Alm. Brand (Copenhagen:ALMB) Q2 2026 Earnings Call

0:00 Hello, everyone. Thank you for joining us and welcome to the Alm Brand Second Quarter twenty twenty six Earnings Call. After today's prepared remarks, we will host a question and answer session. To withdraw your question, please press star one again. I will now hand the conference over to Andreas Rubin Madsen, CEO at Alm Brand. Please go ahead. Good morning. Thank you for joining us on our conference call. I'm Andreas Rubemmatson, CEO of Alm Brand Group. As usual, I have with me the head of our RR team, Matt Stingle. This morning, we published our interim report for the second quarter of twenty six, and I'll walk through the presentation of our results. Let's now turn to slide two and the key highlights for my first full quarter as CEO.

0:51 Overall, I'm very pleased with the financial performance in q two. We delivered a strong underlying improvement in the claims ratio, which improved by 200 basis points year on year. At the same time, results in Q2 were negatively impacted by a 700,000,001 off reserve strengthening following the Supreme Court ruling on workers' compensation. In personal lines, growth slowed a bit in the quarter, as expected, due to the year on year effects from last year's repricing fading. However, a growth rate of above 5% during Q2 still indicates that we continue to gain market shares. In Commercial Lines, we experienced a decline in the top line, reflecting our actions to improve profitability in an increasingly soft market for workers' compensation, while seeking to reduce volatility at the same time.

1:37 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 1.0% year on year. Importantly, we improved the underlying claims ratio in commercial lines by 2.3 percentage points year on year. So overall, this reflects continued progress on profitability. And now, I'd like to like you to turn to slide three for our financial highlights. In the table to the right, the middle column reflects our Q2 financials, excluding the impact from the Supreme Court ruling on workers' compensation. Insurance revenue grew to 3,000,000,000 in the quarter. The adjusted insurance service result was $648,000,000, up from $520,000,000 in Q2 last year, and this represents our highest insurance service result ever.

2:30 We continue the strong underlying trend from Q1, with a significant year on year improvement in underlying claims. Weather related claims were higher than we would normally expect for Q2, while major claims were below normal levels. Run off gains at a level of around three and a half percentage points were almost double of the normally expected level. Investment income was strong in q two with a net gain of 215,000,000 related to the rebound in the market impacting equities as well as bonds in a positive direction. Finally, other income and expenses are significantly lower than last year. Primarily, we no longer have integration costs related to Kodan following the completion of the integration. And now, let's turn to slide five.

3:18 As I mentioned before, the group delivered the highest insurance service result ever in q two, adjusted for the supreme court ruling on workers' compensation. The significant improvement was driven by strong underlying improvements, as well as runoff gains when adjusting for the one off charge. In personal lines, the insurance service result increased year on year by 114,000,000 to 400,000,000. This was driven by continued growth, underlying improvements, and runoff gains. The cost ratio increased marginally to 17.2%. In commercial lines, the adjusted insurance result was $248,000,000, up from $234,000,000 last year. The increase was driven by a combination of significant underlying improvements, higher ordinary runoff gains than Q2 last year, and 30 basis points drop in the cost ratio.

4:12 On the other hand, weather claims and major claims were above the level in Q2 last year, while the decline in premiums had only a limited impact on earnings. Please turn to slide six. Insurance revenue grew by 1.7% in the quarter, compared to 2.5% last quarter, reflecting effects from last year's repricing fading and an increasingly soft market for workers' compensation. In personal lines, we continue to take market share, while the effects of repricing are fading as expected. Therefore, I'm quite pleased that we delivered a growth rate of 5.2% year on year. In commercial lines, premiums declined by 2.3%, this points year on year reflecting our continued efforts with improving profitability in the soft market for workers compensation, as well as reducing volatility among our larger customers.

5:04 Adjusted for workers compensation and industrial customers, the commercial portfolio grew at a muted level of 1.0% in Q2. The growth of 1% in the broad commercial book is too low in my view. It calls for a bit of management attention, especially on the SME side. And now moving to slide seven and the claims ratio. The Q2 claims ratio improved by nearly four percentage points year on year, adjusted for the Supreme Court ruling. This reflects strong underlying improvements and relatively high ordinary runoff gains, partly offset by elevated weather claims following the storm Dave in April. In addition, the year on year comparison benefited from the non recurrence of reinstatement premiums recognized in Q2 twenty twenty five.

5:51 The underlying claims ratio was 200 basis points lower year on year, driven by our profitability initiatives. The underlying improvements were particularly strong in commercial lines with 230 basis points improvements in underlying claims year on year, while personal lines improved by a 190 basis points. Overall, the discounting effect was flat year on year at 2.2 percentage points, which may come as a surprise to some of you. This reflects model changes within workers' compensation that offset the positive impact from the higher interest rates in Q2 this year compared to last year. Looking ahead, I would expect the discounting to be at a level of about 2.2% with the current level of interest rates.

6:38 And now, please turn to slide eight. The combined ratio in personal lines improved to 75.5 from 81.6 last year. This was driven by lower underlying claims and runoff gains. On the other side, the cost ratio increased slightly to 17.2% in q two. Premium growth remained strong, 5.2%, despite the fading effects from repricing. Please turn to slide nine for commercial lines. In commercial lines, we observed a reduction in the combined ratio to 81.8 in q two twenty six, adjusted for the Supreme Court ruling, to 83.2 in Q2 last year. The improvement was driven by significant improved underlying claims, and the reinstatement fee for reinsurance in Q2 twenty five not being repeated.

7:30 This was partly offset by somewhat higher, large and weather related claims, while the cost ratio decreased by 30 basis points year on year, providing additional support. Now, let's move to slide 11 and the investment result. You may have noticed that we began disclosing returns on our free portfolio in Q1 this year. This was in response to requests from many of you. In Q2, the investment result was a gain of $250,000,000, primarily driven by the free portfolio, which contributed $2.00 9,000,000, especially with equities benefiting from the general rebound in the market following the geopolitical turmoil experienced during Q1. Let me also briefly touch on the tier two issuance in June. We issued 900,000,000 tier two bonds at a spread of 140 basis points, slightly below the spread on the maturing tier two. The part not already tendered 366,000,000, will have first call in October this year.

8:31 Finally, let's turn to slide 13 and our updated guidance. We're revising our guidance for the insurance service result in '26 upwards by 100,000,000 to 1.2 to 1,400,000,000, excluding runoff gains in second half of twenty six. This reflects the strong underlying performance in Q2, as well as runoff gains. Looking ahead, we continue to expect runoff gains of around 2%. The new guidance corresponds to 1.9 to 2.1 in insurance service result, adjusted for the 700,000,001 off charge related to the Supreme Court ruling on workers' compensation. We continue to expect a cost ratio of around 17% for '26. The combined ratio, excluding the runoff result in H2, is expected to be 88 to 90, corresponding to 82.5 to 84.5 when adjusted for the impact of the Supreme Court ruling, an improvement of 100 basis points, following the strong result we had in q two.

9:36 As a result, guidance for profit before other income and expenses is upgraded by 200,000,000 to 1.45 to 1,650,000,000, or 2.15 2,350,000,000 adjusted for the supreme court ruling. Other income and expenses remain unchanged and guided at an expense of $500,000,000.04 26. And with this, I conclude our presentation, and hand over the word to our moderator. Thank you. Thank you. We will now begin the question and answer session. Please limit yourself to a couple of questions. If you'd like to ask a question, please press star one to raise your hand. To withdraw your question, please press star one again. We ask that you pick up your handset when asking your question to allow for optimum sound quality.

10:33 Your first question comes from the line of Matthias Nielsen with Nordea. Your line is open. Thanks a lot and congratulations on the strong development in the online claims made you this quarter. So my question is a bit about like how we should think about that in the coming quarters and also in the context of your '28 target. It seems like you're quite strong quite off to a strong start, like how should you think about stochasticity and other things with the development you have made both in q one and q two now on on this? So maybe a few comments on that for the coming quarters, and then then we can take my second questions after that. Yeah. Thank you, Matthias. I can give some flavor to that. That a bit of different nuances going through private yeah, personal lines and and and commercial lines separately, but if you want the sort of the very big picture, we have we have some some slight pricing overhang, to name one thing.

11:35 We have also a very slight synergy overhang also remaining. Then we also have some support from from reassurance, as we have talked about before, being highest in commercial lines, but around 0.5 or so on average for the group percent. So if you sort of total that up, that that adds up to around a percentage point or so, plus minus, and then we have around the percentage points, which I would also consider to some degree, it's it's stochastic this quarter of improvements, which which mainly are related to property related lines, actually both in in our commercial and private lines book. So, if we look at that going forward, the guidance we started for the year on this point actually stands.

12:20 We have a base expectation of around, let's say, 100 basis points improvements in the coming quarters. All else equal, that would that would be if you have if that that holds, then that would come to around a hand one and a half percentage points for the full year. So that's sort of the rough guidance for that. Okay. So so 100 around the 100 basis points for the coming quarter, is that, like, fading off to, like, bigger in q three than q four? Is that how we should expect it as pricing is pricing payment is fading, or is there any or is is that already already out of the way? Yeah. I think the composition will be different because we've had, as we I talked about a slight repricing. We've had some synergies still, but that will fade and disappear completely, And then what we'll get in the other hand will be the first parts of our strategic initiative coming through, and to name the main ones coming would be one is the consolidation of our our our data centers, which we have just implemented.

13:26 Then we have the work we're doing within our claims area with what we call smart repairs related to the motor area, and then the final one, procurement, especially within buildings for the for the claims area, those three would add up to something like, let's say, million, roughly 15,000,000 per quarter, roughly evenly divided between the three. So that's sort of that will sort of start ticking in as as the synergy and prices overhang go out, thereby getting back to the the approximately one percentage points in total. Okay. That was that was very clear. Then my second question is, you all you all know sound quite barriers on on the conversion line growth, but if you look on the q on q basis, like, you're up 2.2%.

14:17 Like, is that the like the pace that we should expect in the coming quarters instead of like the January 1, we knew that's kind of behind us, that was soft, but that's how it is. And we know that already, but like when you look at the Q on Q basis, the growth is actually quite fine. That also how we should expect it to be in q three and q four that the q on q growth is is is holding up quite well? Or how should we think about that? I think the the growth the the vicinity of the growth we're seeing now is more or less, I think, a a good start starting for for what we we would expect also in the coming year. As a year on year growth of around, you know, a total decrease of just above 2%, I think, a good starting point for the expectations also in the coming quarters. We do have some of the commercial book renewing 110, but I think it will take we'll have to go into the next year for us to really see a different trend in the total commercial lines premiums.

15:11 Perfect. That was very clear. Thanks a lot. Your next question comes from the line of Osborne Mark with Bank. Your line is open. Good morning. Thanks for taking my question as well. It's actually a bit of a follow-up from one of the previous questions. Back on your guidance for the full year, just trying to understand the journey that we've been on. So we got the Q1 numbers. You raised the guidance of €150,000,000 Obviously, some of it was realized runoff gains, but still. Then we have the on the same day, the adjustment on the back of the workers' compensation case. That was a full 700,000,000 clean-cut. And then I'm just today looking at the underlying trends that you print both for Q1 and Q2, you're lifting your guidance by €100,000,000 essentially the runoff gains. But I do hear what you say in terms of the stochastic elements in, I guess, both Q1 and Q2, but still to me, it seems like there is also an underlying improvement within those 200 basis points that would be that wouldn't explain the full difference from 100 basis points to 200 basis points. Just really trying to understand, I know there's a rounding element as well in your guidance, but still just trying to understand if you see this purely as stochastic or if there is some sort of underlying still improving more than you expected also with the communication that you had. And I guess going forward,

16:41 the improvement into next year, now that we are ahead of the plan for this year, how should we look at that improvement as a starting point is a more ambitious one, so to speak? Yeah, well, me start going through the current year to begin with. I think, I mean, as we also stated, it is it has to do with with two things, as we also say. In sort of very rough sort of numbers, we have some moving parts with with large claims a bit below normal. We have weather claims a bit above, so things are sort of moving around. The main things driving the upgrade would be our underlying loss ratio, and the major one being our adjusted, so to say, prior year gains.

17:32 And I think if you look at it mechanically, also giving what I'm saying around a base expectation of around a 100 basis points in the underlying loss ratio, maybe having, let's say, just below that in a stochastic element, If you add up the math, you might you could do the argument that that a 100 is maybe slightly conservative, I think, but we've we've chosen to stick with that. But I mean, mechanically, you might have an argument that we could also have gone a bit higher if we had chosen to. Does that But then if I look at sorry. You wanna say something? I'm sorry. I'm just saying it it it is is that does that make sense, Asbjorn? Yeah. I mean, I I guess I guess it's also difficult with the rounded numbers to get the exact science of this, but and and, of course, it's a guidance. So so I do get that. Which is more that if we get, let's say, a 100 basis points for q three and q four, I guess your full year improvement is going to be 170 basis points or something like that, right?

18:28 So those extra 70 basis points, do you see that as a headwind for next year? So if you print 50 basis points improvement next year in your original plan, would you actually print 20 basis points deterioration to your underlying claims ratio next year? Hi, Ashtion, Matt here. I think, I mean, you are seeing from a mechanical point of view, you are right because we are thinking it a bit like 150 basis points of underlying improvements then for this year, where we look at it from at this point with 50 basis point being stochastic, then you're right that we at our Capital Markets Day, we pointed to 50 basis points underlying improvement per year, as kind of the structural thing from our strategy initiatives.

19:19 So mechanically that would mean having 50 structurally next year would be flat underlying, but we always strive to make a good underlying progress. So we will still believe that we could report at least a positive development in the underlying loss ratio next year. All right thanks. And then final question from my side, I know you're not sitting with the actual cases yourself but do you have any sort of have you seen anything or heard anything in the back of the Supreme Court ruling in terms of number of cases or things, if your if your sort of estimate is still on the conservative side, any any news on this front? No. Actually, haven't received any any, you know, claims being, so to say, reinitiated, were already fully determined.

20:14 So we've seen nothing, and we have no, in actuality, no no new news yet, which is also what we would have expected at this point in time. Alright. Perfect. Thanks a lot. Thank you. Your next question comes from Martin Burke with SEP. Your line is up. Please go ahead. Thank you so much. Perhaps Andreas, just on your initial comments about management actions in your commercial area regarding the 1% premium growth, underlying premium growth this quarter that you're not satisfied with. Could you please elaborate on that and then beyond the press that we have seen this quarter? And then in addition to that, I guess this workers' comp has been a has been sort of been bucking your premium growth in the commercial segment for now, at least three quarters.

21:16 When do you expect this to this sort of hit when non workers' comp to clear up? And how much technical result is actually in it? And then maybe a last question on premium growth while we added, I mean, private lines continues to do very well. What kind of outlook do you see for private premium growth going forward? Thanks. Let me try to go through that. Starting with the commercial area, have the 1% you mentioned for it's not really a segment as such, but it does give an indication of, let's say it is an indication of what what what the what the broader based commercial book is doing on average.

22:05 Obviously, there are also moving parts within that. Some parts are going very well. Some some parts are a bit more sluggish, but I think the the overall message we try to come up with there is that on sort of a as an ambition, we would we would like and we would also expect to be able to grow more than 1% given the the indexation we have right now in commercial lines. So and and and with the management actions, would say, I think, you know, we it we've had very successful run just to to state that within commercial lines. We've managed over the last few years, and also in in the last quarters, we've continuously brought down volatility, and we've improved profitability.

22:52 And and that has been, you know, successfully done by by the previous management, also by by who's been the head of that for the for the last few years. So I think when we now say this, I'm we did we did a an agreement with also a mutual agreement, and this is more about saying that where we are right now, we feel that that new eyes are needed maybe to to succeed a bit better with the growth within the areas we we want to grow profitably. So I think that was the management part. Then the workers' compensation. Sorry, what And, Thresi, just to follow-up on that management. I mean, what kind of leaders can you pull to restore this growth without compromising your profitability?

23:41 Do you see any pockets where you are were there any low hanging fruits that hasn't been picked yet, or how should we view this? Well, I'm not saying, you know, I I don't I I don't think that obviously, I I believe that we can do better. I don't think it's about price only within this area. It's about becoming even better at also translating the value proposition we have, and the experience we have as a very experienced Danish commercial lines insurer with a full full and sole focus on the Danish market, putting that into play and maybe being even better to put it at into play for the smaller, let's say, the the mid sized small companies, not the very small, but the mid sized small companies. We also talked about that on our strategy in the CMD, which was a growth area. So that's just to say, and I don't and and I think there are a lot of things we can do to to continuously improve that value So, become even more relevant for both the customers we have and the customers we want to have.

24:42 So, I think that's at least giving some flavor on that. So, moving on to workers compensation. When will the head headwind dissipate in terms, as I heard the question, it was related to the pricing. I think it's very difficult in in honesty to to fully predict. We are in a market where where, you know, with other players, and and some of the those players either have a either they have a completely different view on the risk or they have a different tactics around what they're willing to do than we are. So, we'll have to see how it goes. I can't give you any clear indication. I think, you know, it's obviously going to be interesting to see what will happen after the Supreme Court ruling sort of gets settled in the market also as one thing. What will people do there? But I can't give you any clear prediction. We'll have to see as we go along. I can just say that we will continue to demand that our business is profitable also within workers' compensation.

25:46 The the premiums that the premiums that are leaving, do you have any any Oh, yeah. Sorry. Well, it has any clarity on what kind of At least especially within the the large commercial segment, it is almost no technical result. It's just leaving with those premiums. At least, and especially if you're looking at the levels we would be needing to underwrite at, that would be in some cases become loss giving as an alternative scenario. So, and then for yeah. Then there was a premium premiums and private lines personal lines. What to expect there? Could you just repeat it? What was the specific angle? No. I mean, you do have this you have in your private lines, I guess, still have this funny dynamics that you still have a Prolate second franchise, which is still steaming ahead at full throttle, right? Yes. And sort of those growth rates have, of course, been high for a while.

26:51 They're still high. And how I guess my question is, should we expect this sort of mid single digit to go on for also the coming year or years, so to speak? Well, I mean, at least when in the market we're in right now with the trends we're seeing and the the performance we're seeing with our banking partners, we have no reason to expect that to dissipate in the coming quarters. If we go further than that, it's always a question of how does the market overall develop. I think it becomes a bit more tricky to predict, but at least for now, I think I will state that the momentum we see for now, we expect to continue for now. Okay. Alright. Alright. Thanks a lot.

27:39 Your next question comes from Alessia Magne with Barclays. Your line is open. Please go ahead. Hi, good morning. Thanks for taking my questions. Two from my side. One is around the workers' comp pricing. And I'd like to know what's how do you think pricing in the business line will evolve after the ruling? And what level of price increases do you think is needed for the industry to compensate the higher claims burden? And more broadly, can you talk about your expectation on pricing and volume evolution from here, either the group level or if you could split by customer, commercial? Thank you.

28:31 Yeah. Starting with workers' compensation. If we look at the Supreme Court ruling on the margin, so to say, that does have it does impact our expected claims in an upwards direction for the same business going forward. We're looking at we're still doing the the analysis on how much we we feel exactly is needed to to mitigate for that. So on an overall, I would expect market to have the same in terms of trend viewpoint on higher premiums being needed. How much the premiums will in actuality in the market, so to say, be impacted, I think is a more difficult question to answer. For one thing, does, logically depends on what the different players will do, and I just came back from answering questions where we've seen historically, recently, some players be, in my viewpoint, quite irrational about pricing, And what will they do with this event remains to be seen. So honestly, I can't I don't have a clear viewpoint.

29:42 I think that's what everybody's very, you know, keen on on experiencing, seeing what what will happen with that, but I can say that we are looking into it, and the trend, obviously, all else equal, is for higher premiums, given that event. More broadly, I think what we would expect to see in the coming years is that if you look at our group in total, I just meant we just talked about private lines. I think there's no for now, we see we see that momentum continuing. We're able to take market shares, particularly from our strong bank partnerships. So that trend, I think, will is what we expect for for now to continue. So overall, having some base indexation of around two, and then some added market shares on top of that, two to 3%, maybe even a bit more if if we do well, but but something around the levels we're seeing now.

30:39 And I think for commercial lines in a broad sort of sense, we'll have to see with workers compensation. Again, I think it's a bit difficult to predict where that will end up exactly, but in sort of broad sense, I think we have no ambition. We never guide for growth. We don't have an ambition to grow just to grow, but I would be very interested to see our ability to grow, especially within the segments we choose to grow, come a bit up. So, something I think I would be very satisfied if we can continue in an overall commercial book growing with the market, but improving profitability, bringing down volatility, still having that discipline, but also beneath that having some growth come in on top of the indexation within the segments we choose to grow, such as agriculture, as we have seen actually quite strong growth, and also within the general small to medium size, seeing some growth pick up there, then I will be very satisfied with that.

31:32 And that was very clear. Thanks. One follow-up, sorry, on the first question. So from your side, just from what you are seeing based on your analysis and investigation, I mean, are we talking about price increases of single digit, double digit? I mean, do you have any indication that you can share? That would be helpful. Thank you. Yeah. I understand the question and the interest on this topic, but we are still looking into that and arriving at our final conclusion, so it's too soon for us to give that indication. Understood. Thank you. Your next question comes from the line of Karl Lofthagen with Berenberg. Your line is open.

32:17 Please go ahead. Yes. Hi. Thank you for taking my question. The first relates to some press speculation that your distribution partner, Seabunk, is potentially looking for a new insurance partner. I just wanted to check if there's I mean, there any validity today, anything you can comment there? And then the second is just on the arbitration case with Guard. I mean, I guess I appreciate it's very early days, but could you provide a little bit of color just on timeline for how this could take to get some clarity? Also why do you think the claims are founded? Any color there would be appreciated. Thank you. Yeah. Let's start with distribution. I think what you are adhering to is is the press coverage of our long standing partner or partners within the now ALA Suhlbank Group looking into what what the best solution for that for the insurance partnerships will be. And the only thing I can say there is that we're very happy with the partnerships we have with all the banks in the AL Suhlbank Group. They've been long standing with with Suhlbank and also with Vistusk, and we had a very successful recent onboarding of We feel we have a strong position on this in the Danish market, and we are obviously participating in that process with but I think any questions to that process,

33:49 or where they see how that timeline or other considerations, think I'll have to refer to Zuldbank on that, in Zuldbank. Then the second question was around the guard arbitration. I'll try to give some sort of, you know, some clarity on how the timeline is, and so, but now we have this arbitration, which was initiated by guard, and I think as we've talked about, it will, the process will basically be a process where we get, you know, they will they will send a reply, then we will send reply to that, and then there'll be some interactions. And the final clarity, as I understand, could be somewhere around, you know, on the other side of summer break next year in '27.

34:36 And I don't need, I can't give any guarantees for that. That's sort of what I hear could be a realistic timeline. And then just to give an update on what's happened, I mean, what just happened is that we got the first sort of, I think it's actually the second, we got an, we got a new reply from from Garth, we just received, and we simply haven't had time to go through that. We got it here in the weekend. So, haven't, it hasn't, we haven't had time to form an opinion on that. So, we're going through that now, and and we'll be looking through to it. And then I think the realistic, as I said, process forward will be there'll be a couple of more interactions on that, and then we'll see how it goes in the end. Okay, thank you. Very clear. And we have another question from Matthias Nelson with Nordea.

35:25 Your line is open. Please go ahead. Thanks a lot. So sorry for follow-up, Quentin, on the details and maybe a bit nerdy one. But on the underlying claims ratio improvement, when you said 100 basis points, just to make sure that we're on the same line, is that the discount or undiscounted one, given the the one off thing that you had in q four last year, I think that actually matters a bit on on on the discounting in in in the commercial line. So so maybe if you could just clarify which one we we are talking. I'm talking on an undiscounted basis. Okay. Good. Perfect. That was that was clear. Okay. There are no further questions at this time. I will now turn the call back to Andreas Rubin Madsen for closing remarks.

36:18 Thank you. Well, I have nothing really to add at this point. So thanks a lot, all of you, for for for calling in, and I hope you all have a great summer. And that concludes today's call. Thank you for attending. You may now disconnect.