Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Alm Brand AS (FRA:1AM, Financial) reported satisfactory premium growth in personal lines, achieving a 7.3% year-on-year increase, indicating strong market share gains.
- The company announced a new share buyback program of DKK150 million, reflecting a strong capital position and commitment to returning capital to shareholders.
- Synergies from recent initiatives have reduced the underlying loss ratio by more than 1 percentage point year-on-year, demonstrating effective cost management.
- Investment income in Q2 was a profit of DKK65 million, primarily from the fee portfolio, indicating a stable investment performance.
- The divestment of the energy and marine business is expected to free up capital and management time, allowing a focus on the Danish market and reducing volatility in large claims.
Negative Points
- Alm Brand AS (FRA:1AM) faced headwinds from large claims and increasing motor claims in the Danish market, necessitating further profitability initiatives.
- The insurance service result for continuing business decreased to DKK312 million from DKK425 million in Q2 last year, partly due to less favorable claims experience.
- Discontinued business made a loss after tax of DKK89 million in Q2, primarily due to adverse developments in old claims related to offshore wind projects.
- The combined ratio for commercial lines increased to 97.3 in Q2, which is considered unacceptable in the long run, driven by high large claims and lower run-off gains.
- There is a need for further price adjustments in both personal and commercial lines to address rising average repair costs and maintain profitability.
Q & A Highlights
Q: Can you elaborate on the growth in premiums, particularly in personal and commercial lines, and the technical profitability in the quarter?
A: Rasmus Nielsen, CEO: We are pleased with the 8% growth in personal lines, indicating market share gains while maintaining a stable underlying claims ratio. In commercial lines, growth is less of a priority compared to profitability. Andreas Madsen, CFO: The quarter faced headwinds from large claims in commercial lines, impacting profitability. We are addressing underlying profitability issues, particularly in motor and workers' compensation, with further profitability initiatives.
Q: Could you provide more clarity on the average claim trends in motor insurance and the impact on profitability?
A: Andreas Madsen, CFO: The market has been adjusting to new frequency levels, which has driven up average claims costs due to increased demand for repairs and spare parts. We are implementing further price adjustments to address this. The impact on profitability is being managed through pricing strategies, and we are confident in achieving the right balance.
Q: Regarding discontinued operations, is there a risk of further old claims adjustments affecting the sales price?
A: Andreas Madsen, CFO: The adjustments in Q2 were related to extraordinary developments in a few old claims and are not expected to recur. These adjustments do not impact the sales price of the discontinued operations, and we do not foresee similar issues in the coming quarters.
Q: What initiatives are being taken to improve profitability in commercial lines, and are there any plans for personal lines?
A: Andreas Madsen, CFO: We are implementing pricing adjustments in commercial lines, particularly for motor and workers' compensation, with major renewals on October 1 and January 1. In personal lines, we continue to adjust prices to address average claims trends, and we are confident in achieving profitability targets over time.
Q: Can you explain the strategy behind the investment portfolio adjustments for higher expected returns?
A: Andreas Madsen, CFO: We aim to enhance returns by increasing exposure to illiquid investments that offer a premium without adding significant volatility. This strategy focuses on safe, low-credit-risk products, allowing us to achieve better returns while maintaining a conservative investment approach.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
