions.

And with these words, over to you, Johan.

Johan Brahmer, Group CEO, Tryg: Thanks a lot, Gjen, and good morning to everybody on the call from me as well. I'd like to start just by commenting on the revenue growth, which for Q1 is just shy of 4%. It ends up at 3.7%, primarily driven by price adjustments in the private segment in order to offset the continued inflationary pressures. The insurance service result for Q1 is DKK 1,540,000,000.00, which is substantially above last year's level. This is primarily driven by a mild winter resulting in lower claims costs.

The combined ratio for the group is 84.2% with good performance in Denmark and Sweden and an improving trend in Norway. The group underlying claims ratio improved by 30 basis points, while private improved by 10 basis points. The improvements are underpinned by our profitability initiatives across the board. The overall investment result was satisfactory at DKK $320,000,000, especially in a fairly volatile period with often contradictory macroeconomic news flows. We're reporting a pretax result just below DKK 1,500,000,000.0, 1 point 4 9 1 million to be precise, a return on own funds of 33.4% and we pay a dividend per share of DKK 2.05.

The solvency ratio is 1.95 as per end of Q1. With that, I move to Page five on the customer satisfaction. And customer satisfaction remains very important for Trich, and we are satisfied to achieve a Q1 level of 82 against an overall Capital Market Day target of 83 in 2027. It is worthwhile to remind everybody that we have now fully included our Swedish business in the baseline of 81 for 2024. We see a strong link, as always, between customer satisfaction and customer retention, and this is coupled, of course, with our low distribution costs and level of profitability.

And the main driver main driver of the improvement in Q1 is our Swedish business, where there's an intensified focus on customer satisfaction following the full integration of Trokende. With that, I move to Slide six. And I guess the previous slide on customer satisfaction presents a fairly adequate bridge to a very recent event, namely the publication of a report on the Danish non life insurance industry by the Danish consumer and competition authorities. I'd like to start out by saying, and this is important, that we do welcome a good public debate on our industry, recognizing the role and importance that it plays in the society. As it seems like the possible outcome of an eventual investigation has worried some of you on the call here, we deemed it important to remind you about some specific facts around this topic.

So fact number one is that Private Denmark, the focus of this report, is an important part of our Danish business, but a smaller part of a much more diversified group following the acquisition of RSA Scandinavia. Fact number two is that we do run a very efficient business, characterized by a low expense ratio and lower distribution cost than in many other geographies in Europe, as we continuously work to automate our processes, streamline the business in general, as well as improve our digital setup. Fact number three is that Danish consumers understand that insurance is an important product. That is fairly well illustrated by the fact that families buy approximately four products per household. And at the same time, we at TOEIC have a high level of customer satisfaction compared to other markets.

That being said, it is still apparent and clear that consumers remain sensitive to price increases, which is also noticed in the current figures following a prolonged period of inflationary pressure on claims costs. I'll get back to that later on. Fact number four is that in one of the key product categories in the industry, namely motor, we see relatively similar insurance prices in Scandinavia compared to other nations outside Scandinavia, despite of the fact that the price and value of cars in Denmark and Norway is highly elevated due to very high taxation levels on new cars. Fact five: It appears from the report that indexation is one of the debated items subject to the possible market investigation. Allow me to stress that indexation is a general market practice through decades in Denmark.

And should it be altered, it will be an industry move affecting all players. It is worthwhile to remember that indexation is not used in Norway and hardly used in Sweden, so we are at Toyk quite familiar with other models also. So overall and to wrap up our position in this matter at the current stage, we do not believe this report or any possible future investigation will change our ability to run a healthy business with strong customer satisfaction in Denmark and to produce long term attractive shareholder returns. With that, please turn to Slide seven on the group ISR. We're showing in this slide, as we always do, the split of the ISR into the two business segments, private and commercial.

As a reminder and as communicated together with the annual report last year, we run the business with only two divisions following the merger of the commercial and corporate segment, and our reporting will, of course, mirror this going forward. As for the IR sign, the private segment, on the top of this slide, you can see how it was improved due to a lower amount of weather claims following a generally mild winter and also an improved underlying claims ratio. As for the ISA in the commercial segment on the bottom of the slide, you can see how it has improved thanks to a lower amount of weather and large claims, partly offset by a lower runoff result and also an improved underlying claims ratio going the other way. And with that, I turn to Slide eight, where we show the Insurance Services results split by geography. And I'd like to start on the right hand side as illustrated in the bridge there.

You can see that the movement from Q1 twenty twenty four to Q1 twenty twenty five is largely explained by a mild winter, lower large claims and a slightly better underlying performance, although a lower runoff result is partly offsetting this. On the geographical splits on the left hand side, you can see that Denmark is reporting a higher ISR driven by lower weather and large claims as well as a higher runoff result. Norway is showing an improved performance also helped by a mild winter. And in general, we noticed progress in our Norwegian business, and we firmly believe that the profitability initiatives are bearing fruits in line with our expectations. We'll get back to that particular topic later on.

And as for Sweden, we are reporting a lower ASR compared to last year, primarily driven by an abnormally high runoff in Q1 last year. And with that, we turn to the next section on the insurance revenue development in Slide 10 of the presentation. Our top line grew 3.7% in Q1, primarily driven by price adjustments in the private segment to offset inflationary pressures. This is particularly true in Norway, we'll come back to this as I mentioned earlier. The growth in the private segment was 5.1%, primarily driven by price adjustments, with the growth in Denmark and Sweden almost on par with the total private growth, whereas in Norway, it was somewhat above.

The growth in the commercial segment was just under 1% with the loss of a couple of Norwegian corporate customers weighing negatively until mid this year, but also in general, a lower commercial growth as some customers are reacting to price increases in particularly in the Danish part of the business. And with that, let's move to Slide 11 on the Norwegian profitability. The combined ratio in Norway was 95.3% in Q1, a much improved level from last year also helped by a more benign winter. It is important to remember that the earnings path in Norway is even more skewed towards Q2 and Q3 than the earnings path of the group. This is obviously driven by the fact that in some years, the winter weather may result in significantly higher claims cost in our Norwegian business compared to the spring and summer period.

Our profitability actions for the private segment in Norway remain unchanged, including high levels of price increases for, in particular, motor and home insurance. We can see that the effect of that is coming through and that the impact will gradually earn through the P and L. With that, let's turn to Slide 12 on customer retention. And customer retention, an important topic, remains broadly stable, especially when looking at this in longer term development series. That being said though, is of course evident that the different profitability initiatives needed to offset deflationary pressures are impacting the overall retention levels more recently, especially in Denmark.

This is further testament to the fact that we work within well functioning markets. And as experienced in the past at times of significant profitability measures, we do see some customers leaving us. We believe long term that we'll remain highly competitive attractive for customers due to our overall low expense level and high efficiency. And with that, I guess I'll turn it over

Mikael Schersten, Group CTO, Tryg: to you, Mick. Thanks, Johan. And we now turn to Slide 14. In this slide, we show the development of the underlying claims ratio, where we clean the reported claims ratio from large and weather claims, runoff as well as interest impacts. The group underlying claims ratio improved by 30 basis points, and the improvement was also supported by an improvement of 10 basis points in private, our largest business unit.

Profitability initiatives within, in particular, Motor and the Norwegian private segment contributed to the development. We continue to see that ongoing profitability actions are earning through and continue to expect a broader stable to slightly improving claims ratio going forward as stated at the Capital Markets Day in December. And I'll now turn to Slide 15, where we deep dive into Motor. The development for Motor has been an important focus area for Trigg in the last eighteen months. And we now see that all the profitability initiatives we have pushed through are positively impacting the financial performance.

We are in good control over the claims frequency development and notice a stabilizing development over the past quarters, in line with our expectations. Q1 twenty twenty four had an abnormal high claims frequency due to the harsh weather conditions. When normalizing for this, we estimate the underlying claims frequency to have increased by modest 1% from Q1 twenty twenty four to Q1 twenty twenty five. At the same time, we see high average claims development driven by newer cars with added technologies, which are more complex to repair. It's important to note that the development of claim severity is a combination of older cars having lower than average claims inflation and new cars pushing the average significantly up.

We estimate the average claims development to be an increase of 6% in Q1 twenty twenty five versus Q1 twenty twenty four. In this number, we have normalized for the high number of weather related low cost claims that happened in Q1 twenty twenty four. If we had included these, the increase would have been an increase of 9%, but we would then also have seen a clearly falling claims frequency. This development in motor claims frequency and severity is in line with our expectations, and we are pricing accordingly. In particular, pricing on new cars is an important focus area as it needs to reflect this development and also the fact that claims history can be reduced for new car brands and models.

And we now turn to Slide 16. In this slide, as usual, we show the overall level of large and weather claims, the runoff result and our overall discount rate. Large claims were slightly below normal in Q1, while weather claims were much below normal, reflecting a milder than normal winter and a much milder winter than in 2024. Interest rates in general have been rising in Q1 on the back of a muted macroeconomic environment and the discount rate was 2.3% in Q1. Finally, the runoff result was 2% in the quarter, in line with our Capital Markets Day guidance where we stated a runoff result of around 2% going forward towards 2027.

And with that, I hand it over to you, Gian.

Giannandrea Roberti, Head of Financial Reporting, Tryg: Thanks, Mick. We now move on to the investment section. We show here in the first slide the total invested assets of 62,000,000,000, split as usual in the matched portfolio of EUR 46,000,000,000 and the free portfolio of EUR 16,000,000,000. As per end of Q1, Scandinavian government and covered bonds represented 95% of invested assets following the derisking of the free portfolio last autumn. We are particularly pleased about our chosen asset mix, especially at times of renewed macroeconomic instability.

Moving on the second slide. We are showing here that the total investment result was $320,000,000 in Q1, obviously well above normalized expectation. The free portfolio posted a good return, driven primarily by healthy returns on covered bonds, including some short term rates falling. The matched portfolio included approximately €75,000,000 in interest on premiums provision, around €50,000,000 from narrowing credit spreads at the end of the quarter, while the remaining part stems from a positive mismatch in between the discount to curve and our asset side, the covered bonds. One always has to remember that we try to match 46,000,000,000 and few basis points of difference may impact the results accordingly.

Other financial income and expenses is also much better than normal at around minus EUR 18,000,000, helped by positive currencies adjustments and a very minor negative on the inflation hedge. I would like to stress that the result year to date is significantly different compared to what it would have been if we didn't make the change on the free portfolio and the current asset mix strengthen our strategic asset allocation. And with this, over to you, Alan.

Alan Tyssen, Group CFO, Tryg: Thanks, Jens. And please turn to the first slide in the solvency and expenses section. Here, we are showing an updated development of our solvency position with a new layout. The solvency ratio was 1.95% at the end of Q1, down from 1.96% at year end. The group capital generation before dividend payment was 19% in Q1 and what is historically the quarter with the lowest level of earnings.

In addition, the solvency ratio displays very low currency sensitivities driven by our chosen strategy. Our solvency ratio will always be fairly simple to model. Owned funds is mainly a function of operating earnings and capital distribution, while the SCR remains relatively stable as this is primarily impacted by the overall business growth. Now please turn to the next slide. In this slide, we are showing the recent development of our solvency ratio.

We mentioned at the Capital Market Day and Repeat today that we expect the solvency level to long term gravitate towards a less conservative level. We continue to believe that an elevated level of solvency has served us well in a volatile macroeconomic period. I would like to add that even after very significant market turbulence in the first ten days also in April, our solvency ratio is virtually unchanged at approximately 1.95%. Please note that we do not anticipate any big swings in our solvency position. As mentioned, we will review this at year end.

And at that time, we may consider extraordinary capture repatriation if found appropriate. Please turn to the next slide for updated solvency sensitivities. Solvency sensitivities are virtually unchanged since Q4. And in general, we have very low sensitivities, especially after there's a derisk carried through during the autumn. Unsurprisingly, covered bond spreads remain the biggest sensitivity as this is by far our biggest asset class.

And now please turn to the next slide for details on the development of our expense ratio. The expense ratio was 13.3% in Q1, helped by a good top line growth and strong cost control in general. The total number of employees increased this quarter, driven by investments in some of our strategic initiatives, insourcing of some tech competencies and by a minor change in on how this is calculated. The total cost base remains fully in line with our recent CMD communication. Here, we stress that we expect a stable to slightly improving expense ratio development towards 2027.

Finally, we see low expense ratio as a key competitive advantage and we are very pleased to be able to run our business with such a strong level of efficiency. And with this, I will hand it over to you, Johan.

Johan Brahmer, Group CEO, Tryg: Thanks a lot, Alan. And I guess we're now slowly entering the final part of our presentation today. I'd like you to move to slide 26, where I'd like to remind you of the three main pillars supporting our 2027 strategy and our ambition to grow the ISR by DKK 1,000,000,000 to DKK 8,200,000,000.0 from the DKK 7,200,000,000.0 normalized base of 2024. As you might recall, the first pillar, scale and simplicity, add DKK 500,000,000 technical excellence will help with DKK 300,000,000 and customer and commercial excellence will bring another DKK 200,000,000 towards 2027. And on this slide, we are commenting on a few selected examples just to add some flavor on the initiatives behind the strategic pillars as the implementation of the 2027 strategy is actually progressing very well.

As for scale and simplicity, we have implemented a new IT organization, reducing our cost as we have increased the ratio of people working in a Scandinavian and truly scaled manner from 30% to 45%. As for technical excellence, we've launched a scaled best practice scored loss model, enabling a more advanced portfolio management model in the private segment supporting retention rates. And finally, within the last pillar, customer and commercial excellence, we are seeing a robust sale of pregnancy insurance in Denmark, which is one of our focus areas highlighted at the CMD. And if you turn to the next slide, I'll elaborate a little bit further on this particular example. As presented at our CMD in December, we have a strong focus on trying to build a stronger PA book in Denmark, where the starting point is the sale of the pregnancy insurance product similar to our portfolio in Sweden.

And we're very pleased to see a continued growth in the sale of the pregnancy insurance in Denmark and actually also to see a strong conversion rate from pregnancy into child insurance. Due to our scale, we are able to apply learnings and methodologies from TORCANSA into our other markets allowing for a faster ramp up. And please note that this is a structural long term strategic initiative that we expect to be very important in the long run for both our Danish and Norwegian business. And finally, moving to the next page, I'd like to firmly repeat our financial targets for 2027, which are completely unchanged. We are targeting a combined ratio of around 81%, translating into an insurance service result target of DKK 8,200,000,000.0 or as stated, between DKK 8,000,000,000 to 8,400,000,000.0, allowing for some flexibility at both ends of the range considering all the moving parts.

In addition, we'll deliver a roof between DKK 35,000,000,000 and 40,000,000,000. And finally, we aim at distributing between DKK 17,000,000,000 and DKK 18,000,000,000 to shareholders, including the growing ordinary dividend and the DKK 2,000,000,000 buyback started on the day of the CMD. We are highlighting in this slide also the strategic KPIs supporting the financial metrics being customer satisfaction, straight through processing and CO2 reduction. And with that, I'll now turn to the last slide of the presentation, my favorite slide reiterating that we are a dividend stock and nothing will change in this matter. And operator, with that, I think we're ready to take questions.

Speaker 4: Thank you. In the interest of time and maximum duration of this call, we ask that you please limit yourself to one question. If you have additional questions, you may rejoin the queue. The first question is from the line of Esbjorn Wacht from Danske Bank. Please go ahead.

Your line will now be unmuted.

Speaker 5: Yes. Good morning. Thanks for taking my one question, which will be on the consumer and competition authority report that you have the slide on. So I do get the view that you have when it comes to to indexation, but I was actually also a bit curious on the reports conclusions when it came to loyalty premiums also because I I do recall that you and and your peers in the past have been talking about quite different combined ratios for different customer groups when it came to sort of loyalty and how long they've been with the group. So maybe you can shed some light on sort of how you could see that impacting the loyalty premium going forward or what that impact could be on your business?

And maybe if you could link it a bit to the Slide 12, the customer churn slide, where, obviously, we see churn picking up quite significantly in Norway and Denmark. So so basically, what is driving, of course, this churn? How how long have the clients that leave you been with you? It has has it been sort of a change to that pattern over the last couple of years, so the mix of people that leave you is different now than it was a couple of years ago or what? That would be my question.

Thank you.

Johan Brahmer, Group CEO, Tryg: Thanks a lot for that or those questions, Esbjorn. I'll try to sort of to answer them perhaps in a backwards order, right? So if you just look at the churn, I don't we're not disclosing the details of the churn we are seeing, right? But I think what we're seeing in terms of retention rates is to me a demonstration of the fact that there's a fierce competition in the markets and the customer mobility is fairly strong. We're seeing 500,000 customers in Denmark moving provider every year.

So there's a lot of mobility and I think the industry sees it that way. As for your first question as to loyalty premium and loyalty payments, you're asking for my conclusion. I don't think we're at a position now to conclude anything. Let's await the hearing that's going on in April. Let's await a possible market investigation.

What I can say is that there is no indications in the DCCA report that regulation around price walk would be relevant. The DCCA seems to conclude from the report that the so called loyalty payment, if even present, is significantly lower than what it was in The U. K. Sector. And there's no track record of Danish authorities setting prices across industries.

So I think let's await what comes from the hearing and the market investigation. But at current stage, it looks like the DCCA concludes that the so called loyalty payment is significantly lower than it was in The U. K.

Speaker 5: All right. Thanks a lot for those answers.

Speaker 4: The next question is from the line of Faisal Lakhani from HSBC. Please go ahead. Your line will now be unmuted.

Speaker 6: Hi, there. I just wanted to come back to the same topic. I agree the report suggests that, you know, loyalty walking or price walking is much lower in Denmark than The UK, but I guess the question is more is on the relative usage of price walking. So could you give a sense of, a, what's your average duration of your customer is, b, what the delta is between a new and renewing customer for yourself, and and see if you see that being different for for the various players across the market. And just as a side point, has the DC DCCA taken into account your foundation model and what that means for rebates and if that plays into the the delta or the price walking element as well?

Thank you.

Johan Brahmer, Group CEO, Tryg: Faiza, thanks for those questions. And I'll try to get around them as good as possible, right? You're asking for the tenure of our customers. It varies quite a lot across markets, across business lines, across partner agreements and direct agreements. So it's difficult to give you a straight answer on that, to be very frank.

And as to your question regarding whether the DCCA has looked into the foundation, it's unclear to me. It seems to me from the report, from the 178 pages, that there are two things that stand out to me. One is that there is no indications that anybody has done anything wrong in the industry, number one. And second of all is they seem to be zooming in on this indexation methodology of repricing that has been occurring in Denmark for many, many decades. Let's await the hearing.

Let's await a possible market investigation. And I must say, just coming back to my conclusion here is, we do not believe that this report will in any way hamper our ability to run an efficient business with strong customer satisfaction and healthy returns to shareholders.

Speaker 6: Okay. I appreciate it. I mean, Justin, it would be appreciated given the fact that I've covered The UK companies as well that, you know, the differential can be quite big and people will worry about the margins or the relative margin for yourself versus the rest of your peers. So if you can disclose that over time, that'd be appreciated. Thank you.

Johan Brahmer, Group CEO, Tryg: Copy that.

Speaker 4: The next question is from the line of Matthias Nielsen from Nordea. Please go ahead. Your line will now be unmuted.

Speaker 7: Thank you very much, and thank you for taking my question as well. So my question is like a bit coming back to the retention rates, like how worried should we be about that? And also given the fact that we also see the underlying claims ratio in the private improving 10 basis points year on year, is that also another signal that you're moving closer to getting back to the competition where you also go for balloon growth and new customers and cross selling? Also noticed that you changed your house house insurance list prices during the quarter. So if you can give a bit of update on on, like, how you view on on on on getting back to to growth being more split between volume and prices in the future?

Johan Brahmer, Group CEO, Tryg: Thanks Matthias for those questions. Maybe I'll address the retention part and the growth part and then maybe I'll pass it on to you Mick for the underlying thoughts. So on the retention part, you're right. We are seeing retention rates weakening slightly for this quarter. That being said, this is a natural element to observe when we're going through profitability initiatives as we've been going through for quite a while.

We've seen this before at TUIC when we are going through this level of price initiatives. Historically, we've seen these retention rates taper back into where they were before as the market normalizes. So we are not super concerned at this moment at all. We expect them to bounce back as the market normalizes. In terms of the growth component, I think you're touching upon something quite important strategically.

We've had a period of time where inflation has been taking up quite a lot of our headspace. It is, of course, always a balanced approach, how you handle inflation and underlying, but also how you handle your costs your growth. I think you're right in assuming that should the world normalize, the growth component and the organic growth will take up more of our strategic initiatives. We are seeing parts of that already. We are seeing product categories like cyber insurance picking up.

We are seeing categories like pregnancy insurance picking up. So there are elements of this that are starting to crank up. But that being said, it has been a very much inflation focus for a while. Let's hope that the market stabilizes a bit and we'll see more organic growth going forward. And then Mingen, maybe on the underlying part, you would comment?

Mikael Schersten, Group CTO, Tryg: Yes. So let comment on two specific things. If I first just comment on the retention rates, I think we should also remember that there are specific individual specific agreements during the last couple of quarters, which we have deliberately walked away from in order to focus on the profitability. And then the second part is, I mean, obviously, over time, we do not expect the inflationary pressure to be what it has been over the past eighteen, twenty four or so months. So gradually, we will move into a different part of the business cycle, where obviously rates will play a less part and growth in other areas such as growing the number of customers and growing the number of products per customer will play a part.

But again, we are completely focused on the bottom line result And at least for some parts of the business, mainly motor and Norwegian personal lines, we still are very focused on the profitability initiatives, namely rate. But over time, we will see a different balance of the growth.

Speaker 7: Thank you very much. So just to conclude, so it's fair to assume that it is getting closer to a normalization in the space if you look maybe apart from Norway?

Johan Brahmer, Group CEO, Tryg: I don't honestly, with the turbulence we're seeing in the world these days, I don't want to conclude anything. Our priority number one is to stay alert and react to all changes in the market. So I don't want to conclude anything. I can just conclude that we are alert.

Speaker 7: Thank you very much.

Speaker 4: The next question is from the line of Michele Bellatorre from KBW. Please go ahead. Your line will now be unmuted.

Speaker 8: Yes. Thank you for taking my question. So going to Slide 15 regarding the average claim cost, which increased by 6%. So you mentioned claims inflation on new cars, but so how much of this is still, you know, general inflation? And if we go to new cars, are you increasing the number of, let's say, new cars, you know, the the the coverage of new cars?

Or is it probably the same, or you're planning to increase it? And I believe this regards both Denmark and Norway. So if you can give more details about these numbers this number. Thank you.

Mikael Schersten, Group CTO, Tryg: Yes. Thank you for those questions. I think if we start with the general impact of average claims without stating the exact number, the overall claims inflation for somewhat older cars is below, so definitely below the 6% level, as we stated here. So that's dragging the average down. On the other hand, then the average claims of new cars is significantly above this level.

And then one should also remember that here, one could be fooled by the averages as different car brands, different car models have very different average claim profiles. So that's something, obviously, that we is firmly on and taking into account when we price for new cars and new models. And then when it comes to sort of the how we get into new sales of our new cars, that is not different than what it has been before. There is a similar sort of transition and churn as normal in the portfolio. So that is by no means any different.

The different part is that the increase in claims sort of the increase in claims leads to increase in insurance prices, and that is something that we expect to continue and we're priced for, and it's something that affects the market overall.

Speaker 8: Thank you.

Speaker 4: The next question is from the line of Martin Graigasbirch from SEB. Please go ahead. Your line will now be unmuted.

Speaker 7: Thank you so much. I have

Speaker 9: a question on underlying combined ratio by geography. It seems like it's improving fairly nicely in Denmark and also nice to see it in Norway. But what is happening in Sweden in the first quarter?

Mikael Schersten, Group CTO, Tryg: Yes. So if I start on that and thanks for the question, Martin. I mean, overall, we are very happy about the development of the profitability in Sweden. So the main change relative to last year is the runoff, which was clearly different in Q1 twenty twenty four. So just to say, we are very sort of pleased with the profitability development and the underlying development in Sweden.

Speaker 9: But what's the reason for the 300 basis points drift three twenty basis points drifts in Sweden on your underlying combined ratio?

Johan Brahmer, Group CEO, Tryg: Just so I understand you correctly, you're talking about the combined ratio, right? That is the

Speaker 9: Not underlying combined ratio by Joerg, the one that we get in the analyst fact sheet.

Giannandrea Roberti, Head of Financial Reporting, Tryg: Look at the numbers, Martin. It's I think it's the underlying claims because we don't publish the underlying combined ratio by geography. So it's the underlying claims ratio.

Speaker 9: It says it in the end of the fact sheet, it's on Page two. We have the underlying combined ratio by We don't publish that

Giannandrea Roberti, Head of Financial Reporting, Tryg: number. Those numbers are all coming from the Q1 report like whole numbers.

Johan Brahmer, Group CEO, Tryg: If we just zoom out of that particular note, we are very comfortable with the underlying performance across geographies.

Speaker 5: Okay. Alright. Okay. It must

Speaker 9: be a mistake in the in this fact sheet then.

Speaker 5: And

Speaker 4: let me remind you that if you have a question And with that, we'll take the next question from Jan Erik Jelan from ABG. Please go ahead. Your line will now be unmuted.

Johan Brahmer, Group CEO, Tryg0: Hello. Thank you for taking my questions. Do you hear me? Now

Johan Brahmer, Group CEO, Tryg: we don't.

Johan Brahmer, Group CEO, Tryg1: Hello?

Johan Brahmer, Group CEO, Tryg: Now we hear you again.

Johan Brahmer, Group CEO, Tryg0: Now we can okay, Maria, thank you. When it comes to the premium growth and the indexation and the retention levels, how should we think about sales cost going forward when it comes to the lower retention and the sort of increase in wanted premium growth from the different kind of segments? Is it so that that could change the overall cost ratio in some way or another because you have to sort of pick up the number of sales points you have and add to the overall sales cost? How should they read about that into your wanted premium and more products per wallet, etcetera? Thank you.

Mikael Schersten, Group CTO, Tryg: For that question. And no changes whatsoever in our distribution setup. And we don't see any changes in sort of distribution cost in any way. So we're very pleased with sort of the distribution setup that we have. And I think over time, the only thing that will change going forward is, as we stated before, the growth mix, obviously will change a little bit from the rate increase growth and the growth from new customers and product per customers.

So that we will see taking on a different profile over time, but otherwise, no changes.

Johan Brahmer, Group CEO, Tryg: And just coming back

Johan Brahmer, Group CEO, Tryg0: to your So it means that

Johan Brahmer, Group CEO, Tryg: Go ahead.

Johan Brahmer, Group CEO, Tryg0: So it means that the sell upselling to the same clients is quite cheap, while getting a new client or attracting a new client is more much more expensive. So that's why you can keep the sales cost fixed or flat or constant.

Mikael Schersten, Group CTO, Tryg: Yes. I mean, first of all, correct. And yes, I mean, the distribution model is by no means changing. So it's the similar profile as it has been previously.

Johan Brahmer, Group CEO, Tryg: And with the changes we are seeing in retention rates, don't expect us to change our distribution setup due to that. We see it more as small changes or bumps, so to speak.

Johan Brahmer, Group CEO, Tryg0: Okay. Thank you.

Johan Brahmer, Group CEO, Tryg: Just coming back to your question before, Martin, on the underlying combined ratio. I think there's a typo in that particular page you're looking at. It is the combined ratio. And exactly as Micker said, the impact is driven by an extraordinary runoff in Q1 last year. That's the deviation.

So it's a typo.

Speaker 4: The next question we have is from the line of Alex MacKenzie from BNP Paribas Exam. Please go ahead. Your line will now be unmuted.

Johan Brahmer, Group CEO, Tryg2: Good morning. Thanks for taking my question. It's just really on commercial growth. I guess, following the shrinkage we kind of expected in Q1 in the old corporate division, just around what kind of growth we can expect going forward in that? And then on, I guess, the old what was the old commercial business?

I might have misheard or misinterpreted, but I think some of the comments earlier sounded slightly negative on growth into Q2 this year. So just a little more detail there would be helpful. Thank you.

Johan Brahmer, Group CEO, Tryg: Thanks for that question, Alex. And I think just to be more clear, right? So we are seeing Q1 being a little bit depressed in the Commercial Lines due to a few Norwegian corporate business customers who left us and that's going to have some negative weight up until mid this year. So we expect the same in Q2. In general for Commercial Lines, we are seeing the growth being a little bit under pressure due to the retention rates caving in a bit to the price increases.

As mentioned, we expect this to normalize over time as we get into more normal territories. So nothing to be concerned of. It's just the nature of the profitability initiatives we're doing and the fact that we lost a few Norwegian clients last year that is weighing negatively up until mid this year.

Johan Brahmer, Group CEO, Tryg2: Thank you.

Speaker 4: And next up, we have a follow-up from Faisal Lakhani from HSBC. Please go ahead. Your line will now be unmuted.

Speaker 6: Hi there. I wanted to come back to the development of the private underlying loss ratio. How what is the delta between earned rate versus claims inflation? Should we see a pickup in the earned premium, therefore, a greater improvement in the private underlying loss ratio as the year goes on? Thank you.

Mikael Schersten, Group CTO, Tryg: Thanks for that question, Faizan. And I think I'll first just go back to sort of our headline on this that we expect a broadly stable to slightly improving underlying claims ratio. And as stated before, the mix of that between the private and the commercial segment will change over time. We have seen, obviously, the commercial part improving over a long period of time. This quarter is the first where we've seen an improvement in private for some years.

So we do expect a different mix in that, but overall, stable to slightly improving underlying claims ratio going forward.

Speaker 6: Okay. But no sense to the trajectory of the shift and how quickly that could happen between private and commercial. Could it happen, get to you a bit more aggressively?

Mikael Schersten, Group CTO, Tryg: Yes. I mean, we again, we're coming back to the headline, but with a stable to slightly improving underlying claims ratio. I mean, I would like to stress, though, that I mean, we have taken the actions specifically on motor, specifically on Personal Lines Norway, and we're seeing the impact of that earnings through, which we're very happy about and comfortable around.

Speaker 6: Okay. Thank you very much.

Speaker 4: The next question comes from Daniel Wilson Amoriya from Morgan Stanley. Please go ahead. Your line will now be unmuted.

Speaker 6: Hi. Good morning, guys.

Johan Brahmer, Group CEO, Tryg3: Thank you for taking my questions. Two really quick ones. One on real estate. I'm wondering if you have any updates on kind of the divestment there, if there's anything happening in the background. I understand nothing has physically happened this quarter, but if there's any updates on your progress there, then that would be great.

And then secondly, if you could get the corporate or the owned corporate gross number going to be great. Thank you very much.

Alan Tyssen, Group CFO, Tryg: Yes. Let me start with the update on properties. And the update is that there's actually no news there. We will, as said, take an optimistic approach to this asset class. But long term, we still plan to exit it.

Johan Brahmer, Group CEO, Tryg: And as for your second question around the growth, as I heard it, the growth in the corporate portfolio. Essentially, the growth in the commercial lines is still impacted by the rebalancing of the corporate portfolio that was completed by the end of last year. It will still weigh negatively on the growth in Commercial Lines up until mid this year.

Johan Brahmer, Group CEO, Tryg3: Is it possible to get the number the growth number for Q1 this year for corporate?

Johan Brahmer, Group CEO, Tryg: An adjusted number, no. Actually, the way we are reporting now is we have combined the entities and we are reporting them in an aggregate number. I think we also said at the full year that should there be any material information for you for the market to know, we would share that. Other than that, we are going to now report as one combined entity. Bear in mind that the corporate part following the de risking journey we've been on is a very small proportion of the total group premiums.

Johan Brahmer, Group CEO, Tryg3: All right. Thank you very much.

Speaker 4: We have another follow-up from Alex MacKenzie from BNP Paribas. Please go ahead. Your line will now be unmuted.

Johan Brahmer, Group CEO, Tryg2: Hi, Dan. Just going back on the on the corporate division, in particular, on the the trade guarantee business. I guess, do you see any opportunities or risk there given any trade related uncertainty at the minute? And then, I guess, with the focus of the corporate division more towards Nordic geographies, what's your strategy for the Guaranty business going forward? Thank you.

Mikael Schersten, Group CTO, Tryg: So if we start with the credit insurity business, I mean, first of all, it's 3% of our total book. So I think should remind ourselves about the size of it. Second of all, we're very happy about the quality of the underwriting quality of the portfolio. And obviously, third, we're taking on a very sort of conservative approach in our reinsurance part of it. So overall, sort of very happy about that exposure and the profitability development that we're seeing in that part.

Johan Brahmer, Group CEO, Tryg2: Thanks. And then I guess is that a part of the business that you're looking to grow?

Johan Brahmer, Group CEO, Tryg: That's a very good question. And we do see this being a profitable growth pocket for us as a business. That being said, we have a careful and cautious growth journey here. This is not something you want to dip your toes into quickly. We have a history of having this business on our books.

We have a business of having very careful growth, and we'll expect to continue that careful growth journey. But it is something that has strategic importance for us as it is a good way of growing in a profitable part of the market.

Johan Brahmer, Group CEO, Tryg2: Understood. Thank you.

Speaker 4: Next up, we have another follow-up from Jan Erik Jalland from ABG. Please go ahead. Your line will now be unmuted.

Johan Brahmer, Group CEO, Tryg0: Thank you, Thijs, for taking my follow-up. Just back to the DCA report and this indexation, could you shed some more light into how that indexation actually work? Who decides what kind of indexation it will be per product? If you as a company actually, have an impact to to that, number at all, or is it set to the different commit different body, or is it a cooperation between the company setting the rate, etcetera? And finally, is it possible to discount it in any way on top of that?

Mikael Schersten, Group CTO, Tryg: I think if I bring this back sort of to of a fairly high level and strategic part, I mean indexation is something to looking at sort of the salary inflation in the market and then having that as an overall market sort of factor that everyone sort of in the market goes by. I think if we sort of just go back, if it's handled in that way or if it's handled the way it's handled in Sweden or Norway, I mean, it doesn't really matter. As long as sort of we have the same rule for the entire market, it doesn't really change things.

Johan Brahmer, Group CEO, Tryg0: But do you impact as a company, is it set this indexation, is it set by a different body? Or is it set by you?

Johan Brahmer, Group CEO, Tryg: The indexation is based on index tables from the Danish authorities on statistics. That's what it's based upon.

Johan Brahmer, Group CEO, Tryg0: Okay. And then you set your own indexation based on that and company B sets their indexation based on that, but the same kind of principles?

Johan Brahmer, Group CEO, Tryg: The indexation is fixed based on public tables. And then whatever pricing measures anybody in the industry would have to do, they do on top of the indexation if needed. But indexation is done from an authoritative source in Danish statistics.

Johan Brahmer, Group CEO, Tryg0: So how could that be so poor from the report then?

Johan Brahmer, Group CEO, Tryg: I think that comes down to a question you should ask the DCCA. They see this as hampering for full competition. We as an industry see it differently. But let's await the hearing that is going on in April. Let's await a possible market investigation.

This is a methodology that has been used for decades in Denmark. We've seen other markets where we are in Norway and Sweden where it's not being used. There are different ways of doing it. Let's await and see how this debate ends.

Johan Brahmer, Group CEO, Tryg0: Agreed. Thank you.

Speaker 4: The next question is from Autonomous Research. If you can please state your name before your question, that would be wonderful. Thank you. Your line will now be opened.

Johan Brahmer, Group CEO, Tryg1: Good morning, everyone. This is Yudesh Chukwu from Autonomous Research. Can you order me?

Giannandrea Roberti, Head of Financial Reporting, Tryg: Yes. We can hear you.

Johan Brahmer, Group CEO, Tryg1: Yes. Thank you. Yeah. So if you can if that could be about on the DCA DCA investigation as well. I understand, I mean, this this is the first time they're doing this investigation under, following some legislative change last year.

Can you remind us what kind of enforcement powers they have? I know you mentioned that they have not talked about NurOwn doing in the market, but if could just remind us what kind of conventional action they could take, that'd be very helpful. And then secondly, just on loyalty premium and price walking, I believe the Swedish regulator did a test study two or three years ago. Can you remind us of the outcome of that, please? Thanks.

Johan Brahmer, Group CEO, Tryg: Thanks a lot for those questions. To be very clear, I had a little bit of trouble hearing it, but I think I understood the gist of it. So the first one is around how this market investigation could be conducted. This is the first time it would be conducted in Denmark, so it's a little bit unclear to everybody. But I can remind you of one thing.

Please remember that the DCCA report does not indicate that the insurance sector has done anything wrong. And the DCCA scope and mandate under the market investigation regime is to impose orders on practices with future effect nothing else, so we don't show any risk of fines or retroactive actions. And on the second point, as I understood it, it was very much around loyalty payment. And the DCEA concludes in the report that the loyalty payment in the Danish sector based on the numbers they have gathered is significantly lower than it was in The UK sector.

Johan Brahmer, Group CEO, Tryg1: Thank you very much. I think the second question was around similar study that was done in Sweden actually two or three And I was wondering what was the outcome of that just for us to get a sense of guide of what can happen afterwards.

Johan Brahmer, Group CEO, Tryg: I think all I can share is that the Swedish FSA has made the same analysis concluding that there were no competitive issues in motor insurance, but some signs in other parts, smaller parts. But no actual intervention was made in that market. So that's all I can share on the Swedish angle.

Johan Brahmer, Group CEO, Tryg1: Right. Very clear. Thank you very much.

Speaker 4: We have come to the end of a list with questions. So I will hand it back to the speakers for any closing remarks.

Giannandrea Roberti, Head of Financial Reporting, Tryg: Thanks a lot to all of you for a good dialogue and some good questions. Trig Investor Relations teams as always will be able to help you today and the next few days. Otherwise, we look forward to see you in the forthcoming period. Thanks a lot.

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