Alm. Brand (Copenhagen:ALMB) Q3 2026 Earnings Call

0:00 Hello, everyone. Thank you for joining us and welcome to the OMBRAND Third Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press Start 1 to raise your hand. To withdraw your question, press Start 1 again. I will now hand the conference over to Andreas Ruben Madsen, CEO at OMBRAND. Please go ahead.

0:25 Good morning, and thank you for joining us on our conference call. I'm Andreas Ruben Madsen, the CEO of Enmilde Brandt, and as usual, I have with me the head of our IR team, Mads Thinggaard. This morning, we published our interim report for the third quarter of 26, and I will now walk you through the presentation of the results. Please turn to slide two. Overall, I'm quite pleased with the financial performance in Q3. We delivered the highest insurance service results to date, which is driven by lower weather-related and major claims, as well as run-off gains. We report an overall premium growth of 1.6%, mainly driven by personal lines, which recorded a growth of 4.7%. The growth slowed slightly in Q3, as expected, as a result of last year's repricing fading.

1:15 A growth rate of almost 5% for private lines, does however still indicate that we continue to gain market shares from strong bank partnerships as the key driver. In commercial lines, we reported a decline in the top line, reflecting our actions to improve profitability and reduce volatility at the same time. Adjusted for the workers' compensation and industrial customers, the commercial portfolio reflected a premium growth of 2.7% year on year, indicating a satisfactory growth in our focus area. Insurance operating expenses increased slightly during the quarter bringing the expense ratio up to 16.1%. The movement reflects normal fluctuations over the quarters. Today we announced a FTE reduction of 85 consisting of 55 redundancies and 30 discontinued positions. We thus continue to focus on reducing our cost base and building a more efficient group.

2:15 The underlying claims ratio improved by 70 basis points year-on-year, whereas personal lines delivered an underlying improvement of 0.8 percentage points and commercial lines reported an improvement of 0.5. The improvement was notably lower than in H1, mainly due to stochastic effects. Additionally, the increased coverage for workers' compensation following the ruling represented a 40 basis point headwind, while underlying claims Improved by 130 basis points in the first nine months of 26, supported by favorable stochastic effects. We should expect a bit lower improvement for the full year, assuming a structural improvement in Q4 of 50 to 100 basis points.

3:02 Turning now to slide three, let me take you through the financial highlights. Insurance revenue grew slightly, leading to an overall growth of 1.6% year-on-year, while the insurance service result amounted to 755 million, which is our highest result to date. The insurance service result was almost entirely driven by very low levels of weather and major claims, as well as high runoff gains. Investments amounted to a loss of 76 million in the quarter, primarily driven by rising interest rates. Finally, Other income and expenses are significantly lower than last year as we no longer have integration costs related to Kodam following the completion of the integration.

3:49 And now please turn to slide five. As I mentioned before, the group delivered the highest insurance service result to date. The significant improvement was driven by lower level of major and weather claims as well as higher runoff gains and an improved underlying claims ratio. In personal lines, the insurance service result increased by 90 million year-on-year to 360 million. The strong performance was mainly driven by a significantly lower level of weather claims, which improved by 3.3 percentage points year-on-year, supported by lower major claims and continued improvements in the underlying business. The cost ratio increased slightly to 17.0 in Q3 2026. In commercial lines, the insurance search result increased by 130 million year-on-year to 395 million. The strong performance was mainly driven by significantly lower major claims, improving by 6.2 percentage points year-on-year, and higher runoff gains.

4:53 This was partly offset by an adverse comparison for the risk adjustment, as Q3 2025 benefited from the one-off positive effect, related to the expansion of the partial internal model to include CODEM activities. The expense ratio went up slightly by 0.2 percentage points against Q3 last year. Turning now to slide 6 on insurance revenue. Insurance revenue grew by 1.6% in the quarter almost unchanged compared to 1.7% last quarter. In personal lines, we continue to gain market share, while the impact of repricing is fading as expected. As such, growth of 4.7% is seen as a satisfactory outcome, primarily driven by customer inflows and retention in our bank partnerships.

5:43 During the quarter, we were also pleased that AL Sudbank renewed its partnership with a mini-bank group, reaffirming the strength of our bank assurance proposition. In commercial lines, we reported a decline in premiums of 1.8%, Slightly improved versus a decline of 2.3% last year. Our efforts continue to focus on improving profitability as well as reducing volatility. Adjusted for the workers, compensation and industrial customers, the commercial portfolio reflected a premium growth of 2.7%, which I view as satisfactory. Moving on to slide 7 and the claims ratio. The Q3 claims ratio improved by a very satisfactory 7.2 percentage points year-on-year, reflecting lower major and weather-related claims as well as strong runoff gains. The improvement was partly offset by a 1.9 percentage point deterioration in the risk adjustment, as Q3-25 benefited from a one-off effect related to the before-mentioned expansion of the partial internal model to include cold-end insurance activities.

6:49 The underlying claims ratio improved by 70 basis points year-on-year, reflecting the positive impact of our profitability initiatives, including strategic initiatives beginning to take effect. This was partly offset by stochastic headwinds and the workers' compensation ruling, for which the implications for the current year have now become clearer. Commercial lines improved by 50 basis points year-on-year, while personal lines improved to 80 basis points. The discounting effect contributed 20 basis points year-on-year driven by higher interest rates, although this was partly offset by the workers' compensation model change introduced in Q4-25. And now please turn to slide 8 on personal lines.

7:36 The combined ratio in personal lines improved to 78.3 from 83.0 in Q3 last year. This was primarily driven by lower levels of major and weather-related claims, as well as an 80 basis point improvement in the underlying claims ratio year-on-year, driven by the strategic initiatives kicking in, but also impacted by a stochastically benign Q3 last year. On the other hand, the cost ratio increased slightly to 17.0 in Q3. Premium growth was 4.7%, despite the gradually fading impact of repricing. Please turn to slide 9, covering commercial lines. Commercial lines delivered a strong Q3, with a combined ratio improving to 71.7 from 81.3 in the same period last year.

8:25 This development was supported by runoff gains of 7.5 percentage points, primarily driven by workers' compensation and property. Major claims were also significantly lower, amounting to 5.1%, compared with 11.3% in Q3 last year. Despite the impact from the workers' compensation ruling and the stochastically benign Q3 last year, the underlying claims ratio improved by 50 basis points year-on-year, reflecting the positive effects of our profitability-enhancing measures starting to take effect as well as lower reinsurance costs. The cost ratio increased slightly compared with last year, mainly reflecting normal quarterly fluctuations. And now let's move to slide 11 for the investment results.

9:11 In Q3, the overall investment result was a loss of 76 million, primarily driven by the free portfolio where bonds led to a loss of 34 million, primarily as a consequence of rising interest rates. The group's investment portfolio remains well diversified with a low risk profile. Finally, let's turn to slide 13 for our updated guidance. On October 5th, we upgraded Our 26 outlook and raised our guidance for the insurance services sold by 250 million to 1.5 to 1.6 billion, excluding runoff gains in Q4 26 from the previous range of 1.2 to 1.4 billion. The upgrade reflects lower levels of major claims and weather related claims than previously expected, as well as runoff gains. We continue to expect a cost ratio of around 17% for 2026.

10:08 Excluding the runoff result in Q4, the combined ratio is now expected to be in the range of 86.5 to 87.5 adjusted for the impact of the Supreme Court ruling. This corresponds to a combined ratio of 81 to 82. In addition, we reduced our guidance for the investment result by 100 million to 150 million for 26, reflecting the increase in interest rates. As a result, our guidance for profit before other income and expenses was increased by 150 million, to 1.65 to 1.75 billion. Guidance for other income and expenses is down by 50 million to an expense of 0.55 billion for 2026. The increase is due to one-off costs related to the FTE reduction announced today.

10:54 We expect to book the 40 million one-off costs in Q4. With that, I conclude the presentation and hand over to our moderator. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press Start 1 to raise your hand. To withdraw your question, press Start 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Vash Gozelia with Goldman Sachs. Your line is now open. Please go ahead.

11:39 Hi, thank you for taking my questions. So I have two, one on the underlying claims ratio. So you have noted the 90 basis points headwind in the commercial segment this year, basically coming from workers' comp. So one clarification on that, like why has it come through underlying and not included in the Thank you very much. And essentially, how should we think about the exit solvency to ratio for 2026? And can we expect the stochastically better year to translate to a higher capital return?

12:39 Or would you hold back some of the good news for the GARD arbitration?

12:44 Yeah, thank you. I can start on On the first question, and then I think Mads will do some of the capital, or we can help each other at least. We start with the underlying loss ratio in commercial lines. It's true that we have approximately 90 basis points of headwind coming from the effect in the small claims, the underlying loss ratio coming from the Supreme Court ruling. And how does that sort of work against, how is that connected to the 700 million strength ring? The 700 million is almost entirely prior year losses regarding the backdated effect of all the claims we have already handled for the last up to 30 years. So what happens is that that's the major effect, but what you're seeing in the underlying loss ratio is the effect from on an onward looking basis.

13:47 We expect to get more claims simply because the threshold now is lower and the effect in our books is estimated to around the 90 basis points. So this is definitely something that we will need to sort of cater for in terms of pricing. And we will also be repricing the new business coming in to cater for that. So a lot of the book would renew in the large segment on January 1st in the commercial lines business. So we should already see an effect there. And then we'll get through the full transition will take around a year or four quarters, so to say. But we've already started repricing the new business coming in. So I hope, you know, so we would have a slight headwind next year, but we should get fully back the profits from this effect.

14:40 And maybe Mads, you can talk a bit into capital.

14:43 Yes, I mean, I can give some input here on how you should see the capital evolving by year end and Q4. And it's, I mean, one thing is that we have a very clear pattern through the year. where we see the profit margin that is part of our capital base tick up quite a bit in Q4 and then decline in the rest of the quarter. So when you model Q4, you should put in a healthy uptick in the profit margin and that is also reflecting the renewal that That is quite heavy at the start of Q1.

15:28 So there is a kind of an addition to do there. And just to give a kind of a structural number, then we are talking about effects of 300-400 million optics in Q4, structurally, due to the seasonality here. So I think that that's one thing to look for. And then another item is that that immediately after Q3 we did issue a private placement on tier 2 that can play in our capital base and there we should have a tailwind of around 5 percentage points as well that should be modeled into the Q4 solvency coverage.

16:16 So I think that's some of the elements and then I think Andreas will mention whether you should expect something from Gaard in Q4.

16:27 The short answer is that we find the Gaard claim completely unfounded also after having reviewed the latest reply and as such there is no reason to see any effects translating in anywhere. We have not put a single penny in reservations for that and I see no effect coming into capital either.

16:49 Can I just clarify on your first reply? So you mentioned that you still expect some headwind next year. But if I've understood correctly, you repriced most of the business in first gen. So while I appreciate you will have a little bit of headwind, but net-net, you should still see a tailwind, right? Because you will reprice most of the business. So this starting point of higher 90 basis points should not be a should not be the case. So you should almost see like probably 70 basis points tailwind, if that's a fair number?

17:24 I think we would expect to get most of the 90 basis point headwind back. We'll get a significant portion back in the beginning of the year, but we will need to reprice the portfolio for us to get So I think what I said is that we have some headwind now, and we expect to reprice that. We should see an effect already in Q1 next year, and then we will get it fully back during the year. It won't translate into an actual tailwind. I don't think that would be the right way to sort of view that in terms of underlying loss ratio.

17:59 Understood. That's really clear. Thank you. Your next question comes from the line of Yudishi Shikori with Autonomous Research. Your line is now open. Please go ahead.

18:15 Good morning, everyone. Thank you for taking my questions. I've got three quick questions, actually. The first one is on the headcount reductions you announced today. I was wondering whether at the time you unveiled your 2028 targets at the end of 2025, whether these reductions are included in the plan or whether these are new measures that offer you some sort of extra buffer to reach your targets. So that's my first question. And my second question is actually on guard and whether you have any sight of the likely timeline when this issue will be resolved. And then finally on commercial, you are providing us with the growth rate adjusted for workers' comp and industrial customers. So I was wondering whether the measures you have been taking in these two lines, whether these are complete and therefore in 2027 the growth rate will look different. Thank you.

19:18 Yeah, thank you. Well, the headcount adjustments we did today, I think the short answer is that While we work on a number of initiatives, we also have data centers being merged. So we shut down one. Also a meaningful impact of around 50 million in full year run rate. So just to name a major event also coming in. This, I would say, more or less is in line with what plans we've had and and follows the line we set to become more efficient over the years.

20:03 So I wouldn't see this as something that changes what you might call the expected track from what we said when we came with our 2028 strategy. And it is not to be seen as us getting, we're not in no way doing new targets just because we did this adaption. Then going to the GARD timeline, We expect the GAAD arbitration to be concluded in the end of August next year. So just to maybe comment briefly on the process, as expected, there will be some iterations. We received a reply from GAAD in the middle of July, as I also recall we mentioned back then.

20:49 We didn't have time at that point to sort of go through it, but we have been going through it thoroughly since then. And I think the important thing to highlight once more here is that we still consider it completely unfounded and now the arbitration will need to go its course. So that was that. And then around top line growth in our commercial lines business, I heard the question that framed that we've had some headwind in terms of top line. We see a more sensible growth when adjusting for the larger segments and workers' comp where we have the 2.7% highlighted. And what does that mean for expectations going into next year?

21:35 Well, we think we're in a good place in terms of profitability. If you adjust for some of the headwind we mentioned, we have a strong track in commercial lines, both in this quarter and for the full year. We're seeing the effects from the profitability initiatives we've already done. But it's hard to predict exactly how will the renewal go in terms of where will the market be. and will we need to walk away from further business? We'll have to see. But as you know, we are about profitability first and remain so. So we'll have to see where the market is in workers' compensation for one thing and especially in the large segment when we get to the 1-1 renewal.

22:23 All right. All right. Understood. Thank you. Thank you very much. Your next question comes from the line of Anders Hornbach with Danske. Your line is now open. Please go ahead.

22:36 Hello, it's Anders Hornbach from Danske Markets. Any chance you could split your premium growth into a price component and an underlying unit growth that would be helpful both for the commercial segment and the private segment? And any reason to believe that one of losses would Thank you.

23:02 Starting with premiums, I can do that in rough numbers. Private top line growth 4.7%, indexation around 2%, the rest or at least the major part of the rest is to be considered market share growth. A lot of that coming from from our bank partnerships. So that would be the main drivers of the main composition of private lines. Going through commercial lines, in total, we have a decrease of 1.8 percentage points and very rough numbers. But the major effects are, let's say, indexation around two and then a 4% effect from the The profitability or the de-risking of the book, walking away from some of the larger, especially workers' compensation and larger segment.

23:56 So if we hadn't had that sort of development in 1.1, we would be closer to a normal indexation for commercial lines also. So I hope that helps with that composition. Then you asked about runoff gains. Sorry, is there a follow up on that? I'll go to runoff gains and we can always take an extra question if you need more on premiums. For runoff gains, I heard the question being now we've had a favorable development also in Q3 and been a bit above normal. For some of the quarters, the short answer is that this does not change our structural expectation. We continue to expect in a long term setting around plus 2% in runoff gains. But as we've mentioned before, it fluctuates and can fluctuate from quarter to quarter, and we will not be including it as a guidance for that reason within a one year time frame.

24:59 So, yeah. Very good, thank you. Your next question comes from the line of Martin Berg with SEB. Your line is now open, please go ahead.

25:12 Yeah, thank you so much, Andreas. Just maybe one more time on workers' comp. I guess you took the 700 million in Q2. You report runoff gains of 104 million in Q3 in your commercial line segments. How much is that? You say workers' comp and property releases, but how much of that is actually workers' comp? And then perhaps The 40 BIPs that you want to reclaim next year, given that this is a hyper-competitive market, are you sure that you can actually price this through? And the 40 BIPs, if you manage to price this through, what kind of profitability level does that bring you at in your workers' comp business?

26:03 And then maybe a third question while we're at it, you still guide for 100 BIPs. Thanks. Let me try to go through that, see if I got it all, but I can always circle back if needed.

26:34 I understand there are some moving parts on workers' compensation. That's fair enough. Just to maybe put a few words on that, we already commented on the 40 basis points for the group or 90 basis points in commercial headwind, which is the small claims effect on an ongoing basis from the future effect of the Supreme Court ruling. Then we also have, and that's true, a runoff gain in commercial lines where we mentioned workers' compensation in Q3 26. And that is true. And most of the effect, without giving exact numbers, let's say two thirds or something, most of the effect And the driver behind that is that we got the yearly wage regulation index, which basically comes once a year.

27:34 And until it is fixed, we have to sort of estimate what we think our expenses will be. And this year it came in positively. So that's at least the major, it's not all of the reasons, but that would be the mentionable factor. It's a very good question, Martin. Again, you're right that how much will we get would, to some degree, obviously depend on where the market is in terms of the headwind we now need to reprice for.

28:25 I would say my sense is that the market is communicating that from the effect of the Supreme Court ruling, most players will be repricing. But we'll have to see where it ends up. For now, at least, I would expect that we would get that profits back through higher prices. That would be my base expectation. Maybe Mads, you could do the underlying loss ratio. Is there something about what to expect for the guidance?

28:54 Yeah, for next year. Of course, that has a bit of an interplay with what we just discussed, whether the headwind from workers' comp could be a small tailwind next year when When the year over year effect is out and perhaps some repricing is in, but as a starting point, For next year, I think I would start with the 50 basis point that we are pointed to at our capital market stay as where we are creating effects from initiatives that will support that one rate. And then we could have some plus minus from this and stochastic effects. I would say start with 50 basis points of improvement.

29:53 All right. Thanks a lot, guys. Your next question comes in the line of Alessia Moigny with Barclays. Your line is now open. Please go ahead.

30:06 Hi. Good morning, everyone. Thank you for taking my question. One follow-up clarification. On the FTE reduction, I would have expected that to have actually a positive impact on potentially next year underlying and expense ratio. But you said before, if I understood correctly, that that is actually partly included already in your 2028 targets, so we shouldn't actually see any change in direction and trends. Is that correct? I should actually expect.

30:44 Let me clarify, but our 28 targets is a reduction in expense rates of 100 basis points compared to 2025 levels, bringing us to 16%. We are now at 17% for this year guidance. And then we have also on top of that, we plan for Structural improvement in the claims ratio of 150 basis points over three years. So what I'm just saying is that the fact that we now need to also look at our wage base and do a reduction is just in line with that expectation that we expect to improve both our claims ratio and our As a result of the FT reduction. Well, yes, but of course, yes. But it should be seen as one of many levers or initiatives which will support a lower claims ratio and lower cost ratios.

31:58 Okay. Your next question comes from the line of Ole Overbo with DNB Carnegie. Your line is now open. Please go ahead.

32:15 Hi guys, just a small question on interest rates really. Could you just remind us again how you do the discounting calculation? Is that quarterly averages or a period end number? Given how the interest rates have moved so far this quarter, could you just remind us how should we think about going into Q4 and early next year with the current grade level?

32:38 Hi Ola and Mads here. I mean, we do the technical calculations of the discounting rate is done monthly. And the implication of that is that when we have a 2.4% discounting here on Q3, Then the increases that we did see in the interest rate in September of some size are not fully baked into that level. So it would be reasonable to expect a discounting effect in Q4 that would be 20 basis points higher, I would say. So that would also be kind of a good place to start for 2027.

33:24 Perfect, very clear. There are no further questions at this time. I will now turn the call back to Andreas Ruben Madsen for closing remarks.

33:38 Yeah, thanks for joining today and thanks for the questions. So have a good day. This concludes today's call. Thank you for attending. You may now disconnect.