Alm. Brand (Copenhagen:ALMB) Q1 2026 Earnings Call

0:00 Ladies and gentlemen, thank you for joining us, and welcome to the Alm Brand first quarter twenty twenty six earnings call. After today's prepared remarks, we will host a question and answer session. I will now hand the conference over to Andreas Ruben Matson, CEO at Alm Brand. Please go ahead. Good morning and thank you for joining us on our conference call. I'm Andreas Rubemason, the CEO of Alm Brand Group since March first this year and as usual I have with me our Head of IR, Matt Tindall. This morning we published our interim report for the first quarter of twenty twenty six and I will now walk you through the presentation of our results.

0:49 Let's now look at the highlights from my first quarter as CEO. Please turn to slide two for some of the headlines regarding our business in the first month of the year. I'm pleased with the overall financial performance in a very satisfactory Q1 with strong underlying improvement in the claims ratio. Growth in personal lines faded somewhat in Q1 twenty six from a double digit level in Q4 twenty five. This was as expected due to the year on year effects from last year's repricing fading out. Growth of over 6% during Q1 in private lines does however indicate that we are continuing to take market shares in this market. In commercial lines, we experienced a decline in the top line revenue as a result of our efforts to improve profitability and reduce volatility in an increasingly soft market for workers' compensation.

1:39 Adjusted for the areas we work on in this respect, which is workers' compensation and industrial customers, the commercial portfolio reflected a premium growth of 2% year on year. We succeeded with an improvement in the undiscounted underlying claims ratio in commercial lines of 2.6 percentage points year on year, while personal lines are more impacted by icy roads conditions in Q1, but still delivering an improvement of 1.3 percentage points in underlying claims. And now I would like to turn to slide three for our financial highlights. Insurance revenue grew to above DKK2.9 billion in the quarter. The insurance service result was DKK496 million compared to DKK337 million in Q1 last year.

2:26 We view this as a good start to the year especially considering the strong underlying development. Weather related claims were much lower than we would normally expect for Q1, while I would characterize large claims as being on a normal level in Q1. Investment income in Q1 was a loss of 43,000,000 which related to the geopolitical turmoil impacting equities as well as bond returns in a negative direction. It's worth remembering that we as a company are set to benefit from increasing interest rates looking ahead. Other income and expenses are significantly lower compared to last year primarily due to the absence of integration costs related to codon reflecting the completion of the integration process. Now let's move on to slide five.

3:15 The group made a technical result of $496,000,000 in the quarter up from $337,000,000 last year. The significant improvement was driven by underlying improvement as well as higher runoff gains. In personal lines year on year, we had an improvement in insurance service result of 55,000,000 to now $246,000,000. This was due to underlying improvements, lower ratios for weather and large claims as well as continued growth. Insurance service result from commercial lines was $250,000,000 against 146,000,000 last year driven by a combination of significant underlying improvement and much higher run up gains than Q1 last year. Please turn to slide six. Insurance revenue grew 2.5% in the quarter compared to 4.6% last quarter as a result of fading effects from last year's repricing and an increasingly soft market for workers' compensation.

4:13 In personal lines, we're still taking market share while the effects of repricing are fading as expected. Therefore, I'm quite pleased with the growth in personal lines of 6.4 percentage points year on year. In commercial lines, we're seeing a decline in premiums of 1.8% due to our work of improving profitability and reducing volatility and increasingly soft market for workers' comp. Adjusted for workers' compensation and industrial customers, commercial portfolio reflected a premium growth of 2%, which is acceptable. And now moving on to Slide seven with the claims ratio. Q1 claims ratio was down four eighty basis points year on year in a quarter with lower weather claims for than a normal Q1, a higher level of runoff gains and a strong underlying improvement.

5:01 The underlying claims ratio was 160 basis points lower year on year driven by profitability initiatives, 170 basis points on an undiscount basis. The underlying improvements especially visible in commercial lines with a two sixty basis point improvement in underlying claims year on year while personal lines still positive impacted more negatively by icing road conditions. Personal lines showed an improvement in undiscounted underlying claims of 120 basis points year on year. And now please turn to Slide eight. The combined ratio in personal lines improved to 84.5% from 87.1% last year due to lower underlying claims, a decline in the cost ratio and lower weather and large claims.

5:47 Premium growth is still on a high level of 6.4% despite fading effects from repricing. Please turn to slide nine for Commercial Lines. In Commercial Lines, we observed a significant reduction in the combined ratio to 81.3% in Q1 twenty twenty six down from 89.3% in Q1 twenty twenty five. This improvement was supported by higher run off gains of around 600 basis points year on year largely driven by cargo and property related claims. Additionally lower underlying claims contributed to a further two forty basis point reduction year on year. The cost ratio was also decreased by 50 basis points year on year in Commercial Lines providing additional support although the large claims rose to 11.3 percentage points in Q1 slightly above the normal level of 10% typically expected for Commercial Lines.

6:42 And now move on to slide 11 for the investment results. You may notice that we as of this quarter have begun disclosing returns on our free portfolio in response to requests from many of you. The investment result in Q1 showed a loss of €43,000,000 in Q1 with $5,000,000 of this loss stemming from the free portfolio, which was adversely affected by a decline in share prices. Additionally, our bond portfolio was impacted by rising interest rates and widening credit spreads. As you'll be aware, this was driven by the geopolitical turmoil experienced during Q1. I'd also like to take a moment to address our fixed income line, which amounts to DKK0.9 billion with approximately half that number placed in private debt and asset class which has received some attention recently.

7:31 I'd like to highlight that this exposure is limited to a well diversified portfolio of loans to European companies. And now finally, please turn to slide 13. We're revising our guidance for the insurance service result in 2026 upwards by CHF150 million to 1,800,000,000 to 2,000,000,000 excluding run off gains from Q2 to Q4 of twenty twenty six. This follows a strong underlying development in Q1 as well as a high level of run off gains. Continue to expect around 2% in run off gains looking ahead. The cost ratio is still expected to be at around 17% for 2026, while the combined ratio excluding the run off result in Q2 to Q4 is expected to be 83.5% to 85.5%, an improvement of 100 basis points.

8:23 Our guidance for the investment result is lowered by €50,000,000 to €150,000,000 in 2026 following the loss in Q1. This adjustment also reflects a nice rebound in Q2 so far. Consequently, guidance for profit before other income and expenses is upgraded by DKK100 million to DKK1.95 billion to DKK2.15 billion. Other income and expenses remain unchanged and guided an expense of $05,000,000,000 for 2026. And with this, I conclude our presentation and hand over the word to our moderator. Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad to raise your hands. To which to read a question, please press star one again.

9:20 Your first question comes from Asthmaian Moore from Danske Bank. Your line is now open. Please go ahead. Yes. Good morning. Thanks for taking my questions. First question would be on something that is not part of the report, but but the Supreme Court ruling that we will get in an hour. I'm just wondering, since you don't mention it as a contingent liability in your repo, you did mention the annual dispute with GARP. So just wondering why you don't mention this as a contingent liability. You don't see it as contingent liability or you don't see it as a material impact on your reserves.

10:06 So how should we look at sort of the potential outcome here versus the €7,000,000,000 of claims reserves you have in workers' compensation? So since we will get the ruling after this call, likely, we'll be put together a bit of flavor at this stage. Thank you. Yeah. Thank you, Adjane. Well, I mean, to answer your question, we see nothing new in this regard compared to the situation when we did our annual report not that many months ago. We have a general statement in our annual report regarding, you know, the general exposure we will always have in the group to the types of all suits or disputes, and we have we don't see no reason to sort of that going into as we approach the ruling today. And then to round off on that, I would say, as we also say, I think let us now just wait. I think we'll get clarity very soon, and obviously, we aim to provide clarity as soon as we can and are following it closely up to the ruling coming year as well.

11:15 Okay. Fair enough. But if I then may I mean, you paid a dividend more than two weeks ago. And I guess we're still waiting for you to initiate the buyback. Is there any sort of link between, first of all, the postponed buyback, secondly, your dividend payment, your decision to pay a dividend and what you see as sort of scenario and potential outcomes of this case? In general, would say I think you're aware we have a very comfortable solvency situation. We have a robust solvency situation. We're not postponing any buyback. We communicated that we were expecting to start it in Q2. We are now only one month into that.

12:02 That being said, I think there's some good reason to We first of all had a Q1, you know, a general Q1 yeah, financial statements we'd like to have a proprietary call, and then we also have the supreme court ruling coming very soon. But but we we're still on within the overall time frame that we communicated being sometime during q two. Okay, fair enough. Then if I may, on your actual numbers and the underlying claims ratio improvement in Q1 to 170 basis points, somewhat above the guidance that you've given for the full year and your communication on the improvement being back end loaded during the year. How much of this also given that you raised your guidance by 150, which is, to a large extent, seems to be, you can say, low quality driven in Q1. So how recurring do you see this underlying improvement? How much has been sarcastic and basically locked in Q1?

13:04 Yeah. Well, I think first of all, just I would confirm that you are right that most of our upgrade comes from weather and one offs this time around, but that's however provide a good good solid bottom line in Q1 nonetheless. I think to give you some flavor of it, I think something just above a percentage point, maybe slightly above there is probably more what I would consider a structural level for now. We did have some tailwind within certain segments seeing both a favorable development in private lines and also in commercial lines, especially in commercial lines.

13:50 But I would say, you know, probably you shouldn't expect quite as much on growing basis for now. But for the full year, is it fair to assume that would be above the 100 basis points given the good start of the year? Yeah, that would be our slightly above would be our sort of what we're aiming for. Okay, excellent. Thank you so much. Your next question comes from the line of Martin Burke with SEB. Your line is now open. Please go ahead. Thank you so much. Just just following up on the questions in regards to the underlying improvements coming through. Guess you ahead of the quarter, you communicated them to be back end loaded, now they're suddenly front end loaded.

14:40 What has happened and why is this only just above the 100 basis points for the full year? Yeah. Well, I mean, think as I think we've we've commented on us previously that that you will see some fluctuations from quarter to quarter and most of the improvements you're seeing are definitely structural created by some of the effects we've been mentioning previously being to highlight them I would say a bit of tailwind from synergy overhang in Q1. We also have a favorable impact from reinsurance maybe around let's say 50 basis points for the group, most of that being in commercial lines. And then I also think it's fair to say that we have some support also in Q1 coming from our overall profitability initiatives within commercial lines, whereas you may have noticed also we did see some workers' comp and industrial customers leave. So those are the things staying in, but we also had to be fair some fantastic tailwind on average which we would not expect every quarter from now on. And Martin, if I may ask you, it's Matthew.

15:52 What we actually said ahead of the one was that the the effect on the strategy initiatives would be back end loaded but in the start of the year we would have support from still Delta from the synergies we implemented last year from the integration of our latest report that have a bit of effect still here in the start of the year as well as the effects from the massive repricing last year kicking in mostly in the start of the year. So we were actually pointing to kind of a little bit of improvement during the year but with different sources. Okay. All right. Just a final question from my side. In terms of the customer dividend, I guess you have shed some more light on it over the course of Q1.

16:44 What has the response been so far? And or what kind of feedback do you get on it? And what are sort of the ambitions with this customer dividend or this loyalty scheme? Yeah. Thank you, Michael. I think we're we're happy to see that we're getting the type of feedback that that many of our customers see this is definite positive. We feel it may not be unique for us as to some of the other market players, we feel that it is definitely new for us that we have the ability now because our main owner has gotten the financial strength to support us in this meaningful decay and we feel this is a good way to also benefit especially our loyal customers which have been with us for many years, which have a number of products with us. Also, the customers we would be aiming most to retain.

17:47 So we we're looking very much forward to to seeing the effects of this. Thanks. Your next question comes from the line of Matthias Nielsen from Nordea. Your line is now open. Please go ahead. Thanks a lot, and thanks for taking my questions as well. So the first one I have is a bit on the revenue growth, especially for the personal lines, like the year on year growth you see in Q1. Do you see that as a good indication of where we should expect growth to be in the coming quarters? Do we still expect some headwind from pricing or other items that indicate that growth should come down through the year?

18:33 How should we think about that? If you could give a bit of guidance on that, that's the first question that would be super nice. Yeah. Thanks, Matthias. Well, I think, you know, we're very happy to see a continued growth in personal lines. Sort of rough indications would consider half of the growth around three percentage points coming from actual new customers being brought continuous to the group, much of that from our strong partnerships with the banks. And then now we are in the beginning of Q1 as Mads also mentioned, so you might see a slight sort of tailwind in the beginning still from the remaining parts of the repricing fading even though we are starting to come down now as you've seen compared to last quarter.

19:30 So, I think an indication for the full year could be something for personal lines around and we have the indexation at around two and then maybe let's say two or three coming from market shares on top of that. Thank you. That was very clear. And then if we move to, like, the the the the workers' compensation segment where you now say you you you lose out on a bit of on a few customers, like, maybe you could could say a bit more about the profitability of those low cost contracts, like, where they are on top of the group combined ratio or the return on capital allocated. Maybe you could say something there on like what's going on in that segment at the moment. Yeah. I'm happy to do that. I think many of you will recall that also from previous discussions that workers' compensation both for us and for our peers has historically been a product which from time to time and recently so has struggled a bit in terms of overall profitability.

20:33 We've had sort of a conviction that we've been for some time quite skeptical around especially standalone workers compensation. We feel it typically creates a better balance for us if we can do it in combination with other products where we typically on average would have higher margin and earnings. And what's happened this time I would say is that we have seen a development where for reasons not completely known to us, have certain players being willing to underwrite workers' compensation at levels that we would see as not profitable and we have not been willing to do so this way around either.

21:18 So most of the reduction would be from standalone customers and leaning towards the larger segments where we've been the most skeptical. And this is not a new theme for us, as I mentioned. You would have mentioned, I think you would recall that I have mentioned this in the past, but we see the effect now in Q1 also because we, as you also may recall, we do have a large part of our commercial portfolio turning on oneone. Sure. So, just to clarify a bit of that, is it fair to assume that the combined ratio and the return on capital has not been fantastic on those people that is leaving Alm at the moment? Quite the contrary, so it's improving the possibilities despite that the revenue goes a bit down.

22:04 That is right. That's the way we see it or else we, know, in general, wouldn't have that approach, but we do not see this as something that's really adding meaningful margins to us and also from a capital standpoint, this is not the best segment to be in. Thank you. If I may, I'll do the last first question and then I'll jump back in the queue. On inflation, what are you seeing out there at the moment? Like, there's a lot of stories out there on oil prices. And what else what are you seeing? And have you already started to adjust some prices? Or how long can you wait before you start to adjust price? Maybe you have something you could say there. And then I'll jump back in the queue. Yeah, sure. Of course, we're following the situation closely also. I think we might be, I think pointing at especially the results we're seeing in energy prices after the situation with the war in The Middle East, which may also start to translate into certain material prices.

23:05 I think as we see it for now, we do not see this as something that puts us in a position where we need to do repricing on any meaningful large scale. So, don't see that for now. But that being said, obviously, we're following it closely and if this turns into be something that is very prolonged, then we'll have to reevaluate continuously to see where we go. But for now, we don't see that impact there. Thanks a lot. That's very clear. Your next question comes from the line of Simon Brun with ABDBY. Your line is now open. Please go ahead. Yes. Thank you, guys. Just a quick question and and a basic follow-up on on Almadenov's question on the commercial lines.

23:54 Just in terms of the premium growth, how should we think of it? I I I appreciate that you write on the report that there's an ongoing initiative in workers' comp. Does that apply to industrial as well? Meaning that this is a continued sort of pruning process that will continue to impact the commercial premium growth after the year, or or or should that turn sort of positive on a quarter on quarter basis anytime soon? Thank you. Yeah. Like, can start by maybe giving some rough indications of our decomposition. We have 1.8 percentage points overall reduction. I would put indexation at around 2%. Then we also would have a slight tailwind from some of the repricing fading out last year that could come to let's say around half a percent.

24:49 And then the initiatives or at least the effects of our renewal within especially workers' compensation and certain industrial clients would account for 3.5% in reduction of premiums. And if you look at that effect, the last one, it's something that we would see will continue through the year. Mechanically, we would probably see a slight fade towards the end if you look at it on a relative basis through last year, but I think in an overall statement it is something that will impact the group growth for the entire year. But if you put it sort of up in, if you go in very high end sort of numbers, you might argue that if you look at personal lines, we still see some positive market intake of recent 4% on top of indexation and repricing. And on the other hand, have on commercial lines, you have the opposite effect coming from the effects of this pruning, so to say.

25:57 Okay. Super helpful. Thank you. Your next question comes from the line of Yudic Shikori with Autonomous Research. Your line is now open. Please go ahead. You for taking my question. My my first first question is actually a clarification on the comments of of commercial lines. I mean, the thing that, you know, you you started this you know, repricing and portfolio pruning action recently, is is that is that going to be, like, a multiyear adjustment process, or is that just an impact we should consider just for this year? That's my first question. And secondly, sorry, go ahead please. Maybe start with that and I'm happy to take a second one following.

26:46 Well, think, Judith, if you go back in a slightly longer perspective than just recent quarters, I think this has been sort of a core part of our strategy and narrative for a long time. If you go back to the CMD, you also see our voiceover of what segments we sort of are most focused on growth. And within commercial lines, would be agriculture and the sort of larger part of SME, the small to medium sized. We've always stated that we don't guide growth and that we need to be able to walk away from unprofitable business. So, don't think this is a new thing for us, but I would say that to be fair, I think we couldn't have fully sort of foreseen what the market would be like in workers' compensation and it's definitely not become better during the last year. It's gone worse. It's become even I'd say, yeah, even more soft.

27:34 And so I wouldn't we wouldn't maybe fully have predicted this. How it will be next renewal for the major fast turning in the end of the year, we'll have to see. But that's sort of the situation. So now we are where we are. Alright. Alright. Thank you very much. And my second question, unfortunately, is on the on the upcoming ruling on workers' comp. Look, you know, in in the in the event of adverse ruling, we only have some official estimates from the Ministry of Employment. I I was wondering, I mean, you must have already reviewed your own book, past cases, etcetera. I mean, how how swift swiftly would you be able to come out and and give us your best estimate of what the cost is likely to be? Is that gonna be like, you know, like, a very like, within a day or is that gonna take weeks weeks or months?

28:25 Well, I think just to restate it, now we will have to see what the supreme court ruling will be. But as you adhere to, obviously, we've prepared for for for what may come. And, you know, depending on how clear the ruling is, we'll have to see, but I can promise you guys that we will do utmost to provide clarity as soon as possible. Alright, thank you very much. There are no further questions at this time. I will now turn the call back to Andreas Rubin Madsen for closing remarks. Yeah. Thanks for joining today, and, have a good day. This concludes today's call. Thank you for attending. You may now disconnect.